Existing law, the Alcoholic Beverage Control Act, administered by the Department of Alcoholic Beverage Control, regulates the sale and distribution of alcoholic beverages and the granting of licenses for the manufacture, distribution, and sale of alcoholic beverages within the state. Existing law limits the amount of on-sale general licenses that may be issued by the department based on the population of the county in which the licensed premises are located.

This bill would provide an exception to the limitation described above by authorizing the issuance of up to 10 additional new original on-sale general licenses for bona fide public eating places in the County of Nevada. The bill would prohibit the department from issuing more than 4 of these licenses per year. The bill would specify that a person holding a valid on-sale general license for seasonal business is not prohibited from applying for licenses to be issued pursuant to this authorization. The bill would prohibit transferring the new licenses out of the county or to a premises that does not qualify under these provisions. The bill would also prohibit selling or transferring the new licenses for a price greater than the original fee paid by the seller or transferor.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of Nevada.

Existing law, the Alcoholic Beverage Control Act, administered by the Department of Alcoholic Beverage Control, regulates the sale and distribution of alcoholic beverages and the granting of licenses for the manufacture, distribution, and sale of alcoholic beverages within the state. Existing law limits the amount of on-sale general licenses that may be issued by the department based on the population of the county in which the licensed premises are located.

This bill would provide an exception to the limitation described above by authorizing the issuance of up to 10 additional new original on-sale general licenses for bona fide public eating places in the County of Nevada. The bill would prohibit the department from issuing more than 4 of these licenses per year. The bill would specify that a person holding a valid on-sale general license for seasonal business is not prohibited from applying for licenses to be issued pursuant to this authorization. The bill would prohibit transferring the new licenses out of the county or to a premises that does not qualify under these provisions. The bill would also prohibit selling or transferring the new licenses for a price greater than the original fee paid by the seller or transferor.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of Nevada.

Existing law, the Alcoholic Beverage Control Act, administered by the Department of Alcoholic Beverage Control, regulates the sale and distribution of alcoholic beverages and the granting of licenses for the manufacture, distribution, and sale of alcoholic beverages within the state. Existing law limits the amount of on-sale general licenses that may be issued by the department based on the population of the county in which the licensed premises are located.

This bill would provide an exception to the limitation described above by authorizing the issuance of up to 10 additional new original on-sale general licenses for bona fide public eating places in the County of Nevada. The bill would prohibit the department from issuing more than 4 of these licenses per year. The bill would specify that a person holding a valid on-sale general license for seasonal business is not prohibited from applying for licenses to be issued pursuant to this authorization. The bill would prohibit transferring the new licenses out of the county or to a premises that does not qualify under these provisions. The bill would also prohibit selling or transferring the new licenses for a price greater than the original fee paid by the seller or transferor.

This bill would make legislative findings and declarations as to the necessity of a special statute for the County of Nevada.

Date of Hearing: June 28, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

SBPCA Bill Id:SB 787

Author:(Dahle) – As Introduced Ver:February 17, 2023

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

SUMMARY:

This bill authorizes the Department of Alcoholic Beverage Control (ABC) to issue up to 10 additional new original on-sale general licenses for bona fide public eating places in the County of Nevada, but no more than four licenses per year.

The new license cannot be transferred out of the county or sold for a price greater than the original fee paid by the seller.

FISCAL EFFECT:

Minor and absorbable costs to ABC. Any additional licensing and enforcement investigations generated by the 10 additional on-sale licenses issued over time should be covered by corresponding licensing fees.

However, this committee sees a wide array of bills that propose to modify the scope of alcohol laws. Generally, modest increases in the number of licenses issued such as that proposed by this bill do not generate major new enforcement workload for ABC, but many similar increases for other counties have been approved in recent years. Over time, these proposals in the aggregate could lead to significant new costs and future budget requests.

COMMENTS:

1. Purpose. According to the author:

Small businesses must be a top priority for all of California, especially in less populated areas like my district. Places like Nevada County rely on the success of tourism and the restaurant industry. Increasing the number of on-sale general licenses available will greatly bolster the economy of these areas and will support local business.

1. Support and Opposition. There is no registered support on file for this bill.

This bill is opposed by Alcohol Justice, which argues “respecting overconcentration thresholds would be an obvious and easily defensible means to control the outbreak of alcohol-related mortality.”

