Legislature(1993 - 1994)

04/26/1994 09:10 AM FIN

Audio Topic
* first hearing in first committee of referral
+ 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                 
  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                 
  [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                 
  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                 
  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.)                        
  The meeting was adjourned at approximately 11:35 a.m.                        

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