Legislature(1995 - 1996)
04/16/1996 03:45 PM STA
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE STATE AFFAIRS COMMITTEE April 16, 1996 3:45 p.m. MEMBERS PRESENT Senator Bert Sharp, Chairman Senator Randy Phillips, Vice-Chairman Senator Loren Leman Senator Dave Donley MEMBERS ABSENT Senator Jim Duncan COMMITTEE CALENDAR SENATE BILL NO. 314 "An Act relating to issuance of a restaurant or eating place liquor license." HB 210 (PRIVATE MOTOR VEHICLE LICENSING/TESTING) was scheduled, but not taken up on this date. HB 364 (ELECTION CRIMES; INTERFERENCE W/VOTING) was scheduled, but not taken up on this date. HB 384 (PIONEERS' HOME - INABILITY TO PAY) was scheduled, but not taken up on this date. HB 437 (JUDICIAL OFFICERS COMPENSATION COMMISSION) was scheduled, but not taken up on this date. PREVIOUS SENATE COMMITTEE ACTION SB 314 - See State Affairs minutes dated 3/28/96. WITNESS REGISTER Chris Anderson Glacier Brew House 8241 Sunniest Dr., Anchorage, AK ¶(907)786-3789 POSITION STATEMENT: opposes SB 314 Richard Sassara Railway Brewing 1964 Loussac Dr., Anchorage, AK ¶(907)243-7775 POSITION STATEMENT: opposes SB 314 Guy Kasnick Pike's Landing 4438 Airport Way, Fairbanks, AK 99709¶(907)479-7113 POSITION STATEMENT: supports SB 314 Hap Ryder interest-holder in two alcoholic beverage dispensary licenses 122 N. Turner, Fairbanks, AK 99701¶(907)456-6437 POSITION STATEMENT: supports SB 314 Joe Kingsolver Elks Lodge 1351 717 W. 3rd, Anchorage, AK 99501¶(907)276-1351 POSITION STATEMENT: opposes SB 314 Gary Klopfer Snow Goose Restaurant 3401 Denali St., #202, Anchorage, AK 99503¶(907)561-2274 POSITION STATEMENT: opposes SB 314 Mark Staples Midnight Sun Brewing 7329 Arctic Blvd, Anchorage, AK 99518¶(907)344-1179 POSITION STATEMENT: opposes SB 314 Mark Wilson Snow Goose Restaurant & Brewery and Sleeping Lady Brewing Company 1400 W. Benson Blvd, #150, Anchorage, AK 99503¶(907)276-4115 POSITION STATEMENT: opposes SB 314 Mark Moehn Sleeping Goose Restaurant 1400 W. Benson Blvd, #150, Anchorage, AK 99503¶(907)276-4115 POSITION STATEMENT: opposes SB 314 Mark Nystuen Sleeping Goose Restaurant & Sleeping Lady Brewing Company 3510 Spenard Rd, #100, Anchorage, AK 99502¶(907)272-4255 POSITION STATEMENT: opposes SB 314 Bob Gross 737 W. 5th Ave., Anchorage, AK 99501¶(907)786-3762 POSITION STATEMENT: opposes SB 314 Mary Sassara Railway Brewing Company 1964 Loussac Dr., Anchorage, AK 99517¶(907)243-7775 POSITION STATEMENT: opposes SB 314 Karen Weaver Shareholder, Railway Brewing Company 8501 Greenhill Way, Anchorage, AK 99502¶(907)344-5081 POSITION STATEMENT: opposes SB 314 Harvey Prickett Snow Goose Restaurant & Brewery 405 E. Fireweed Lane, Anchorage, AK 99503¶(907)277-7884 POSITION STATEMENT: opposes SB 314 Doug Griffin, Director Alcoholic Beverage Control Board 550 W. 7th Ave., Ste. 350, Anchorage, AK 99501-3510¶(907)277-8638 POSITION STATEMENT: testified on SB 314 Bill Roche Alcoholic Beverage Control Board 550 W. 7th Ave., Ste. 350, Anchorage, AK 99501-3510¶(907)277-8638 POSITION STATEMENT: testified on SB 314 ACTION NARRATIVE SB 314 RESTAURANT LIQUOR LICENSE OWNERSHIP TAPE 96-29, SIDE A Number 001 CHAIRMAN SHARP called the Senate State Affairs Committee to order at 3:45 p.m. and brought up SB 314. The chairman called the first witness. Number 030 CHRIS ANDERSON, Partner & General Manager, Glacier Brew House, stated he has been in the full-service restaurant industry for 20 years. The Glacier Brew House project was begun over a year ago, and will seat 150 people in the dining room, 85 people in the bar, 35 people in banquet rooms, and 60 people on the deck. The Glacier Brew House will employ 85 people full time, and 100 people full time during peak season. We will not be offering hard liquor. The concept has been approved four times by the Anchorage Assembly and through all the community councils. Mr. Anderson stated that the concept of a combination restaurant and brewery is a new concept for Alaska. It is a very successful enterprise in the lower forty- eight. To be successful, one must make a considerable capital investment. By the time we open next month, our capital investment will be between $2,500,000.00 and $3,000,000.00. MR. ANDERSON stated that he does not agree with the argument regarding an un-level playing field. He thinks the costs are about level for having a restaurant-brewery as they are for just opening a restaurant. His first objection to SB 314 is that the Glacier Brew House has followed all Alaskan laws for the last year and based a business on those laws. SB 314 would stop Mr. Anderson from owning any other restaurant in the State of Alaska if he currently holds a restaurant-brewery license. He disagrees that he can be legislated from opening a secondary business. Especially when the statutes