Legislature(1993 - 1994)
04/26/1994 09:10 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 372
An Act relating to community local options for control
of alcoholic beverages; relating to the control of
alcoholic beverages; relating to the definition of
`alcoholic beverage'; and providing for an effective
date.
Co-chair Pearce directed that SB 372 be brought on for
discussion. PATRICK SHARROCK, Director, Alcoholic Beverage
Control Board, Dept. of Revenue, and KEVIN SULLIVAN, aide to
Senator Taylor, came before committee. The Co-chair
referenced CSSB 372 (Jud) as well as a draft CSSB 372 (Fin)
(work draft 8-LS1848\K, Ford, 4/26/94). Senator Kelly MOVED
for adoption of CSSB 372 (Fin) "K" version. No objection
having been raised, version "K" of CSSB 372 (Fin) was
ADOPTED.
[Temporary tape malfunction. Minutes of this portion of the
meeting reflect transcription of shorthand notes.]
Mr. Sharrock explained that the primary element of the
legislation would allow villages and communities local
options for control of alcoholic beverages. He directed
attention to a handout (copy on file) and noted the menu of
options, provisions relating to changing or removing an
option, and new provisions relating to delivery sites and
catering permits.
Mr. Sharrock next directed attention to a recent article
highlighting a situation at St. Marys. He explained that
the proposed legislation would make it easier for
communities to change the options they elect to be under.
It allows communities to change or remove local options. At
the present time, 112 villages are under one local option
provision or another. Some wish to change the current
status.
Mr. Sharrock further spoke to products from which alcohol
can be extracted and the fact that some communities seek to
prohibit the import of those products. The bill provides
some law enforcement authority to intervene in instances
where prohibited products are being utilized. Mr. Sharrock
alluded to the fact that the chief of police in one
community identified 25 drug-store products he requested not
be shipped into his community.
[The recording problem was corrected at this point.
Remaining minutes reflect transcription of the tape
recording of the meeting.]
Mr. Sharrock noted that Senator Kelly previously introduced
legislation requiring server training for those who serve or
sell alcoholic beverages. Common carrier dispensary
licenses were included in the list of entities to which
training applies. Common carriers that are in Alaska for a
limited time feel that the criteria and subject matter
relating to server training, as set forth by the board in
regulations, is burdensome, cumbersome, and includes matters
that do not apply to them. That is the rationale for
language within CSSB 372 (Jud), listing only statutes that
apply to the serving of alcohol in Alaska by employees
aboard common carriers. In response to a question from Co-
chair Pearce, Mr. Sharrock advised that the amendment
applies to cruise ships, the ferry system, airlines, and the
Alaska Railroad. Sec. 48, at page 27, specifies the
statutes common carriers must address in training employees
who sell alcohol. Training requirements for these carriers
is more limited than for other dispensers statewide. Need
for the accommodation has been demonstrated.
Kevin Sullivan next spoke to municipal tax exemptions. He
said that provisions do not limit municipal taxing
authority. However, they do not allow a municipality to
single out alcohol and apply a "sin tax" to it alone. The
thinking was that if municipalities are able to apply a
specific tax to alcohol, that presents a strong argument
against future imposition of alcohol taxes by the state. In
uncertain economic times, the state must protect its sources
of revenue. CSSB 372 (Jud) calls for a 20%, across-the-
board increase on alcoholic beverages--malt liquor, wine,
and distilled spirits. Tax moneys would flow directly to
the general fund.
Senator Sharp directed attention to Sec. 45, page 26, and
asked what changes in the Senate Judiciary version
accomplish in terms of municipal options. Mr. Sharrock
explained that the board was not involved in the changes
because they relate to policy questions. He then said that
language at line 27 appears to delete municipal ability to
impose a property tax on inventories. Line 29 states that a
sales tax on alcoholic beverages may be imposed if a general
sales tax is in place on other sales within the
municipality. Mr. Sharrock further pointed to related
language at Sec. 58, page 30. Kevin Sullivan reiterated
need to protect state revenue sources for the future. He
again noted that if each municipality imposes a different
tax structure, that presents a strong argument against
increased state taxes. The prohibition also provides some
certainty to the industry.
