Legislature(1995 - 1996)

03/22/1995 01:37 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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              
 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                 
 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              
 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                 
 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           
 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.                                                          

Document Name Date/Time Subjects