Legislature(2013 - 2014)BARNES 124
04/02/2014 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Adjourn | |
| Start | |
| HB309 | |
| HB152 | |
| HB160 |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 309 | TELECONFERENCED | |
| += | HB 152 | TELECONFERENCED | |
| *+ | HB 160 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 309-CRAFT DISTILLERY LICENSE
3:19:48 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 309, "An Act relating to a craft distillery
license."
REPRESENTATIVE REINBOLD moved to adopt the proposed committee
substitute (CS) for HB 309, labeled 28-LS0698\Y, Strasbaugh,
3/6/14, [Version Y] as the working document.
CHAIR OLSON objected for the purpose of discussion.
3:20:55 PM
REPRESENTATIVE TUCK, Alaska State Legislature, stated that HB
309 will not have any impact on the state but will modernize the
distillery laws in Alaska so they more closely mirror those for
wineries and breweries by giving distilleries the ability to
attract customers by hosting tours of their facilities and offer
samples and sell products.
REPRESENTATIVE TUCK explained the changes in the proposed
committee substitute (CS) for HB 309, Version Y, will allow
local distilleries take part in the tourism industry. This
could contribute more to the economy and create jobs by allowing
for the sales of up to one gallon of the product directly to the
public for consumption off premises. This bill would also allow
for the sale of not more than three ounces for consumption on
premises and for the public to sample small portions of the
product free of charge. Similar to wineries and breweries, HB
309 would prevent distilleries from acting as a de facto bar by
prohibiting bar-like amenities such as limited hours of
operation. This bill has received the support of all five of
Alaska's small distilleries, the Brewers Guild of Alaska, the
Haines Chamber of Commerce, Explorer Fairbanks, the Kenai
Peninsula Tourism Marketing Council, the Alaska Farm Bureau, and
Alaska Cabaret, Hotel, Restaurant, and Retailer's Association
(CHARR). He reported that HB 309 does not have any opposition.
3:22:24 PM
REPRESENTATIVE TUCK provided a section-by-section analysis of HB
309, Version Y. He referred to page 1, lines 3-9, Section 1, to
AS 04.11.170, related to distillery licenses. Current law only
allows for the distillery operation and sales to licensees. He
said that HB 309 will allow the holder of the distillery license
to sell alcoholic beverages directly to the public for
consumption off premises, limited to one gallon. He explained
that previously a distributor could only sell to licensees.
3:23:36 PM
REPRESENTATIVE TUCK referred to page 1, lines 8-9, of Version Y,
noting the prohibition of selling less than five gallons is
removed at the request of industry since there wasn't a clear
reason for the restriction. He referred to page 1, lines 10-15,
Section 2, which allows for free samples in small portions with
exceptions for intoxicated persons. He related that subsection
(e) allows for sales of up to three ounces a day to a person for
consumption on the premises, similar to provisions for
breweries. He highlighted prohibitions in Version Y against
live entertainment, televisions, pool tables, dancing, games,
game tables, or other recreational or gaming opportunities on
the premises where the product is served, and seats at a bar.
Additionally, this section would limit hours from 9 a.m. to 8
p.m. He stated that these restrictions are intended to prevent
distilleries from acting as de facto bars. He noted two
amendments in members' packets are pending.
3:25:12 PM
REPRESENTATIVE SADDLER asked how many distilleries are located
in Alaska.
REPRESENTATIVE TUCK answered that five distilleries are located
in Alaska, with one in Matanuska-Susitna area, one in Anchorage,
one in Haines, and one located on the Kenai-Peninsula.
3:26:09 PM
GEORGE ASCOT, Staff, Representative Chris Tuck, Alaska State
Legislature, identified the five distilleries in Alaska. He
stated that the Alaska Distillery is located in Wasilla, the
Bare Distillery, Alaska, LLC is located in Anchorage, the High
Mark Distillery, Inc. is located in Sterling, the Port Chilkoot
Distillery is located in Haines, and Ursa Major Distilling is
located in Fairbanks.
3:26:48 PM
REPRESENTATIVE REINBOLD asked about the fiscal note.
REPRESENTATIVE TUCK said it is a false fiscal note. It is a
zero fiscal note, but the false fiscal note of $10 million per
year indefinitely was intended as an April Fools' Day joke.
3:27:30 PM
REPRESENTATIVE REINBOLD moved to adopt Amendment 1, labeled 28-
LS0698\Y.1, Strasbaugh, 3/28/14, which read as follows:
Page 2, following line 7:
Insert a new bill section to read:
"* Sec. 3. AS 04.21.065(a) is amended to read:
(a) A holder of one of the following types of
licenses or permits shall post on the licensed or
designated premises three separate warning signs as
described in (b) of this section:
(1) beverage dispensary license;
(2) restaurant or eating place license;
(3) club license;
(4) brewery license; this paragraph applies
only to a brewery that permits a person to sample
portions of the brewery's product;
(5) package store license;
(6) common carrier dispensary license;
(7) recreational site license;
(8) pub license;
(9) winery license; this paragraph applies
only to a winery that permits a person to sample
portions of the winery's product;
(10) distillery license; this paragraph
applies only to a distillery that permits a person to
sample portions of the distillery's product;
(11) caterer's permit;
(12) [(11)] special events permit;
(13) [(12)] conditional contractor's
permit;
(14) [(13)] another license or permit
issued by the board authorizing consumption of
alcoholic beverages."