Co-chair Pearce noted an inconsistency in the Senate
Judiciary approach in that it seeks to prohibit
municipalities from singling out alcohol for taxation, yet
it allows the state to do just that and increases the state
tax by 20%. Mr. Sullivan responded that the state tax is
presently in statute. He concurred that the issue reflects
a policy call: Is the state going to give municipalities
the ability to levy such a tax or retain tax on alcohol to
the "exclusive domain of the state." Senate Judiciary
determined it should be a state issue.
Senator Sharp voiced his belief that the prohibition would
substantially impact the Fairbanks area, particularly if it
is retroactive to July 1, 1985. Mr. Sullivan noted that
provisions within CSSB 372 (Jud) would not apply to
municipal sales taxes in effect before the effective date of
the instant legislation. It would not retroactively claim
sales tax revenues generated in the past.
Senator Kelly inquired concerning the ABC board position on
the issue. Mr. Sharrock reiterated that the board has never
involved itself in tax matters. Senator Kelly asked what
amounts might be involved and questioned whether the
legislature should do away with those revenues without
knowing how much they are. Mr. Sullivan voiced his
understanding that a new fiscal note was being generated.
Co-chair Pearce concurred that the change would have an
impact and asked if the Dept. of Revenue was preparing a new
note. ROD MOURANT, Deputy Commissioner, Dept. of Revenue,
advised that the note would be available later in the day.
Discussion followed between Senator Rieger and Mr. Sharrock
concerning a situation in Anchorage. Mr. Sharrock advised
that the board resolved the issue three or four weeks ago
through adoption of regulations for restaurant licenses with
Karoake entertainment. The regulations allow that form of
entertainment in those restaurants between 6:00 and 9:00
p.m. He also acknowledged ongoing review and need for
revision of restaurant licensing. The board does not
believe revisions can be accomplished by regulation and has
discussed introduction of legislation.
Kevin Sullivan told members that CSSB 372 (Jud) incorporates
an additional change which prohibits the sale of beverages
containing more than 76% alcohol--152 proof. Everclear is
the only commonly sold beverage in excess of that limit. It
is 95% alcohol (190 proof) and is sold only in Georgia and
Alaska. Mr. Sharrock explained that, in the original
version of the bill, the board intended to prohibit shipping
of that product in response to written orders to package
stores. The board limitation was 75%. Senator Halford
offered an amendment in Senate Judiciary which changed the
percentage to 76. Senator Kerttula asked why the committee
sought to preclude the sale of Everclear. Mr. Sullivan said
that one is more susceptible to death from consumption of
great amounts of alcohol in concentrated form.
Senator Sharp pointed to subsection (1) in Sec. 28, page 21,
and asked if the prohibition on sale of an alcoholic
beverage if it "is not in liquid form" reflects new
language. Mr. Sharrock advised that the language is
currently in law. It was inserted in 1980 to address import
of powdered alcoholic drinks.
KEN SWISHER, Executive Director, Alaska Municipal League,
next came before committee and voiced concern regarding
Secs. 45 and 58, which he said reduce municipal taxing
authority. Tax on alcohol would be precluded in the absence
of a general sales tax at the local level. In the face of
declining municipal assistance and revenue sharing,
municipalities need the flexibility to raise revenues at the
local level and structure local taxes to fit the community.
Mr. Swisher advised that the Municipality of Fairbanks would
be impacted by the bill if its municipal sales tax was not
enacted before 1985. The current 5% liquor tax generates
approximately $850.0 per year for Fairbanks. That is one-
third of the amount received from revenue sharing and a
substantial amount for the community.
Sec. 58 removes municipal ability to impose property taxes
on liquor, and Sec. 45 deals with inventory and sales taxes.
Legislation that creates a further decline in municipal
revenues is unacceptable.
Mr. Swisher suggested that alcoholic beverages are one of
the most "price-elastic" purchases. He questioned
suggestions that a modest increase in the price would
dissuade people from purchasing it. Experience has not
shown that. Mr. Swisher then suggested that concern for
protecting the state's tax base by preventing local
governments from imposing such taxes is not well founded.
RESA JERREL, National Federation of Independent Business,
next came before committee on behalf of the federation's
4,800 members. She voiced opposition to provisions within
Sec. 59 (page 30) which would increase the alcohol tax. A
poll of members evidenced 92% in favor of reduction of state
spending prior to increases or imposition of new taxes. A
poll of taxing preferences resulted in 43% in support of a
state sales tax, support for a personal income tax, and 13%
for increased taxing of alcohol and liquor products. Ms.
