HOUSE BILL NO. 116 "An Act extending the termination date of the Alcoholic Beverage Control Board; and providing for an effective date." 2:29:15 PM LAURA STIDOLPH, STAFF, REPRESENTATIVE KURT OLSON, testified that HB 116 would extend the termination date of the Alcoholic Beverage Control Board to June 30, 2018. She shared that each year the Division of Legislative Audit reviewed state boards and commissions to determine whether they should be reestablished per AS 24.44. The division of Legislative Audit reviewed the activity of the board and determined that there was a demonstrated public need for the board's continued existence and that it had been operating in an effective manner. She furthered that the board had addressed all issues found in prior audits, with two being resolved and one being partially resolved. She noted the five findings and recommendations from the most recent legislative audit (copy on file): Recommendation No. 1 The board's director should ensure that all board meetings are properly published on the State's Online Public Notice System. Prior Finding From FY 07 through FY 09, 11 of 16 board meetings were not adequately publicly noticed per statute or board policy requirements. Four meetings were not advertised on the State's Online Public Notice System; the venues for seven board meetings were not advertised in the local newspaper; and seven meetings were not advertised timely. Current Status From FY 09 through February 2014, three of 25 board meetings were not published on the State's Online Public Notice System. Although the board has procedures for public noticing, Department of Commerce, Community, and Economic Development staff did not adhere to procedures due to general oversight. Alaska Statute 44.62.310(e) requires reasonable public notice be given for meetings. Failure to publicly notice board meetings may limit public input in the regulatory process. Lack of public input may reduce the board's effectiveness in addressing public concerns. We recommend the board's director ensure all board meetings are properly published on the State's Online Public Notice System. Recommendation No. 2 The board should notify local governing bodies of applications for new and transfer licenses within 10 days of receipt. Prior Finding The board did not consistently adhere to the statutory requirement of notifying the local governing body within 10 days of receiving an application as required by AS 04.11.520. This requirement allows time for local governments to review and possibly protest a license being issued, renewed, relocated, or transferred. Local governing bodies were not consistently notified because board members and the director did not provide appropriate guidance and oversight to staff to ensure compliance with state laws, and with its decisions. Current Status For two of 10 new or transfer licenses tested, the board did not inform the local governing body within 10 days of receiving the application. Both notifications were sent between 11 and 20 days after the board received the application. The errors resulted from prior board staff not adhering to the board's policies and procedures which require local governing bodies be notified in a timely manner. Alaska Statutes specify a timeline for the board to review applications, notify local governing bodies, and receive protests. Alaska Statute 04.11.510 requires the board to review applications within 90 days of receipt. Alaska Statute 04.11.520 requires the board to notify local governing bodies within 10 days of receiving an application. A local governing body may protest within 60 days as provided by AS 04.11.480. Delays in notifying local governing bodies may result in inappropriately limiting the time the local governing body and/or the board has to review applications. We recommend the board notify local governing bodies of applications for new and transfer licenses within 10 days of receipt. Recommendation No. 3 The board should issue catering permits in accordance with statutory requirements. Catering permits may be issued to beverage dispensary licensees (BDL) to sell alcoholic beverages at conventions, picnics, social gatherings, sporting events, or similar affairs. The permits expire after seven days and can only be used for events hosted off licensed premises. Alaska Statutes 04.11.230(a) states: A caterer's permit authorizes the holder of a beverage dispensary license to sell or dispense alcoholic beverages at conventions, picnics, social gatherings, sporting events, or similar affairs held off the holder's licensed premises. The permit may only be issued for designated premises for a specific occasion and for a limited period of time. A review of four licensees that received more than six consecutive catering permits during the audit period yielded three instances of noncompliance. Two were related to catering permits issued to serve alcohol in another room of the same premises. The permits were issued for six to 14 consecutive weeks while the board processed the licensee's application for a duplicate BDL. A duplicate BDL allows a licensee to serve alcohol in another room of an establishment. The third noncompliant permit resulted from the board issuing a catering permit to one licensee to serve alcohol for another business with an expired BDL. In this case, the permits were issued for eight consecutive weeks while the board processed the licensee's renewal application. Each of the three variances represent a statutory violation because the permits were issued with the intention to serve alcohol on a licensed premises and to maintain daily operation of a business rather than for a short term social gathering or similar event. Circumventing licensing laws weakens the board's role as regulator and may result in inequitable treatment of applicants. Inquiries with board members revealed that the board considered the issuance of the noted catering permits a convenience to both licensees and the public. At the time, the board believed that issuing the license or permit was appropriate to ensure the businesses could continue to operate. We recommend that the board issue catering permits in accordance with statutory requirements. Recommendation No. 4 The board should issue recreational site licenses in accordance with statutory requirements. Recreational site licenses may be issued to businesses that host non-school-related recreational events held during a season. Of the 32 recreational licensee's active during the audit period, the audit found 15 businesses (47 percent) did not meet the criteria for a recreational license. Ineligible businesses include bowling alleys, a sports center and pub, an exercise gym, a gift shop, theatres, and pool halls. These business types did not meet the definition of a recreational site nor were operations limited to a season. The issuance of these licenses expanded the number of establishments licensed to sell alcohol over the number allowed by statute. According to AS 04.11.210(a), the holder of a recreational site license may sell beer and wine at a recreational event during and one hour before and after recreational events. AS 04.11.210(c) defines recreational events as baseball games, car races, hockey games, or curling matches regularly held during a season. Inquiries with board members revealed that the improper issuance of recreational site licenses was caused by an historic misunderstanding of what qualifies as a recreational event. We recommend