SB 52-ALCOHOLIC BEVERAGE CONTROL; ALCOHOL REG  4:04:17 PM CHAIR SPOHNHOLZ announced that the final order of business would be CS FOR SENATE BILL NO. 52(FIN) am, "An Act relating to alcoholic beverages; relating to the regulation of manufacturers, wholesalers, and retailers of alcoholic beverages; relating to licenses, endorsements, and permits involving alcoholic beverages; relating to common carrier approval to transport or deliver alcoholic beverages; relating to the Alcoholic Beverage Control Board; relating to offenses involving alcoholic beverages; amending Rule 17(h), Alaska Rules of Minor Offense Procedure; and providing for an effective date." 4:04:32 PM The committee took an at-ease from 4:04 to 4:06 p.m. 4:06:01 PM SENATOR PETER MICCICHE, Alaska State Legislature, as prime sponsor, introduced SB 52. He reported that alcohol remains the top abused substance in Alaska; however, for those that drink responsibly, the industry is also an important economic driver throughout the state. He said this bill has been an eight-year effort involving 13,000 hours of work and input from 120 primary stakeholders, as well as from the legislature. He recounted the legislation's previous unanimous passage from the Senate in SB 76, which died in the House Finance Committee thereafter. The current version, CSSB 52(FIN) am, also unanimously passed the Senate. He stated that the bill's primary focus is public health and safety, adding that the industry, the Alcohol Beverage Control (ABC) Board, the Alcohol & Marijuana Control Office (AMCO), the legislature, and the public were also included. The goals, he said, are promoting a fair business climate; protection of public health and safety; limiting youth access to alcohol; promoting responsible use and reducing the harms of overconsumption; implementing change without negatively harming existing businesses and responsible operators; and expanding local control for municipalities. SB 52 is about balance, reorganization, and fairness, he said. He further noted that although the bill is dense, about 90 percent of it is reorganization of existing law. He said it modernizes the state's 35-year-old patchwork of statutes into a modernized framework for today's industry. 4:09:13 PM ANNA BRAWLEY, Staff, Senator Peter Micciche, Alaska State Legislature, informed the committee that she is a senior associate at Agnew::Beck Consulting and that [the firm] has been involved in this process since the first meeting in 2012. She proceeded to provide a PowerPoint presentation, entitled "Alcohol Beverage Control (ABC) Board Title 4 Review, on behalf of Senator Micciche, prime sponsor. She stated that each state is responsible for regulating alcohol manufacture, distribution, and sales in its jurisdiction since the repeal of prohibition in 1933. The purpose of alcohol control laws is to balance the interests of the industry with the public health and safety concerns about alcohol misuse (slide 2). 4:10:55 PM REPRESENTATIVE STUTES sought clarification on the type of consulting provided by Agnew::Beck Consulting. MS. BRAWLEY stated that they provide many different services, including community planning, public health, and public policy. 4:11:24 PM REPRESENTATIVE FIELDS questioned whether Agnew::Beck Consulting has a history of working with the Alaska Mental Health Trust Authority on issues of public safety related to substance misuse and addiction. MS. BRAWLEY confirmed that. 4:11:45 PM MS. BRAWLEY resumed her presentation. She said the purpose of the Title 4 project has been to consider the statutes as a whole and to make them work better for everyone. She restated the goals - all aimed towards promoting a fair business climate and protecting public health and safety, as well as making Title 4 a clear and consistent legal framework (slide 5). CHAIR SPOHNHOLZ inquired as to the original impetus for the entire Title 4 rewrite process. MS. BRAWLEY explained that the process was initiated by the ABC Board in 2012. The board members spearheaded the effort and brought different stakeholders together. She said originally, it was a one-day meeting where they figured out the biggest issues that needed to be addressed. They formed subcommittees and for several years, the process was funded by the Rasmuson Foundation, the Alaska Mental Health Trust Authority, and Recover Alaska, which started as an initiative by the aforementioned groups. 