CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1311

Author:(Ting)

As Amended Ver:August 20, 2019

Majority vote

SUMMARY:

Authorizes the Department of Alcoholic Beverage Control (ABC) to allow specified alcoholic beverage licenses in the City and County of San Francisco to be transferred within the same neighborhood.

The Senate Amendments:

Conform the language in this bill to changes made by SB 82 (Budget and Fiscal Review Committee), Chapter 29, Statutes of 2019.

COMMENTS:

Existing law provides for a limitation on the number of new on-sale general licenses that may be issued in a given year by ABC based on the population growth of the county in which the licensed premises are located. The ratio is one on-sale general license for each 2,000 residents. For example, if a county grows by 10,000 people in a given year, ABC will issue five new licenses in that county.

If ABC receives more applications than there are licenses available, a public drawing is held. To participate in such a drawing, an applicant must have been a resident of California for at least 90 days prior to the date of the scheduled drawing. Successful drawing participants will be notified that they have 90 days to complete a formal application for their specific premises. The cost of these new licenses is $15,835 each.

Individuals seeking to open a full-service restaurant with a bar or cocktail menu who fail to obtain a liquor license through this process typically must locate an existing licensed owner willing to sell their license. Usually, that is done by contacting a liquor license broker. The cost of obtaining a license on the secondary market is driven by supply and demand and can reach upwards of $400,000.

SB 1285 (Leno), Chapter 790, Statutes of 2016, authorized five licenses in San Francisco beyond the city's limit. In 2017, AB 471 (Ting), Chapter 442, expanded this program to a total of 30 licenses with a limitation of five licensed issued each year. Both bills were introduced in response to the lack of not only licenses in the city but the cost of obtaining such a license on the open market. The believe was that the issuance of these new licenses would revitalize certain neighborhoods in San Francisco and create more jobs, foot traffic, and social spaces.

AB 471 specifically allowed ABC to issue up to five new original neighborhood-restricted special on-sale general licenses each year, until a total of 30 new licenses were issued. These licenses, also known as Type 87 licenses, were to be located in specified census tracts within the City and County of San Francisco. These licenses are only issued for bona fide eating places and allow the sale of beer, wine, and distilled spirits for consumption on the licensed premises. They require unique public notification and community interaction during the formal application process, and are generally non-transferrable.

During the first two years of availability, ABC awarded a total of nine new Type 87 licenses. New businesses have opened up along commercial corridors outside the city center, including Third Street in the Bayview, Outer Mission in the Excelsior, San Bruno Avenue, Ocean Avenue, Noriega Street, Taraval Street, and Visitacion Valley.

Type 87 licenses are significantly more affordable, costing approximately $15,835, than they would on the secondary market. If ABC receives more applications than there are Type 87 licenses, a public drawing is held. However, one of the unique aspects of the Type 87 licenses is that these licenses are not allowed to be transferred to any other premises, even if the new premises would be located in the same neighborhood. This bill allows for the transfer of that license if the new licensed premise are located in the same neighborhood.

According to the Author:

According to the author's office, "in 2016, the Legislature created a neighborhood restricted liquor license program for San Francisco's outer neighborhoods, providing these areas much needed economic boost. In the first two years of operation, this program has awarded nine Type 87 liquor licenses, and are the first new licenses issued in San Francisco in over 80 years. Businesses benefit from the increased traffic that successful restaurants and bars bring by adding variety, reducing vacancies, creating new jobs, and providing space for community socializing."

However, the author's office points out that, "raising rent in the City endanger the early successes of the program. Because the Type 87 license cannot be transferred to any other location, even by the same business owner, these entrepreneurs are forced to pay higher rents, potentially going out of business, or lose the Type 87 license and pay for a license on the secondary market.

This bill allows a Type 87 license in San Francisco to be transferred within the same neighborhood. The bill retains all the existing conditions and restrictions for the program, including being non-transferrable to another owner, public meetings, and compliance with the state department's regulations."

Arguments in Support:

According to the City of San Francisco Mayor, London N. Breed, "while this program has already successfully creating exciting new opportunities for neighborhood restaurants, over the past two years we have learned that the prohibition on transferring a license to a new location imperils license-holders facing difficult lease renewal negotiations or the potential demolition and redevelopment of their premises. This restriction is ill-suited to today's uncertain commercial real estate climate. This narrow amendment in AB 1311 will strengthen the neighborhood liquor license program."