CHAIR OLSON objected for the purpose of discussion.
3:27:54 PM
REPRESENTATIVE TUCK explained that Amendment 1 adds a new
section that requires posting of warning signs to caution that
drinking and smoking during pregnancy can lead to birth defects.
It would also inform people that a person providing alcohol to a
person under the age of 21 can receive up to five years in
prison and a fine of $50,000. Additionally, Amendment 1 would
identify that a person under 21 years of age entering the
premises could be subject to a fine up to $1,000, which is the
same as for any type of establishment that serves alcohol.
3:28:39 PM
CHAIR OLSON removed his objection. There being no further
objection, Amendment 1 was adopted.
3:28:50 PM
REPRESENTATIVE REINBOLD moved to adopt Amendment 2, labeled 28-
LS0698\Y.2, Strasbaugh, 3/28/14, which read as follows:
Page 2, following line 7:
Insert a new bill section to read:
"* Sec. 3. AS 04.21.025(a) is amended to read:
(a) As a condition of issuance or renewal of a
license and selling alcoholic beverages under a
license, the board shall require a licensee who sells
or serves alcoholic beverages and a licensee's agents
and employees who sell or serve alcoholic beverages or
check the identification of a patron to complete an
alcohol server education course approved by the board,
if the license is for a
(1) beverage dispensary;
(2) restaurant or eating place;
(3) club;
(4) package store;
(5) recreational site;
(6) pub;
(7) distillery;
(8) conditional contractor."
CHAIR OLSON objected for the purpose of discussion.
REPRESENTATIVE TUCK stated that Amendment 2 adds a new bill
section related to alcohol server education courses. He
explained that distilleries, their agents, and employees who
sell or serve alcohol must complete an alcohol server course
approved by the board. He said that it has been known as
[Techniques of Alcohol Management] (TAM), but the new card is
now called a [Training for Alcohol Professionals] (TAP) card.
He noted that anyone serving alcohol has the same
responsibilities and requirements to get certified as for any
other establishment.
CHAIR OLSON removed his objection. There being no further
objection, Amendment 2 was adopted.
3:30:17 PM
HEATHER SHADE, Co-owner, Port Chilkoot Distillery, stated that
the distillery produces hand crafted small batches of whiskey,
gin, and vodka in Southeast Alaska. She wished she could invite
members to visit the distillery, which is in a restored
historical building; however, existing laws prohibit this
invitation. Five distilleries are located in Alaska, with each
representing a unique region of the state. She compared this to
over 450 small distilleries nationwide. She reported that most
states have updated their distillery laws to allow for on-site
tastings and sales. She stated that this has led to great
economic success. Idaho passed their distillery bill several
weeks ago, which is similar to the one before members today.
The distilleries in Alaska are already contributing to the
state's economy, supporting other industries in Alaska. She
advised members that her distillery buys Alaska grown
agricultural products, which are used to make the craft spirits
and also creates export products for the state and provides
jobs. She predicted that if this law is updated she will hire
two additional people to accommodate the visitor aspect of the
business. It is difficult to compete with national distilled
products so this bill will model what microbreweries have done.
She noted the importance of distilleries being able to promote
their products on site to be competitive. In fact, it is often
the personal connection with the customer that sets the small
distilleries apart from imported mass-produced products. She
related the many challenges that businesses face in Alaska,
including the seasonal market, the high-cost of exportation, and
difficult shipping logistics, and the bill would help the
distilleries be in a better position to absorb the costs by
operating the distilleries as visitor destinations.
3:34:06 PM
MS. SHADE related that the community of Haines has been a big
supporter of their distillery business and many people are
excited to show it off. She pointed out that the business is
located next to the cruise ship dock and she hopes to be able to
invite visitors to the distillery. Essentially this bill has
been the result of teamwork with distilleries, the breweries,
the tourism industry, the farm bureau, and the chambers of
commerce. She concluded that the local communities are hoping
to see these new businesses survive. Similar bills in other
states have proved to be a huge success and this one is good for
Alaska's businesses. She hoped members would support the bill.
3:35:04 PM
FELICIA KEITH-JONES, Owner, High Mark Distillery, stated that
her distillery is a hand-crafted one. She said that HB 309 will
mean tastings, tours, and bottle sales from her own distillery.