4:13:27 PM MS. BRAWLEY directed attention to slide 6, entitled Key Concepts in Title 4, which read as follows [original punctuation provided]: The 3-tier system: separation of manufacturers, wholesalers and retailers to prevent monopolies Licenses and permits:  License: allows a business to sell, serve, distribute and/or manufacture alcohol for 2 years. Permit: time-limited alcohol sales or service, by a licensee or non-licensed organization. Population limits: regulates number of licenses available in each community by type Proposed new concept: Endorsements on licenses to expand premises or allowed activities MS. BRAWLEY continued to slide 7. She explained that the 3-tier system was created after prohibition to address the concern that monopolies in the alcohol industry would encourage behaviors that lead to the consequences of alcohol misuse. The original 3-tier system proclaimed that alcohol must be manufactured, distributed, and sold to the public by different businesses; however, the industry has evolved since then, particularly with breweries and smaller manufacturers becoming a more popular business model that sells directly to the public (slide 7). She turned attention to slide 8, entitled Categories of Recommendations, which read as follows [original punctuation provided]: 1. Alcohol Licenses, Permits and Trade Practices 2. Role and Functions of the ABC Board and Staff 3. Underage Drinking and Youth Access to Alcohol 4. Regulation of Internet Sales of Alcohol 5. Technical or Administrative Law Changes 6. Local Option Communities* * Note: Local Option recommendations are documented in the report, but not included in SB 52. More comprehensive discussion of Local Option laws is needed in the future. 4:16:42 PM REPRESENTATIVE HANNAN asked if anything in SB 52 changes the ability to exercise local option for communities in Alaska. SENATOR MICCICHE noted the importance of not confusing local option communities with local control. He said the only local option that is affected is the online regulation and the delivery of alcohol to communities that may be local option. 4:17:44 PM MS. BRAWLEY resumed her presentation. She explained that slides 9-11 illustrate the systems proposed reorganization. The slides show license type by each tier (manufacturing tier, wholesale tier, retail tier) of the industry, which endorsements would apply to those licenses, and which licenses are exempt from population limits (slides 9-11). She noted the three new retail licenses highlighted on slide 10: brewery retail, winery retail, and distillery retail. She said they are only new in the sense that they are taking privileges that manufacturers have today and making them separate retail licenses. She added that all three are proposed under existing population limits (slide 10). 4:19:55 PM REPRESENTATIVE STUTES questioned whether SB 52 proposes any changes to current population limits. MS. BRAWLEY said the bill changes the proposed brewery, winery, and distillery retail licenses, putting them at 1 per 12,000 for new licenses. MS. BRAWLEY resumed her presentation on slide 12, explaining that the rest of the slides focus on the proposed changes to Title 4, such as more retail options for manufacturers. She said under current law, the brewery, winery, and distillery licenses have manufacturing and retail privileges SB 52 would split that into two license types, allowing for a pure manufacturing license that could be used with a retail license (slide 12). She turned attention to brewpubs, which is currently a license type that can be utilized with a bar; however, it only allows the production of a limited number of gallons per year. Essentially, she said, a traditional brewery is limited to the amount they serve to the public, while a brewpub can serve as much as they want to the public, but the amount they can produce is limited. SB 52 would create more equity within this tier and give manufacturers more options, including participating in the existing retail license system (slide 13). She noted that slide 14 illustrates the proposed manufacturer sales limits by product type. 4:23:34 PM REPRESENTATIVE STUTES questioned whether having both a brewery license and a distillery retail license would allow for the sale of 36 ounces of beer and 3 ounces of spirits to the same person. MS. BRAWLEY said shes not sure if a licensee can currently utilize two different licenses on the same premises. REPRESENTATIVE STUTES restated her question, asking if someone uses different licenses in the same venue, could they serve the maximum that each license allows to each customer. SENATOR MICCICHE offered his understanding that these types of [retail] licenses cannot be stacked. 4:25:01 PM MELISSA WALTER, Administrative Officer, Alcohol & Marijuana Control Office, Department of Commerce, Community & Economic Development, in response to Representative Stutes, said she does not know that policy. 4:25:19 PM The committee took a brief at-ease. 4:25:58 PM MS. BRAWLEY directed attention to slide 15. She reported that endorsements on licenses is another concept proposed under SB 52. She explained that this would allow for the potential expansion of what a business can do. Depending on the endorsement, a business could serve on larger grounds or offer additional activities. She said it benefits both the individual business and the system as a whole because it provides an alternative mechanism in the policy instead of just creating a new license for a very specific business type it would allow for the creation of an endorsement in the future (slide 15). She continued to slide 16, entitled Proposed Endorsements, which read as follows [original punctuation provided]: ? R-7A | Bowling Alley Endorsement ? R-7B | Package Store