Arguments in Opposition:

None on file

FISCAL COMMENTS:

According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

VOTES:

ASM GOVERNMENTAL ORGANIZATION: 19-0-2

YES: Gray, Bigelow, Aguiar-Curry, Berman, Bonta, Brough, Cooley, Daly, Gallagher, Gipson, Jones-Sawyer, Lackey, Low, Mathis, Melendez, Quirk-Silva, Robert Rivas, Blanca Rubio, Salas

ABS, ABST OR NV: Cooper, Eduardo Garcia

ASM APPROPRIATIONS: 18-0-0

YES: Gonzalez, Bigelow, Bloom, Bonta, Brough, Calderon, Carrillo, Chau, Diep, Eggman, Fong, Gabriel, Eduardo Garcia, Maienschein, Obernolte, Petrie-Norris, Quirk, Robert Rivas

ASSEMBLY FLOOR: 74-0-6

YES: Aguiar-Curry, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooper, Cunningham, Dahle, Daly, Diep, Eggman, Flora, Fong, Frazier, Gabriel, Gallagher, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, O'Donnell, Obernolte, Patterson, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Voepel, Waldron, Weber, Wicks, Wood, Rendon

ABS, ABST OR NV: Arambula, Burke, Cooley, Friedman, Cristina Garcia, Ting

SENATE FLOOR: 39-0-1

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dahle, Dodd, Durazo, Galgiani, Glazer, Lena Gonzalez, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ABS, ABST OR NV: Leyva

UPDATED:

VERSION: August 20, 2019

CONSULTANT: Eric Johnson / G.O. / (916) 319-2531 FN: 0001519

 THIRD READING  

Bill No: AB 1311

Author: Ting (D), et al.

Amended: 8/20/19 in Senate

Vote: 21

SENATE GOVERNMENTAL ORG. COMMITTEE: 14-0, 6/11/19

AYES: Dodd, Wilk, Allen, Archuleta, Borgeas, Bradford, Chang, Galgiani, Glazer, Hill, Jones, Nielsen, Portantino, Wiener

NO VOTE RECORDED: Hueso, Rubio

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 74-0, 5/16/19 (Consent) - See last page for vote

SUBJECT: Neighborhood-restricted special on-sale general licenses: transfers

SOURCE: Author

DIGEST: This bill authorizes the Department of Alcoholic Beverage Control (ABC) to allow specified alcoholic beverage licenses in the City and County of San Francisco to be transferred within the same neighborhood.

Senate Floor Amendments of 8/20/19 conform the language in this bill to changes made by SB 82 (Committee on Budget and Fiscal Review, Chapter 29, Statutes of 2019).

ANALYSIS:

Existing law:

1. Establishes the Department of ABC and grants it exclusive authority to administer the provisions of the ABC Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation, and sale of alcoholic beverages in this State and the collection of license fees.
2. Provides that the Department of ABC must deny an application for a license if issuance would create a law enforcement problem, or if issuance would result in, or add to, an undue concentration of licenses in the area where the license is desired. However, for liquor stores and other specified retail licenses, the Department of ABC is authorized to issue a license if the respective local government determines that public convenience or necessity would be served by granting the license.
3. Caps the number of new on-sale and off-sale general licenses issued by the Department of ABC. The ratios are one on-sale general license for each 2,000 persons in the county in which the premises are situated and one off-sale general license for each 2,500 persons.
4. Defines “bona fide public eating place” to mean a place which is regularly and in a bona fide manner used and kept open for the serving of meals to guests for compensation and which has suitable kitchen facilities connected therewith, containing conveniences for cooking an assortment of foods which may be required for ordinary meals, the kitchen of which must be kept in a sanitary condition with the proper amount of refrigeration for keeping of food on said premises and must comply with all the regulations of the local Department of Health.
5. Authorizes the Department of ABC to issue no more than five new original neighborhood-restricted special on-sale general licenses per year, until a total of 30 licenses are issued, to premises located in any of the census tracts, as specified, within the City and County of San Francisco. Licenses issued pursuant to this exception shall not be transferred between premises, except where the licensed premise have been destroyed, as specified.

This bill authorizes the Department of ABC to allow specified alcoholic beverage licenses in the City and County of San Francisco to be transferred within the same neighborhood.

Comments

Purpose of this bill. According to the author’s office, “in 2016, the Legislature created a neighborhood restricted liquor license program for San Francisco’s outer neighborhoods, providing these areas much needed economic boost. In the first two years of operation, this program has awarded nine Type 87 liquor licenses, and are the first new licenses issued in San Francisco in over 80 years. Businesses benefit from the increased traffic that successful restaurants and bars bring by adding variety, reducing vacancies, creating new jobs, and providing space for community socializing.”

However, the author’s office points out that, “raising rent in the City endanger the early successes of the program. Because the Type 87 license cannot be transferred to any other location, even by the same business owner, these entrepreneurs are forced to pay higher rents, potentially going out of business, or lose the Type 87 license and pay for a license on the secondary market. AB 1311 allows a Type 87 license in San Francisco to be transferred within the same neighborhood. The bill retains all the existing conditions and restrictions for the program, including being non-transferrable to another owner, public meetings, and compliance with the state department’s regulations.”

Alcohol license limitation. Existing law provides for a limitation on the number of new on-sale general licenses that may be issued in a given year by the Department of ABC based on the population growth of the county in which the licensed premises are located. The ratio is one on-sale general license for each 2,000 residents. For example, if a county grows by 10,000 people in a given year, the Department ABC will issue five new licenses in that county.

