BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1670


                                                                    Page  1





          Date of Hearing:  April 6, 2016


                   ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION


                                  Adam Gray, Chair


          AB 1670  
          (Dodd) - As Introduced January 15, 2016


          SUBJECT:  Alcoholic beverages:  licenses


          SUMMARY:  Authorizes the Department of Alcoholic Beverage  
          Control (ABC) to issue a maximum of 25 new original on-sale  
          general licenses, over a five-year period, for bona fide public  
          eating-places in the County of Napa.  Specifically, this bill:  


          1)  Provides that in Napa County (29th class), commencing  
          January 1, 2017, ABC, in addition to those licenses currently  
          issued under the law may issue five additional new original  
          on-sale general licenses for bona fide public eating places per  
          year, for a period of five years.  Any premises to qualify for a  
          license under this section shall have a seating capacity for 25  
          or more diner.  In no event shall more than 25 on-sale general  
          licenses for bona fide eating-places be issued under this  
          provision.


          2)  Authorizes ABC to issue a special on-sale general license to  
          the operator of any for-profit theater located within the County  
          of Napa, configured with theatrical seating of at least 800  
          seats and primarily devoted to live theatrical performances  
          under the following conditions:









                                                                    AB 1670


                                                                    Page  2









            a)  The special on-sale general license shall not be issued  
          until any existing licenses issued                          by  
          ABC to the operator for the premises of the for-profit theater  
          are canceled.





            b)  The special on-sale general license shall permit sales,  
          service, and consumption of                                  
          alcoholic beverages in the lobbies and seating areas of the  
          for-profit theater for the period beginning two consecutive  
          hours prior to a live theatrical performance and ending three  
          hours after the live theatrical performance is completed, as  
          specified. 





            c) Any special on-sale general license issued shall not be  
          required to be operated as a bona                           fide  
          public eating-place.     





            d) The "for-profit theater" shall not include an adult or  
          sexually oriented business, as defined. 


          3)  Contains an urgency clause.









                                                                    AB 1670


                                                                    Page  3






          EXISTING LAW:  


          1)  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.  


          2)  Establishes ABC 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. 


          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.


          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  








                                                                    AB 1670


                                                                    Page  4





          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.


          7)  Authorizes ABC to issue a special on-sale general license to  
          any nonprofit theater company, subject to specified  
          requirements.


          FISCAL EFFECT:  Unknown


          COMMENTS:  


          Background:  Existing law provides for a limitation on the  








                                                                    AB 1670


                                                                    Page  5





          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 licensee 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 these new licenses is $13,800  
          each.  According to ABC, currently there are approximately  
          15,360 (Type 47) licenses statewide.  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 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  
          $150,000 to $200,000.


           Purpose of the bill  : According to the author, Napa County has  
          become immensely popular over the past few years as a tourist  
          location.  According to Destination Analysts Inc., the number of  
          tourists that visited Napa increased from 2.94 million people in  
          2012 to 3.3 million people in 2014.  While a majority of the  
          visitors to Napa take day trips, nearly 950,000 of these  
          visitors spend at least one night in local lodgings.  Tourism  
          has therefore become one of the major economic drivers in the  
          region, generating $1.6 billion in 2014 in the Napa Valley. 


          AB 1670 would authorize ABC to issue a maximum of 25 new  
          original on-sale general licenses, over a five-year period, for  
          bona fide public eating-places in the County of Napa.





          According to proponents, existing ABC regulations limit the  
          number of Type 47 licenses to just one license for each 2,000  








                                                                    AB 1670


                                                                    Page  6





          inhabitants in Napa County.  What used to be an adequate number  
          of Type 47 licenses has now become a significant burden on new  
          business owners, or those wishing to expand their operations,  
          forcing them to compete with established businesses.  This is  
          not the intent of the ABC Act but this unintended consequence  
          prohibits restaurants, especially smaller restaurants with fewer  
          seats, from being able to obtain a license and inherently  
          increases barriers to fair competition.