currently say he can do so. His business plans and the type of management he designed was not for a single restaurant in Anchorage. They have a lot of potential for growth in many outlying communities, from Fairbanks to Juneau and many other places. To stop the growth of a business would be unfortunate. The brewery-restaurant concept, with just beer and wine being served, are more family oriented than the drinking establishments of the past. We should not have legislation that gets in the way of competition. They are competing with every other restaurant. The company for which he worked for fourteen years is two blocks from the Glacier Brew House, and they are wishing him well. MR. ANDERSON stated he has submitted a possible amendment to SB 314 which addresses some of his concerns. He hopes the committee will take it into consideration. To be four weeks from opening with an investment of $2,500,000.00 that he cannot grow is unacceptable. Number 135 SENATOR LEMAN asked Mr. Anderson if he knows how many people have approved applications for a brewery license. MR. ANDERSON responded he is aware of eleven breweries that are currently open or have applications pending. Number 150 RICHARD SASSARA, President, Railway Brewing, stated he is concerned with SB 314. His company has invested about $1,300,000.00, and the Alaska Railroad Corporation has invested as well. Railway Brewing has gone through hearings with the Municipality of Anchorage, the ABC Board, zoning, building department, and ATF. SB 314 is unfair in that it seems to be an eleventh hour measure to pull the rug out from under us when we're so close to opening. Backers of this bill and the constituents who are pushing it have had ample opportunity to voice their opinion, and no one has stepped to the plate on it. It is also unclear to Mr. Sassara whether SB 314 would allow for transfer of license. Mr. Sassara's interpretation of the statutes for breweries and brew-pubs is that the State of Alaska's brewery licensing laws are fairly conservative in relation to other state's statutes, so he doesn't think they need to be further restricted by SB 314. Railway Brewing is not interested in operating in the beverage dispensary license business: they aren't interested in serving hard alcohol. They feel that hard alcohol is a thing of the past. Mr. Sassara thinks SB 314 is unfair in the areas of growth and transferability, and he thinks it suppresses Alaskan owned businesses. He thinks the state should support businesses that are creating jobs and rehabilitating old buildings within communities. Number 220 GUY KASNICK, Owner, Pike's Landing, testifying from Fairbanks, stated he is concerned with the situation that developed last year after the passage of SB 87. That allowed departure from the 50/50 food and liquor ratio on application. His concern is that a wholesaler being allowed to retail their own product will set up a monopolistic situation. A brewery can produce their product at the production price, which is less than the amount any other licensee can pay for it. Also, the sale of the brewed product off premises is an advantage that mechanism has, which he thinks would be unfair to the traditional licensee. Mr. Kasnick stated that free alcohol samples is something that's never been allowed to any other licensee in Alaska. He also thinks that a licensee that is a non- brewery could be forced to purchase their product, if they have a very good product. He would be very concerned if the Alaskan Brewery had a retail outlet next to his business. Mr. Kasnick stated there is good reason that Anheiuser Busch, under federal law, cannot open chains of taverns across the U.S. It is his understanding that up to 75 of these brewery licenses could potentially be issued in the state. He thinks that would be very dangerous to the established retail liquor industry. He thinks that the businesses currently being established in Anchorage should be allowed to open their operations, and he thinks that SB 314 provides for that. He thinks those businesses might have to forego expansion though. Mr. Kasnick urged passage of SB 314. Number 290 HAP RYDER, interest-holder in two alcoholic beverage dispensary licenses, testifying from Fairbanks, asked for support of SB 314. Passage of SB 314 will deter unfair competition with legitimate beverage dispensary license holders. Mr. Ryder stated that passage of SB 314 will preserve the original intent of SB 87, and in particular, those sections that pertain to prohibited financial interests. In a time of increasing regulation of a legitimate private business, and a time when legislation, such as HB 523, SB 314 will deter the proliferation of new alcoholic beverage outlets for the general public and the growth of a business industry