BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 1260
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          SENATE THIRD READING
          SB 1260 (Yee)
          As Amended  August 2, 2010
          Majority vote 

           SENATE VOTE  :30-0  
           
           GOVERNMENTAL ORGANIZATION   18-0  APPROPRIATIONS    17-0        
           
           ----------------------------------------------------------------- 
          |Ayes:|Coto, Anderson,           |Ayes:|Fuentes, Conway,          |
          |     |Blakeslee, Chesbro, Cook, |     |Bradford,                 |
          |     |Evans, Galgiani, Hall,    |     |Huffman, Coto, Davis, De  |
          |     |Hill, Jeffries, Ma,       |     |Leon, Gatto, Hall,        |
          |     |Mendoza, Nestande,        |     |Harkey, Miller, Nielsen,  |
          |     |Portantino, Silva,        |     |Norby, Skinner, Solorio,  |
          |     |Torres, Torrico, Tran     |     |Torlakson, Torrico        |
          |-----+--------------------------+-----+--------------------------|
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
           SUMMARY  :  Amends an existing provision of the Alcoholic Beverage  
          Control Act (Act) to enable guests to purchase beer and wine in  
          sealed containers from hotel or motel gift shops for consumption  
          on the premises.   Specifically,  this bill  :   

          1)Authorizes hotels and motels, as defined, to sell beer and  
            wine in sealed containers from "food sale areas" for  
            consumption by guests and their invitees on the premises.    

          2)Defines "food sale area" as a food facility that routinely  
            offers for sale, throughout the area's normal hours of  
            operation each day to all of the lodging establishment's  
            transient guests and their invitees, primarily items like  
            prepackaged sandwiches, salads, snacks, candy, dairy products,  
            water, soft drinks and other nonalcoholic beverages in bottles  
            or cans, and similar food items, as well as, various sundries  
            such as health and beauty aids, nonprescription drugs, film,  
            and batteries. 
           
          EXISTING LAW  :

          1)Establishes the Department of Alcoholic Beverage Control (ABC)  
            and grants it exclusive authority to administer the provisions  
            of the Act in accordance with laws enacted by the Legislature.  








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             This involves licensing individuals and businesses associated  
            with the manufacture, importation and sale of alcoholic  
            beverages in this state and the collection of license fees or  
            occupation taxes for this purpose. 

          2)Permits full service hotels to offer alcoholic beverages for  
            sale by means of "mini bars" in guest rooms.  This provision  
            of law was enacted in response to the introduction of mini  
            bars in hotels in other states and internationally.

          3)Establishes an on-sale general license for "restricted service  
            lodging establishments" (e.g., Embassy Suites, Days Inn,  
            Residence Inns, etc.) that permits hotels and motels to sell  
            or furnish alcoholic beverages for consumption on the premises  
            by means of:  1) controlled access alcoholic beverage cabinets  
            (mini bars) located in guestrooms; or, 2) furnishing alcoholic  
            beverages only to their transient guests and their invitees  
            under circumstances where the cost of the alcoholic beverages  
            is included in the price of the overnight occupancy  
            accommodation.

          4)Provides that a hotel or motel licensed pursuant to this  
            section shall not sell or furnish alcoholic beverages to the  
            general public and shall not be entitled to a caterer's  
            permit.  Such an establishment is not permitted to operate a  
            restaurant, it must have at least 10 guestrooms, and it may  
            not derive more than 5% of its total gross annual revenues  
            from sales of alcoholic beverages.  Such licensees are  
            additionally required to purchase all their alcoholic  
            beverages from licensed wholesalers or winegrowers and must  
            pay an application fee of $6,000 and an annual renewal fee, as  
            specified.

          5)Permits ABC to issue a special on-sale wine license to an  
            establishment licensed to do business as a bed and breakfast  
            inn.  This provision of law, enacted in 1987, was intended to  
            permit bed and breakfast inns to provide small amounts of wine  
            to registered guests.  This law was not intended to place bed  
            and breakfast inns in a competitive environment with other  
            licensed businesses.

          6)Defines "bed and breakfast inn," as an establishment of 20  
            guestrooms or less, which provides overnight accommodations,  
            serves food only to registered guests, serves only a breakfast  








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            or similar early morning meal, and in which the price of the  
            food is included in the price of the room.  In addition, the  
            predominant relationship between occupant and owner or  
            operator is that of innkeeper and guest.

