HOUSE FINANCE COMMITTEE March 19, 1999 1:50 P.M. TAPE HFC 99 - 48, Side 1. TAPE HFC 99 - 48, Side 2. TAPE HFC 99 - 49, Side 1. CALL TO ORDER Co-Chair Therriault called the House Finance Committee meeting to order at 1:50 P.M. PRESENT Co-Chair Therriault Representative Foster Co-Chair Mulder Representative Grussendorf Vice Chair Bunde Representative J. Davies Representative Austerman Representative Moses Representatives Kohring, G. Davis and Williams were not present for the meeting. ALSO PRESENT Representative Norman Rokeberg; Representative Eric Croft. TESTIFIED VIA TELECONFERENCE Douglas Griffin, Director, Alcohol Beverage Control Board (ABC), Anchorage; Linda Kesterson, Attorney, Alcohol Beverage Control Board, Anchorage; Chris Anderson, Glacier Brew House, Anchorage; Rod Hancock, Moose's Tooth, Anchorage. SUMMARY HB 69 An Act relating to the Alcoholic Beverage Control Board; and providing for an effective date. CS HB 69 (FIN) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Revenue dated 3/8/99. HOUSE BILL NO. 69 "An Act relating to the Alcoholic Beverage Control Board; and providing for an effective date." Co-Chair Therriault pointed out that Committee members packets contained letters from the Alaska Cabaret Hotel, Restaurant & Retailers Association (CHARR) Board addressing concerns which had been voiced by Senator Donley. [Copy on File]. Additionally, the packet contains correspondence from the Alcohol Beverage Control (ABC) Board, Douglas Griffin, Director. [Copy on File]. REPRESENTATIVE NORMAN ROKEBERG acknowledged the timely response from the ABC Board. He pointed out that industry does support the legislation, and urged Committee members to move the bill from Committee. Representative Grussendorf advised that he had received a call from the CHARR Board and that they indicated that they would endorse only the concept of the brewpub and the extension of the board. The Board has reserved comments on other amendments floated into the bill. Co-Chair Mulder questioned why the one-year requirement had been placed on limited liability corporations (LLC). LINDA KESTERSON, (TESTIFIED VIA TELECONFERENCE), ATTORNEY, ALCOHOL BEVERAGE CONTROL BOARD, ANCHORAGE, corrected that a change involved limited liability corporations which can hold a liquor license under statute. The resident issue would place limited liability corporations and limited liability partnerships under the same rules that now exist for corporations and partnerships under AS 4.11.390. "RESIDENCE REQUIREMENTS. (a) A beverage dispensary license or package store license may not be issued to a person or association of persons who have not resided in the state for at least one year before the date of application." Co-Chair Mulder again questioned why trade was being restricted. Ms. Kesterson replied that was not the intent. In order to provide appropriate background checks of the individuals who will be conducting liquor business in the State, it has been State policy that those persons should be in business or have connections with the State for at least one year. She stressed that this would not preclude foreign corporations from doing business in the State and that current law requires that corporations or partnerships must reside in the State for one year. The proposed change would make limited liability partnerships consistent with existing law. Co-Chair Mulder observed that current law provides a "hurdle" for new, upcoming businesses. He stated that the proposed language would expand the problem. Ms. Kesterson believed that at this time, there is not a problem with the one-year residency requirement and that she knew of no one who had objected to it. She noted that the change would place licensees on par with partnerships and corporations. DOUGLAS GRIFFIN, (TESTIFIED VIA TELECONFERENCE), DIRECTOR, ALCOHOL BEVERAGE CONTROL BOARD, ANCHORAGE, stated that he personally would support Co-Chair Mulder's suggestions of removing the requirement on existing business entities, He noted that larger policy questions have not been scrutinized by the Board. Representative Rokeberg clarified that portion of the bill had been drafted from information received in a memorandum from the office of Ms. Kesterson. He questioned the hesitation. Representative Moses suggested that it would be "unfair" to deny the benefits to a limited liability corporation (LLC) if that corporation could not access residency for one year. Representative J. Davies commented that the letter from CHARR should not be characterized as support for the legislation. It was not stated that they support the legislation but rather, they clarified specific issues. Representative Rokeberg respectfully disagreed. Co-Chair Therriault pointed out that Mr. Hackenmiller, President, CHARR, indicated that he "hoped" the brewpubs would support this. Representative Moses advised that the membership of CHARR is mainly dispensary license holders with one brewpub member. Representative