already in trouble with moralists, fundamentalists, MADD, downtown urban areas, and the like. That certain individuals have circumvented the law by using loopholes to justify the rejection of SB 314 is not sufficient justification. He stated there are greater problems presented by non-enactment. He urged support of SB 314. Number 330 JOE KINGSOLVER, Elks Lodge 1351, testifying from Anchorage, stated that if SB 314 is passed and the progress of the Snow Goose Restaurant is terminated, this will mean almost the end of the Anchorage Elks Lodge. The Elks and other investors have put a lot of money into the project in good faith. He thinks SB 314 is unfair and should be killed. Number 340 GARY KLOPFER, majority owner, Snow Goose Restaurant, testifying from Anchorage, stated he submitted written testimony to the committee. He stated what he has heard so far at this committee meeting reminds him of prohibition days. The marketplace is changing; micro-brewed is the concept of fresh coffee, fresh beer, and fresh bread, all of which are becoming popular. Mr. Klopfer is amazed that Wonder Bread isn't trying to outlaw small, micro- bakeries, because they're afraid of the competition. People nowadays are trying to be more concerned about not only the amount of alcoholic beverages they drink, but also what they drink. People would like the ability to purchase fresh beer brewed on premises. Mr. Klopfer stated that from the beginning, Snow Goose Restaurant never had the intention of serving hard alcohol. Based on the market place and what's going on in the rest of the country, one can see that there is a demand for this type of business. The passage of SB 314 would do nothing but keep those people who have liquor licenses in business, and there would be no economic benefit for the blossoming of this industry in our state. He hopes that SB 314 does not pass. CHAIRMAN SHARP asked if it is the intention of Snow Goose Restaurant to only sell their beer on premises, and not retail it. MR. KLOPFER responded that is correct. The downtown Anchorage area is only zoned for commercial, not industrial, so we got a waiver because we wanted to be strictly on-site. Number 393 MARK STAPLES, Midnight Sun Brewing, testifying from Anchorage, is opposed to SB 314. His project has been several years in the works, and he is not ready to give up his option to at some point have a restaurant. He doesn't understand why people with dispensary licenses think this is unfair. If they want to do a brew pub, they can either buy a brew-pub license, or if they want to do a brewery, they can give up their dispensary license. There is nothing that he is doing that they cannot do if they want to. Mr. Staples stated that the so-called "loophole" is something that the ABC Board is the first one to tell you to use. It's a little late to be changing the whole structure. Number 410 MARK WILSON, managing partner, Snow Goose Restaurant and Brewery and Sleeping Lady Brewing Company, testifying from Anchorage, is opposed to SB 314. He recommends against passage because, one, current statutes support the federal code of regulations as they apply to liquor licensing and joint ownership. Secondly, restaurant and brewery combinations bring multi-million dollar investment to Alaska. Third, restaurant and brewery combinations enhance tourism and growth in Alaska. SB 314 discourages investment. SB 314 is not good legislation and unfairly protects special commercial interests. SB 314 ruins one or more developments in Anchorage. Contrary to representations that have been made, the brewery and restaurant brewery combinations, which are commonly called brew-pubs throughout the U.S., have been openly and aggressively pursued and supported by state legislatures throughout the United States. Mr. Wilson read a resolution (Joint Resolution #95-33) passed by the 60th General Assembly of the State of Colorado. Mr. Wilson stated that SB 314 is bad for business: it does not support growth of tourism, it does not encourage capital investment in Alaska, and it sends the wrong message to promising and entrepreneurial endeavors. Pleas do not pass SB 314. Number 465 GEORGE MALEKOS, testifying from Anchorage, stated he is also speaking for three other businesses: 1) Earl Mayo, How How Restaurant & Lounge, Muldoon; 2) Rod Muma, Garcia's Restaurant & Cantina, Eagle River; 3) Garry Buffington, J.J.'s Sportsman's Lounge or Bar, Muldoon. MR. MALEKOS stated that he and the businesses just listed all strongly support SB 314. Number 475 MARK MOEHN, Snow Goose Restaurant, testifying from Anchorage, opposes SB 314 because it would not help this industry flourish. This new industry is a classic example of an opportunity to produce more within the state, rather than shipping products into