She emphasized that this needs to happen to modernize the
industry guidelines currently being enjoyed by breweries and
wineries across Alaska. She characterized the system as being a
little antiquated only since distilleries did not previously
exist in Alaska. The state has five distilleries and it is time
to catch up with the rest of the industry. The current
guidelines are rather restricting and confusing, for example,
the federal government requires the distilleries to train and
establish distilleries across the U.S. She personally trained
in Spokane at Dry Fly Distillery and at Jack Daniels Distillery.
These distilleries are used as models for running an Alaskan
distillery; however, she was informed that Alaska's guidelines
do not follow the same federal guidelines that the distilleries
providing the training follow. She said she is passionate about
HB 309 due to the sales potential and the ability to capture
lost revenue. In fact, distilleries are anchors for tourism,
and the Kenai Peninsula has already lost potential revenue. For
example, the Alaska General Contractors, Inc. and political
functions would like to use the Alaskan spirits, but cannot
currently sample the products. The bill would also help support
buying Alaskan products. Fishing derbies and dipnetting brings
thousands of visitors to the region and many want tasting
parties for chartered clients. Hotels have reported that the
distillery gives people a reason to stay an extra day to visit.
MS. KEITH-JONES stated that the Kenai-Peninsula currently has
five breweries, one winery, and her distillery. It keeps people
in the communities for a longer length of time. She personally
turned away three carloads of people who wanted to visit
yesterday so the word is out. On average, tasting rooms command
$45,000 to $150,000 per year in purchases. Alaskan distilleries
also are subject to three taxes totaling 40 percent for each
bottle sold, which is currently lost revenue to the state.
3:39:47 PM
MS. KEITH stated that her company provides an interesting place
to go, and the distillery is an example of applied chemistry.
She pointed out lost revenue to the state and local government.
She also noted that her distillery could expand her staff from
four to six or seven employees if she has a tasting room. In
addition, her distillery uses all Alaskan or U.S. goods. Last
year she paid $28,000 in shipping to one company in Alaska.
This industry has been viable and is growing and she hopes it
will to continue to grow. The distillery uses renewable
resources, including grain and water and donates spent mash to
chicken farmers. She also employs a veteran. Distilled spirits
are one of the main products that can easily be exported, at a
profit, to the Lower 48 and internationally. In fact, her
products are requested internationally. She also highlighted
key successes in hand crafted spirits, noting the Kenai-
Peninsula has shown overwhelming support towards the distillery.
She reported that High Mark Distillery has been chosen two years
in a row for people's choice awards at the "Taste of the Kenai"
event and was selected as Wells Fargo's successful entrepreneur
of the year for 2013. The Haines Chilkoot Distillery and the
High Mark Distillery were chosen by the small business
development center as success stories for 2014. She said this
industry is a highly motivated one that has proven to bring in
income and create jobs. Many non-profits have mentioned they
depend on her distillery's contributions to sustain them. She
concluded by mentioning letters of support in members' packets
from many organizations. She urged members to allow the
distilleries to use the "Buy Alaska" stamp.
3:44:03 PM
REPRESENTATIVE MILLETT asked whether anyone has talked to
Mothers against Drunk Driving.
REPRESENTATIVE TUCK answered no; but commented that he has not
had any push back so far.
3:44:40 PM
DALE FOX, President & CEO, Alaska Cabaret, Hotel, Restaurant,
and Retailer's Association (CHARR), testified in support of HB
309, noting the CHARR's government affairs committee unanimously
supported the intent of HB 309 to help the Alaska distilleries
and to give them the same rights that have been given to
breweries and wineries. He complimented the sponsor and the
distilleries for doing a great job on outreach and communicating
with all of the parties to ensure that the bill had all the
needed elements. He characterized the bill as a good bill that
is worthy of members' support.
3:45:38 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 309.
CHAIR OLSON removed his objection. There being no further
objection, Version Y was before the committee.
REPRESENTATIVE JOSEPHSON said it seems like a good bill and it
is a niche that could be enhanced for this type of opportunity.
He suggested the committee support it.
3:46:43 PM
REPRESENTATIVE HERRON asked to put a question on the record. He
recalled that a distillery sells its products at the Anchorage
Airport. He assumed that this would not be a place at which
samples could be given.
REPRESENTATIVE TUCK was unsure if the bill limits location, that
if the distillery is licensed and wishes to dispense products
they could do so.
REPRESENTATIVE MILLETT said she likes the bill.
REPRESENTATIVE TUCK clarified that the distillery is limited to
spirits.
3:47:47 PM
REPRESENTATIVE REINBOLD moved to report the proposed committee
substitute (CS) for HB 309, labeled 28-LS0698\Y, Strasbaugh,
3/16/14, as amended, out of committee with individual
recommendations and the accompanying fiscal note. There being
no objection, the CSHB 309(L&C) was reported from the House
Labor and Commerce Standing Committee.