BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1670| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1670 Author: Dodd (D) Amended: 8/1/16 in Senate Vote: 21 SENATE GOVERNMENTAL ORG. COMMITTEE: 12-0, 6/28/16 AYES: Hall, Berryhill, Bates, Block, Gaines, Glazer, Hernandez, Hill, Hueso, Lara, McGuire, Vidak NO VOTE RECORDED: Galgiani SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 ASSEMBLY FLOOR: 76-0, 4/28/16 (Consent) - See last page for vote SUBJECT: Alcoholic beverages: licenses SOURCE: Author DIGEST: This bill authorizes the Department of Alcoholic Beverage Control (ABC) to issue, from January 1, 2017 to December 31, 2017, no more than a total of five additional new original on-sale general licenses for bona fide public eating places with a seating capacity of 25 or more diners, in Napa County. This bill also authorizes the Department of ABC to issue a special on-sale general license to the operator of any for-profit theater located within Napa County, subject to certain requirements and conditions. ANALYSIS: Existing law: 1)Establishes the Department of ABC and grants it exclusive AB 1670 Page 2 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. 2)Provides that 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 licenses, 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. 3)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 three-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 AB 1670 Page 3 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. (Government Code Section 28020) This bill: 1)Authorizes the Department of ABC to issue, from January 1, 2017 to December 31, 2017, no more than a total of five additional new original on-sale general licenses for bona fide public eating places with a seating capacity of 25 or more diners, in Napa County (County of the 29th class). 2)Authorizes the Department of ABC to issue a special on-sale general license to the operator of any for-profit theater located within Napa County, configured with theatrical seating of at least 800 seats and primarily devoted to live theatrical performances. 3)Stipulates that the special on-sale general license for the for-profit theater shall not be issued until any existing licenses issued by the Department of ABC to the operator for the premises of the theater are canceled. 4)Provides that 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 completion of the performance. 5)Provides that any special on-sale general license issued for a for-profit theater pursuant to this bill shall: (a) not be subject to existing "drawing for priority" procedures, (b) not be required to be operated as a bona fide public eating place, and (c) not be subject to existing provisions of law relating to the issuance or transfer of public premises licenses. 6)Makes it explicit that for purposes of this bill a "for-profit AB 1670 Page 4 theater" shall not include an adult or sexually oriented business, as defined in Section 318.5 of the Penal Code. 7)Contains legislative findings and declarations as to the necessity of a special statute for Napa County. 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 the Department of 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 the Department of ABC will issue five new licenses in that county. A drawing is held by the Department of 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. In 2008, AB 2266 (Evans, Chapter 130) granted Napa County the privilege of 15 additional on-sale general licenses (over a three-year period) due to the fact that the County had a relatively fixed year-round population yet millions of visitors travelled to Napa each year because of its international reputation of producing fine wines. AB 2266 led to an increase in full liquor service restaurants in the area and provided visitors to Napa County more dining options. Purpose of AB 1670. The author's office notes that the number of visitors to Napa continues to increase while the population of the county has not grown. 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 in Napa that would like to cater to the AB 1670 Page 5 large number of visitors in the area but are unable to because they do not have a license to serve alcohol. According to Destination Analysts Inc., a tourism research group, 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 one million 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. This bill authorizes the Department of ABC to issue a maximum of five additional new original on-sale general licenses, over a one-year period, for bona fide public eating places in the County of Napa. In addition to authorizing the five new original on-sale general licenses for restaurants in the County of Napa, this bill adds a new Section of law to the ABC Act that permits the Department of ABC to issue a new special on-sale general license for the operator of any for-profit theater located in Napa County with at least 800 seats configured with theatrical seating. This new license will permit the sale and consumption of alcoholic beverages in the lobbies and seating areas of the theater for the period of time beginning two hours prior to a live theatrical performance and ending three hours after completion of the performance. Additionally, the licensed premises are not required to operate as a restaurant. Furthermore, this bill prohibits the issuance of this new special on-sale general license for the theater until any existing licenses for the premises of the theater are canceled. Only one for-profit theater in Napa County, the Uptown Theater, would be eligible for this special on-sale general license. The Uptown Theater, a historic landmark built in 1937, is located in downtown Napa and hosts a variety of live music and comedy shows. The theater consists of 9,960 square feet with seating