BILL ANALYSIS Ó SB 462 Page 1 Date of Hearing: July 8, 2015 ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION Adam Gray, Chair SB 462 (Wolk) - As Amended May 11, 2015 SENATE VOTE: 36-0 SUBJECT: Alcoholic beverages: tied house restrictions: Sonoma County. SUMMARY: Extends an existing tied-house exception in the Alcoholic Beverage Control Act (Act) pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include a specified entertainment complex, known as the Green Music Center, located on the campus of Sonoma State University. Additionally, this bill adds a new section of law to the Act that allows alcoholic beverage licensees, as specified, to make monetary or alcoholic beverage contributions to the Green Music Center under certain conditions. Specifically, this bill: 1)Expands an existing "tied-house" exception in the Act pertaining to the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees to include a complex of not more than 50 acres located on the campus of Sonoma State University, in Sonoma County. SB 462 Page 2 2)Provides that, with respect to this complex, advertising space and time may also be purchased from or on behalf of the owner of the complex, a long-term tenant or licensee of the venue, whether or not the owner, long-term tenant, or licensee holds an on-sale license. 3)Makes it explicit that the advertising space or time shall be purchased only in connection with live, artistic, musical, sports, food, beverage, culinary, or other cultural entertainment events and performances to be held on the premises of the complex. 4)Creates a new section of law in the Act that allows alcoholic beverage licensees, as specified, to make monetary or alcoholic beverage contributions to a complex dedicated to the presentation of live artistic, musical, sports, food, beverage, culinary, lifestyle, or other cultural entertainment events or performances, if all the following conditions are met: a)The permanent retail on-sale licensee in the complex is a nonprofit charitable corporation or association; SB 462 Page 3 b)The complex is not more than 50 acres located on the campus of , and owned by, Sonoma State University, in Sonoma County, dedicated to presenting live artistic, musical, sports, food, beverage, culinary, lifestyle, or other cultural and entertainment events and performances with venues that include a concert hall with a seating capacity of approximately 1,500 seats, a second concert hall with a seating capacity of up to 300 seats, an outdoor area with a seating capacity of 5,000 seats and a further outdoor area with a seating capacity of 10,000 seats; c)The complex has a permanent retail on-sale license that is a long-term tenant of the complex; d)The donated alcoholic beverages shall not be used or sold by the permanent retail licensee and a monetary contribution shall not be used in, or for the benefit of, the permanent retail on-sale licensee; e)The donation or monetary contribution shall not be conditioned directly or indirectly, in any way, on the purchase, sale, or distribution of any alcoholic beverage manufactured or distributed by the holder of the license by the licensee of the complex; SB 462 Page 4 f)The donated alcoholic beverages may only be used or sold in connection with fund raising activities held on or off the permanent licensed premises; and, g)The permanent retail on-sale licensee in the complex must serve other brands of beer, wine or distilled spirits, distributed by competing wholesaler entities in addition to the brand that is donated. 5)Allows the complex to acknowledge and thank a donating alcoholic beverage licensee in event programs, on the complex's Internet Web site, and on stage during an event or program. 6)Contains legislative findings (boilerplate language) with respect to the exceptions established by this bill to the general prohibition against tied house interests. 7)Contains an urgency clause to take effect immediately. SB 462 Page 5 8)Makes other minor, conforming, and technical changes. EXISTING LAW: 1)Establishes the Department of Alcoholic Beverage Control (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 for this purpose. 2)Separates the alcoholic beverage industry into three component parts, or tiers (referred to as the "tied-house" law or "three-tier" system), of manufacturer (including breweries, wineries and distilleries), wholesaler, and retailer (both on-sale and off-sale). The original policy rationale for this body of law was to: (a) promote the state's interest in an orderly market; (b) prohibit the vertical integration and dominance by a single producer in the market place; (c) prohibit commercial bribery and to protect the public from predatory marketing practices; and, (d) discourage and/or prevent the intemperate use of alcoholic beverages. Generally, other than exceptions granted by the Legislature, the holder of one type of license is not permitted to do business as another type of licensee within the "three-tier" system. SB 462 Page 6 3)Prohibits, in general, an alcohol manufacturer, wholesaler, or any officer, director, or agent of any such person from owning, directly, or indirectly, any interest in any on-sale license, or from providing anything of value to retailers, be it free goods, services, or advertising. 4)Prohibits paid advertising by winegrowers, beer manufacturers and distilled spirits producers in cases where a retail licensee also owns a sports or entertainment venue. Over the years numerous exceptions to this prohibition have been added to the ABC Act [e.g., Sleep Train Arena (formerly known as ARCO Arena) in Sacramento, Oakland Coliseum in Oakland, Arrowhead Pond Arena in Anaheim, Kern County Arena in Bakersfield, the National Orange Show Event Center in San Bernardino, California Speedway in Fontana, Grizzly Stadium in downtown Fresno, Raley Field in West Sacramento, HP Pavilion in San Jose, the Home Depot Center in the City of Carson, Levi's Stadium in the City of Santa Clara, and other venues]. 