Legislature(1999 - 2000)
05/10/1999 02:25 PM Senate JUD
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
SENATE JUDICIARY COMMITTEE
May 10, 1999
2:25 p.m.
MEMBERS PRESENT
Senator Robin Taylor, Chairman
Senator Rick Halford, Vice-Chairman
Senator Dave Donley
Senator Johnny Ellis
MEMBERS ABSENT
Senator John Torgerson
COMMITTEE CALENDAR
SENATE BILL NO. 114
"An Act relating to impersonating a public servant."
-MOVED CSSB 114(JUD) OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 69(FIN) am
"An Act requiring certain reports or information from alcoholic
beverage licensees that are also limited liability organizations;
relating to powers of employees of the Alcoholic Beverage Control
Board to investigate violations of certain criminal laws; relating
to regulation of alcoholic beverage licenses issued to limited
liability organizations; relating to brewpub licenses; relating to
package store licenses; relating to a licensee's violation of laws
relating to alcoholic beverage licensing, sales, and distribution
and to imposition, monitoring, and enforcement of conditions
imposed on alcohol beverage licensees that are recommended by a
local governing body and that are required to be imposed on an
alcohol beverage licensee unless the Alcoholic Beverage Control
Board determines the recommended conditions are arbitrary,
capricious, or unreasonable; relating to consumption of alcoholic
beverages on licensed premises; relating to the liability of a
member of a limited liability organization who also holds an
alcoholic beverage license; extending the termination date of the
Alcoholic Beverage Control Board to June 30, 2003; relating to
residency requirements for obtaining an alcoholic beverage license;
and providing for an effective date."
-MOVED CSHB 69(JUD) OUT OF COMMITTEE
SENATE BILL NO. 162
"An Act relating to the rule against perpetuities, nonvested
property interests, and powers of appointment; and providing for an
effective date."
SCHEDULED BUT NOT HEARD
SENATE BILL NO. 163
"An Act relating to a trustee's duties to inform and account to
beneficiaries; relating to the revocation, modification,
termination, reformation, construction, and trustees of trusts; and
relating to transfer restrictions in trusts."
SCHEDULED BUT NOT HEARD
SENATE BILL NO. 165
"An Act relating to the remedies available to judgment creditors
against limited liability company members and their assignees and
against limited partnership general and limited partners and their
assignees; and providing for an effective date."
SCHEDULED BUT NOT HEARD
SENATE BILL NO. 166
"An Act relating to the amendment and revocation of spouses'
community property agreements and community property trusts; and
providing for an effective date."
SCHEDULED BUT NOT HEARD
SENATE BILL NO. 109
"An Act relating to prohibited campaign contributions; and
providing for an effective date."
PREVIOUS SENATE COMMITTEE ACTION
SB 114 - See Judiciary minutes dated 3-29-99 and 4-12-99.
HB 69 - No previous Senate action.
SB 162 - See Judiciary Committee minutes dated 5-3-99.
SB 163 - See Judiciary Committee minutes dated 5-3-99.
SB 165 - No previous Senate action.
SB 166 - No previous Senate action.
SB 109 - See Judiciary minutes dated 4-19-99.
WITNESS REGISTER
Representative Norm Rokeberg
Alaska State Legislature
Juneau, Alaska 99081-1182
POSITION STATEMENT: Sponsor of HB 69
Geoff Larson
Alaskan Brewing Company
5429 Shaune Drive
Juneau, AK 99801
POSITION STATEMENT: Supports extending the ABC Board but has
concerns about HB 69
Mark Staples, CEO
Midnight Sun Brewing Company
9660 Reliance
Anchorage, AK 99507
POSITION STATEMENT: Supports extending the ABC Board but has
concerns about HB 69
Gary Klopper
717 W 3rd Ave
Anchorage, AK 99501
POSITION STATEMENT: Supports extending the ABC Board but has
concerns about HB 69
Shawn Wendling
737 W 5th Ave
Anchorage, AK 99501
POSITION STATEMENT: Supports HB 69
Chris Andrus
Glacier Brewhouse
737 W 5th Ave
Anchorage, AK 99501
POSITION STATEMENT: Supports HB 69
Larry Hackenmiller
518 Farmers Loop Road
Fairbanks, AK 99712
POSITION STATEMENT: Expressed concerns about HB 69
Karen Berger
Homer Brewing Company
1562 Homer Spit Rd. #A
Homer, AK 99603
POSITION STATEMENT: Supports the extension of the ABC Board but is
opposed to HB 69
Matt Jones
3300 Old Seward
Anchorage, AK 99507
POSITION STATEMENT: Supports HB 69
Doug Griffin
Alcohol Beverage Control Board
550 W 7th #350
Anchorage, AK 99501
POSITION STATEMENT: Answered questions about the ABC Board and HB
69
ACTION NARRATIVE
TAPE 99-30, SIDE A
Number 001
CHAIRMAN ROBIN TAYLOR called the Senate Judiciary Committee meeting
to order at 2:25 p.m. Present were Senators Halford, Donley,
Ellis, and Taylor. The first order of business to come before the
committee was SB 114.
