BILL ANALYSIS Ó AB 1558 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1558 (Mathis) As Amended August 16, 2016 Majority vote -------------------------------------------------------------------- |ASSEMBLY: |76-0 |(April 28, |SENATE: |38-0 |(August 18, | | | |2016) | | |2016) | | | | | | | | | | | | | | | -------------------------------------------------------------------- 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. AB 1558 Page 2 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 EXISTING LAW: 1)The enactment of the 21st Amendment to the United States (U.S.) Constitution in 1933 repealed the 18th Amendment and ended the era of Prohibition.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 AB 1558 Page 3 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. AB 1558 Page 4 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 AB 1558 Page 5 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