BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 461
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          ASSEMBLY THIRD READING
          AB 461 (Achadjian)
          As Amended  May 1, 2013
          Majority vote 

           GOVERNMENTAL ORGANIZATION   17-0 APPROPRIATIONS     17-0        
           
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          |Ayes:|Hall, Nestande, Bigelow,  |Ayes:|Gatto, Harkey, Bigelow,   |
          |     |Chesbro, Cooley, Gray,    |     |Bocanegra, Bradford, Ian  |
          |     |Hagman,                   |     |Calderon, Campos,         |
          |     |Roger Hernández, Jones,   |     |Donnelly, Eggman, Gomez,  |
          |     |Jones-Sawyer, Levine,     |     |Hall, Ammiano, Linder,    |
          |     |Medina, Perea, V. Manuel  |     |Pan, Quirk, Wagner, Weber |
          |     |Pérez, Salas, Torres,     |     |                          |
          |     |Waldron                   |     |                          |
          |     |                          |     |                          |
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           SUMMARY  :  Authorizes the Department of Alcoholic Beverage  
          Control (ABC) to issue five new original on-sale general  
          licenses to San Luis Obispo County between January 1, 2014, and  
          December 31, 2016, for restaurants with a seating capacity for  
          50 or more diners.  Specifically,  this bill  : 

          1)Provides that in a county of the 24th class (San Luis Obispo  
            County), ABC may issue a total of five additional new original  
            on-sale general licenses for bona fide public eating places,  
            until January 1, 2017.  

          2)Specifies to qualify for a license under this bill, the  
            premises upon which a bona fide public eating place is  
            operated shall have a seating capacity for 50 or more diners. 

          3)Requires ABC to follow existing "drawing for priority"  
            procedures with respect to the issuance of these new licenses  
            as set forth in Business and Professions Code Section 23961 of  
            the Alcohol Beverage Control Act (Act).

          4)Provides that current law does not prohibit a person who  
            currently holds a valid on-sale general license for seasonal  
            business from applying for an original on-sale general  
            license, as defined.

          5)Provides that a license issued under this bill shall not be  








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            transferred from one county to another nor shall it be  
            transferred to any premises not qualifying under this new  
            statute.

           EXISTING LAW  :

          1)Grants states the authority, with the enactment of the 21st  
            Amendment to the U.S. Constitution in 1933 repealing the 18th  
            Amendment and ending the era of Prohibition, to establish  
            alcoholic beverage laws and administrative structures to  
            regulate the sale and distribution of alcoholic beverages.  

          2)Establishes ABC and grants it exclusive authority to  
            administer the provisions of the Act in accordance with laws  
            enacted by the Legislature. 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. 

          3)Provides that ABC must deny an application for a license if  
            issuance would create a law enforcement problem, or if  
            issuance would result in, or add to, an undue concentration of  
            licenses in the area where the license is desired.  For liquor  
            stores and other specified retail license, however, the ABC is  
            authorized to issue a license if the respective local  
            government determines that public convenience or necessity  
            would be served by granting the license.

          4)Caps the number of new on and off-sale general licenses issued  
            by the ABC at one for every 2,500 inhabitants of the county  
            where the establishment is located (2,000:1 for on sale  
            licenses).  If no licenses are available from the state due to  
            the population restrictions, those people interested in  
            obtaining a liquor license may purchase one from an existing  
            licensee, for whatever price the market bears.  In 1994, the  
            Legislature approved a three-year moratorium on the issuance  
            of new off-sale beer and wine licenses, which at the time was  
            not bound by any population to license restriction.  In 1997  
            this moratorium was made permanent.

          5)Defines "bona fide public eating place" to mean a place which  
            is regularly and in a bona fide manner used and kept open for  
            the serving of meals to guests for compensation and which has  








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            suitable kitchen facilities connected therewith, containing  
            conveniences for cooking an assortment of foods which may be  
            required for ordinary meals, the kitchen of which must be kept  
            in a sanitary condition with the proper amount of  
            refrigeration for keeping of food on said premises and must  
            comply with all the regulations of the local Department of  
            Health.

          6)Defines an "on-sale" license as authorizing the sale of all  
            types of alcoholic beverages: namely, beer, wine and distilled  
            spirits, for consumption on the premises (such as at a  
            restaurant or bar).  An "off-sale" license authorizes the sale  
            of all types of alcoholic beverages for consumption off the  
            premises in original, sealed containers.  

          7)Authorizes ABC, to issue five new original on-sale general  
            licenses per year, until January 1, 2016, for bona fide public  
            eating places having a seating capacity for 50 or more diners  
            in a Marin County.   Provides that no more than a total of 15  
            such licenses shall be issued relative to this statute.

