Legislature(1995 - 1996)
03/22/1995 01:37 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SJUD - 3/22/95 SB 87 ALCOHOLIC BEVERAGES: LOCAL OPTION & MISC. CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to order at 1:37 p.m. The first order of business was CSSB 87(CRA). JOE AMBROSE, legislative aide to Senator Taylor, gave the following testimony. Last year the Alcoholic Beverage Control Board (ABC Board), prompted by concerns over a lack of clarity about how local option elections are to be conducted, requested legislation to simplify the process. The ABC Board also asked the same vehicle be used to address technical amendments to Title 4. The result last year was SB 372, which passed the Senate but died in the House Rules Committee in the final days of the session. SB 87 is essentially the same as last year's legislation. MR. AMBROSE continued. CSSB 87(CRA) addresses the shortcomings in current statute governing local option, for which no provision is made for going from one type of option to another. Under current law, a community must first vote to remove all restrictions on the sale and/or importation of alcoholic beverages, then conduct a second election on new options. This burdensome process can cause confusion for municipalities and unincorporated villages. The Community and Regional Affairs committee substitute addresses specific concerns raised by local option communities. Those amendments were supported by the ABC Board, and the chairman of the sponsoring committee. MR. AMBROSE discussed proposed amendments to CSSB 87(CRA) that are supported by the Division of Elections, liquor industry and chair of the sponsoring committee. CSSB 87 (CRA) is primarily a housekeeping measure to clarify existing law to make local option a more understandable process. MR. AMBROSE explained Amendment #1 to page 22, lines 26-29. Line 27 should read, "under AS 04.11.491(a)(1) and the premises is a nonprofit club, corporation, or association that was..." and line 29 should cite "AS 04.11.491(a)(1)." Number 115 SENATOR GREEN asked if the nonprofit status would apply to corporations and associations. MIKE FORD, Legislative Legal Services, clarified the word "nonprofit" refers to "club," "corporation," and "association." SENATOR ADAMS noted to prevent future problems with interpretation, the word "nonprofit" should be inserted before all three words to clarify the intent. SENATOR TAYLOR made a motion to amend Amendment #1 to insert the word "nonprofit" in front of the words "club," "corporation," and "association" and to move Amendment #1. SENATOR ADAMS objected. MIKE FORD suggested an additional change to Amendment #1. He noted the word "place" was used on line 27 because it also appears on line 22. He suggested replacing the word "place" on line 22 with the word "premise" and changing line 27 to read, "premises are occupied by a nonprofit club...." SENATOR GREEN asked if line 24 needed to be amended to include the word "nonprofit." MR. FORD did not believe so. There being to objection to adopt Amendment #1, as amended, the motion carried. Number 173 SENATOR GREEN moved the adoption of Amendment #2 which was labeled "9-LS0673\F.1." SENATOR ADAMS objected. MR. AMBROSE addressed lines 19-22 on page 1 of Amendment #2 and line 1 on page 2. In revisions made to the Community and Regional Affairs Committee substitute, the effective date of Section 70 of the bill was inadvertently deleted. Section 73 would reinstate the immediate effective date. SENATOR ADAMS asked what Section 70 pertains to. MIKE FORD stated Section 70 allows the ABC Board to adopt regulations. RICK URION, Alaska Wine and Spirits Wholesale Association, explained the remainder of Amendment #2. He stated the 21st amendment to the U.S. Constitution allows states to control the importation of alcoholic beverages into their borders. All but six states have chosen to do so with a primary source law. Amendment register their suppliers and brands of liquor with the department, along with a statement from the manufacturer of the product that the wholesaler is the primary source. This procedure would protect the state and its revenue source by allowing products to be traced and ensuring the payment of excise taxes by wholesalers. It also protects the state, wholesalers and the jobs created within the industry. This language would prevent gray market goods (products manufactured in foreign countries intended for consumption or use in a foreign country) from entering the state of Alaska. SENATOR ADAMS questioned how Amendment #2 would affect a typical COSTCO member and how COSTCO distributes liquor from its warehouse. MR. URION clarified retailers would not be affected at all, unless they bought gray market goods. The bill is directed to wholesalers. He noted the industry will be self-policing. PATRICK SHARROCK, Director of the ABC Board, commented Amendment #2 does not address Senator Adams' question; Section 10 on page 5 does. Section 10 restricts purchases of alcoholic beverages for resale. SENATOR ADAMS asked what the ABC Board's position is on Amendment either amendment. He added the intent of the measure is to solidify, in law, what has been implied or perceived for many years. Number 265 SENATOR ELLIS asked Mr. Sharrock's personal opinion of the proposed amendment. MR. SHARROCK answered it solidifies a 3 tiered system of the distribution of alcoholic beverages throughout the country, which is probably beneficial. SENATOR ELLIS asked how the fees that would be established in statute compare to other states. MR. URION replied CSSB 87(CRA) differs from other state laws so it is difficult to compare. He developed the fee structure by determining the cost to the department to cover filing costs. SENATOR ELLIS asked if other states have a similar fee structure. MR. URION explained other states have fees but they are calculated in many different ways. SENATOR ELLIS questioned whether the fees in Amendment #2 are comparable in any way. MR. URION stated the industry believes the fees to be reasonable. SENATOR