the state, which is why he opposes SB 314. Number 483 MARK NYSTUEN, General Contractor, Snow Goose Restaurant and Sleeping Lady Brewery, testifying from Anchorage, is concerned with the financial impacts of SB 314. As he understands it, SB 314 could potentially kill their project, so he is really concerned about the bill. Number 492 BOB GROSS, real estate developer, testifying from Anchorage, stated he specializes in urban renewal projects in downtown Anchorage. He thinks SB 314 would stifle economic development if left unamended. If properly amended, he thinks SB 314 could support economic development and growth. Local Alaskans have invested millions of dollars of personal funds in these projects, and those are funds that stay in our community. Unless the bill is amended, that would be stifled. These people are not going to the state or local government and asking for money; they are taking a huge personal risk. Concerning benefits to the public, it is Mr. Gross' assessment that hundreds of new jobs will be created by this industry. Improvements have been made to the Elks Club Building, the Alaska Railroad Depot Building, and other buildings. He thinks the impact on the tax rolls for the city will exceed over $100,000.00 per year just in increased property taxes. Each of these businesses will tremendously support the tourist industry. He thinks it's important that committee members realize that they have been involved in this process for 12 months. That process includes public notification, public posting, community council support and approval, assembly-level approval, conditional use permit approval, and ABC Board approval. Everyone has supported it. As SB 314 reads right now, the bill would kill all the work that these people have done and would stifle economic growth. Mr. Gross stated that if SB 314 was properly amended, it could support economic growth and development. Number 522 MARY SASSARA, Marketing Director, Railway Brewing Company, testifying from Anchorage, stated the Railway Brewing Company is creating 140 seat restaurant at the historic Alaska Railroad Depot Building. She stated the business is a restaurant first and a micro-brewery second. Ms. Sassara thinks it is unfair for SB 314 to be introduced after Railway Brewing Company has completed all requirements of the State of Alaska, the Municipality of Anchorage, and the ATF, only to have the rug pulled out from underneath them. The bill has all the markings of a self-serving legislation, the sole purpose of which is to legislate out competition. The legislature should be encouraging growth. Railway Brewing Company will add about 35 new jobs to the Anchorage market. Railway Brewing Company is renovating a State of Alaska owned building with the cooperation and financial support of the Alaska Railroad Corporation. Railway Brewing Company will create jobs, a tourist facility, generate taxes, and will create an Alaskan manufactured product. MS. SASSARA stated that in the eighteen months since Railway Brewing Company began working on this project, none of the people pushing SB 314 voiced any disapproval, even thought Railway Brewing has been through four separate municipal hearings and four ABC public hearings. Why did the backers of SB 314 not protest at those times? Railway Brewing Company has obtained all of the required licenses, including building permits and zoning requirements. She urged opposition of SB 314, and noted that the bill also does not address the issue of transferability of licenses. Without that, the sale or transfer of stock would not be allowed. Alaska Statutes for breweries and brew-pubs are currently already more conservative than existing laws in other states. She listed several brew pubs in Washington and Oregon which she enjoys visiting while on vacation. Ms. Sassara stated Railway Brewing Company is not interested in serving hard alcohol and does not want to attract the type of clientele that drinks hard alcohol. She urged the committee not to support SB 314. Number 550 KAREN WEAVER, shareholder in Railway Brewing Company, testifying from Anchorage, stated she hasn't really been involved in the permitting process, but she and her husband really love beer and they fly to Seattle regularly in order to patronize the brew pubs down there. The only thing she has heard from the supporters of SB 314 is, "It's going to hurt me." She doesn't hear anything about the Alaskans who want to have micro-breweries in the state and want to get a premium product. She thinks a majority of Alaskans have been waiting for brew-pubs to open in Alaska, and it would be a pity to have it stop at this point. Ms. Weaver opposes SB 314. Number 560 HARVEY PRICKETT, designer of Snow Goose Restaurant & Brewery, testifying from Anchorage, stated