SB 114-IMPERSONATE POLICE/EMERGENCY VEHICLE
CHAIRMAN TAYLOR informed committee members that a committee
substitute had been prepared (CSSB 114) that includes Senator
Halford's amendments to Sections 3 and 4.
SENATOR DONLEY moved to adopt CSSB 114(JUD), version G, dated
4/23/99, as the working document of the committee. There being no
objection, CSSB 114(JUD) was adopted.
CHAIRMAN TAYLOR proposed an amendment (Amendment 1) to assure that
a public servant cannot use his or her title, uniform, badge, or
other identifying accouterment of office, in a political fashion.
SENATOR HALFORD moved to adopt Amendment 1.
CHAIRMAN TAYLOR explained Amendment 1 increases the penalty from a
violation to an offense.
SENATOR DONLEY asked if Amendment 1 applies to all government
employees or to state government employees only. CHAIRMAN TAYLOR
said he believes it applies to all government employees. He added
that a city policeman could not have his picture taken wearing a
badge and then endorse a partisan political candidate with that
photograph.
SENATOR DONLEY expressed concern that Amendment 1 is too broad and
will be applied to situations for which it was not intended.
CHAIRMAN TAYLOR noted public servants who are elected to a partisan
public office are exempted from the provision in the following
paragraph. People who are not exempt are those elected to a non-
partisan office, such as the mayor of Juneau. The mayor could not
hold a fundraiser at his home, using his title as mayor, for a
partisan gubernatorial candidate.
Number 135
SENATOR ELLIS objected to the adoption of Amendment 1. The motion
to adopt Amendment 1 carried with Senators Halford, Donley, and
Taylor voting "yea," and Senator Ellis voting "nay."
SENATOR ELLIS informed committee members that Randy Smith, a
constituent, expressed concern about language in the bill that
makes a strong connection between municipal and local police
department control and the activities of community patrols. He
noted that Mr. Smith was unable to testify at the last hearing.
CHAIRMAN TAYLOR asked if Senator Ellis worked with Mr. Smith on his
concern. SENATOR ELLIS said he worked with all community patrols
that got back to him, however Mr. Smith did not get back to him
until after action was taken, therefore his concerns were not
satisfied.
CHAIRMAN TAYLOR asked if Mr. Smith suggested language to resolve
his concerns.
Number 158
SENATOR DONLEY pointed out that Mr. Smith's concerns revolve around
the fact that several years ago the Municipality of Anchorage (MOA)
refused to cooperate with, or organize, community patrols. CSSB
114(JUD) contains the language, "organized by, or in cooperation
with." When the MOA simply refused to cooperate, the citizens
undertook organizing community patrols on their own.
SENATOR ELLIS thought the MOA has moved forward in that arena,
however Mr. Smith remained concerned because he serves as the
institutional memory for the whole effort.
CHAIRMAN TAYLOR pointed out the phrase, "organized by, or in
cooperation with," begins on the bottom of page 1 and continues on
the top of page 2 of CSSB 114(JUD).
SENATOR ELLIS suggested and moved the following language as
Amendment 2, "of an organized community patrol within a community
or municipality." He said that language does not require a direct
connection and that Mr. Smith's intent is to do no harm to
community patrols. There being no objection, the motion carried.