          7)Authorizes bed and breakfast inn licensees to serve wine  
            purchased from a licensed winegrower or wholesaler only to  
            registered guests.  The law provides that wine shall not be  
            given away to guests, but the price of the wine will be  
            included in the price of the room.  In addition, existing law  
            prohibits guests from removing wine from the grounds of the  
            establishment.  The bed and breakfast inn license requires an  
            original fee of $50 and an annual renewal fee of $6 for each  
            guestroom in the establishment until December 31, 2004, and  
            for each year thereafter the annual fee shall be calculated,  
            as specified.

          8)Authorizes ABC to issue a special on-sale "general" license to  
            any person operating a bed and breakfast inn, as specified, to  
            serve any alcoholic beverage, as defined, and to charge a $200  
            fee for that license and a renewal fee of $15 for each  
            guestroom in the establishment, not to exceed $200.

           FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee:

          1)Given the large number of lodging establishments that could  
            now be interested in licenses to sell beer and wine, costs  
            could be in excess of $300,000 for workload associated with  
            ABC providing licenses and enforcement for new beer and wine  
            licenses for these limited service establishments. These costs  
            would be fully offset by increased licensing revenue.  

          2)Negligible, non-reimbursable costs for prosecution and/or  
            incarceration, offset by fine revenue, for misdemeanor  
            violations of provisions associated with significantly  
            expanding the number and types of facilities that will likely  
            sell alcoholic beverages.

           COMMENTS  :  The bill's sponsor, the California Hotel and Lodging  
          Association, states going back several decades, the lodging  
          industry was comprised primarily of "full service" hotels, such  
          as Hiltons, Sheratons, Westins, and the like.  At the same time,  
          the motel segment of the industry was still young and there were  








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          very few, if any, bed and breakfast inns.  Additionally, it was  
          very rare that a lodging establishment, other than a full  
          service hotel, offered any sort of alcoholic beverage service,  
          or food service, for that matter.  Those full service hotels  
          that desired to sell alcoholic beverages would typically obtain  
          one of the two common types of licenses from ABC - the one for a  
          restaurant (e.g., bona fide eating place) or the one for a bar  
          (e.g., public premise). 

          With the advent of a wide range of "limited service" lodging  
          establishments (e.g., Fairfield Inns, Residence Inns, Days Inns,  
          Embassy Suites, etc.), which rarely had either a bar or  
          restaurant, a problem arose in terms of meeting guest  
          expectations with respect to the furnishing of alcoholic  
          beverages.  In addressing this issue, the industry and the  
          Legislature, with the cooperation of the ABC, responded with  
          enactment of new laws to allow limited service establishments to  
          keep pace with the evolving trends in the lodging industry.  For  
          example, these "limited service" lodging establishments are  
          currently allowed to provide alcoholic beverages from a  
          controlled access cabinet (mini bar) in guest rooms and they are  
          also authorized to provide alcoholic beverages to their guests  
          during a manager's reception.

          Background:  Under current law, hotels and motels in the state  
          that do not have a bar or restaurant on the premises can only  
          sell alcohol under limited circumstances.  They can obtain a  
          restricted (Type 70) license which allows them to sell small  
          bottles of liquor, 50 milliliters or less, through  
          restricted-access mini bars located in guests' rooms, or they  
          can include the cost of wine and beer in the cost of the room  
          and host receptions where the alcohol is provided without an  
          additional charge.  These licenses are offered by ABC, with an  
          initial fee of $6,000.  In addition, under current law, hotels  
          and motels may also apply for off-sale beer and wine (Type 20)  
          licenses that do not restrict sales to guests and their  
          invitees. Only 34 hotels in the state currently hold both Type  
          20 and Type 70 liquor licenses.
           
           In support:  The sponsor contends this bill represents a  
          carefully crafted expansion of existing law to enable  
          "restricted service lodging establishments" to sell beer and  
          wine from food sale areas for consumption by guests on the  
          premises.








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          The sponsor further states, this bill would:  1) limit the type  
          of alcoholic beverage service that can be provided - that is,  
          the license would permit the sale of beer and wine only; 2)  
          limit the individuals who can purchase the beverages - that is,  
          only guests and invitees of guests; 3) provide safeguards  
          through the ABC licensing process; and, 4) the restricted  
          service lodging establishment license may be transferred to  
          another person but not to another location.  

          Prior/related legislation:  SB 696 (Yee) of the 2007-08 Session,  
          a similar measure, would have enabled "restricted service  
          lodging establishments" to expand the manner in which they may  
          sell beer and wine to their guests.  The bill died on the  
          Assembly Appropriations Committee Suspense File.
           

          Analysis Prepared by  :   Eric Johnson / G. O. / (916) 319-2531


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