he is financially and design-wise heavily involved in the project. If the plug was pulled at this point, he thinks it would be a deterrent and set a bad precedent for economic growth in downtown Anchorage. He urged the committee to oppose SB 314. Number 570 CHAIRMAN SHARP stated the committee has a proposed amendment that would provided protection for those who have an approved application. He asked if there was anyone available from the ABC Board. Number 580 DOUG GRIFFIN, Director, Alcoholic Beverage Control Board, stated he is in Anchorage. CHAIRMAN SHARP asked Mr. Griffin if he's seen the amendment. MR. GRIFFIN responded he has not. TAPE 96-29, SIDE B Number 585 SENATOR DONLEY read the amendment: Insert a new section specifying, "The prohibition against issuance of a restaurant or eating place license does not apply to a person who holds or who has an approved application for a brewery license on the effective date of this act." CHAIRMAN SHARP asked Mr. Griffin if he would interpret "approved application" as an application that's been submitted and is in proper order, but has not been finalized. MR. GRIFFIN replied he would interpret an approved application as one that has been approved by the board. In some instances, he has the ability to give temporary approval of licenses between board meetings, but he would be more conservative in this instance and would want full approval of the board. SENATOR DONLEY asked if there are currently any pending applications. MR. GRIFFIN responded there is a brewery in Homer that has a temporary license at this time. SENATOR RANDY PHILLIPS asked how many have been approved and how many are pending total. MR. GRIFFIN replied there are about five or six licenses which have been approved, but not issued. SENATOR RANDY PHILLIPS asked if it would be more appropriate to specify "an issued license", rather than "an approved application". Is SENATOR DONLEY asked what is holding them up. SENATOR RANDY PHILLIPS asked if there is a difference between the issuance of a license and an approved application. Number 558 MARK WILSON, Snow Goose Restaurant & Brewery, testifying from Anchorage, stated the problem with the amendment is it doesn't address transferability. The Snow Goose is transferring a license, and every single transfer has to be approved. So it could be interpreted that the license is not approved if it is not approved for transfer. If the Snow Goose Restaurant & Brewery sold shares of it's ownership to someone else, Alaska Statutes specifies that constitutes a transfer of the license, and we would then have to go before the ABC Board to be approved. SB 314 would essentially cancel the license, because ownership could never be transferred, we could never sell shares, and we could never take on shareholders. SENATOR RANDY PHILLIPS asked the ABC Board Representatives what the process is for issuance of licenses. Is there a difference between an approved application and an issued license? Number 537 MR. GRIFFIN replied there are two different pieces there, and that is that the brewery license has been approved. Then you get into the restaurant eating place license side, and some of those are licenses that are being transferred, and some are new licenses. They're all in various states. He stated he would let Mr. Roche address that question. Number 520 BILL ROCHE, ABC Board, testifying from Anchorage, stated that in one instance, there is a brewery that has had its' license approved, but is applying to transfer to a separate entity for tax flight purposes. They are also applying to transfer the ownership of the restaurant or eating place liquor license. So the language of the amendment is unclear to us as to what is intended with the wording "approved license". CHAIRMAN SHARP stated the problem is only in transferability. He asked if the board has some approved applications for a brewery license, but have not yet issued those. MR. ROCHE responded that is correct. There are several that have been approved, but not yet issued. CHAIRMAN SHARP noted that the amendment would allow those permits to be issued. SENATOR RANDY PHILLIPS asked how long it would take between approval and issuance of licenses. MR. ROCHE replied that depends on the construction schedules of the applicants and the federal process. It takes quite some time after the ATF inspectors do their final inspection before the federal government issues the brewers notice, and we cannot issue an Alaska liquor license until the brewers notice is in hand. SENATOR RANDY PHILLIPS noted that the committee should, in that case, key in on approved applications. CHAIRMAN SHARP stated he reads the amendment as stating the prohibition against issuance of a restaurant eating place license can occur anytime in the