that the board issue recreational site licenses in accordance with statutory requirements. Recommendation No. 5 The board should implement a process to monitor and track all complaints to ensure they are resolved in a timely manner. The board has not established a process to monitor and track all complaints to ensure they are resolved in a timely manner. The board does have a process to receive complaints from licensees or law enforcement agencies through their website, telephone, or emails. However, complaints are only tracked if they result in an inspection or investigation. If the complaint is deemed invalid, it is not documented. Furthermore, the basis for a decision not to investigate is not documented and maintained. The efficiency with which complaints are investigated is one of the sunset evaluation criteria used in the legislative oversight process. Alaska Statute 44.66.050(c)(6) specifies the sunset review must evaluate: The efficiency with which public inquiries or complaints regarding the activities of the board, commission, or agency filed with it, with the department to which a board or commission is administratively assigned, or with the office of victims' rights or the office of the ombudsman have been processed and resolved. By not tracking complaints, there is an increased risk that board staff may not investigate complaints received and/or not investigate complaints in a timely manner. Such instances could reduce the board's ability to effectively enforce alcoholic beverage laws. Additionally, complaints received directly by board staff via telephone or email may never be resolved in the event of staff turnover. Because there was no statutory mandate, the board director did not consider tracking all complaints as necessary. We recommend that the board establish a process to monitor and track all complaints to ensure that they are resolved in a timely manner. She relayed that it was the opinion of the Division of Legislative Audit that the board be extended three years to June 30, 2018. She said that had the marijuana initiative not passed, the board would have been extended for five years. She noted that the regulation of the marijuana control board established in HB 123, would fall under the ABC board, which was why the fiscal note reflected the expenditures for the regulation of marijuana. She added that the money had not been appropriated and would be removed if HB 123 passed. She concluded that the ABC board served an important role in guarding the health and safety of Alaskans by protecting the general public through the issuance, renewal, revocation, and suspension of alcoholic beverage licenses. 2:32:13 PM Ms. Curtis spoke to the recommendations outlined in the legislative audit. She noted that the first recommendation was a repeat recommendation from the prior sunset. She said that in 2014, 3 of 25 board meetings had not been noticed during the audit period. She touched on the second recommendation, stating that the division had tested 10 licenses, 2 of which were not communicated to the local governing bodies within the 10 day time frame. She stated that under the third recommendation the division had reviewed 4 licensees, with 6 consecutive catering permits issues during the period; 3 of the 4 were discovered to be statutory violations because the permits were issued with the intention to serve alcohol on a licensed premises that would maintain daily operations of a business, rather than for a short-term social gathering or similar event. She said that the board issues the permits to ensure that those businesses could continue to operate. She continued that that of the 32 licensees that were active during the audit period, 15 did not meet the criteria for a recreational license. She detailed that ineligible business included: bowling alleys, a sports center and pub, and exercise gym, gift shops, theatres, and pool halls. She said that the businesses did not meet the definition of a recreational site, nor were operations limited to a season. She relayed that the issuance of the licenses expanded the number of establishments licensed to sell alcohol over the number allowed for in statute. She furthered that inquiries with board members had revealed that the improper issuance of the recreational site licenses was caused by a historic misunderstanding of what constituted a recreational event. She shared that under the final recommendation the division had found that the board had a process to receive complaints; however, if complaints were not investigated or inspected, they were not documented. She concluded that the board and the department had concurred with all of the recommendations. 2:35:39 PM CYNTHIA FRANKLIN, DIRECTOR, ALCOHOLIC BEVERAGE CONTROL BOARD, JUNEAU, testified that she had supervised the final responses to the audit and had provided details to the auditors regarding the fixes to the issues identified in the audit. She discussed the first audit finding. She explained that the director now reviewed all of the public notices that were issued by the administrative personnel. She spoke to the second recommendation. She said that in many cases same day public notification of applications was occurring, which was well within the 10 day notice requirement. She continued to the third recommendation. She shared that the catering permit had been an issue with both the board and the agency. She assured the committee that the board had instituted the practice if strictly adhering to the statute regarding when catering permits were issued. She moved to the fourth recommendation and shared that the board had demonstrated understanding of the parameters of the recreational site licenses. She spoke to the fifth recommendation. She said that complaints for investigators were charted on a spreadsheet, the agency was paper based and the information was placed in a paper file. She concluded that the agency had undergone several changes over the past 4 years that had enhanced its performance: the audit, the move from the Department of Public Safety to the Department of Commerce, Community and Economic Development, and the stakeholder review of statutes. She felt that the board was taking strong and strict action regarding violations of statute and regulation. 2:42:59 PM Senator Bishop wondered how quickly complaints would be resolved by the board. Ms. Franklin relayed that her agency had a 24 hour rule; complaints were directed to the Enforcement Supervisor upon receipt and were investigated within 24 hours. Senator Bishop asked how long an initiated investigation would take to close out. Ms. Franklin replied that it would depend on the activity. She said that she generally checked in with investigators after 3 days, but most were same day resolution. 2:45:07 PM Co-Chair MacKinnon felt that the departmental move of the board had led to more errors but less complaints. Ms. Franklin said that the board was working on a community policing approach to their licensees; 5 enforcement officers were working on the issue. She believed that an argument could be made for the appropriateness of either department to house the board; however, being in DOC had made the board itself more attuned to its public safety obligations, and less reactive to the enforcement duties of the board. 2:48:00 PM Co-Chair MacKinnon OPENED public testimony. 2:48:34 PM Co-Chair MacKinnon CLOSED public testimony. HB 116 was HEARD and HELD in committee for further consideration.