capacity of 857 and an additional 980 square feet of lobby area with 200-person capacity. Located adjacent to the theater is the Courtyard Café which is open for lunch Monday-Friday and for dinner before the start of a performance. The Courtyard Café AB 1670 Page 6 currently has an on-sale beer & wine license (Type 41). Under the provisions of this bill, the existing Type 41 license will have to be canceled prior to the issuance of the new on-sale general license. The author's office states that movie theaters and live theatrical performances have experienced declining box-office revenues in recent years as a result of an expansion of online media streaming. The author's office believes that a solution to this dilemma might be the option to sell and consume alcoholic beverages before and during live theatrical performances. The author's office contends that existing limitations on licensees and regulatory barriers have become major obstacles for local businesses that wish to offer such an amenity and service. Under current law, patrons generally must consume their drinks in a segregated, partitioned-off space and they are not allowed to take alcoholic beverages to their seats. In 2013, a similar type of exemption was granted for the operator of any for-profit theater in San Francisco, configured with theatrical seating of at least 1,000 seats and primarily devoted to live theatrical performances. [AB 525 (Ting, Chapter 235, Statutes of 2013)] Related/Prior Legislation AB 2266 (Evans, Chapter 130, Statutes of 2008) authorized the Department of ABC to issue five 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. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes SUPPORT: (Verified 8/9/16) Atlas Social Napa City of American Canyon City of Calistoga AB 1670 Page 7 City of Napa County of Napa Downtown Napa Association Family Winemakers of California JAX White Mule Diner Napa Chamber of Commerce Napa Valley Development Corporation Square 1 Tasting Bar St. Helena Chamber of Commerce Town of Yountville Zapolski Real Estate, LLC OPPOSITION: (Verified 8/9/16) Alcohol Justice Wine and Water Watch Several Napa County residents ARGUMENTS IN SUPPORT: Writing in support, Family Winemakers of California states that "AB 1670 reflects the growing popularity of Napa as a wine destination, and allows for smaller restaurants, with seating capacity of 25 or more, to apply for on-sale licenses. We believe that a measured increase in the number of on-sale licenses, with an overall cap, as proposed, provides local enforcement agencies the ability to adapt to increased responsibilities." Also writing in support, several cities within the County (Calistoga, Napa, American Canyon, and the Town of Yountville), including Napa County, note that what used to be a challenging, but inadequate number of Type 47 licenses has now become a significant burden on new business owners, or those wishing to expand their operations, competing with established businesses. These local entities state that "the going price for a Type 47 license has increased significantly in the past seven years resulting in an 'aftermarket' of approximately $400,000 for Type 47 licenses. This is not the intent of the ABC laws and regulations, and the unintended consequence prohibits restaurants, especially smaller restaurants with fewer seats, from being able to obtain a license and inherently increases barriers to fair competition." These local entities emphasize that it is not their intent to create more stand-alone bars and AB 1670 Page 8 lounges but to encourage new and expanded dining establishments to strengthen the local economy. ARGUMENTS IN OPPOSITION: Writing in opposition, Alcohol Justice states that "increasing the availability of alcohol is associated with increased alcohol-related harm. Increasing the number of retail licenses, no matter how minimal, will increase availability and therefore impact public health. The state already suffers more than $22 billion in alcohol-related harm and over 10,000 alcohol-related deaths annually. We believe AB 1670 will ultimately increase those catastrophic alcohol-related harms and costs in the state." Also writing in opposition, Wine and Water Watch states that "AB 1670 would allow further alcohol saturation in an area that is experiencing many problems, largely associated with the alcohol industry in Napa County. We urge you strongly to reject this bill until a complete study is done on how to mitigate the cumulative impacts of further alcohol based tourism and come up with a fair solution for the public and the visitors. Without such a study, passage of this bill will only further diminish the quality of life for the residents with no solutions." Several Napa County residents have also expressed their dissatisfaction with this bill. These residents note that Napa County is primarily a rural county with two-lane roads that connect many of the surrounding communities. These lands and rural infrastructure are inadequate to handle much of the recent and continuing large scale commercial tourism promotion and development, and the associated cumulative impacts. These residents are not necessarily opposed to wine or alcohol use, however, they emphasize that such use must remain in balance with the health, welfare and safety considerations of their communities. They believe that AB 1670 fails to fully analyze or address the extent of the impacts of what it proposes, particularly the entertainment/theatrical component of the bill. ASSEMBLY FLOOR: 76-0, 4/28/16 AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper, AB 1670 Page 9 Dababneh, Dahle, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon NO VOTE RECORDED: Chávez, Daly, Mathis, Olsen Prepared by:Arthur Terzakis / G.O. / (916) 651-1530 8/10/16 15:49:15 **** END ****