future to a person who holds an approved application for a brewery license as of the effective date. Which means if the application is approved, but not yet issued, it would still trigger the ability to issue the brewery license and they could acquire a restaurant eating place license down the road if they so desired. Number 502 SENATOR DONLEY stated it is late in the year, and this looks to be very technical. There are two or three major concepts he would like to see incorporated into SB 314 if it moves ahead. He asked if it is the committee's intent to move SB 314. CHAIRMAN SHARP replied he would like to move it up to the Finance Committee. But he does want to ensure that before the bill leaves the State Affairs Committee there is no financial harm done to those who have already jumped through all the hoops. SENATOR DONLEY is afraid that if SB 314 is not crafted correctly, there will be a stampede for this type of license. His other concern is to address transferability. He does not want to set up some sort of ultra-valuable license. CHAIRMAN SHARP stated he is concerned about that also: SB 314 would be creating a select few who would have the right to operate this type of business. It would create value rapidly. SENATOR DONLEY suggested putting a cap on the transferability or specify that any excess goes back to the general fund. There are a lot of complicated questions here, it's eighty degrees in this room, and we're dealing with the budget today. SENATOR RANDY PHILLIPS asked how much it costs for one of these licenses. An unidentified speaker from Anchorage responded about $2,000,000.00. MR. GRIFFIN replied a two-year license for a restaurant eating place (a beer and wine license) is $600.00. A brewery license is $1,000.00 for a two-year license. Number 458 SENATOR DONLEY doesn't think limiting the resale value of those licenses would be as simple as just putting a cap on the value. He thinks that would just artificially inflate the value of another part of the business. We have to have some provision for transferability related to investors in the business. CHAIRMAN SHARP agreed, but he doesn't know how you would divorce the value of the license from the establishment. He asked if committee members have suggestions they could prepare in the next few days. Number 440 SENATOR RANDY PHILLIPS stated his concerns are that he has some constituents who support SB 314; second, there are half a dozen people in the midst of the licensing process; third, there is the problem of creating a super-valuable license; lastly, he is concerned with the effective date. SENATOR DONLEY is also concerned about being fair to people who have micro-breweries and full-blown liquor licenses, but who are not allowed to sell off-premises. They should be allowed to sell off-premises too. Number 405 SENATOR LEMAN wanted to make sure he understood the process for approving an application. Do you apply and get approval before or after investing money? Number 390 MR. GRIFFIN responded approval can be granted at any time during the process. The actual issuance of the license comes after the brewery facility has been constructed. CHAIRMAN SHARP asked what the normal time frame is between when an application is submitted and the board acts on the application. MR. GRIFFIN responded the minimum time period is 60 days. MR. KLOPFER, Snow Goose Restaurant & Brewery, stated the ATF takes a minimum of two months before they will even act on that paperwork. SENATOR DONLEY asked if there is any requirement that applicants will already have made a capital investment before getting an application approved. MR. GRIFFIN responded yes. There has to be some design work done before approval. They don't need to have architectural quality drawings, but we need to have a general idea of the layout and the location. CHAIRMAN SHARP asked if capacity is tied to it at any time. MR. GRIFFIN replied there is no maximum capacity for a brewery, but there is a maximum capacity for a brew-pub for those who have a beverage dispensary license. SENATOR RANDY PHILLIPS suggested the legislative drafter of SB 314 contact the ABC Board. We could outline our concerns to the drafter, who could relay those to the board and try to work out language to address those concerns. Number 350 CHAIRMAN SHARP stated that would make him more comfortable with the legislation. He asked Mr. Griffin if that would be acceptable. MR. GRIFFIN responded that would be acceptable. SENATOR RANDY PHILLIPS made a motion to table SB 314 until Thursday's committee meeting. It would then be his intent to move SB 314 at that meeting. CHAIRMAN SHARP, hearing no objection, stated the motion was adopted. Number 315 CHAIRMAN SHARP adjourned the Senate State Affairs Committee meeting at 4:57 p.m.