If the Department of ABC receives more applications than there are licenses available, a public drawing is held. To participate in such a drawing, an applicant must have been a resident of California for at least 90 days prior to the date of the scheduled drawing. Successful drawing participants will be notified that they have 90 days to complete a formal application for their specific premises. The cost of these new licenses is $15,835 each.

Individuals seeking to open a full-service restaurant with a bar or cocktail menu who fail to obtain a liquor license through this process typically must locate an existing licensed owner willing to sell their license. Usually, that is done by contacting a liquor license broker. The cost of obtaining a license on the secondary market is driven by supply and demand and can reach upwards of $400,000.

Type 87 licenses. SB 1285 (Leno, Chapter 790, Statutes of 2016), authorized five licenses in San Francisco beyond the city’s limit. In 2017, AB 471 (Ting, Chapter 442, Statutes of 2017) expanded this program to a total of 30 licenses with a limitation of five licensed issued each year. Both bills were introduced in response to the lack of not only licenses in the city but the cost of obtaining such a license on the open market. The hope was that the issuance of these new licenses would revitalize certain neighborhoods in San Francisco and create more jobs, foot traffic, and social spaces.

AB 471 specifically allowed the Department of ABC to issue up to five new original neighborhood-restricted special on-sale general licenses each year, until a total of 30 new licenses were issued. These licenses, also known as Type 87 licenses, were to be located in specified census tracts within the City and County of San Francisco. These licenses are only issued for bona fide eating places and allow the sale of beer, wine, and distilled spirits for consumption on the licensed premises. They require unique public notification and community interaction during the formal application process, and are generally non-transferrable.

During the first two years of availability, the Department has awarded a total of nine new Type 87 licenses. New businesses have opened up along commercial corridors outside the city center, including Third Street in the Bayview, Outer Mission in the Excelsior, San Bruno Avenue, Ocean Avenue, Noriega Street, Taraval Street, and Visitacion Valley.

Type 87 licenses are significantly more affordable, costing approximately $15,835, than they would on the secondary market. If the Department of ABC receives more applications than there are Type 87 licenses, a public drawing is held. However, one of the unique aspects of the Type 87 licenses is that these licenses are not allowed to be transferred to any other premises, even if the new premises would be located in the same neighborhood. AB 1311 allows for the transfer of that license if the new licensed premise are located in the same neighborhood.

Related/Prior Legislation

SB 352 (Dodd, 2019) authorizes the Department of ABC, in counties that have reached its limit of on-sale general licenses, to issue up to 10 additional new original on-sale general license for bona fide eating places following the year the limit is reached. (Pending in the Assembly Appropriations Committee)

AB 471 (Ting, Chapter 442, Statutes of 2017) authorized the Department of ABC to issue no more than five new original neighborhood-restricted special on-sale general licenses per year, until a total of 30 licenses are issues, to premises located in any of the census tracts, as specified, within the City and County of San Francisco. Additionally, authorized the Department of ABC to issue a maximum of 20 new original on-sale general licenses, over a four-year period, in the County of Napa, as specified.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 8/21/19)

City of San Francisco Mayor, London N. Breed

The Dark Horse Inn

OPPOSITION: (Verified 8/21/19)

None received

ARGUMENTS IN SUPPORT: According to the City of San Francisco Mayor, London N. Breed, “while this program has already successfully creating exciting new opportunities for neighborhood restaurants, over the past two years we have learned that the prohibition on transferring a license to a new location imperils license-holders facing difficult lease renewal negotiations or the potential demolition and redevelopment of their premises. This restriction is ill-suited to today’s uncertain commercial real estate climate. This narrow amendment in AB 1311 will strengthen the neighborhood liquor license program.”

ASSEMBLY FLOOR: 74-0, 5/16/19

AYES: Aguiar-Curry, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooper, Cunningham, Dahle, Daly, Diep, Eggman, Flora, Fong, Frazier, Gabriel, Gallagher, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Arambula, Burke, Cooley, Friedman, Cristina Garcia, Ting

Prepared by: Felipe Lopez / G.O. / (916) 651-1530

8/21/19 13:49:00

**** END ****

 THIRD READING  

Bill No: AB 1311

Author: Ting (D), et al.

Amended: 4/12/19 in Assembly

Vote: 21

SENATE GOVERNMENTAL ORG. COMMITTEE: 14-0, 6/11/19

AYES: Dodd, Wilk, Allen, Archuleta, Borgeas, Bradford, Chang, Galgiani, Glazer, Hill, Jones, Nielsen, Portantino, Wiener

NO VOTE RECORDED: Hueso, Rubio

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 74-0, 5/16/19 (Consent) - See last page for vote

SUBJECT: Neighborhood-restricted special on-sale general licenses: transfers

SOURCE: Author

DIGEST: This bill authorizes the Department of Alcoholic Beverage Control (ABC) to allow specified alcoholic beverage licenses in the City and County of San Francisco to be transferred within the same neighborhood.

