BILL ANALYSIS Ó
SB 1285
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Date of Hearing: June 30, 2016
ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
Adam Gray, Chair
SB
1285 (Leno) - As Amended April 6, 2016
SENATE VOTE: 38-0
SUBJECT: Alcoholic beverages: licenses
SUMMARY: Would authorize the Department of Alcoholic Beverage
Control (ABC), beginning January 1, 2017 to issue no more than a
total of 28 new original "neighborhood-restricted" special
on-sale general licenses for a bona fide eating place, for
premises located within specified City and County of San
Francisco neighborhoods, subject to specific requirements and
restrictions. Specifically, this bill:
1)Allows, beginning January 1, 2017, ABC to issue no more than a
total of 28 new original neighborhood-restricted special
on-sale general licenses for premises located within the City
and County of San Francisco. In addition, makes it explicit
that an application for a neighborhood-restricted special
on-sale general license shall be subject to all the
requirements that apply to an on-sale general license for a
bona fide eating place and that license fees shall be the same
as those for an on-sale general license for a bona fide eating
place.
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2)Maintains these neighborhood-restricted special on-sale
general licenses to premises located within seven specified
census tracts and provides for no more than a total of four
such licenses within each of the seven designated census
tracts (neighborhoods). Also, provides that a
neighborhood-restricted special on-sale general license may
exercise all of the privileges, and be subject to all the
restrictions, of an on-sale general license for a bona fide
eating place.
3)Prohibits the issuance of a neighborhood-restricted special
on-sale general license until any existing on-sale licenses
issued to the applicant for the same premises are canceled.
Also, prohibits any person who currently holds an on-sale
general license for a premises from applying for a license
issued pursuant to this bill for that licensed premises.
4)Provides the applicant for one of these new licenses to
conduct a minimum of one pre-application meeting either on the
premises of the business or within a one-mile radius of the
premises to discuss the application with neighbors and members
of the community. Also, requires the applicant to mail
notification of the pre-application meeting to residents,
neighborhood associations and law enforcement entities, as
specified. In addition, requires the applicant to obtain
signed verification from the local governing body that he/she
has completed the pre-application meeting.
5)States that a license issued pursuant to this bill shall not
be:
a) transferred between counties;
b) transferred to any person, partnership, limited
partnership, limited liability company, or corporation,
except as specified; and,
c) transferred to any other premises with the exception of
any licensee whose premises have been destroyed as a result
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of fire or any act of God or other force beyond the control
of the licensee.
6)Stipulates that, upon the cancellation of any license issued
pursuant to this bill, the license shall be returned to ABC
for issuance to a new applicant following procedures
established in existing law.
7)Provides any person that holds a neighborhood-restricted
special on-sale general license issued pursuant to this bill
from exchanging his or her license for an on-sale license for
public premises.
8)States that a neighborhood-restricted special on-sale general
license issued pursuant to this bill shall not, with respect
to beer and wine, authorize the exercise of the rights and
privileges granted by an off-sale beer and wine license.
9) Requires ABC to adopt rules and regulations to enforce the
provisions of this bill.
EXISTING LAW:
1) The enactment of the 21st Amendment to the U.S. Constitution
in 1933 repealed the 18th Amendment and ended the era of
Prohibition. Accordingly, states were granted the authority to
establish alcoholic beverage laws and administrative structures
to regulate the sale and distribution of alcoholic beverages.
2) Establishes ABC and grants it exclusive 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.
3) Provides ABC must deny an application for a license if
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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.
4) 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 3-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.
5) 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.
6) 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
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.
7) Provides for 58 counties and 58 "classes" of counties - one
county to each class based on their 1970 Census populations -
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the City and County of San Francisco is a county of the 6th
class.
FISCAL EFFECT: Unknown
COMMENTS:
Purpose of the bill : According to the author, this bill is
intended to create a new type of neighborhood-restricted,
non-transferable liquor license for restaurants in order to
promote economic development, job growth, and increased vitality
in San Francisco's underdeveloped commercial corridors. The
author states that successful restaurants help to activate
neighborhood commercial corridors by reducing vacancies, adding
to the variety of neighborhood-serving small businesses,
creating good jobs for residents, providing important spaces for
neighbors to meet and socialize, and boosting foot traffic that
helps increase community safety. The author states this bill
will create an incentive for entrepreneurs to launch new
restaurants in currently vacant storefronts.
The author states that because state law has capped the number
of full liquor licenses available in San Francisco, licenses can
only be purchased from existing licensed business owners, unless
of course an applicant gets lucky in the annual ABC liquor
license drawing. Due to the scarcity of available licenses,
full liquor licenses are currently being sold on the secondary
market in San Francisco for around $300,000 with prices expected
to increase as the City's population continues to grow. The
author maintains that these extraordinary prices make full
liquor licenses inaccessible for small business owners in the
City's outer neighborhoods. Simply put, a small restaurant
owner cannot charge the prices needed to recoup such an
investment. As a result, licensed establishments tend to
concentrate in - and continue to migrate to - the City's most
active and bustling areas, even though many out-lying
neighborhood and commercial corridors would significantly
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benefit from the increased vitality that successful nightlife
businesses could bring.
