Legislature(2001 - 2002)

05/13/2002 01:20 PM JUD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                 CSHB 152(RLS)-BREWPUB LICENSES                                                                             
                                                                                                                                
CHAIRMAN  TAYLOR  informed  members   that  a  proposed  committee                                                              
substitute had been prepared.                                                                                                   
                                                                                                                                
SENATOR  ELLIS moved to  adopt the  proposed committee  substitute                                                              
(labeled Ford,  5/11/02, Version  S) as  the working draft  before                                                              
the committee.                                                                                                                  
                                                                                                                                
CHAIRMAN TAYLOR  announced that with  no objection, Version  S was                                                              
adopted  as  the  working  draft before  the  committee.  He  then                                                              
announced the arrival of Senator Donley and took an at-ease.                                                                    
                                                                                                                                
CHAIRMAN TAYLOR  called the  meeting back to  order and  asked Mr.                                                              
Griffin to describe the committee substitute to members.                                                                        
                                                                                                                                
MR. DOUG GRIFFIN,  Director of the Alcohol Beverage  Control Board                                                              
(ABC Board), testifying from Anchorage,  informed members that the                                                              
committee  substitute  will  allow   brewpubs  to  manufacture  an                                                              
additional quantity of beer, which  solves the problem for some of                                                              
the  new  businesses  that  are   doing  well  by  being  able  to                                                              
manufacture  a  product   in  Alaska.  It  will   also  give  some                                                              
flexibility  to  lower-capitalized  businesses  that want  to  get                                                              
"their foot  in the door" without  having to supplement  more of a                                                              
restaurant-type of business. The  big difference is that a brewpub                                                              
tied to  a beverage  dispensary license  will  be allowed to  sell                                                              
wholesale up  to 15,000 gallons of  its product to  other licensed                                                              
establishments. The ABC Board is  very supportive of the committee                                                              
substitute as it  encourages businesses that want to  make beer on                                                              
their  premises  to  supplement   more  of  a  restaurant-type  of                                                              
approach without having to spend  hard earned capital on licenses.                                                              
It  also  allows  those  businesses  with  a  beverage  dispensary                                                              
license to  brew more beer without  having to look outside  of the                                                              
state for  contracts. He noted the  limit on production  of 15,000                                                              
gallons  through  wholesalers  is  key  in that  it  protects  the                                                              
breweries that  only brew beer and  provides a check  and balance.                                                              
The ABC Board believes this legislation  is a good compromise that                                                              
will help the  growth of the brewing industry in  Alaska, which is                                                              
one of Alaska's success stories.                                                                                                
                                                                                                                                
CHAIRMAN TAYLOR  asked Mr.  Griffin to  explain how the  committee                                                              
substitute might  impact current  license holders, in  particular,                                                              
George Malecos (ph).                                                                                                            
                                                                                                                                
MR.  GRIFFIN  said Mr.  Malecos  would  be  able to  continue  the                                                              
operation  of   his  restaurant  without  a   beverage  dispensary                                                              
license. He  could operate his very  small on-site brewery  with a                                                              
restaurant  eating  place license  as  it  meets the  criteria  in                                                              
Section 3.  Other businesses could  do the same without  having to                                                              
purchase a beverage dispensary license.                                                                                         
                                                                                                                                
SENATOR THERRIAULT asked what the  impact of this legislation will                                                              
be on the Silver Gulch Brewery. He  asked whether it will increase                                                              
competition  for that  brewery as  it will now  be competing  with                                                              
larger volumes made by the brewpubs.                                                                                            
                                                                                                                                
MR. GRIFFIN  said that is  a valid concern  that was  expressed by                                                              
Mr.  Grady of  the Silver  Gulch  Brewery and  Mr.  Larson of  the                                                              
Alaska Brewing Company. That issue  has created the tension within                                                              
this discussion: people  in the brewery business  feel that Alaska                                                              
does not  have a  level playing  field because  the people  in the                                                              
restaurant business  are brewing as a sideline and  the brewing is                                                              
their "bread and  butter." He noted that is why  the limitation of                                                              
no more  than 15,000  gallons of  beer that could  be sold  by the                                                              
restaurants was included. He said  he does not know why the number                                                              
15,000 was  chosen but  he thought  it locks  them into  the level                                                              
currently  being  produced  so that  they  cannot  increase  their                                                              
market  share.  He  felt  that  future  legislatures  need  to  be                                                              
diligent  about requests  to raise  that  number to  make sure  an                                                              
increase  does  not  create unfair  competition  to  the  straight                                                              
brewery operations.                                                                                                             
                                                                                                                                
