Legislature(1995 - 1996)
04/16/1996 03:45 PM Senate STA
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* first hearing in first committee of referral
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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.
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