BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                       AB 1670|
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                                   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  








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            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  








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            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  








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            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  








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          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  








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          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








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          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  








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          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,  








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            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


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