Number 211
SENATOR HALFORD moved CSSB 114 (JUD) from committee with individual
recommendations. SENATOR ELLIS objected. The motion carried with
Senators Halford, Donley, and Taylor voting "yea," and Senator
Ellis voting "nay."
HB 69-ALCOHOLIC BEVERAGE CONTROL BOARD
REPRESENTATIVE NORM ROKEBERG, sponsor, said HB 69 is an omnibus
Alcohol Beverage Control (ABC) Board bill. It extends the sunset
date to the year 2003. HB 69 is consistent with the latest audit,
and the bulk of the bill places limited liability partnerships
(LLPs) and limited liability corporations (LLCs) into statute at
the request of the Board.
SENATOR HALFORD asked what LLOs and LLPs are in terms of legal
entities.
REPRESENTATIVE ROKEBERG explained "LLO" is an acronym used by the
legal drafter for limited liability organizations which encompasses
both LLPs and LLCs.
CHAIRMAN TAYLOR noted LLOs are like the old limited partnerships in
that they require a general managing partner. He asked if
liability still flows to someone, and whether LLO formation acts as
a further shield against liability in relation to the alcohol
beverage control laws which require someone to be responsible.
Number 262
REPRESENTATIVE ROKEBERG assumed the liability issue is taken up
with the LLCs but not with the LLPs. He added that the Legislature
adopted these forms of business organizations and has been
incorporating them into applicable titles and chapters. The ABC
board requested that they be adopted into its governing statutes.
CHAIRMAN TAYLOR pointed out HB 69 sets up a triggering device which
requires notification to the ABC Board of the transfer of any
ownership in excess of 10 percent of an organization.
REPRESENTATIVE ROKEBERG said that requirement also applies to
corporations.
CHAIRMAN TAYLOR questioned whether HB 69 originally extended the
sunset date only. REPRESENTATIVE ROKEBERG answered HB 69 reflects
a bill heard in the Senate Judiciary Committee last year. Senator
Torgerson requested that the previous bill contain a provision
covering the sales of hospitality packages of cruise ships and
social events. The LLO provisions were requested by the ABC Board.
He noted HB 69 is more omnibus in that regard.
CHAIRMAN TAYLOR asked why the term "peace officers" is redefined in
HB 69 and who requested that change.
REPRESENTATIVE ROKEBERG noted that amendment was adopted by the
House Finance Committee at Senator Donley's request.
Number 302
SENATOR HALFORD expressed concern that Section 2 gives the ABC
Board the authority to grant any police powers it desires to its
peace officers, including the power to enforce laws beyond, and
different from, gambling, prostitution, or illegal alcohol use or
sales.
SENATOR DONLEY explained the actual powers are granted by the
commissioner of the Department of Public Safety, but the ABC Board
may request that an officer's powers be expanded. To date, the
commissioner has authorized the ABC Board investigators to
investigate gambling and prostitution.
SENATOR HALFORD repeated his concern that Section 2 gives the
commissioner and the ABC Board the authority to basically deputize
the investigators to do anything they want to do.
CHAIRMAN TAYLOR agreed it is broad, and said he would not object to
limiting the authority to activities the commissioner has
authorized to date.
SENATOR DONLEY repeated Section 2 contains a safeguard in that both
the commissioner of DPS and the ABC Board must approve the
expansion of powers. He said Section 2 will conform the statutes
to the status quo.
SENATOR HALFORD noted the last deletion in Section 2 is unnecessary
for that purpose.
REPRESENTATIVE ROKEBERG said he would not object to retaining that
language.
Number 364
CHAIRMAN TAYLOR asked if Section 5 will allow a brew pub license
owner to buy a beverage dispensary license and then sell both hard
liquor and beer on the premises.
REPRESENTATIVE ROKEBERG noted the Legislature established a brew
pub license category in 1988 which requires the licensee to have a
beverage dispensary license. Section 5 will allow the holders of
the "grandfathered" brewery-restaurant licenses, or tavern license
holders, to convert their licenses to a beverage dispensary license
to continue to get some of the benefits of a brewery under the
statute. Section 5 is the result of protracted negotiations
between the "grandfathered" members who hold exempt licenses and
wish to expand their businesses but are prohibited from doing so
because of the tavern bill that passed a few years ago. Both the
Moose's Tooth and the Glacier Brew House license holders would
like, but are unable, to expand their businesses. Those with
exempt licenses will be able to turn them in and purchase, in a
secondary market, a beverage dispensary license and then apply for
a brew pub license. A brew pub license will allow the license
owner to sell beer brewed at the pub at another licensed premise
owned by that licensee, and to sell the product to a wholesaler.
