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. AB 461 (Achadjian) continued Page 2 EXISTING LAW The enactment of the 21st Amendment to the U.S. Constitution in 1933 repealed the 18th Amendment and ended the era of Prohibition.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 AB 461 (Achadjian) continued Page 3 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 AB 461 (Achadjian) continued Page 4 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 AB 461 (Achadjian) continued Page 5 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 **********