Shipping Endorsement ? R-7C | Package Store Delivery Endorsement R-7D | Package Store Re-Packaging Endorsement ? [R-1] Multiple Fixed Counter Endorsement ? [R-1] Hotel/Motel Endorsement ? [R-1] Large Resort Endorsement ? [R-3] Package Store Sampling Endorsement ? [M-1] Brewery Repackaging Endorsement MS. BRAWLEY noted that most of this language already exists in Title 4, such as the three package store endorsements (slide 16). In contrast, one of the new endorsements proposed under SB 52 would allow package stores to provide small free samples on their premises with the package store sampling endorsement. To address the concern of providing excess free alcohol, the proposal places clear limits on what can be served. She stated that any combination of products can be served, not to exceed the alcohol equivalent of any single product type (slide 17). CHAIR SPOHNHOLZ surmised that if business is interested in offering different categories of alcohol at the same time it would have to be a proportional amount. She asked if that is correct. MS. BRAWLEY confirmed that. 4:28:49 PM REPRESENTATIVE HANNAN sought clarification on the underlying licenses for several endorsements listed on slide 16. She asked what the underlying license would be for the bowling alley endorsement. MS. BRAWLEY replied the bowling alley endorsement would be attached to a BDL [beverage dispensary license]. She referenced slide 10, which provides a code for the endorsements and their corresponding license. She noted that not every endorsement is available to every license type. MS. BRAWLEY responding to a follow-up question from Representative Hannan, said the BDL allows for liquor, beer, and wine to be served, which is one of the aspects that differentiates a BDL from a recreational site license. For a bowling alley, she said, the endorsement allows drinks to be served at the lanes instead of a designated bar room. CHAIR SPOHNHOLZ questioned whether the recreational site license would exist under SB 52. MS. BRAWLEY explained that the recreational site license would still exist as a license type; however, it would be renamed the sporting event license. She noted that the language in the statute would remain the same. 4:31:56 PM REPRESENTATIVE HANNAN asked if recreational site licenses are currently limited to beer and wine. MS. BRAWLEY affirmed that. 4:32:16 PM MS. BRAWLEY resumed her presentation on slide 18, entitled R-7 Standardize Permits, which read as follows [original punctuation provided]: ? Unlike licenses, permits are typically issued for single events, on or off licensed premises. ? Define all permit types in statute, not just in regulation ? Fee for all permits is $50 per event day ? Most permits listed are already in statute or regulation ? New permit: Tasting Event Permit, allowing a Package Store to host an event on premises, in partnership with a BDL MS. BRALWEY highlighted the list of proposed permits on slide 19 and continued to slide 20. She explained that the package store tasting event permit would allow a package store to host a special tasting event on its own premises, with onsite consumption of alcohol for those attending the event. She noted that the event may last for four hours and must end by 9 p.m. Furthermore, it limits each license to six events per year in the same community as the license is located (slide 20). She informed the committee that population limits currently exist under Title 4 to determine how many of each license type may be issued in each community (slide 21). Population limited are set by each local government, which can exist within a larger borough. She explained that there are a set number of licenses based on the residents in the local government separate from the residents in the surrounding borough (slide 22). She directed attention to slide 23, entitled Seasonal REPL Tourism, which read as follows [original punctuation provided]: ? Seasonal restaurant license ? Available in smaller communities (< 40,000 pop.) ? Same operating requirements and privileges as full year restaurants (REPL) ? Number of licenses per community determined by formula: - 5-year average of annual visitors/months in season = Average monthly visitor population - (Residents + Average monthly visitors)/1,500 = Available Seasonal REP Tourism licenses ? Season defined as up to 6 months per year, in any combination Example: May through September + 1 winter month MS. BRAWLEY stated that the public convenience system currently exists under Title 4. It allows an individual seeking a restaurant or eating place license (REPL) in a community where there arent any licenses available to purchase to collect petitions that can be turned into AMCO. From there, the ABC Board evaluates whether issuing the license would satisfy public convenience. She explained that SB 52 proposes converting existing public convenience restaurants to full scale restaurants (slide 24). An alternative to the proposed public convenience system is to have local governments petition for additional restaurant licenses [AS 04.11.405]. This would provide cities more local control and encourage the concentration of commercial uses in the city center instead of outside the boarders. 