Purpose

Makes several changes to Title 4 on alcoholic beverages to update, facilitate and clarify the enforcement process and procedures of the Department of Liquor Licenses and Control. Contains a Proposition 108 clause.

Background

This legislation represents the annual effort by the Department of Liquor Licenses and Control (Department) and the various representatives of the liquor industry to modify the liquor code to address industry and Department concerns and clarify the liquor statutes to facilitate enforcement and compliance.

Currently, the Department is required to deposit all license, registration and other fees and penalties into the state general fund. Each fiscal year, the Department receives a general fund appropriation authorized by the Legislature for its operations. Under S.B. 1509, the Department’s budgeting process would be modified by diverting all revenues collected, with the exception of fines and penalties, into a newly established Department of Liquor Licenses and Control Fund. The Department would be authorized to administer the new fund as a non-appropriated fund. According to the Joint Legislative Budget Committee, for FY 1999-2000, the Department’s total revenues, less the fines and penalties, was $4,200,700 and its total operating budget was $2,380,600. Based on the FY 1999-2000, the fiscal impact to the state general fund due to the diversion of revenues, less the fines and penalties, to the new fund would be $1,820,100 annually.

Provisions

Department of Liquor Licenses and Control Fund

1. Eliminates the requirement that license, registration and other fees, with the exception of fines and penalties, be deposited into the state general fund, and eliminates the prescribed allocation of the license fees collected. (4-115)

2. Establishes a Department of Liquor Licenses and Control fund, consisting of all monies collected by the Department, except for fines and penalties. Authorizes the Department to administer the fund as a continuing appropriation and stipulates monies are non-lapsing. (4-116)

Licensure and Licensure Fees

3. Allows the Director to cancel a hearing for a spirituous liquor license application and issue the license if the city, town or county recommends approval of the license, unless the State Liquor Board or an aggrieved party requests a hearing. (4-201)

4. States that a restructuring of a licensee’s business is an acquisition of control and is a transfer of a spirituous liquor license and not the issuance of a new license if all of the controlling persons of the licensee and the new business entity are identical and there is no change in control or beneficial ownership. Specifies the licensee’s history of violations of the alcoholic beverages statutes is the history of the new business entity. (4-203)

5. Requires applicants to provide the necessary information on a form prescribed by the Director to ensure compliance with provisions relating to acquisition of control and nonuse status licensure. (4-203)

6. Requires a location to requalify for a spirituous liquor license and meet the same qualifications for issuance of a new license if the licensee’s interest is forfeited, except when a bona fide lienholder demonstrates mitigation. (4-203)

7. Increases fees on interim permits, applications for an original license or the transfer of a license and various renewal licenses. (4-203.01 & 4-209)

8. Eliminates the requirement of the Director to assess a surcharge on licenses. (4-209)

Disciplinary Action

9. Requires the notice of a hearing for a complaint against a licensee or lienholder to include compliance actions with respect to a license issued. (4-210)

10. Allows a lienholder to participate in the determination of the disciplinary action. Requires the lienholder to prove specified circumstances by a preponderance of the evidence, if the Director is to consider mitigation on behalf of the lienholder, including the lienholder’s interest is a bona fide security interest, the lienholder took reasonable steps to correct the licensee’s prior actions and the lienholder reasonably attempted to remain informed by the licensee about the business’ conduct. (4-210)

11. Expands the actions of the Director when issuing an order in the event the Director decides not to revoke the license based on the circumstances provided by the lienholder to include the requirement that a lienholder pay any civil penalties imposed on the licensee. (4-210)

Miscellaneous

12. States that the investigations unit within the Department must also include seven officers in the community interaction unit to respond to complaints from neighborhood associations, neighborhood civic groups and local governing authorities regarding liquor violations. (4-112)

13. Permits a distiller, vintner, brewer or wholesaler to donate spirituous liquor up to $100 in a calendar year to a tax-exempt organization for charitable fundraising activities. (4-244)

14. Eliminates the requirement of the Director to transfer monies collected from fees for daily off-sale special event licenses to the Department of Health Services for evaluation and treatment of persons impaired by alcoholism. (4-203.02)

15. Eliminates the requirement of depositing receipts derived from club licenses and applications into the department of mental retardation capital investment fund.

16. Exempts the Department from the Administrative Procedures Act (APA) until December 31, 2001 for either modifying rules regarding signs, retail promotions, glassware promotions or product recovery by a wholesaler when a retailer is closed or discontinues a product, or conforming rules to statutory changes.

17. Requires the Department to provide notice and hold at least two public hearings prior to adoption of any proposed rules under the exemption from APA. Requires an opportunity for public input in at least one pubic hearing on draft rules considered for adoption by the Department.

18. Makes technical and conforming changes.

19. Contains a Proposition 108 clause, which requires an affirmative vote of at least two-thirds of the members of each chamber of the Legislature.

Prepared by Senate Staff