Under this bill, 28 new neighborhood-restricted special on-sale
general licenses, for bona fide eating places, would be
authorized to be issued by ABC exclusively within specific San
Francisco census tracts (neighborhoods). The author's office
notes that these neighborhoods were selected in line with the
City's Invest in Neighborhoods strategy, which is an interagency
partnership to strengthen and revitalize certain neighborhood
commercial districts around San Francisco. Specifically, the
census tracts were selected by comparing the map of current type
47 licenses scattered across the City with the Invest in
Neighborhood corridors and identifying the areas with few or no
such licenses.
This bill provides for a maximum of four such restricted
licenses that may be issued by ABC in each of the seven census
tracts containing a target neighborhood commercial corridor.
The author's office has identified these census tracts as
follows: (1) Third Street in Bayview; (2) San Bruno Avenue in
Portola; (3) Leland Street and Bayshore in Visitacion Valley;
(4) Mission Street in the Excelsior; (5) Ocean Avenue; (6)
Taraval Street in the Sunset; and, (7) Noriega Street in the
Sunset.
The author's office emphasizes that the neighborhood-specific
limits attached to these new licenses will prevent any
overconcentration of alcohol licenses in corridors that already
have a substantial amount of nightlife. The author maintains
this bill is structured to ensure that the applicants who pursue
these licenses will engage with the local community through a
pre-application vetting process, as specified. Additionally,
this bill will not diminish the value of any existing liquor
license because these new licenses would not be transferrable to
a new business owner or a new location. In addition, the author
asserts that owners of existing full liquor licenses across San
Francisco would remain able to sell or transfer their licenses
citywide and reap the value of their investment on the private
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market.
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 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, ABC will issue five new
licenses in that county. ABC holds a drawing 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. Typically, that is 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. According to ABC, currently there are
approximately 13,360 Type 47 licenses statewide.
Policy consideration : The bill is not clear relating to which
local governing body will be empowered to approve the
application at the local level before being forwarded to ABC for
approval. To provide checks and balances within the application
process, the author should consider an amendment, which would
require the San Francisco Board of Supervisors to approve by
vote an application before it is forwarded to ABC for approval.
The bill requires the applicant to conduct a minimum of one
pre-application meeting to discuss the application with
neighbors and members of the community within the census tract
in which the premises are located, however, it does not outline
the specific goals of this meeting. Who would be empowered to
make the final determination of gauging the success, or lack
thereof, relating to the meeting? The intent of the bill is
somewhat unclear why the new 28 special on-sale general licenses
would be divided evenly among census tracts in the county.
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Might it be more prudent to disburse the licenses to address the
true need and demand within the specified census tracts?
The committee might consider the precedent this bill could set
by allowing a total of 28 on-sale general licenses for a bona
fide eating place at one given time in a specific county. Does
this mean that Los Angeles County might be eligible for up to
364 licenses since its population is approximately 13 times
greater than San Francisco County? Since 2008, the Assembly
Governmental Organization Committee has not passed out a bill,
which granted more than five new on-sale general licenses for a
bona fide eating place in a given year for a specific county.
To further examine how to best deal with the perception that
there is a lack of licenses available in various counties
throughout the state, the committee may want to consider holding
an informational hearing on this matter in the fall.
Related Legislation : AB 1558 (Mathis) of 2016. World authorize
ABC to issue no more than a total of 5 new original on-sale
general licenses, over a 2-year period, for bona fide public
eating places in the County of Inyo. (Pending in Senate
Appropriations G.O. Committee)
AB 1670 (Dodd) of 2016. Would authorize ABC to issue a total of
5 new original on-sale general licenses per year to a bona fide
public eating place with a seating capacity of 25 or more
diners, for a period of 3 years in the County of Napa. The bill
would prohibit more than 15 of those licenses from being issued.
(Pending in the Senate Appropriations Committee)
Prior legislation : AB 461 (Achadjian), Chapter 110, Statutes of
2013. Authorized ABC to issue no more than a total of five new
original on-sale general licenses, over a three-year period, for
bona fide public eating-places in the County of San Luis Obispo.
AB 1320 (Allen), Chapter 467, Statutes of 2012. Authorized ABC
to issue a total of 5 new original on-sale general licenses for
bona fide public eating places per year, for three years in the
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County of Marin. The bill would prohibit more than 15 of those
licenses from being issued.
AB 2266 (Evans), Chapter 130, Statutes of 2008. Authorizes ABC
to issue a total of 5 new original on-sale licenses, per year
for a period of three years, for bona fide public eating places
having a seating capacity of 50 or more diners in Napa County.
SB 762 (Cox), Chapter 193, Statutes of 2007. Authorized ABC to
issue 10 new original on-sale general licenses for bona fide
public eating-places in the County of Mono.
SB 1092 (Berryhill), Chapter 571, Statutes of 1975. Authorized
ABC to issue 5 additional new original on-sale general licenses
for bona fide public eating places (seating for 100 or more
diners) in any county where the inhabitants number less than
5,000 but more than 3,000 (Mono County) according to the 1970
federal census and where the major economy of that county is
dependent upon the year-round use of that county's recreational
facilities.
SB 784 (Berryhill), Chapter 407, Statutes of 1975. Authorized
ABC to issue 3 additional original off-sale general licenses in
a county of the 58th class (Alpine County).
REGISTERED SUPPORT / OPPOSITION:
Support
San Francisco Chamber of Commerce
Family Winemakers of California
Golden Gate Restaurant Association
San Francisco Office of Economic and Workforce Development
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Opposition
None on file
Analysis Prepared by:Eric Johnson / G.O. / (916)
319-2531