ANALYSIS:

Existing law:

1. Establishes the Department of ABC and grants it exclusive authority to administer the provisions of the ABC Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation, and sale of alcoholic beverages in this State and the collection of license fees.
2. Provides that the Department of ABC must deny an application for a license if issuance would create a law enforcement problem, or if issuance would result in, or add to, an undue concentration of licenses in the area where the license is desired. However, for liquor stores and other specified retail licenses, the Department of ABC is authorized to issue a license if the respective local government determines that public convenience or necessity would be served by granting the license.
3. Caps the number of new on-sale and off-sale general licenses issued by the Department of ABC. The ratios are one on-sale general license for each 2,000 persons in the county in which the premises are situated and one off-sale general license for each 2,500 persons.
4. Defines “bona fide public eating place” to mean a place which is regularly and in a bona fide manner used and kept open for the serving of meals to guests for compensation and which has suitable kitchen facilities connected therewith, containing conveniences for cooking an assortment of foods which may be required for ordinary meals, the kitchen of which must be kept in a sanitary condition with the proper amount of refrigeration for keeping of food on said premises and must comply with all the regulations of the local Department of Health.
5. Authorizes the Department of ABC to issue no more than five new original neighborhood-restricted special on-sale general licenses per year, until a total of 30 licenses are issued, to premises located in any of the census tracts, as specified, within the City and County of San Francisco. Licenses issued pursuant to this exception shall not be transferred between premises, except where the licensed premise have been destroyed, as specified.

This bill authorizes the Department of ABC to allow specified alcoholic beverage licenses in the City and County of San Francisco to be transferred within the same neighborhood.

Comments

Purpose of this bill. According to the author’s office, “in 2016, the Legislature created a neighborhood restricted liquor license program for San Francisco’s outer neighborhoods, providing these areas much needed economic boost. In the first two years of operation, this program has awarded nine Type 87 liquor licenses, and are the first new licenses issued in San Francisco in over 80 years. Businesses benefit from the increased traffic that successful restaurants and bars bring by adding variety, reducing vacancies, creating new jobs, and providing space for community socializing.”

However, the author’s office points out that, “rising rents in the City endanger the early successes of the program. Because the Type 87 license cannot be transferred to any other location, even by the same business owner, these entrepreneurs are forced to pay higher rents, potentially going out of business, or lose the Type 87 license and pay for a license on the secondary market. AB 1311 allows a Type 87 license in San Francisco to be transferred within the same neighborhood. The bill retains all the existing conditions and restrictions for the program, including being non-transferrable to another owner, public meetings, and compliance with the state department’s regulations.”

Alcohol license limitation. Existing law provides for a limitation on the number of new on-sale general licenses that may be issued in a given year by the Department of ABC based on the population growth of the county in which the licensed premises are located. The ratio is one on-sale general license for each 2,000 residents. For example, if a county grows by 10,000 people in a given year, the Department ABC will issue five new licenses in that county.

If the Department of ABC receives more applications than there are licenses available, a public drawing is held. To participate in such a drawing, an applicant must have been a resident of California for at least 90 days prior to the date of the scheduled drawing. Successful drawing participants will be notified that they have 90 days to complete a formal application for their specific premises. The cost of these new licenses is $15,835 each.

Individuals seeking to open a full-service restaurant with a bar or cocktail menu who fail to obtain a liquor license through this process typically must locate an existing licensed owner willing to sell their license. Usually, that is done by contacting a liquor license broker. The cost of obtaining a license on the secondary market is driven by supply and demand and can reach upwards of $400,000.

Type 87 licenses. SB 1285 (Leno, Chapter 790, Statutes of 2016), authorized five licenses in San Francisco beyond the city’s limit. In 2017, AB 471 (Ting, Chapter 442, Statutes of 2017) expanded this program to a total of 30 licenses with a limitation of five licensed issued each year. Both bills were introduced in response to the lack of not only licenses in the city but the cost of obtaining such a license on the open market. The hope was that the issuance of these new licenses would revitalize certain neighborhoods in San Francisco and create more jobs, foot traffic, and social spaces.

AB 471 specifically allowed the Department of ABC to issue up to five new original neighborhood-restricted special on-sale general licenses each year, until a total of 30 new licenses were issued. These licenses, also known as Type 87 licenses, were to be located in specified census tracts within the City and County of San Francisco. These licenses are only issued for bona fide eating places and allow the sale of beer, wine, and distilled spirits for consumption on the licensed premises. They require unique public notification and community interaction during the formal application process, and are generally non-transferrable.

During the first two years of availability, the Department has awarded a total of nine new Type 87 licenses. New businesses have opened up along commercial corridors outside the city center, including Third Street in the Bayview, Outer Mission in the Excelsior, San Bruno Avenue, Ocean Avenue, Noriega Street, Taraval Street, and Visitacion Valley.

Type 87 licenses are significantly more affordable, costing approximately $15,835, than they would on the secondary market. If the Department of ABC receives more applications than there are Type 87 licenses, a public drawing is held. However, one of the unique aspects of the Type 87 licenses is that these licenses are not allowed to be transferred to any other premises, even if the new premises would be located in the same neighborhood. AB 1311 allows for the transfer of that license if the new licensed premise are located in the same neighborhood.