CHAIRMAN  TAYLOR   said  Alaska   statute  has  not   contained  a                                                              
limitation in the past.                                                                                                         
                                                                                                                                
MR.  GRIFFIN  clarified   that  the  limitation   was  on  overall                                                              
manufacturing  in the  amount  of 75,000  gallons,  which the  ABC                                                              
Board believed  was adequate  at the time.  He explained  that the                                                              
owners of  the Moose's Tooth  and the  Bear Tooth Theater  came up                                                              
against the limit when they converted  from breweries to brewpubs.                                                              
Relief  is provided  for  the brewers  because  once the  brewpubs                                                              
reach  the  150,000-gallon  limit,  they  can  only  wholesale  10                                                              
percent  of their  product (15,000  gallons)  in competition  with                                                              
straight breweries.                                                                                                             
                                                                                                                                
CHAIRMAN TAYLOR  maintained that  the business Senator  Therriault                                                              
was inquiring  about will  now, for the  first time, have  a limit                                                              
upon competition.                                                                                                               
                                                                                                                                
MR. GRIFFIN said that is correct.                                                                                               
                                                                                                                                
CHAIRMAN TAYLOR took public testimony.                                                                                          
                                                                                                                                
MS. KAREN BERGER informed members  that she did not have a copy of                                                              
the  committee substitute.  She stated  the  Silver Gulch  Brewing                                                              
Company, Alaska Brewing Company,  Haines Brewing Company and Homer                                                              
Brewing Company felt  the Moose's Tooth should be  able to brew as                                                              
much as  it wanted but  it should be  out of the  wholesale market                                                              
because the  brewers do not want  to compete with  their customers                                                              
and do not want to see "super licenses"  created. She said the cap                                                              
on 15,000  gallons for wholesale  is not  100 percent of  what the                                                              
brewers wanted but is valid.                                                                                                    
                                                                                                                                
CHAIRMAN TAYLOR asked  Ms. Berger if the 15,000-gallon  cap is not                                                              
as low as she would like but that she is glad a cap is in place.                                                                
                                                                                                                                
MS. BURGER  said she believes  some sort  of cap on  the wholesale                                                              
sales needs  to be  put in  place to  put a  harness on the  super                                                              
license of a brewpub with a beverage dispensary license.                                                                        
                                                                                                                                
CHAIRMAN  TAYLOR  said he  believes  that  is  the intent  of  the                                                              
legislation.                                                                                                                    
                                                                                                                                
MS. BURGER  commented that this  committee substitute  came around                                                              
so quickly the other companies have  not had a chance to confer on                                                              
it.                                                                                                                             
                                                                                                                                
CHAIRMAN TAYLOR said  he was aware of that but  the Legislature is                                                              
running out of  time so if people  want a cap, this is  the way to                                                              
get  it at  this point  in time.  He  thanked Ms.  Berger for  her                                                              
testimony.                                                                                                                      
                                                                                                                                
SENATOR DONLEY asked for an explanation  of the differences in the                                                              
committee substitute (Version S).                                                                                               
                                                                                                                                
CHAIRMAN  TAYLOR said  the major  difference is  the limit  of the                                                              
15,000-gallon cap  on wholesaled beer. The original  bill provided                                                              
for wholesale sales of up to 75,000 gallons.                                                                                    
                                                                                                                                
SENATOR  DONLEY asked  if  the final  House  version provided  for                                                              
wholesaling up to 75,000 gallons.                                                                                               
                                                                                                                                
CHAIRMAN  TAYLOR said  that is  correct but  the Senate  Judiciary                                                              
Committee substitute  restricts that amount to 15,000  gallons. He                                                              
explained  that the  competition between  the parties  was in  the                                                              
wholesale arena  and the  parties actually  ended up competing  on                                                              
their own brands.                                                                                                               
                                                                                                                                