          The number of visitors to Napa continues to increase while the  
          population of the county has not grown.  The limited number of  
          licenses in Napa County does not reflect the tourist population  
          that includes more than three million visitors to the Napa  
          Valley each year who enjoy food service as an integral part of  
          the Napa experience and contribute to the economy.


          The author points out that Napa has a year-round population of  
          140,362, as of the last census, which translates into 94 Type 47  
          alcohol retail licenses; however, millions of visitors come to  
          Napa each year due to its international reputation for producing  
          fine wines.  In August 2015, Napa was granted only one new  
          off-sale license, and  no new on-sale licenses  .  The author and  
          proponents believe this bill will lead to an increase in full  
          service restaurants in the area and provide visitors to Napa  
          County more restaurant options.


          Another provision of the bill would create and authorize ABC to  
          issue a special on-sale general license to the operator of any  
          for-profit theater located within the County of Napa, configured  
          with theatrical seating of at least 800 seats and primarily  
          devoted to live theatrical performances. AB 1670 would not  
          require the licensee to operate as a bona fide public  
          eating-place.  Currently, there is  only one  for-profit theater  
          that would be eligible. The Uptown Theater is located in  
          downtown Napa, hosts a variety of live music and comedy shows.   
          In 2013, a similar type of exemption was granted for the City  








                                                                    AB 1670


                                                                    Page  7





          and County of San Francisco to the operator of any for-profit  
          theater, configured with theatrical seating of at least 1,000  
          seats and primarily devoted to live theatrical performances.  





          The author states that the movie theater industry has been  
          facing increasing hardships with the expansion of online media  
          streaming.  Box-office revenues reflect this trend, with ticket  
          sales in 2015 at their lowest level in seventeen years.  One  
          solution to this issue might be to serve alcohol inside theaters  
          that are devoted to live theatrical performances.  Serving  
          alcohol could offer financial relief to theaters and allow  
          customers to fully experience the theater, its amenities, and  
          the live performance.  However, strict limits on ABC licenses  
          and regulatory barriers have become major obstacles for local  
          businesses who wish to offer this type of amenity and service.





           Related legislation  : SB 1285 (Leno) of 2016.  This bill would,  
          beginning January 1, 2017, provide an exception to this  
          limitation for a county of the 6th class, as specified, for 28  
          new original special on-sale general licenses for bona fide  
          eating places for premises located within specified census  
          tracts in that county, subject to specified requirements.   
          (Pending in Senate G.O. Committee)


          AB 1558 (Mathis) of 2016.  Would authorize ABC to issue no more  
          than a total of 5 new original on-sale general licenses, over a  
          2-year period, for bona fide public eating places, public  
          premises, or both in the County of Inyo.  (Pending in the  
          Assembly G.O. Committee)









                                                                    AB 1670


                                                                    Page  8






           Prior legislation  : AB 525 (Ting), Chapter 235, Statutes of 2013.  
           Created a new special on-sale general license in the ABC Act  
          that enables the operator of any for-profit theater, as  
          specified, located within the City and County of San Francisco,  
          to serve alcoholic beverages during certain hours in specified  
          areas of the theater.  





          AB 461 (Achadjian), Chapter 110, Statutes of 2013.  Authorized  
          ABC to issue no more than a total of five new original on-sale  
          general licenses, over a three-year period, for bona fide public  
          eating-places in the County of San Luis Obispo.  





          AB 1320 (Allen), Chapter 467, Statutes of 2012.  Authorized 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 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  
          the County of Napa.













                                                                    AB 1670


                                                                    Page  9





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





          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).


          REGISTERED SUPPORT / OPPOSITION:




          Support


          Napa County Board of Supervisors


          City of American Canyon









                                                                    AB 1670


                                                                    Page  10






          City of Napa


          City of Calistoga


          Family Winemakers of California


          Napa Downtown Association


          Napa Chamber of Commerce


          Napa Property Based Improvement District


          Town of Yountville




          Opposition


          None on file







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











                                                                    AB 1670


                                                                    Page  11