BILL ANALYSIS                                                                                                                                                                                                    Ó






                                                       Bill No:  AB  
          461
          
                 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
                       Senator Roderick D. Wright, Chair
                           2013-2014 Regular Session
                                 Staff Analysis

          AB 461  Author:  Achadjian
          As Amended:  May 1, 2013
          Hearing Date:  June 11, 2013
          Consultant:  Art Terzakis

                                     SUBJECT  
                              Alcoholic Beverages

                                   DESCRIPTION
           
          AB 461 adds a new Section to the Alcoholic Beverage Control  
          (ABC) Act which authorizes the Department of ABC to issue  
          no more than a  total of 5  new original on-sale general  
          licenses, over a  3-year period  , for bona fide public eating  
          places in the  County of San Luis Obispo  . Specifically, this  
          measure:

          1)Authorizes the Department of ABC, to issue no more than 5  
            new original on-sale        general licenses, from  
            01/01/2014 to 12/31/2016, for bona fide public eating  
            places having a seating capacity for 50 or more diners in  
            a county of the 24th class. 

          2)Requires the Department of ABC to follow existing  
            "drawing for priority" procedures with respect to the  
            issuance of these new licenses as set forth in Section  
            23961 of the ABC Act.
                                         
           3)Provides that a person who currently holds a valid  
            on-sale general license for seasonal business is not  
            prohibited from applying for an original on-sale general  
            license pursuant to this measure.
                                         
           4)Makes it explicit that a license issued pursuant to this  
            measure shall not be transferred from one county to  
            another nor shall it be transferred to any premise not  
            qualifying under these provisions. 





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                                   EXISTING LAW

           The enactment of the 21st Amendment to the U.S.  
          Constitution in 1933 repealed the 18th Amendment and ended  
          the era of Prohibition.  Accordingly, states were granted  
          the authority to establish alcoholic beverage laws and  
          administrative structures to regulate the sale and  
          distribution of alcoholic beverages.  

          Existing law establishes the Department of Alcoholic  
          Beverage Control and grants it exclusive authority to  
          administer the provisions of the Alcoholic Beverage Control  
          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. 

          The 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.

          Existing law 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 3-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.

          Existing law 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 suitable kitchen facilities  
          connected therewith, containing conveniences for cooking an  
          assortment of foods which may be required for ordinary  




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          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.

          Existing law 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.  

          Existing law (Government Code Section 28020) provides for  
          58 counties and 58 "classes" of counties - one county to  
          each class based on their 1970 Census populations.

                                    BACKGROUND
           
           Purpose of AB 461:   According to the author's office, San  
          Luis Obispo County is comprised of communities scattered  
          along the beaches and mountains of the Central Coast which  
          leads to many tourists visiting the county for its various  
          attractions.  In conjunction with the growing wine and  
          tourism industry, San Luis Obispo County has a flourishing  
          restaurant scene as well, which requires the additional  
          liquor licenses proposed in AB 461.  Under current law, the  
          number of liquor licenses issued in a given county is tied  
          to the population of that county which creates a problem  
          for restaurants and hotels that would like to cater to the  
          large number of visitors in the area but are unable to  
          because they do not have a license to serve alcohol. 

          Writing in support of AB 461, the City of Atascadero  
          contends that this measure is necessary to accommodate the  
          county's tourism industry that accounts for a significant  
          portion of the local economy.

          Writing in opposition, the City of San Luis Obispo has  
          expressed concern that this measure could undermine local  
          control and lead to an overconcentration of alcohol related  
          businesses in the downtown area. 

           Staff Comments:   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 the Department of ABC  




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          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 the Department of 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 or cocktail menu who fail to obtain a  
          liquor license through this process typically must locate  
          an existing licensed owner willing to sell his/her license.  
           Usually, that's 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 most recent records indicate that San Luis Obispo  
          County's population growth has been relatively stagnant  
          over the past few years resulting in no new on-sale general  
          licenses being made available and as of 2012 there were 126  
          on-sale general licenses in existence within the county.   
          According to ABC, there are approximately 13,560 Type 47  
          licenses statewide.

                            PRIOR/RELATED LEGISLATION
          
           AB 1320 (Allen), Chapter 467, Statutes of 2012.   Authorized  
          the Department of ABC to issue a maximum of  15  new original  
          on-sale general licenses, over a 3-year period, for bona  
          fide public eating places in the County of Marin.  

          AB 2560 (Allen) 2011-12 Session.   Identical to AB 1320  
          (Allen) of 2011-12.  (Held in Assembly policy committee at  
          author's request.)

           AB 2266 (Evans), Chapter 130, Statutes of 2008.   Authorized  
          the Department of ABC, commencing 01/01/2009, to issue  5   
          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.  

           SB 762 (Cox), Chapter 193, Statutes of 2007.   Authorized  
          the Department of ABC to issue  10  new original on-sale  




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          general licenses for bona fide public eating places in the  
          County of Mono.

           AB 1252 (N. Waters), Chapter 753, Statutes of 1977.    
          Permitted the Director of 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 the Department of 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 the Department of ABC to issue  three  additional  
          original off-sale general licenses in a county of the 58th  
          class (Alpine County).

           SUPPORT:   As of June 7, 2013:

          City of Atascadero

           OPPOSE:   As of June 7, 2013:

          City of San Luis Obispo

           FISCAL COMMITTEE:   Senate Appropriations Committee

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