J. Davies MOVED to adopt Amendment #1. [Copy on File]. Co-Chair Therriault OBJECTED. Representative J. Davies explained that at this time, when a license is up for renewal or change, the local governing body would have an opportunity to comment on it. The current problem is that the ABC Board does not have the authority in statute to attach a condition to their approval. Amendment #1 would allow local citizens an opportunity to address concerns with the ABC Board. Representative J. Davies stated that current language reads that the board "shall deny the application or continued application unless the board finds that the protest is arbitrary". Amendment #1 would add the issue of conditions to that language. Mr. Griffin explained that the ABC Board could attach conditions of approval, which, to date, has only been done selectively because it tends to increase enforcement needs. Representative Bunde understood that the ABC Board does not have the authority to approve or disapprove conditions, however, testimony received from Mr. Griffin indicates differently. Mr. Griffin pointed out that "meeting of conditions" is addressed in AS 04.11.395. The revoking of a license is not an option. If conditions are violated, the process begins with filing an accusation, followed by a response period to decide if the accusation could be settled informally, and then a hearing involving the Administrative Procedures Act. At that time, a finding would be made. Co-Chair Therriault asked if Amendment #1 would expand the conditions of license approval and extension. Mr. Griffin replied that the amendment would shift power to local government. The Board recognizes the authority of local governments to exercise their right to use the conditions. However, Mr. Griffin worried about the restrictions that the amendment would implement. He stated that he opposed the amendment because he did not know the limitations that it might bring forth. Mr. Griffin added that conditions have been used in Anchorage as an agreement between the licensee and the Assembly, acting as a precursor in cases of violations. If the conditions are mutually agreed upon and there is a violation, then the Board would be comfortable with the condition, as it had been agreed upon. It would not involve the Board except, that it would create a record on which to base a legitimate protest. Co-Chair Mulder asked who would be included in a "local governing body". REPRESENTATIVE ERIC CROFT replied that was referenced in statute and would include the Municipal Assembly of Anchorage as the governing body. It would not be a community counsel but rather, it is the recognized elected assembly or city council. Co-Chair Mulder asked if the amendment would provide the ABC more power than they currently have. Mr. Griffin replied that the amendment would not give more power, but would make the local governing body stronger on the condition of alcohol service. It would increase the workload of the enforcement staff. Mr. Griffin noted that the Board would be comfortable with conditions agreed between a local government and a licensee, and that the ABC Board would not be required to be party to that. He believed that Amendment #1 would make the ABC Board responsible for enforcement. Representative J. Davies apologized that it had been perceived that the purpose of the amendment was to give the board more responsibility. The concern of the amendment is focused on the governing body and that it be able to attach a condition of approval for an issue. He questioned the current enforcement condition which the ABC Board is responsible to meet. Mr. Griffin explained that the Board does not provide a level of oversight and enforcement at work places. The Board is uncomfortable with that because of enforcement restraints and the size of their travel budget. He acknowledged that many places in the State do not have a Board presence and in those instances, the Board relies on local police enforcement. Representative Austerman noted that because he had served on the local assembly, he would support the concept of the amendment. He believed that communities should have as much authority as the ABC Board to implement conditions and concerns. They currently can not do that. Representative Grussendorf spoke in support of the amendment. Representative Moses voiced concern with local governing bodies having too much power particularly in small communities that can be politically polarized. He admitted that even in large cities, influential city assembly members can be "troublesome" and create an unfair protest. (Tape Change, HFC 99-48, Side 2). Representative J. Davies summarized that the current practice has resulted in local citizens feeling that their needs are not being met. That concern would be substantially met with adoption of Amendment #1. A roll call vote was taken on the motion. IN FAVOR: Grussendorf, Moses, Austerman, J. Davies OPPOSED: Foster, Bunde, Therriault, Mulder