ELLIS requested, on behalf of the committee, that Mr. Urion and the ABC Board provide the committee with statistics on similar fees charged in other states. Number 300 SENATOR TAYLOR asked if the bill would generate new revenue. MR. URION replied affirmatively. SENATOR ADAMS asked for the ABC Board's position on Section 10, specifically in regard to a COSTCO member. MR. SHARROCK commented it would prohibit a licensed retailer from purchasing alcohol at that location for resale. SENATOR TAYLOR asked if liquor stores in the state were allowed to sell products at wholesale cost. MR. SHARROCK replied negatively, and explained a wholesale licensee cannot have an interest in a liquor store. SENATOR TAYLOR commented COSTCO has a retail license, but a COSTCO member could buy a large quantity of liquor at a discount price without paying sales tax. MR.SHARROCK noted that could be perceived as a wholesale purchase if the quantity was very large. SENATOR TAYLOR commented if the member bought the liquor for resale, he/she would be violating the law. MR. SHARROCK stated the problem lies in the fact that COSTCO is not required to ask the customer whether the purchase is for resale. SENATOR TAYLOR stated a retailer is prohibited from selling at wholesale prices. MR. SHARROCK added the sales tax has already been paid in the form of an excise tax. SENATOR MILLER asked where COSTCO purchases the liquor. MR. URION replied from a licensed wholesaler which must be Alaska based. SENATOR MILLER asked where the concern lies. MR. URION explained the bill does not change the way anything is currently done, and that there is not a problem with gray market goods; the bill merely closes up a loophole that exists. He reiterated a retailer cannot be a wholesaler, therefore the COSTCO situation is not a problem. SENATOR MILLER questioned the need for additional restrictions. He compared the situation to other retail businesses who resell products purchased from retailers. MR. URION clarified excise tax must be paid on alcoholic beverages and is paid by wholesalers. He explained the excise tax is only paid once, and not by retailers like COSTCO. SENATOR TAYLOR noted the non-Alaskan distributor who ships liquor into the state without paying the excise tax cannot be policed. The retailer who purchases that liquor will do so at a much cheaper price because the cost of the tax does not have to be taken into consideration. Number 390 SENATOR ADAMS suggested the deletion of Section 10 on page 5. Number 400 SENATOR GREEN asked for clarification of how gray market goods create market problems in other states. MR. URION replied in the contiguous states a wholesaler can transport goods from state to state easily. The problem is not as prevalent in Alaska, however there have been times when gray market goods have been transported into the state. He discussed quality control problems with such goods and the inability to remove those products from circulation when they are unsafe. SENATOR GREEN asked how CSSB 87(CRA) would prevent those problems. MR. URION explained it requires primary source distributors to register the names of the producers of goods. SENATOR TAYLOR commented the Washington State ABC Board determines which brands can be sold in the state, and the liquor stores are controlled by the state. SENATOR ADAMS questioned the fee structure in Amendment #2. MR. URION answered he determined the fee structure. SENATOR TAYLOR responded the committee had requested comparable fee calculations from other states. SENATOR ELLIS commented he supports the effective date change in Amendment #2 but preferred to wait for the fee structure information before taking action on that portion of the amendment. MR. SHARROCK noted Mr. Urion calculated the fee amounts to cover minimum administrative costs. SENATOR ELLIS stated he would like the fee comparisons to determine whether the fees are justifiable recompensation to the state. He asked that the comparisons include the total administrative costs to the ABC Board. SENATOR TAYLOR announced he would table Amendment #2. There being no objection, Amendment #2 was tabled. The committee discussed Amendment #3 (9-LS0673\F.2). SENATOR GREEN moved the adoption of Amendment #3. For purposes of discussion, SENATOR ELLIS objected. MR. AMBROSE noted Amendment #3 was submitted at the request of the Division of Elections. Number 478 MR. FORD discussed the intent of Amendment #3. It clarifies that local option language on a ballot contains a summary of the authority in question. This would define what option is being voted on. SENATOR TAYLOR asked if it clarifies the election process. MR. FORD responded it clarifies the ballot itself. SENATOR ELLIS removed his objection. SENATOR ADAMS objected for the purpose of discussion. He asked what happens when there are two competing petitions, one to impose a restriction, and the second to repeal that petition. MR. FORD stated CSSB 87(CRA) specifies that the first petition filed that is certified as meeting statutory requirements takes precedence (page 21, lines 11- 14). That petition must be voted on before a second petition can be filed. Number 515 SENATOR TAYLOR asked who the entity would be that determines certification. MR. FORD replied it would depend; if the election was municipal, it would be certified by the municipal clerk. SENATOR ADAMS questioned how a "dry" community would go "damp." He asked if a community would have to go from "dry" to "wet" before going "damp." MR. FORD explained it would be a one-step process. SENATOR ADAMS asked how often a petition can be filed. MR. FORD noted page 21 (subsection f) contains language which addresses time limitations. SENATOR ADAMS removed his objection, but stated he will look at subsection (f) on page 21 for possible amendment. There being no objection to the adoption of Amendment #3, the motion carried. Number 532 SENATOR ADAMS announced he was given a list of proposed amendments from the Department of Public Safety that he would present to the committee on Monday.