Related/Prior Legislation

SB 352 (Dodd, 2019) authorizes the Department of ABC, in counties that have reached its limit of on-sale general licenses, to issue up to 10 additional new original on-sale general license for bona fide eating places following the year the limit is reached. (Pending on the Assembly Desk)

AB 471 (Ting, Chapter 442, Statutes of 2017) authorized the Department of ABC to issue no more than five new original neighborhood-restricted special on-sale general licenses per year, until a total of 30 licenses are issues, to premises located in any of the census tracts, as specified, within the City and County of San Francisco. Additionally, authorized the Department of ABC to issue a maximum of 20 new original on-sale general licenses, over a four-year period, in the County of Napa, as specified.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT: (Verified 7/1/19)

City of San Francisco Mayor, London N. Breed

The Dark Horse Inn

OPPOSITION: (Verified 7/1/19)

None received

ARGUMENTS IN SUPPORT: According to the City of San Francisco Mayor, London N. Breed, “while this program has already successfully creating exciting new opportunities for neighborhood restaurants, over the past two years we have learned that the prohibition on transferring a license to a new location imperils license-holders facing difficult lease renewal negotiations or the potential demolition and redevelopment of their premises. This restriction is ill-suited to today’s uncertain commercial real estate climate. This narrow amendment in AB 1311 will strengthen the neighborhood liquor license program.”

ASSEMBLY FLOOR: 74-0, 5/16/19

AYES: Aguiar-Curry, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooper, Cunningham, Dahle, Daly, Diep, Eggman, Flora, Fong, Frazier, Gabriel, Gallagher, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Arambula, Burke, Cooley, Friedman, Cristina Garcia, Ting

Prepared by: Felipe Lopez / G.O. / (916) 651-1530

7/3/19 15:51:15

**** END ****

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Bill Dodd

Chair

2019 - 2020 Regular

Bill No: AB 1311 Hearing Date: 6/11/2019

SUBJECT: Neighborhood-restricted special on-sale general licenses: transfers

DIGEST: This bill authorizes the Department of Alcoholic Beverage Control (ABC) to allow specified alcoholic beverage licenses in the City and County of San Francisco to be transferred within the same neighborhood.

ANALYSIS:

Existing law:

1. Establishes the Department of ABC and grants it exclusive authority to administer the provisions of the ABC Act in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation, and sale of alcoholic beverages in this State and the collection of license fees.
2. Provides that the Department of ABC must deny an application for a license if issuance would create a law enforcement problem, or if issuance would result in, or add to, an undue concentration of licenses in the area where the license is desired. However, for liquor stores and other specified retail licenses, the Department of ABC is authorized to issue a license if the respective local government determines that public convenience or necessity would be served by granting the license.
3. Caps the number of new on-sale and off-sale general licenses issued by the Department of ABC. The ratios are one on-sale general license for each 2,000 persons in the county in which the premises are situated and one off-sale general license for each 2,500 persons.
4. Defines an “on-sale” license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar); and, an “off-sale” license as authorizing the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.
5. Defines “bona fide public eating place” to mean a place which is regularly and in a bona fide manner used and kept open for the serving of meals to guests for compensation and which has suitable kitchen facilities connected therewith, containing conveniences for cooking an assortment of foods which may be required for ordinary meals, the kitchen of which must be kept in a sanitary condition with the proper amount of refrigeration for keeping of food on said premises and must comply with all the regulations of the local Department of Health.
6. Authorizes the Department of ABC to issue no more than five new original neighborhood-restricted special on-sale general licenses per year, until a total of 30 licenses are issued, to premises located in any of the census tracts, as specified, within the City and County of San Francisco. Licenses issued pursuant to this exception shall not be transferred between premises, except where the licensed premise have been destroyed, as specified.

This bill authorizes the Department of ABC to allow specified alcoholic beverage licenses in the City and County of San Francisco to be transferred within the same neighborhood.

Background

Purpose of the bill. According to the author’s office, “in 2016, the Legislature created a neighborhood restricted liquor license program for San Francisco’s outer neighborhoods, providing these areas much needed economic boost. In the first two years of operation, this program has awarded nine Type 87 liquor licenses, and are the first new licenses issued in San Francisco in over 80 years. Businesses benefit from the increased traffic that successful restaurants and bars bring by adding variety, reducing vacancies, creating new jobs, and providing space for community socializing.”

However, the author’s office points out that, “rising rents in the City endanger the early successes of the program. Because the Type 87 license cannot be transferred to any other location, even by the same business owner, these entrepreneurs are forced to pay higher rents, potentially going out of business, or lose the Type 87 license and pay for a license on the secondary market. AB 1311 allows a Type 87 license in San Francisco to be transferred within the same neighborhood. The bill retains all the existing conditions and restrictions for the program, including being non-transferrable to another owner, public meetings, and compliance with the state department’s regulations.”