          8)Authorizes the ABC, commencing January 1, 2009, to issue five  
            additional new original on-sale licenses, per year for a  
            period of three years, for bona fide public eating places  
            having a seating capacity for 50 or more diners in Napa  
            County.  Provides that no more than a total of 15 such  
            licenses shall be issued relative to this statute.

           FISCAL EFFECT  :  According to the Assembly Appropriations  
          Committee, any additional licensing and oversight costs for ABC  
          associated with this legislation will be minor and absorbable.

           COMMENTS  :  

           Background  :  As noted above, existing law provides for a  
          limitation on the number of new on-sale general licenses that  
          may be issued in a given year by ABC based on the population  
          growth of the county in which the licensed premises are located  
          (one license for every 2,000 residents).  Thus, if a county  
          grows by 10,000 people in a given year ABC will sell five new  
          licenses in that county.  A drawing is held by ABC if there are  
          more buyers than licenses available.  The cost of an original  
          on-sale general eating place license (Type 47) is $13,800.   
          Individuals seeking to open a full-service restaurant with a bar  








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          or cocktail menu who fail to obtain a liquor license through  
          this process typically must locate an existing licensed owner  
          willing to sell his or her license.  Usually, that is done by  
          contacting a liquor license broker.  The cost of obtaining a  
          license on the secondary market is driven by supply and demand  
          and potential sellers may ask for upwards of $150,000.  Some of  
          these potential sellers view their license as tickets to a  
          richer retirement.  

          ABC's records from 2011 indicate that San Luis Obispo County's  
          population was 270,966 and 271,483 in 2012 there were 126  
          on-sale general licenses in existence within the county.  Based  
          on those statistics, no new on-sale general licenses were made  
          available in 2011or 2012.  However, ABC records indicate that  
          one new on-sale general license was made available and issued  
          through the priority drawing process in 2008 and another in  
          2009.  According to ABC, currently there are approximately  
          13,560 Type 47 licenses statewide.

           Purpose of the bill  :  In 2012, ABC issued additional liquor  
          licenses to counties with satisfactory population growth  
          verified by the Department of Finance (DOF).  San Luis Obispo  
          County (County) was not eligible for additional liquor licenses  
          based on the set criteria.
           
           According to the author, while the County could not show  
          satisfactory proof of population growth, the number of  
          businesses unable to obtain a license each year demonstrates the  
          County's need for additional liquor licenses.
           
           The author's office states, located between Los Angeles and San  
          Francisco, San Luis Obispo County is comprised of communities  
          scattered along the beaches and mountains of the Central Coast.   
          With such a diverse geography, many tourists make their way to  
          the County for its various attractions.  In conjunction with the  
          growing wine and tourism industry, San Luis Obispo County has a  
          flourishing restaurant scene, which requires the additional  
          liquor licenses.  
           
           The author states, although the distribution of liquor licenses  
          across the San Luis Obispo County reflect the population, ABC  
          does not take into account the many tourists who visit the  
          County each year, making it even more difficult for  
          entrepreneurs to succeed in a volatile economic climate.  This  








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          bill will provide San Luis Obispo County with additional liquor  
          licenses to accommodate the growing tourism industry that  
          accounts for a significant portion of the local economy.  

          Prior legislation  :  AB 1320 (Allen), Chapter 467, Statutes of  
          2012.  Authorized ABC to issue a maximum of 15 new original  
          on-sale general licenses, over a three-year period, for bona  
          fide public eating places in Marin County.

          AB 2266 (Evans), Chapter 130, Statutes of 2008.  Authorized ABC  
          to issue a maximum of 15 new original on-sale general licenses,  
          over a three-year period, for bona fide public eating places in  
          Napa County.

          SB 762 (Cox), Chapter 193, Statutes of 2007.  Allowed ABC to  
          issue 10 new original on-sale general licenses for bona fide  
          public eating places in Mono County.

          AB 1252 (Waters), Chapter 753, Statutes of 1978.  Permitted ABC  
          to authorize the conversion of any on-sale general license for  
          "seasonal business" to an on-sale general license, as specified.  

                             
          SB 1092 (Berryhill), Chapter 571, Statutes of 1975.  Authorized  
          ABC to issue five additional new original on-sale general  
          licenses for bona fide public eating places (seating for 100 or  
          more diners) in any county where the inhabitants number less  
          than 5,000 but more than 3,000 (Mono County) according to the  
          1970 federal census and where the major economy of that county  
          is dependent upon the year-round use of that county's  
          recreational facilities.

          SB 784 (Berryhill), Chapter 407, Statutes of 1975.  Authorized  
          ABC to issue three additional original off-sale general licenses  
          in a county of the 58th class (Alpine County).

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


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