BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 683| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- UNFINISHED BUSINESS Bill No: SB 683 Author: Wolk (D), et al. Amended: 6/21/16 Vote: 21 PRIOR VOTES NOT RELEVANT SENATE GOVERNMENTAL ORG. COMMITTEE: 11-0, 8/23/16 (pursuant to Senate Rule 29.10) AYES: Hall, Berryhill, Bates, Block, Gaines, Galgiani, Glazer, Hill, Hueso, Lara, Vidak NO VOTE RECORDED: Hernandez, McGuire ASSEMBLY FLOOR: 78-0, 8/18/16 - See last page for vote SUBJECT: Alcoholic beverage licenses: nonprofit sales license SOURCE: Author DIGEST: This bill grants the Department of Alcoholic Beverage Control (ABC) the authority to issue a special nonprofit sales license to a nonprofit mutual benefit corporation associated with the Department of Viticulture and Enology at the University of California Davis (UC Davis) and permits the licensee to, among other things, accept up to 20,000 gallons of wine produced by UC Davis and sell the wine to consumers or to other licensees authorized to sell wine. Assembly Amendments gut and amend the contents of the bill relating to the State Library and add language that allows the SB 683 Page 2 Department of ABC to issue a special license, with certain privileges, to a nonprofit associated with the Department of Viticulture and Enology at UC Davis. ANALYSIS: Existing law: 1)Establishes the Department of ABC and grants it exclusive authority to administer the provisions 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 for this purpose. 2)Separates the alcoholic beverage industry into three component parts of manufacturer, wholesaler, and retailer. The original policy rationale for this body of law was to prohibit the vertical integration of the alcohol industry and to protect the public from predatory marketing practices. Generally, other than exemptions 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. This is known as the "tied-house" law. 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)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, SB 683 Page 3 horticultural organizations) for the purpose of assisting in fund-raising efforts. 5)Allows students who are at least 18 years of age and enrolled in degree granting programs in enology or brewing at accredited public postsecondary educational institutions to taste, but not consume, an alcoholic beverage for educational purposes as part of the instruction in a course required for a degree. 6)Allows nonprofit organizations that either promote home brewing or home winemaking, or that are primarily composed of home brewers or home winemakers, to sell beer or wine at fundraising events subject to specified conditions, including requiring an educational component to the event and limiting the nonprofit organization to two such events that sell wine or beer pursuant to this authorization per year. 7)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 a special nonprofit sales license to a nonprofit mutual benefit corporation that that has a board membership composed of the Dean of the College of Agricultural and Environmental Sciences, the Chair of the Department of Viticulture and Enology, and the Chair of the Department of Food Services Technology of the public university (UC Davis) located within the county of the 28th class (Yolo County) that includes courses in viticulture and enology in its curriculum. 2)Provides that the special nonprofit sales license authorizes the licensee to do all of the following: SB 683 Page 4 a) Accept the transfer of, and take title to, up to 20,000 gallons of wine per year produced by the public university, notwithstanding that the public university does not hold any license issued pursuant to this division. Produced includes wine donated to, or purchased by, the public university for educational or experimental purposes and that are thereafter treated or processed by the public university. b) Sell wine received pursuant to item #2(a) above, to consumers for consumption off the licensed premises or to other licensees authorized to sell wine. c) Give licensees samples of the wine it sells, subject to the tasting limitations in current law and any Department of ABC regulations. 3)Provides that the special nonprofit sales license does not authorize the licensee to purchase or otherwise obtain wine from a licensee or other manufacturer or seller of wine, except as specified in this bill. 4)Provides that a public university, as defined above, may transfer wine produced by the public university to a special nonprofit sales licensee. 5)Provides that the original fee for the special nonprofit sales license shall be $500 and the annual renewal fee shall be $100. Background Purpose of SB 683. According to the author's office, this bill SB 683 Page 5 is intended to create a special nonprofit sales license within the ABC Act that will benefit the environment and the Department of Viticulture and Enology at UC Davis. UC Davis, through its College of Agricultural and Environmental Sciences, offers undergraduate and graduate degrees in the areas of grape growing and wine making. Currently, any product produced through the program is discarded. The author's office states that "creating a specific nonprofit entity, separate from the university, will allow wine to be marketed, with the proceeds remitted to the department that created the product to support its mission of teaching, research and extension. SB 683 will also help prevent unnecessary and avoidable waste by allowing wine to be sold instead of discarded." Prior Legislation AB 1989 (Chesbro, Chapter 239, Statutes of 2014) created a narrow exception to existing ABC Act provisions relating to consumption or possession of alcoholic beverages by underage persons by allowing students who are at least 18 years of age and enrolled in degree granting programs in enology or brewing at accredited public postsecondary educational institutions to taste, but not consume, an alcoholic beverage for educational purposes as part of the instruction in a course required for a degree. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: No According to the Assembly Appropriations Committee, no additional state costs. SUPPORT: (Verified8/22/16) SB 683 Page 6 California Association of Winegrape Growers Family Winemakers of California Germain-Robin Distillery Heitz Wine Cellars Ironstone Vineyards Long Meadow Ranch & Affiliates Moulds Family Vineyard Napa Valley Vintners Napa Valley Grapegrowers Paul Hobbs Winery Ramey Wine Cellars St. George Spirits, Inc. The Wine Group Treasury Wine Estates Wente Family Estates Wine Institute OPPOSITION: (Verified8/22/16) Alcohol Justice California Alcohol Policy Alliance ARGUMENTS IN SUPPORT: Proponents note that the UC Davis Department of Viticulture and Enology has played a vital role in providing the California wine industry and grape growers with the knowledge and techniques to continuously improve winemaking and farming methods. Their research has enabled California grape growers and winemakers to produce some of the best wines in the world. Allowing the university to recoup some of its operational costs would result in more funds for research to the benefit of the entire wine industry in California. Proponents also contend that the current practice of disposing of wine products is unsustainable from an environmental point-of-view and that this bill makes fiscal sense. The privilege of selling the wine, predominantly in bulk, would enable the UC Davis Department of Viticulture and Enology to SB 683 Page 7 recoup some of the production costs it incurs and also funnel excess revenue into support for teaching, research, and extension. ARGUMENTS IN OPPOSITION: Opponents claim that SB 683 will expand the number of alcohol license types and, in turn, increase the availability of alcohol. Opponents believe this new license type opens the door to additional entities that produce other alcohol products, thus creating greater problems in more communities, which will negatively impact public health and safety in California. ASSEMBLY FLOOR: 78-0, 8/18/16 AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon NO VOTE RECORDED: Harper, Roger Hernández Prepared by:Arthur Terzakis / G.O. / (916) 651-1530 8/23/16 20:03:09 **** END ****