Those two changes are an attempt to satisfy the expansion needs of
the licensees as well as to maintain a consistent legislative
policy to prohibit a tavern type situation. Two of the three
exempt license holders agree with this provision; one does not.
SENATOR HALFORD asked if Section 5 contains the "guts" of the bill.
Number 410
REPRESENTATIVE ROKEBERG said it is the most controversial and
important part of HB 69. He noted such a policy is consistent and
will not harm anyone else in the industry. It will allow the two
businesses mentioned to expand. He disagrees that HB 69 will be an
anti-competition bill because although it changes the limit on the
brew pub license to 75,000 gallons per year, the limitation on the
existing licenses will not be affected because they are limited by
the zoning ordinances in Anchorage.
SENATOR HALFORD asked how many licensees exist. REPRESENTATIVE
ROKEBERG answered there are four brew pub licenses. Those
licensees do not like this bill.
SENATOR HALFORD asked if there are three exempt licenses.
REPRESENTATIVE HALFORD said only two opted to do it; one continues
to operate under a "grandfather" license. The two want to expand
their businesses therefore they are willing to buy beverage
dispensary licenses and become brew pubs. To do so, they need to
sell a modest amount of their product to wholesalers, and to sell
the brew produced at their single premises to their expanded
premises.
SENATOR HALFORD asked if the expanded premise will have another
license. REPRESENTATIVE ROKEBERG said yes, and that it could
either be a restaurant or beverage dispensary license, depending on
what is served.
SENATOR HALFORD said in order to make this work, those licensees
would be categorized as brew pubs, and the brew pubs will be
allowed to do more. REPRESENTATIVE ROKEBERG said "exactly." He
added some in the brewing industry have complained that this bill
will create additional competition, however he does not believe
that the existing four brew pubs have the capacity to sell
wholesale.
SENATOR HALFORD asked if existing businesses could buy another
license to expand their businesses. REPRESENTATIVE ROKEBERG said
they cannot because the economic interest clause prohibits them
from expanding.
SENATOR HALFORD said the economic interest clause has been in
existence for 40 years. REPRESENTATIVE ROKEBERG said that is
correct but it was expanded a few years ago to include the
restaurant eating place license.
SENATOR HALFORD said anything that has to do with liquor has to do
with money, and that he is trying to figure out what happens to the
value of licenses as they transfer back and forth. He said it is
hard to level the playing field.
Number 488
REPRESENTATIVE ROKEBERG stated the alcohol industry is the most
highly regulated in the state, and the Legislature needs to be
consistent in the way it manages that industry. He pointed out a
grandfather licensee cannot sell his/her business or transfer the
license.
SENATOR HALFORD said those licenses did not cost anywhere near the
current price of a license.
REPRESENTATIVE ROKEBERG said the criticism the committee will hear
from witnesses is that HB 69 will not allow brew pubs to compete
with breweries by selling on the secondary market through
distributorships. However, brew pubs are not the same as breweries.
A brewery owner can sell to any other licensee, a retailer or a
wholesaler, while a brew pub owner can sell only to a wholesaler.
The existing brew pubs do not have the capacity to sell to the
secondary market and impact the breweries.
CHAIRMAN TAYLOR announced he would take teleconference testimony.
Number 530
GEOFF LARSON, President of the Alaskan Brewing Company, informed
committee members he began a small brewery 13 years ago that is now
the largest in the state. He supports the extension of the
termination date of the ABC Board and believes the extension is the
most important provision of HB 69. A number of small brewers are
fearful of the provision that allows wholesale sales by brew pubs.
Although he will not be affected personally he expressed concern
that the change may create an unlevel playing field for small
brewers who want to market their product at their pubs only. He
believes HB 69 might treat all more fairly if Section 5 is removed,
however he supports the bill as its intent is to extend the ABC
Board.