5)Allows wineries, breweries, distilled spirits manufacturers, and importers to donate their product(s) to certain nonprofit organizations (e.g., fraternal orders, social organizations, civic leagues, veterans' organizations, religious groups, horticultural organizations) for the purpose of assisting in fund-raising efforts. SB 462 Page 7 6)Provides a narrow tied-house exception for certain alcoholic beverage licensees to make monetary and alcoholic beverage contributions to a symphony association (the San Francisco Symphony) that is a nonprofit charitable corporation or association, under specified conditions. The symphony association must hold a retail on-sale license in a portion of its premises and no such gift shall be used in or for the benefit of the symphony association's retail on-sale license. Additionally, the symphony association must sell or serve competing brands of beer, wine, and spirits in addition to brands produced or marketed by the donating licensees. (B & P Code Section 25503.31) 7)Provides a narrow tied-house exception for the holder of a winegrower's license whose licensed premises of production are located within the Counties of Lake, Mendocino, Napa, or Sonoma to donate wine and make monetary contributions to an opera house (the Napa Opera House) that is a nonprofit charitable corporation provided certain conditions are met. The opera house must hold a permanent retail on-sale license and no such donation or monetary contribution shall be used in or for the benefit of the permanent retail on-sale licensee. In addition, donated wine may only be used or sold in connection with fundraising activities held on or off the permanent licensed premises. Additionally, the opera house is allowed to acknowledge and thank donating winegrowers on the opera house's Internet Web site, event programs and on stage during an event. (B & P Code Section 25503.32) FISCAL EFFECT: Unknown COMMENTS: SB 462 Page 8 Purpose of the bill . The author's office states that as with any performing arts venue, sponsorships and fund raising are critical components to the viability of the programs offered at the Green Center. Being located in Sonoma County, the local wine and beer community has been very supportive of the Green Center and would like to donate money or product and/or provide sponsorship for various activities. This bill allows certain alcoholic beverage producers to donate wine, beer, or spirits and also make monetary contributions to the Green Center, if certain conditions are met. The Green Center, in turn, would be allowed to sell those donated alcoholic beverages to patrons at fund raising events. The author's office emphasizes that the Legislature in past years has granted similar ABC privileges to the San Francisco Symphony and the Napa Opera House. The author's office notes that the second component of this bill relates to existing tied-house laws and the general prohibition against advertising arrangements between retail, wholesale and manufacturer licensees. The author's office points out that in order to allow local wineries and other producers and wholesalers of alcoholic beverages to pay for advertising at Green Center events, it is necessary to carve an exemption in the law. Over the years, numerous such exceptions have been incorporated into the ABC Act (see "existing law" item #4 above.) Thus, this bill amends ABC tied-house provisions to include the Green Music Center complex on the list of exemptions in the law, thereby allowing the Center to develop certain alcoholic beverage sponsorships with various manufacturers and distributors. SB 462 Page 9 Donald and Maureen Green Music Center . According to the author's office, the Green Music Center is a focal point for arts in Sonoma County, presenting year-round programming of premier classical, contemporary, jazz, chamber and world music artists in concert. The Green Music Center complex, located on the campus of Sonoma State University, includes a 1,400+ seat concert hall (Weill Hall), an intimate 240+ seat second concert hall (Schroeder Hall), as well as an outdoor area with seating for up to 5,000. Patrons seated on Weill Lawn are offered a number of distinct experiences including a full-service gourmet meal on the dining terrace, table seating, or lawn seating where purchased food or picnics can be enjoyed. In support . Writing in support, the California State University (CSU) states that Sonoma County wineries and breweries have been very supportive of the Green Music Center and would like the opportunity to partner with the Center for purposes of donating product and/or providing sponsorship for various activities. CSU believes that granting the Center an exemption similar to what others in the state have received would enable the campus to continue to support their Center and its mission. Also writing in support, the Family Winemakers of California states that traditionally, entertainment venues sell a variety of advertising signage that typically promote products for sale at the facility or site, including alcoholic beverages. Current advertising restrictions in the ABC Act would preclude any signage, paid for by the manufacturer, unless such an exception is created. This exception is patterned after one granted to SB 462 Page 10 the San Francisco Symphony in 2009, which has operated without incident. Furthermore, FWC notes that the exception does not change the existing requirement that other brands of beer, wine, or distilled spirits, distributed by competing wholesaler entities, be served at the venues in addition to the brand that is advertised which creates some equity for competing brands and wholesalers. Prior Legislation . SB 1531 (Wolk, Chapter 334, Statutes of 2012) authorized, until January 1, 2018, the Napa Valley Opera House to accept wine and monetary donations from wineries located within the Counties of Napa, Sonoma, Lake, and Mendocino under specified conditions. SB 131 (Wiggins, Chapter 638, Statutes of 2009) authorized alcoholic beverage licensees, until December 31, 2014, to make monetary or alcoholic beverage contributions to the San Francisco Symphony under specified conditions. REGISTERED SUPPORT / OPPOSITION: Support SB 462 Page 11 California State University, Office of the Chancellor California State University Sonoma Family Winemakers of California Opposition None on file Analysis Prepared by:Eric Johnson / G.O. / (916) 319-2531