Representatives G. Davis, Williams, Kohring were not present for the vote. The MOTION FAILED (4-4). Representative J. Davies MOVED to adopt Amendment #2. [Copy on File]. Co-Chair Therriault OBJECTED. Representative J. Davies explained that the amendment would address audit concerns regarding the issuance of arrest notices on a premises. Amendment #2 would provide when there is an arrest, the Board would be notified. Representative Austerman stated that he agreed with the amendment, however, he pointed out that the ABC Board has indicated that they are in the process of drafting regulations requiring timely and complete reporting and enforcing annual license fees. Mr. Griffin suggested that a 60-day wait period would be sufficient. The Board plans to have a full disclosure reporting through the last quarter prior to disbursement. He noted that the ABC Board was investigating regulations requiring only Title 4 violations, whereas, Amendment #2 speaks to any kind of arrests. Mr. Griffin questioned if the ABC Board would support the amendment as it would change Title 12. Co-Chair Therriault inquired if the amendment would act as an unfunded mandate to local assemblies and if it would require a fiscal note for State Troopers. Representative J. Davies denied that the motion would have that great of a fiscal impact. At the present time, all items are being tracked, and that, the amendment would require only an additional three-month summary be sent to the ABC Board. Mr. Griffin suggested that there would be a screening process by the Board. The immediate items checked would be the Board's capability and the potential licensee. He pointed out that this action would be a policy call made by the Legislature. He acknowledged that all information received by the Board would be useful. Representative Bunde questioned how the responsibility would impact the Board's workload. Mr. Griffin replied that it would be difficult to predict the increased workload. At present time, all information is received from Anchorage, which has the largest number of licensed premises. Mr. Griffin believed that it would not require additional funding needs. Representative Rokeberg implied that the amendment would fiscally affect the Department of Public Safety and the ABC Board, as well as being an unfunded mandate to local governments. Representative Moses recommended that it would be better if the ABC Board was restricted to license violations only. He stated that many violations that occur at his liquor store, are drug-related events. He worried about increased police activity which could unwarrently close bars. Representative Foster agreed, pointing to the lose of licenses. Representative J. Davies pointed out that the ABC Board currently is responsible for the work recommended in Amendment #2. He acknowledged that there could be circumstance where the patterns of these types of arrests are important. If drugs and prostitution are occurring on a premises, one would conclude that there is business going on at that location that should be checked. In response to Co-Chair Therriault, Mr. Griffin noted that the ABC Board's regulations would be available for public comment within sixty (60) days. A roll call vote was taken on the motion. IN FAVOR: Grussendorf, Moses, J. Davies OPPOSED: Foster, Austerman, Bunde, Mulder, Therriault Representatives Williams, Kohring, G. Davis were not present for the vote. The MOTION FAILED (3-5). Representative J. Davies MOVED to adopt Amendment #3. [Copy on File]. Co-Chair Therriault OBJECTED. Representative J. Davies explained that Amendment #3 addresses work performed by the ABC Board investigators for prostitution and gambling issues. The concern is that in the audit, there is not explicate statutory authority to do that work. He observed that the language of the amendment would make that work consistent with the actual practice. Mr. Griffin advised that the ABC Board supports the amendment to give them power to investigate gambling and prostitution. In response to Representative Bunde, Mr. Griffin reiterated that the ABC Board suggested that language be added which stipulates that those actions be limited to licensed premises only. Representative J. Davies did not object to adding that language, however, pointed out that the issue was somewhat addressed on Lines 11 & 12. He added, prostitution issues are defined in AS 11.66.100-130 and gambling related offenses are defined in AS 11.66.200-280. Those definitions limit the work too specifically gambling and prostitution. Representative Rokeberg stated that he would support the amendment if he received a guarantee from the House Finance Committee that when the bill reach the House Floor, Committee members would support the change to the intent and title. Co-Chair Therriault asked if the language of the amendment would adequately cover the concern voiced by Mr. Griffin. Mr. Griffin agreed that his concerns were adequately addressed on