Number 559
The following participants testified via teleconference from
Anchorage.
MARK STAPLES, CEO of the Midnight Sun Brewing Company, agreed with
Mr. Larson that the extension of the ABC Board is very important
therefore HB 69 needs to pass. He disagrees with Representative
Rokeberg's comment that HB 69 will do no damage to small breweries.
To assume that no damage will be done to his business by allowing
a few businesses to sell hard alcohol and beer and compete with him
in the wholesale dealer market is silly. HB 69 does not level the
playing field. Regarding the suggestion that this problem will
regulate itself through zoning ordinances, Glacier Brew House has
been in violation of the zoning ordinance since it opened and the
zoning commission has looked the other way.
GARY KLOPPER, majority owner of the Snow Goose Restaurant and
Sleeping Lady Brewing Company, agreed HB 69 should pass so that the
ABC Board can continue. He recounted that the original restaurant-
brewery concept was wonderful, however the liquor license holders
outlawed it several years ago. The restaurant-brewery industry has
been a good one for Alaska and he favors trying to rebuild it. He
stated that several of Representative Rokeberg's remarks were
incorrect. First, the only two licensees who agree with the
provisions of HB 69 are the owners of the Glacier Brew House and
the Moose's Tooth. Every other brewery in the state is against the
idea of competing with the wholesale market.
TAPE 99-30, SIDE B
MR. KLOPPER continued. For the owner of a brewery license,
anything sold by the brewery produces income, and those sales are
its lifeblood. An establishment that can sell hard liquor at a bar
and then get tap handles does so as a marketing tool. Several
small breweries have already lost tap handles to competing, larger
establishments for that exact reason. The original statutes were
similar to the federal statutes and made a large distinction
between beer and wine and hard liquor. Blurring that distinction
creates a different ball game.
Number 577
SHAWN WENDLING, head brewer at the Glacier Brew House, stated he
has worked as a brewer in four different states. Each of those
four states has made an effort to bring some parity to the liquor
market because sales can be quite lucrative. He suggested the cost
of building a brewery certainly equals, if not outweighs, any
licensing benefit the brewery may get. That aside, HB 69 addresses
the parity problem by saying that a brew pub with a liquor license
is competing head-to-head with a majority of people dispensing beer
within the State of Alaska. He supports HB 69 because it will
create parity and because the down sides cited are nonexistent
because of the cap.
CHRIS ANDRUS, Glacier Brew House co-owner, said he strongly
supports HB 69. This bill is the result of lengthy discussions
between the ABC Board, ARBA and CHAR. He worked diligently over
the past three years to get legislation passed that would allow him
to expand his business. The sticking point during the negotiations
was that the beverage dispensary industry felt his type of business
should be required to have a beverage dispensary license. He has
agreed to purchase one at a price of $125,000 to $150,000 but has
asked that he be able to sell some beer on the premise. Brew pubs
are currently restricted from selling off premise. He has been
selling an ancillary amount of beer off premise - not for marketing
purposes - he sells it at the same price as anyone else in the
market. His goal is to open a second restaurant and sell his
excess beer until sales at the second restaurant increase. He
expects his off-premise sales to diminish every year if HB 69
passes.
LARRY HACKENMILLER, owner of the Club Manchu, testified via
teleconference from Fairbanks and expressed concern about the
police powers granted in Section 2. If Section 2 is enacted, ABC
investigators could issue speeding tickets. Last year, through a
regulation change, the ABC Board allowed its investigators to carry
weapons and wear bullet-proof vests to arrest prostitutes and
gamblers. He questioned why weapons are necessary because if that
activity is a substantial risk to the community, the police would
be aware of it. He asked committee members to reinsert the deleted
language on lines 25 - 27 which state that ABC investigators are
limited to situations pertaining to the governing, manufacture,
barter, sale, or possession of alcoholic beverages within the
state. Without that language, an Alaska alcohol, tobacco and
firearms group, consisting of armed personnel, will be created, and
they will require funding.
