BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1285|
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UNFINISHED BUSINESS
Bill No: SB 1285
Author: Leno (D)
Amended: 8/2/16
Vote: 21
SENATE GOVERNMENTAL ORG. COMMITTEE: 11-0, 4/12/16
AYES: Hall, Berryhill, Block, Gaines, Galgiani, Glazer,
Hernandez, Hueso, Lara, McGuire, Vidak
NO VOTE RECORDED: Hill, Runner
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
SENATE FLOOR: 38-0, 5/2/16
AYES: Allen, Anderson, Bates, Beall, Berryhill, Block,
Cannella, De León, Fuller, Gaines, Galgiani, Glazer, Hall,
Hancock, Hernandez, Hill, Hueso, Huff, Jackson, Lara, Leno,
Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Moorlach,
Morrell, Nguyen, Nielsen, Pan, Pavley, Roth, Stone, Vidak,
Wieckowski, Wolk
NO VOTE RECORDED: Hertzberg, Runner
ASSEMBLY FLOOR: 78-0, 8/18/16 (Consent) - See last page for
vote
SUBJECT: Alcoholic beverages: licenses
SOURCE: San Francisco Office of Economic and Workforce
Development
DIGEST: This bill authorizes, beginning January 1, 2017, the
Department of Alcoholic Beverage Control (ABC) to issue no more
than a total of five (5) new original "neighborhood-restricted"
special on-sale general licenses, for premises located within
specified City and County of San Francisco neighborhoods,
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subject to certain requirements and restrictions.
Assembly Amendments reduce the number of new licenses authorized
to be issued pursuant to this bill from a total of 28 to 5.
ANALYSIS:
Existing law:
1)Establishes the Department of 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.
2)Provides that the Department of 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 Department of 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 Department of 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.
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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
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 -
the City and County of San Francisco is a county of the 6th
class. (Government Code Section 28020)
This bill:
1)Authorizes, beginning January 1, 2017, the Department of ABC
to issue no more than a total of five (5) new original
neighborhood-restricted special on-sale general licenses for
premises located within the City and County of San Francisco.
Also, 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.
2)Limits these neighborhood-restricted special on-sale general
licenses to premises located within certain specified census
tracts (neighborhoods) and provides that a
neighborhood-restricted special on-sale general license may
exercise all of the privileges, and be subject to all the
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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)Requires 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)Provides 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
of fire or any act of God or other force beyond the control
of the licensee.
6)Provides that, upon the cancellation of any license issued
pursuant to this bill, the license shall be returned to the
Department of ABC for issuance to a new applicant following
procedures established in existing law.
7)Prohibits any person that holds a neighborhood-restricted
special on-sale general license issued pursuant to this bill
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from exchanging his or her license for an on-sale license for
public premises.
8)Stipulates 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 the Department of ABC to adopt rules and regulations
to enforce the provisions of this bill.
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.
Purpose of SB 1285. The author's office states that 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's office notes 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
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boosting foot traffic that helps increase community safety. The
author's office believes this bill will create an incentive for
entrepreneurs to launch new restaurants in currently vacant
storefronts.
The author's office argues 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's office notes 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
benefit from the increased vitality that successful nightlife
businesses could bring.
Under this bill, five (5) new neighborhood-restricted special
on-sale general licenses, for bona fide eating places, would be
authorized to be issued by the Department of 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 Neighborhoods corridors and identifying the areas
with few or no such licenses.
This bill provides for a maximum of five such restricted
licenses that may be issued by ABC in any of the census tracts
identified as 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
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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. Also, the author's
office states 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, the author's office contends that 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.
Furthermore, the author's office states 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 market.
Related/Prior Legislation
AB 461 (Achadjian, Chapter 110, Statutes of 2013) authorized the
Department of 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 the
Department of ABC to issue a maximum of 15 new original on-sale
general licenses, over a three-year period, for bona fide public
eating places in the County of Marin.
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.
SB 762 (Cox, Chapter 193, Statutes of 2007) authorized the
Department of ABC to issue 10 new original on-sale general
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licenses for bona fide public eating places in the County of
Mono.
AB 1252 (N. Waters, Chapter 753, Statutes of 1977) permitted the
Director of ABC to authorize the conversion of any on-sale
general license for "seasonal business" to an on-sale general
license, as specified.
SB 1092 (Berryhill, Chapter 571, Statutes of 1975) authorized
the Department of ABC to issue five 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 the
Department of ABC to issue three additional original off-sale
general licenses in a county of the 58th class (Alpine County).
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: Yes
According to the Assembly Appropriations Committee, any
additional licensing and oversight costs for the Department of
ABC will be minor and absorbable.
SUPPORT: (Verified8/19/16)
San Francisco Office of Economic and Workforce Development
(source)
California Restaurant Association
Family Winemakers of California
Golden Gate Restaurant Association
San Francisco Chamber of Commerce
OPPOSITION: (Verified8/19/16)
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None received
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, Harper,
Holden, Irwin, Jones, Jones-Sawyer, 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: Roger Hernández, Kim
Prepared by:Arthur Terzakis / G.O. / (916) 651-1530
8/19/16 19:37:16
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