Jerrel requested that Sec. 59 be removed from the bill.
Co-chair Pearce called for additional testimony on the bill.
None was forthcoming. She then queried members regarding
amendments and disposition of the bill. Senator Kelly MOVED
to delete Sec. 45 prohibiting both a municipal property tax
on alcoholic beverage inventories and the levying of a tax
on alcohol unless a general sales tax is in place. Co-chair
Pearce asked if the motion includes Sec. 58, the prohibition
against a property tax on alcoholic beverages. Senator
Kelly advised that he wished to incorporate Sec. 58 within
his motion. He explained that the state has always conceded
that sales and property taxes provide a source of revenue
for municipalities. It is not good public policy for the
state to attempt to solve its fiscal problems by extending
those problems to municipalities. Co-chair Pearce called
for a show of hands on the motion. The motion to delete
Secs. 45 and 58 CARRIED unanimously.
Brief discussion followed between Senator Rieger and Co-
chair Pearce concerning tobacco taxes contained within
pending health care legislation.
Senator Kelly requested that the Dept. of Revenue provide
updated fiscal note information on CSSB 372 (Jud). He
voiced need for information to support the Senate Finance
position when the bill is before the full Senate for action.
Senator Sharp directed attention to page 31 of the bill and
raised concern over opt-out provisions, unified
municipalities, and organized boroughs. He noted a number
of unincorporated communities in the Fairbanks vicinity and
suggested that new language might fragment borough policy.
Mr. Sharrock explained that under current law "established
village" is defined as:
An unincorporated community that is in the
unorganized borough and that has twenty-five or
more permanent residents or (b) an unincorporated
community that is in an organized borough has
twenty-five or more permanent residents and (1) is
on a road system and is located more than 50 miles
outside the boundary limits of a unified
municipality or (2) is not on a road system and is
located more than 15 miles outside the boundary
limits of a unified municipality.
The problem with the foregoing definition, in relation to
local option elections, is that local option statutes
presently provide that after a local option election
alcoholic beverages cannot be brought into:
the perimeter of an established village or a
certain distance from the perimeter.
Statutes contain no definition for either "perimeter" or
"distance." The instant bill proposes to establish a ten-
mile perimeter. If the perimeter is not established by the
village, the board could establish the perimeter.
Amendments to Title 29 attempt to make language consistent,
absent the perimeter aspect. The perimeter only comes into
play with regard to local options. Mr. Sharrock referenced
language in Secs. 50 and 51 at pages 28 and 29.
In response to a question from Senator Sharp, Mr. Sharrock
explained that, under current law, a village within a
borough could hold a local option election and the perimeter
would apply. The perimeter the board established under
regulation is a five-mile radius. That will have to be
amended or changed if the instant legislation is adopted.
An adequate and defining geographic area had to be
established in order to provide specific enforcement.
Senator Sharp inquired concerning need for Sec. 60. Mr.
Sharrock voiced his understanding that it attempts to "make
the definition consistent throughout other statutes."
In response to questions from Senator Kerttula, Mr. Sharrock
said that the board has promoted the proposed legislation
for a number of years. Although it was initially drafted in
October, it was introduced approximately two weeks ago by
Senate Judiciary. It is lengthy because it changes all
current-law section numbers relating to local option
provisions.
Co-chair Pearce asked if members were in accordance with
alcohol tax increases within the bill. No response was
forthcoming. The Co-chair then queried members regarding
disposition. Senator Rieger MOVED that CSSB 372 (Fin) pass
from committee with individual recommendations. Senator
Kerttula OBJECTED. Co-chair Pearce called for a show of
hands. Lacking a majority of four affirmative votes
required for passage, CSSB 372 (Fin) FAILED to move from
committee on a vote of 3 to 2. (Co-chair Frank and Senators
Rieger and Sharp voted in favor of passage, and Co-chair
Pearce and Kerttula were opposed. Senator Kelly did not
vote, and Senator Jacko was absent from the meeting.)
ADJOURNMENT
The meeting was adjourned at approximately 11:35 a.m.
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