Number 475
KAREN BERGER, owner of the Homer Brewing Company, made the
following comments via teleconference. She agrees 100 percent with
Mr. Larson that the ABC Board's termination date needs to be
extended but she is opposed to HB 69. As a production brewery
license holder, she is unable to sell her product in the retail
market in quantities above 5 gallons. She disagrees with the
sections in the bill that are a compromise with the brew pub
license owners and allow them to sell to the wholesale market.
MATT JONES, co-owner of the Moose's Tooth, voiced support for HB
69. Currently, a brew pub can only produce 75,000 gallons of beer
per year which equals about 2400 barrels per year. His restaurant
business uses 1200 of the 2400 barrels per year. He recently
purchased the Denali Theater and plans to open a second restaurant
in that building. Once the restaurant is open, he assumes the
remaining 1200 barrels could be sold at it. He does not intend to
sell hard liquor but he will have to buy a beverage dispensary
license. Right now, he sells to seven tap handles in town.
Continuing that cash flow while renovating his new restaurant is
very important to him. If he were to have excess capacity beyond
what is sold in his own locations, HB 69 will require him to sell
to a distributor.
Number 413
CHAIRMAN TAYLOR asked Doug Griffin to respond to the concerns
expressed about the expansion of police powers in Section 2.
DOUG GRIFFIN, ABC Board member, said he and other board members
would not be opposed to restoring the deleted language in Section
2 to give it more definition. That language was deleted by the
legislative drafters.
CHAIRMAN TAYLOR noted that language is on line 25 of page 3.
MR. GRIFFIN said the ABC Board does not wish its investigators to
have broad-based authority; the ABC Board wants to focus its
limited resources on enforcing the alcoholic beverage laws in
Alaska.
CHAIRMAN TAYLOR asked Mr. Griffin if he wants the deleted language
to follow "AS 11.66.280." MR. GRIFFIN said yes.
Number 382
SENATOR DONLEY pointed out an earlier version of the bill contained
a provision requiring that the ABC Board be notified of violations
discovered by local police officers. He asked if that provision
was included in this version and noted that it was recommended in
the last audit. SENATOR DONLEY also asked why the title was
written in such a way so that the subject of notification cannot be
taken up by the Senate.
REPRESENTATIVE ROKEBERG said he relied on the legal drafters to
provide a sufficient title.
Number 365
CHAIRMAN TAYLOR thought the notification issue may be covered in
the new Section 11 which covers public interest and its effect on
the transfer or sale of a license.
REPRESENTATIVE ROKEBERG stated the notification provision is in
Section 14. CHAIRMAN TAYLOR asked if that provision accomplishes
what Senator Donley was asking about.
SENATOR DONLEY stated two items in the sunset audit were not
addressed in the House version of the bill, the first being
improved communications between local police departments and the
ABC Board.
MR. GRIFFIN responded the ABC Board did learn from the audit that
it was not getting notice of all violations on licensed premises
from the local police. The ABC Board definitely supports that
concept. The ABC Board is in the process of drafting regulations
that will require reporting and tie the disbursement of license
fees that it shares with municipalities to timely reporting of all
violations. The ABC Board would not oppose adding that requirement
in statute, however the Board's primary concern is making sure the
bill passes.
REPRESENTATIVE ROKEBERG said the notification issue was discussed
with the ABC Board. It was decided that such a requirement would
place an unfunded mandate on local police forces, and because
regulations are being drafted to address the problem, it was
dropped from the bill.
Number 317
CHAIRMAN TAYLOR proposed to amend Section 2 to remove the brackets
and capitalization from the language on lines 25 through 27, thus
reinserting that language back in statute.
SENATOR DONLEY noted he was unsure whether he supports that
amendment because activities could occur for which DPS may want to
give ABC investigators more authority to investigate, such as drug
rings.
SENATOR ELLIS agreed with Senator Donley therefore CHAIRMAN TAYLOR
withdrew his amendment.
SENATOR DONLEY stated he is very disappointed that the committee is
unable to address the notification issue identified in the audit
and that the title of the bill was written in such a way that the
sunset date and the membership of the ABC Board cannot be changed.
SENATOR DONLEY moved CSHB 69(FIN)am from committee with individual
recommendations. There being no objection, the motion carried.
CHAIRMAN TAYLOR adjourned the meeting at 3:44 p.m.
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