Lines 12 & 13. Representative J. Davies indicated that he would speak with the drafter of the amendment for recommendations regarding the wording of that language. Representative Moses questioned why the language was being limited to gambling and prostitution. He suggested that there are more problems with drug use than other concerns. Representative Foster stipulated that this is the ABC Board, not a "beverage, gambling and prostitution commission". He questioned including the above listed concerns. He asked, "Why limit it to only those concerns". He reiterated that this is the ABC Board, and urged that it be restricted to alcohol only. Co-Chair Therriault pointed out that the ABC Board is requesting clearer statutory authority for what they are already doing in the arena of prostitution and gambling. Representative Bunde asked if the legislation addressed ABC agents carrying firearms. Mr. Griffin replied that allowance is for defensive purposes only. The investigators work hand and hand with local police, who are eager to have the investigators armed. Mr. Griffin advised that the ABC Board has worked diligently to stay away from doing arrests. He concluded that gambling, prostitution and alcohol circumstances are much less dangerous than events involving drugs. Co-Chair Therriault WITHDREW his OBJECTION to adopt Amendment #3. Co-Chair Therriault MOVED a conceptual amendment to #3 that the drafter tighten the title, to restrict ABC employees to only "investigation" not "enforcement". There being NO OBJECTION to the conceptual change to Amendment #3, it was adopted. Representative J. Davies MOVED to adopt the amended Amendment #3. Representative Foster OBJECTED to Amendment #3. He stated that police cover the additional concerns and that he objected to the formation of a "police type" state. He reiterated that he objected to providing another agency power without the attention of State police. Co-Chair Therriault commented that the amendment would provide authority to the Board for work that they are already doing. Representative J. Davies added that the ABC Board would be doing this work in concurrence with Department of Public Safety. Representative Foster recommended that if the bill passes, the name of the board should be expanded to include the expanded language. A roll call vote was taken on the motion. IN FAVOR: Grussendorf, Moses, Austerman, Bunde, J. Davies, Therriualt OPPOSED: Foster, Mulder Representatives Kohring, Williams, and G. Davis were not present for the vote. The MOTION PASSED (6-2). (Tape Change HFC 99 - 49, Side 1). Co-Chair Mulder MOVED to adopt a conceptual Amendment #4 which would remove existing language to Page 6, Section #9, Line 9. Representative J. Davies asked if the change would effect only the way corporations respond to the State requirements for beverage dispensary. Co-Chair Mulder advised that it was his intention that the change address only ABC licensees. Representative J. Davies questioned why such action should be taken with current statutory requirements to incorporating a business in the State. Ms. Kesterson replied that most business do not have to be a State resident for a year to form an incorporated business. Co-Chair Therriault pointed out that Amendment #4 would remove language from current statute. Ms. Kesterson suggested that the easiest way to address the issue would be to repeal AS 4.11.390 which speaks to resident requirements. The expansion language of the amendment would broaden that to include LLC and LLP. She clarified that if it was intended to eliminate the one-year residency requirement, it would be best to repeal AS 4.11.390. Representative Rokeberg voiced concern that no public or industry input had been taken on the issue. He offered to work with Representative Mulder on an amendment to be addressed on the House Floor. Co-Chair Therriault noted that Representative Mulder had made the conceptual amendment, and suggested that once the final draft of the bill was received, the Committee could then address any additional concerns. There being NO OBJECTION, conceptual Amendment #4 was adopted. Co-Chair Mulder MOVED to report CS HB 69 (FIN) out of Committee with individual recommendations and with the zero fiscal note. Representative J. Davies OBJECTED for the purpose of a statement. He asked why the Committee would add a conceptual amendment and then wait for the final bill to reconsider. Co-Chair Therriault replied that often, he would hold a bill in Committee for reconsideration if the new language had changed the bill's structure or intent. Co-Chair Mulder added that such action could speed up the process for the bill. Representative J. Davies WITHDREW his OBJECTION. There being NO further OBJECTIONS, it was so ordered. CS HB 69(FIN) was reported out of Committee with a "do pass" recommendation and with a zero fiscal note by the Department of Revenue dated 3/8/99. ADJOURNMENT The meeting adjourned at 3:30 P.M. H.F.C. 10 3/19/99