Legislature(1999 - 2000)
05/10/1999 02:25 PM JUD
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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.