Legislature(1993 - 1994)
04/26/1994 09:10 AM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.