4:40:04 PM REPRESENTATIVE HANNAN asked if a city could apply for the proposed local government petition for a REPL in advance of the existing businesses. SENATOR MICCICHE confirmed that. He explained that if the board approves the licenses that were petitioned for, the city can hold the licenses and then market them to licensees. REPRESENTATIVE HANNAN asked when the fee must be paid. She questioned whether the city is required to put the money up front for the licenses they petition for or if they wait to pay it until there is a physical restaurant to put on the books. SENATOR MICCICHE offered his understanding that the license would not be active until it is awarded to someone who would then go through AMCO to pay the fee and claim the license. 4:42:15 PM MS. BRAWLEY resumed her presentation on slide 26. She noted that currently, Title 4 allows for the relocation of a bar (BDL) from a borough to a city. The bill would keep that provision in place while also allowing the relocation of package stores without creating a new license (slide 26). Another issue, she said, is the enforcement of existing federal law regarding illegal trade practices. The concern centers around how much consolidation of market power there would be in manufacturers or wholesalers. To counteract that, the bill proposes adding equivalent sections to Title 4, protecting retailers and allowing for state enforcement. She noted that this would protect manufacturers and wholesalers as well by promoting free competition rather than shutting competitors out (slide 27). MS. BRAWLEY turned to the adjustment of license fees to reflect current ABC Board budgetary needs. She explained that in many cases, the same type of business is paying a different level of fee for the same activities. She said this is relevant to ensure that license fees are fair across different licensees. She noted that it also requires the ABC Board to review license fees every 5 years and if appropriate, forward a recommendation to the legislature (slide 28). She continued to slide 29, entitled More Accountability for License Fees Allocated to Local Governments, which read as follows [original punctuation provided]: • Current Title 4 allows for local government to receive an allocation equal to the license fees collected in their area, intended for enforcement of Title 4 and related ordinances. • Reporting on these activities is required, but not defined in statute. Some jurisdictions report regularly, while others do not. • The bill includes better reporting and prevention about use of these funds and requiring reports about education activities as well as enforcement. MS. BRAWLEY directed attention to slide 30. She said the ABC Board and AMCO, would work with other agencies and organizations to develop a coordinated education plan about responsible alcohol use and Title 4. 4:47:29 PM MS. BRAWLEY addressed the next slide, slide 31, entitled Internet Sales in Alaska: Few Rules, which read as follows [original punctuation provided]: ? Alaska is one of the only states with no rules for Internet sales of alcohol. ? Alaska Package Stores cannot sell alcohol online, only via (paper) written orders. Alaska Wineries and Package Stores can ship wine to customers in some circumstances. ? Without state laws restricting online sales, there are currently no limits on purchases of alcohol online from out-of-state sellers. ? Alaska consumers also do not pay state excise tax on online purchases, as they do on products sold and purchased in state. MS. BRAWLEY explained that SB 52 would create a winery direct shipment license and allow online alcohol sales only from U.S. wineries and Alaska package stores. She said the winery direct shipment licensee would verify that the customer is 21 or older, that the customer is in a non-local option area, and that the order is within the limit for personal use, which is 6 cases per sale and 12 cases per year (slide 32). CHAIR SPOHNHOLZ asked how the licensee would verify that a buyer is 21 or older when making an online purchase. MS. BRAWLEY said shes not familiar with the specific software; however, many wineries use ID verification. 4:49:42 PM SENATOR MICCICHE added that the system would require that the person ordering the alcohol is carded upon delivery. CHAIR SPOHNHOLZ clarified that the proposal requires verification of age. 4:50:09 PM REPRESENTATIVE RASMUSSEN shared a personal anecdote in which she was required to show ID upon delivery of a bottle of wine. CHAIR SPOHNHOLZ sought to clarify whether age verification is required by state law. SENATOR MICCICHE noted that the spectrum of operators varies dramatically. He said SB 52 would require that every operator is required to verify the ID card of the person receiving the package. 