Alcohol license limitation. Existing law provides for a limitation on the number of new on-sale general licenses that may be issued in a given year by the Department of ABC based on the population growth of the county in which the licensed premises are located. The ratio is one on-sale general license for each 2,000 residents. For example, if a county grows by 10,000 people in a given year, the Department ABC will issue five new licenses in that county.

If the Department of ABC receives more applications than there are licenses available, a public drawing is held. To participate in such a drawing, an applicant must have been a resident of California for at least 90 days prior to the date of the scheduled drawing. Successful drawing participants will be notified that they have 90 days to complete a formal application for their specific premises. The cost of these new licenses is $15,835 each.

Individuals seeking to open a full-service restaurant with a bar or cocktail menu who fail to obtain a liquor license through this process typically must locate an existing licensed owner willing to sell their license. Usually, that is done by contacting a liquor license broker. The cost of obtaining a license on the secondary market is driven by supply and demand and can reach upwards of $400,000.

Type 87 licenses. SB 1285 (Leno, Chapter 790, Statutes of 206), authorized five licenses in San Francisco beyond the city’s limit. In 2017, AB 471 (Ting, Chapter 442, Statutes of 2017) expanded this program to a total of 30 licenses with a limitation of five licensed issued each year. Both bills were introduced in response to the lack of not only licenses in the city but the cost of obtaining such a license on the open market. The hope was that the issuance of these new licenses would revitalize certain neighborhoods in San Francisco and create more jobs, foot traffic, and social spaces.

AB 471 (Ting) specifically allowed the Department of ABC to issue up to five new original neighborhood-restricted special on-sale general licenses each year, until a total of 30 new licenses were issued. These licenses, also known as Type 87 licenses, were to be located in specified census tracts within the City and County of San Francisco. These licenses are only issued for bona fide eating places and allow the sale of beer, wine, and distilled spirits for consumption on the licensed premises. They require unique public notification and community interaction during the formal application process, and are generally non-transferrable.

During the first two years of availability, the Department has awarded a total of nine new Type 87 licenses. New businesses have opened up along commercial corridors outside the city center, including Third Street in the Bayview, Outer Mission in the Excelsior, San Bruno Avenue, Ocean Avenue, Noriega Street, Taraval Street, and Visitacion Valley.

Type 87 licenses are significantly more affordable, costing approximately $15,835, than they would on the secondary market. If the Department of ABC receives more applications than there are Type 87 licenses, a public drawing is held. However, one of the unique aspects of the Type 87 licenses is that these licenses are not allowed to be transferred to any other premises, even if the new premises would be located in the same neighborhood. AB 1311 would allow for the transfer of that license if the new licensed premise are located in the same neighborhood.

Prior/Related Legislation

SB 352 (Dodd, 2019) would authorize the Department of ABC, in counties that have reached its limit of on-sale general licenses, to issue up to 10 additional new original on-sale general license for bona fide eating places following the year the limit is reached. (Pending on the Assembly Desk)

AB 471 (Ting, Chapter 442, Statutes of 2017) authorized the Department of ABC to issue no more than five new original neighborhood-restricted special on-sale general licenses per year, until a total of 30 licenses are issues, to premises located in any of the census tracts, as specified, within the City and County of San Francisco. Additionally, authorized the Department of ABC to issue a maximum of 20 new original on-sale general licenses, over a four-year period, in the County of Napa, as specified.

SB 1285 (Leno, Chapter 790, Statutes of 2016) authorized, beginning January 1, 2017, the Department of ABC to issue no more than a total of five new original “neighborhood-restricted” special on-sale general licenses, for premises located within specified City and County of San Francisco neighborhoods, subject to certain requirements and restrictions.

AB 1670 (Dodd, Chapter 347, Statutes of 2016) authorized the Department of ABC to issue a maximum of five new original on-sale general licenses, over a one-year period, for bona fide public eating-places in the County of Napa, as specified.

AB 1558 (Mathis, Chapter 256, Statutes of 2016) authorized the Department of ABC to issue, over a two-year period, five additional new on-sale general licenses for restaurants, with a seating capacity of 50 or more, in Inyo County.

AB 461 (Achadjian, Chapter 110, Statutes of 2013) authorized the Department of ABC to issue no more than a total of five new original on-sale general licenses, over a three-year period, for bona fide public eating-places in the County of San Luis Obispo.

AB 1320 (Allen, Chapter 467, Statutes of 2012) authorized the Department of ABC to issue a maximum of 15 new original on-sale general licenses, over a three-year period, for bona fide public eating-places in the County of Marin.

AB 2266 (Evans, Chapter 130, Statutes of 2008) authorizes the Department of ABC to issue a maximum of 15 new original on-sale general licenses, over a three-year period, for bona fide public eating places in the County of Napa.

SB 762 (Cox, Chapter 193, Statutes of 2007) authorized the Department of ABC to issue 10 new original on-sale general licenses for bona fide public eating-places in the County of Mono.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

SUPPORT:

The Dark Horse Inn

London N. Breed, Mayor, City of San Francisco

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: According to London N. Breed, Mayor of the City of San Francisco, “while this program has already successfully creating exciting new opportunities for neighborhood restaurants, over the past two years we have learned that the prohibition on transferring a license to a new location imperils license-holders facing difficult lease renewal negotiations or the potential demolition and redevelopment of their premises. This restriction is ill-suited to today’s uncertain commercial real estate climate. This narrow amendment in AB 1311 will strengthen the neighborhood liquor license program.”