SENATOR  DONLEY asked  if the  committee substitute  will allow  a                                                              
business to wholesale that cannot wholesale now.                                                                                
                                                                                                                                
CHAIRMAN  TAYLOR   explained  those  businesses  are   allowed  to                                                              
wholesale up to 75,000 gallons now.                                                                                             
                                                                                                                                
SENATOR DONLEY asked if that law expired.                                                                                       
                                                                                                                                
CHAIRMAN TAYLOR  said that is a  permanent law. He  explained that                                                              
it worked both  ways because the manufacturing  limitation was set                                                              
at  75,000 gallons  so they  could  have wholesaled  all of  their                                                              
capacity. He indicated that Section  3 in the committee substitute                                                              
was  also  changed.  It  now  allows a  person  who  has  a  small                                                              
restaurant  facility to  utilize the  premises without  purchasing                                                              
more liquor  licenses, as long as  the owner stays  within certain                                                              
limitations. He said that opportunity was not available before.                                                                 
                                                                                                                                
SENATOR DONLEY  asked how that will  affect the maximum  number of                                                              
licenses available in a community under existing law.                                                                           
                                                                                                                                
CHAIRMAN TAYLOR  said it will not  expand the available  number of                                                              
liquor licenses.                                                                                                                
                                                                                                                                
SENATOR  DONLEY  asked if  this  bill  will  change the  types  of                                                              
licenses and whether it will provide  licenses for different types                                                              
of premises.                                                                                                                    
                                                                                                                                
CHAIRMAN TAYLOR  said it only  applies to existing  businesses. He                                                              
added that  at one time,  new liquor  licenses were not  issued. A                                                              
person  who wanted  to buy  one had  to  buy it  from an  existing                                                              
business.                                                                                                                       
                                                                                                                                
SENATOR  DONLEY said  he  strongly opposes  the  expansion of  the                                                              
number  of liquor licenses  per community.  He  asked if a  person                                                              
must already have a liquor license  to be eligible to utilize this                                                              
legislation.                                                                                                                    
                                                                                                                                
CHAIRMAN TAYLOR  said that is correct  and it is designed  to save                                                              
those businesses that are struggling.                                                                                           
                                                                                                                                
[Discussion ensued  about member's  positions on this  legislation                                                              
as represented by a member of the other body.]                                                                                  
                                                                                                                                
SENATOR  COWDERY  moved  SCS CSHB  152(JUD)  from  committee  with                                                              
individual recommendations and its accompanying fiscal notes.                                                                   
                                                                                                                                
SENATOR DONLEY objected.                                                                                                        
                                                                                                                                
SENATOR ELLIS moved  to excise, from the committee  packet and the                                                              
official record,  the memo  from the sponsor  [April 10  memo from                                                              
Representative Halcro to Chairman  Taylor requesting a hearing] as                                                              
it is not of importance in itself and it colors the debate.                                                                     
                                                                                                                                
SENATOR  COWDERY withdrew  his motion  to move  SCS CSHB  152(JUD)                                                              
from committee with individual recommendations.                                                                                 
                                                                                                                                
CHAIRMAN  TAYLOR announced  with no objection  to Senator  Ellis's                                                              
motion, the motion carried.                                                                                                     
                                                                                                                                
SENATOR COWDERY again moved SCS CSHB 152(JUD) from committee.                                                                   
                                                                                                                                
SENATOR DONLEY objected.                                                                                                        
                                                                                                                                
A roll call vote  was taken. The motion to move  SCS CSHB 152(JUD)                                                              
from  committee  was  adopted with  Senators  Cowdery,  Ellis  and                                                              
Chairman  Taylor  in  favor and  Senators  Therriault  and  Donley                                                              
opposed.                                                                                                                        
                                                                                                                                
CHAIRMAN  TAYLOR  announced  that  SCS CSHB  152(JUD)  moved  from                                                              
committee and that  the committee would stand in  recess to a call                                                              
of the Chair.                                                                                                                   

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