4:51:22 PM REPRESENTATIVE HANNAN inquired as to why only wineries and package stores can ship directly. SENATOR MICCICHE clarified that the current discussion is about selling alcohol online. He said that in Alaska, wine the only type of alcohol that can be sold online. MS. BRAWLEY noted that an in-state package store can sell any of their products to a customer through written order, which has been interpreted to mean that the store has the customers ID on file. She further noted that currently, the state does not have laws regulating this; however, the U.S. Postal Service is not allowed to ship alcohol, and both UPS and FedEx have also decided to only allow commercial shipments of wine. 4:53:47 PM REPRESENTATIVE RASMUSSEN questioned whether wine could be delivered to from grocery stores via Instacart. MS. BRAWLEY said that specific business model is not discussed in the bill; however, certain stores, such as Fred Meyer and Safeway have their own package store license, which could be used to provide that service. She noted that it would still need to be delivered to an individual at home with ID verification upon arrival. 4:55:19 PM MS. BRAWLEY directed attention to slide 33 to discuss the regulation of common carriers. She stated all common carriers must be approved by the ABC Board to transport and deliver alcohol to consumers throughout the state. Carriers must demonstrate that they have policies and train employees to properly handle shipments of alcohol. She added that the ABC Board would publish that list of carriers, making it available to direct shipment licensees and in-state package stores (slide 33). REPRESENTATIVE RASMUSSEN expressed concern about the business model. SENATOR MICCICHE, in response to Representative Rasmussen, said thats what the common carrier regulations are for. He reiterated that the common carrier would be authorized for alcohol deliveries and would have the necessary policies in place. He offered his belief that those policies would include barring underage individuals from delivering alcohol. 4:58:14 PM MS. BRAWLEY noted that current laws allow underage individuals to work in restaurants; however, they cannot deliver alcohol. She continued to slide 34. She said there is already a system in place that tracks alcohol orders to local option areas, which the bill would maintain. She added that in current Title 4, all data in the local option order database is private and deleted after one year. SB 52 would keep individual order information private but retain aggregate data for 10 years and allow the ABC Board to publish annual total sales volume by region or community that is available to the public (slide 35). She continued to slide 36, entitled RB-6. Revise Title 4 Penalties, which read as follows [original punctuation provided]: ? Review penalties for all Title 4 sections, and revise as needed to make penalties proportionate to the offense, and more consistently enforced. ? Retain existing Misdemeanor and Felony charges for serious offenses, particularly those causing harm to children. Ensure that the ABC Board, and licensee, is informed about Title 4 convictions: require court to send records to AMCO, and AMCO to send to the licensee. ? ABC Board retains authority to impose conditions or additional penalties, including suspending or revoking license. ? See Appendix, Table 3 in Title 4 Review Report for table of all current penalties and proposed changes. MS. BRAWLEY noted that one of the most important penalty changes is increasing the immediate accountability of licensees. She said in current Title 4, a licensee or employee who overserves an intoxicated adult or serves alcohol to a minor is guilty of a class A misdemeanor. SB 52 would change the penalty for both statutes to a minor offense with a $500 fine. Additionally, the owner of the license would receive an administrative penalty of $250. This would alert the owner that a violation occurred and would hold them immediately accountable, while encouraging future compliance (slide 38). To conclude, Ms. Brawley highlighted required keg registration. She said it is currently required in Anchorage and Juneau, but under SB 52, it would be a statewide requirement. She explained that kegs tagged with the purchasers contact information can be tracked if confiscated at an underage party to better enforce underage drinking (slide 39). 5:02:28 PM CHAIR SPOHNHOLZ asked how the proposed fines for overserving an adult or serving a minor compare to the fines under current Alaska law. MS. BRAWLEY said the penalty for an employee that overserves an adult or serves a minor is a class A misdemeanor, resulting in up to a $10,000 fine and a court appearance. She added that there is no immediate penalty on the licensee, which means they might not be aware of the situation until they renew their license. 5:04:01 PM REPRESENTATIVE STORY asked for the current violation rates. SENATOR MICCICHE said they are artificially low because it sets an extreme fine that leads to unlikely conviction. He offered his belief that enforcement loses interest when they know that the penalty will not be realized. He added that the penalty proposed under SB 52 would most likely lead to more results from local or departmental enforcement. [SB 52 was held over.]