Date of Hearing: May 8, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1311

Author:(Ting) – As Amended Ver:April 12, 2019

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill authorizes the Department of Alcoholic Beverage Control (ABC) to allow a specified alcoholic beverage license to be transferred within the same neighborhood. This bill applies only to the special licenses created under SB 1285 (Leno), Chapter 790, Statutes of 2016, and AB 471 (Ting), Chapter 442, Statutes of 2017.

FISCAL EFFECT:

Minor and absorbable costs.

COMMENTS:

1. Background. Existing law limits the number of new on-sale general licenses in a given year based on population growth of the county. One license for every 2,000 residents may be issued, and ABC holds a drawing when there are more buyers than available licenses.

SB 1285 (Leno), Chapter 709, Statutes of 2016, exempted certain neighborhoods in San Francisco from this limitation by allowing for five new on-sale general licenses overall. AB 471 (Ting), Chapter 442, Statutes of 2017, expanded on this program by allowing five new licenses each year, up to 30 overall. Since then, nine additional licenses have been granted and are the first new licenses issued in San Francisco in over 80 years.

1. Purpose. AB 1311 allows the additional licenses authorized by SB 1285 and AB 471 to be transferred to a different premise in the same neighborhood. Under existing law, these special licenses cannot be transferred, which means if the business relocates it must relinquish its alcohol license or buy a new one from the secondary market.

According to the author, San Francisco’s rising rents jeopardize the success of this new program. Increase rents are forcing businesses to make difficult relocation decisions, and the author argues that AB 1311 “furthers the original intent of the previous chaptered bills on this specific subject.”

Analysis Prepared by: Luke Reidenbach / APPR. / (916) 319-2081

Date of Hearing: April 24, 2019

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Adam Gray, Chair

ABPCA Bill Id:AB 1311 (

Author:Ting) – As Amended Ver:April 12, 2019

SUBJECT: Neighborhood-restricted special on-sale general licenses: transfers

SUMMARY: Existing law provides an exception to the license limitation for a county of the 6th class (City and County of San Francisco), for 5 new original neighborhood-restricted special on-sale general licenses, until a total of 30 licenses are issued, for premises located within specified census tracts (neighborhoods), subject to specified requirements. Licenses issued pursuant to this exception shall not be transferred between premises, except where the licensed premises have been destroyed, as provided.

AB 1311 would authorize the Department of Alcoholic Beverage Control (ABC) to allow for the transfer of a license issued pursuant to the above-described exception, if the premises are within the same “neighborhood”, as defined in current law.

EXISTING LAW:

1. Establishes ABC and grants it exclusive authority to administer the provisions of the ABC Act in accordance with laws enacted by the Legislature.
2. Provides that ABC must deny an application for a license if issuance would create a law enforcement problem, or if issuance would result in, or add to, an undue concentration of licenses in the area where the license is desired. However, for liquor stores and other specified retail licenses, ABC is authorized to issue a license if the respective local government determines that public convenience or necessity would be served by granting the license.
3. Caps the number of new on-sale and off-sale general licenses issued by ABC. The ratios are one on-sale general license for each 2,000 persons in the county in which the premises are situated and one off-sale general license for each 2,500 persons.
4. Defines an “on-sale” license as authorizing the sale of all types of alcoholic beverages: namely, beer, wine and distilled spirits, for consumption on the premises (such as at a restaurant or bar) and an “off-sale” license as authorizing the sale of all types of alcoholic beverages for consumption off the premises in original, sealed containers.
5. Defines “bona fide public eating place” to mean a place which is regularly and in a bona fide manner used and kept open for the serving of meals to guests for compensation and which has suitable kitchen facilities connected therewith, containing conveniences for cooking an assortment of foods which may be required for ordinary meals, the kitchen of which must be kept in a sanitary condition with the proper amount of refrigeration for keeping of food on said premises and must comply with all the regulations of the local Department of Health.
6. Authorizes ABC to issue no more than five new original neighborhood-restricted special on-sale general licenses per year, until a total of 30 licenses are issued, to premises located in any of the census tracts, as specified, within the City and County of San Francisco. Licenses issued pursuant to this exception shall not be transferred between premises, except where the licensed premise shave been destroyed, as specified. A neighborhood-restricted special on-sale general license may exercise all of the privileges, and is subject to all the restrictions, of an on-sale general license for a bona fide eating place.

FISCAL EFFECT: Unknown

COMMENTS:

ABC license limitation. Existing law provides for a limitation on the number of new on-sale general licenses that may be issued in a given year by the ABC based on the population growth of the county in which the licensed premises are located. The ratio is one on-sale general license for each 2,000 residents.

