BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1558


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          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          1558 (Mathis)


          As Amended  August 16, 2016


          Majority vote


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          Original Committee Reference:  G.O.


          SUMMARY:  Adds a new Section to the Alcoholic Beverage Control  
          Act that authorizes the Department of Alcoholic Beverage Control  
          (ABC) to issue, over a two-year period, five additional new  
          on-sale general licenses for restaurants, with a seating  
          capacity of 50 or more, in Inyo County.  Specifically, this  
          bill:


          1)Authorizes ABC to issue, from January 1, 2017, to December 31,  
            2019, no more than a total of five additional new original  
            on-sale general licenses in Inyo County for bona fide public  
            eating places, public premises, or both.  In order to qualify  
            for such a license, the premises must have seating capacity  
            for 50 or more diners.


          2)Requires ABC to follow existing "drawing for priority"  
            procedures with respect to the issuance of these new licenses.








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          3)Makes it explicit that a person that currently holds a valid  
            on-sale general license for seasonal business shall not be  
            prohibited from applying for an original on-sale general  
            license pursuant to this bill.


          4)Stipulates that a license issued pursuant to this bill shall  
            not be transferred from one county to another, nor shall it be  
            transferred to any premises not qualifying under the  
            provisions of this bill.     


          The Senate amendments renumber the new Section of law proposed  
          to be added by this bill to the Business and Professions Code to  
          avoid a chaptering out issue with SB 1285 (Leno).


          EXISTING LAW:  


          1)The enactment of the 21st Amendment to the United States  
            (U.S.) Constitution in 1933 repealed the 18th Amendment and  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.  
          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  








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            authorized to issue a license if the respective local  
            government determines that public convenience or necessity  
            would be served by granting the license.


            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.


          4)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 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.
          5)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.  


          6)Provides for 58 counties and 58 "classes" of counties - one  
            county to each class based on their 1970 Census populations.


          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, pursuant to Senate Rule 28.8, negligible state costs.








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          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.  ABC holds a drawing 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 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.  According to ABC,  
          currently there are approximately 13,360 Type 47 licenses  
          statewide.


          ABC's records from 2015 indicate that Inyo's population was  
          18,574, which translates into 17 on-sale general licenses within  
          the county.  In 2015, ABC issued additional liquor licenses to  
          counties with satisfactory population growth verified by the  
          Department of Finance (DOF).  Inyo County was not eligible for  
          additional liquor licenses based on the set criteria.  However,  
          ABC records indicate that one new on-sale general license was  
          made available and issued through the priority drawing process  
          in 2013.


          Purpose of the bill:  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.  This measure is expected to lead to an increase  








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          in full service restaurants in the County of Inyo


          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 states, although the distribution of liquor licenses  
          across Inyo County reflects 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 bill will provide Inyo County  
          with five additional liquor licenses to accommodate the growing  
          tourism industry that accounts for a significant portion of the  
          local economy.


          Analysis Prepared by:                                             
                          Eric Johnson / G.O. / (916) 319-2531  FN:  
          0004741