BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Isadore Hall, III
Chair
2015 - 2016 Regular
Bill No: AB 2135 Hearing Date: 6/14/2016
-----------------------------------------------------------------
|Author: |Levine |
|-----------+-----------------------------------------------------|
|Version: |4/11/2016 Amended |
-----------------------------------------------------------------
------------------------------------------------------------------
|Urgency: |No |Fiscal: |No |
------------------------------------------------------------------
-----------------------------------------------------------------
|Consultant:|Arthur Terzakis |
| | |
-----------------------------------------------------------------
SUBJECT: Alcoholic beverages: revenue sharing
DIGEST: This bill adds a new Section of law to the Alcoholic
Beverage Control (ABC) Act that allows revenue sharing
agreements pursuant to a concessionaire agreement between a fair
operator and a licensed retailer selling alcoholic beverages
during a state or county fair, under specified circumstances.
ANALYSIS:
Existing law:
1)Article XX, section 22, California Constitution, provides that
the State of California, subject to the internal revenue laws
of the United States, shall have the exclusive right and power
to license and regulate the manufacture, sale, purchase,
possession and transportation of alcoholic beverages within
the State, and subject to the laws of the United States
regulating commerce between foreign nations and among the
states shall have the exclusive right and power to regulate
the importation into and exportation from the State, of
alcoholic beverages. In the exercise of these rights and
powers, the Legislature shall not constitute the State or any
agency thereof a manufacturer or seller of alcoholic
beverages.
2)Establishes the Department of Alcoholic Beverage Control (ABC)
and grants it exclusive authority to administer the provisions
AB 2135 (Levine) Page 2 of ?
of the ABC 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.
3)Establishes specific types of alcoholic beverage licenses and
prescribes the rights and duties of the respective licensees.
4)Prohibits a person from exercising a privilege or performing
any act for which a license is required, and a violation of
this prohibition is a misdemeanor or a felony, as specified.
5)Defines a state-supported fair organization as any fair that
conducts an annual fair and submits an annual statement of
operations to the California Department of Food and
Agriculture.
6)Establishes the California Exposition and State Fair (Cal
Expo) as an independent entity in state government governed by
its board of directors.
This bill specifies that a written agreement regarding the
sharing or splitting of gross revenue from the sale of alcoholic
beverages between a licensee and a district agricultural
association, Cal Expo, a county fair, or a citrus fruit fair, in
connection with the sale of alcoholic beverages during a state
or county fair is not the exercise of a license privilege or
performance of an act for which a license is required, unless
the agreement, or any other related agreement or understanding,
results in an unlicensed person exercising control or undue
influence over a licensee or the operation of a licensed
business.
Background
Purpose of AB 2135. The author's office notes that financial
pressures over the years have caused state and county fair
operators to search for additional sources of revenue to support
their operations. The author's office claims that it has become
fairly common for fair operators to enter into revenue sharing
agreements that include a sharing of revenue from the sale of
alcoholic beverages. However under the state's comprehensive
alcoholic beverage licensing scheme, such activities may be
construed to result in the exercising of license privileges by
AB 2135 (Levine) Page 3 of ?
non-licensees, which is prohibited.
The author's office references an Attorney General Opinion in
1966 (47 Ops. Cal. Atty. Gen. 182) that determined it would be a
violation of the ABC Act for a licensee to share revenue from
the sale of alcoholic beverages with a non-licensee, or
otherwise allow a non-licensee to exercise control over the
licensed business. Such arrangements also have the potential to
violate the State Constitution with respect to an agency of the
state being established as a licensed seller of alcohol.
The author's office contends that this bill will clarify that
the mere existence of revenue sharing agreements does not
constitute the exercising of license privileges.
Network of California fairs. The network of California fairs
includes 78 different fairs divided into four categories:
52 District Agricultural Associations (DAA) which are
state government entities governed by a board of directors
appointed by the governor;
23 county fairs which are County government or
not-for-profit organizations;
two citrus fruit fairs (Cloverdale and San Bernardino
Orange Show) which are not-for-profit organizations; and,
The California Exposition and State Fair (Cal Expo), a
state agency.
Prior/Related Legislation
AB 2678 (Gray, 2016) provides a dedicated source of funding for
state fairs and expositions by requiring that 30% of the state's
portion of sales and use tax revenue derived from sales on state
fairgrounds be deposited into a separate account to be spent on
fair-related purposes. (Pending in Senate policy committee)
FISCAL EFFECT: Appropriation: No Fiscal
Com.: No Local: No
SUPPORT:
Department of Alcoholic Beverage Control
Sonoma-Marin Fair
Western Fairs Association
AB 2135 (Levine) Page 4 of ?
OPPOSITION:
Alcohol Justice
ARGUMENTS IN SUPPORT: Proponents point out that "most fairs
have a clause in their concessionaire agreements that includes a
sharing of revenue from the sale of alcoholic beverages. This
has been common practice for a number of years and is vital to
the sustainability of fairs. Recently, such agreements have
come under scrutiny, creating confusion throughout the fair
industry. AB 2135 resolves the issue by making it clear the
practice is permissible at a fair."
ARGUMENTS IN OPPOSITION: Alcohol Justice states that "allowing
the splitting of alcohol revenue between licensees and entities
that host fairs creates an incentive to increase alcohol
availability at these events. The state already suffers more
than $22 billion in alcohol-related harm and over 10,000
alcohol-related deaths annually. We believe AB 2135 will
ultimately increase those catastrophic alcohol-related harms and
costs in the state."