Thus, if a county grows by 10,000 people in a given year, ABC will issue five new licenses in that county. If the number of applicants within a county for a particular type of license is equal to or less than the number of licenses available, all applicants will be notified that they have 90 days to complete a formal application for their specific premises. If ABC receives more applications than there are licenses available, a public drawing will be held. To participate in such a drawing, an applicant must have been a resident of California for at least 90 days prior to the date of the scheduled drawing. Successful drawing participants will be notified that they have 90 days to complete a formal application for their specific premises. The cost of these new licenses is $15,835 each.

According to ABC, currently, there are more than 15,000 on-sale general (Type 47) licenses statewide. Individuals seeking to open a full-service restaurant with a bar or cocktail menu who fail to obtain a liquor license above-mentioned ABC process typically must locate an existing licensed owner willing to sell their license. Usually, that is done by contacting a liquor license broker. The cost of obtaining a license on the secondary market is driven by supply and demand.

Due to the scarcity of available licenses, full liquor licenses are currently being sold on the secondary market in San Francisco for around $300,000 with prices expected to increase as the City’s population continues to grow.

Special license for San Francisco created. SB 1285 (Leno), Chapter 790, Statutes of 2016, authorized five licenses in San Francisco beyond the city’s caps. In 2017, AB 471 (Ting), Chapter 442, Statutes of 2017, expanded this program to a total of 30 licenses, with a cap of 5 licenses issued each year. Both bills were introduced and chaptered in response to the aforementioned license limitations/costs and a willingness at the time, to strengthen and revitalize certain neighborhood commercial districts around San Francisco, while creating more jobs, foot traffic and social spaces.

AB 471 (Ting) allowed ABC to issue up to five new original neighborhood-restricted special on-sale general licenses (Type 87) each year, until a total of thirty new licenses are allotted, to premises located in specified census tracts within the city and county of San Francisco. Type 87 licenses are only issued for bona fide eating places and allow the sale of beer, wine and distilled spirits for consumption on the licensed premises. Type 87 licenses require unique public notification and community interaction/approval during the formal application process, and are generally non-transferrable. These Type 87 licenses are significantly more affordable, costing approximately $15,384, than secondary market rate prices. If ABC receives more applications than there are Type 87 licenses available, a public drawing will be held.

In the first two years of operation, this program has awarded nine Type 87 liquor licenses, and are the first new licenses issued in San Francisco in over 80 years. The program has opened up licenses along commercial corridors outside the city center, including Third Street in the Bayview, Outer Mission in the Excelsior, San Bruno Avenue, Ocean Avenue, Noriega Street, Taraval Street, and Visitacion Valley. Because of lower foot traffic and prices in the City’s outer neighborhoods, small business owners cannot afford these secondary market prices. This leads to a concentration of liquor licenses in San Francisco’s most lively and already successful areas.

Purpose of the bill. According to the author's office, the newly instituted neighborhood-restricted liquor license program (Type 87) for San Francisco’s outer neighborhoods has provided a much needed economic boost. Unfortunately, rising rents in the City of San Francisco might endanger the early successes of the program, as Type 87 licenses shall not be transferred to any other premises, even by the same business owner. If a current license holder is forced to pay a substantial rent increase or cannot reach an agreement with their landlord on the amount, the entrepreneur may go out of business or be forced to relinquish their Type 87 license to purchase a license on the secondary market to move to a location which is more financially feasible.

AB 1311 will allow a Type 87 license holder to move within the same neighborhood (Census tract). The existing original neighborhood-restricted special on-sale general license cap will remain in place under this bill.

The author declares that businesses have benefited from the increased traffic that successful restaurants and bars bring by adding variety, reducing vacancies, creating new jobs, and providing spaces for community socializing. AB 1311 will help to further the original intent of previous chaptered bills on this specific subject.

Prior Legislation. AB 471 (Ting), Chapter 442, Statutes of 2017. Revised an existing exception in law by authorizing ABC to issue no more than five new original neighborhood-restricted special on-sale general licenses per year, until a total of 30 licenses are issued, to premises located in any of the census tracts, as specified, within the City and County of San Francisco. Additionally, this bill allowed ABC to issue a maximum of 20 new original on-sale general licenses, over a four-year period, in the County of Napa, as specified.

SB 1285 (Leno), Chapter 790, Statutes of 2016, authorized, beginning January 1, 2017, the Department of ABC to issue no more than a total of five new original "neighborhood-restricted" special on-sale general licenses, for premises located within specified City and County of San Francisco neighborhoods, subject to certain requirements and restrictions.

AB 1670 (Dodd), Chapter 347, Statutes of 2016, authorized the Department of ABC to issue a maximum of five new original on-sale general licenses, over a one-year period, for bona fide public eating-places in the County of Napa, as specified.

AB 2266 (Evans), Chapter 130, Statutes of 2008, authorizes the ABC to issue a maximum of 15 new original on-sale general licenses, over a three-year period, for bona fide public eating places in the County of Napa.

REGISTERED SUPPORT / OPPOSITION:

Support

Dark Horse Inn

Opposition

None on file

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531