1. Limited On-sale General Licenses. An on-sale general license for a business primarily serving food as a “bona fide eating place” (Type 47) allows the licensee to also serve beer, wine and distilled spirits for consumption on the licensed premises. There are over 17,000 Type 47 licenses issued statewide to full-service restaurants, hotels, bowling alleys, golf courses and other eating establishments.

Existing law limits the number of new on-sale general licenses ABC may issue 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. Because many counties have reached their cap, businesses seeking a license may need to buy one on the secondary market, which can cost up to $400,000. While ABC’s formula generally works for most counties, demand for licenses far outweighs the population-based allotment in some counties, generally due to the county’s slower population growth or the local economy’s reliance on tourism. This bill authorizes ABC to additionally issue, outside of ABC’s population-based formula, up to 10 new Type 47 licenses in the County of Nevada.

1. Related Legislation. AB 1668 (Joe Patterson) authorizes ABC to issue up to 10 additional licenses in the County of Placer, in a manner identical to this bill. AB 1668 is pending on the Senate Floor.
2. Prior Legislation. SB 1452 (Dahle), Chapter 889, Statutes of 2022, authorized ABC to issue up to 10 additional licenses in the County of El Dorado and 10 additional licenses in the County of Shasta, in a manner identical to this bill.

AB 2459 (Bigelow), Chapter 53, Statutes of 2020, authorized ABC to issue up to 10 additional licenses in the County of Mariposa and 10 additional licenses in the County of Napa, as specified.

Analysis Prepared by: Irene Ho / APPR. / (916) 319-2081

Date of Hearing: June 14, 2023

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Miguel Santiago, Chair

SBPCA Bill Id:SB 787

Author:(Dahle) – As Introduced Ver:February 17, 2023

SENATE VOTE: 40-0

SUBJECT: Number of licensed premises: County of Nevada

SUMMARY: This bill authorizes the Department of Alcoholic Beverage Control (ABC) to issue no more than a total of 10 additional new original on-sale general licenses for bona fide public eating places in the County of Nevada. Specifically, this bill:

1. Authorizes ABC to issue no more than a total of 10 new original on-sale general licenses for bona fide public eating places in the County of Nevada.
2. Prohibits ABC to issue more than four of these licenses per year.
3. Provides that this bill does not prohibit a person that currently holds a valid on-sale general license for seasonal business from applying for an original on-sale general license.
4. Prohibits a license issued under this bill from being transferred from one county to another or from being transferred to any premises not qualifying under the provisions of this bill.
5. Provides that no license issued under this bill shall be sold or transferred for a price greater than the original fee paid by the seller.

EXISTING LAW:

1) Establishes ABC and grants it exclusive authority to administer the provisions of the Alcoholic Beverage Control Act (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 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 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. (California Business and Professions § 23816 and 23817)

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. (California Business and Professions § 23393, 23394, 23396 and 23399)

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. (California Business and Professions § 23038)

6) Provides that in Napa County, from January 1, 2017, to December 31, 2017, ABC, in addition to those licenses currently issued under the law may issue no more than five additional new original on-sale general licenses for bona fide public eating places, for a period of one-year. Any premises to qualify for a license shall have a seating capacity for 50 or more diners. (California Business and Professions § 23826.10)

7) Authorizes, beginning January 1, 2017, ABC to issue no more than 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. (California Business and Professions § 23826.13)

8) Authorizes, beginning January 1, 2018, 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. (California Business and Professions § 23826.13)

9) Authorizes, beginning on January 1, 2021, ABC to issue a total of 10 new original on-sale genera licenses in Mariposa County and up to 10 additional new original on-sale general licenses per year in Napa County over a 5-year period. (California Business and Professions § 23826.10)

FISCAL EFFECT: This bill is keyed fiscal by Legislative Counsel.

COMMENTS:

Background.

Type 47 alcohol license. A Type 47 license is specifically designated for businesses that primarily serve food ("bona fide eating place"). The license is meant for those who seek to serve beer, wine, and distilled spirits for consumption on the licenses premises. The license holder must maintain suitable kitchen facilities and make actual and substantial sales of meals for consumption on the premises. Generally, this means that the business must generate at least 51 percent of all gross sales from food. Minors are allowed on the premises.

A Type 47 license is one of the most common types of liquor licenses for restaurants in California. Some common businesses that use the Type 47 license include full-service restaurants, hotels and resorts, bowling alleys, golf courses, and other eating establishments. There are 17,097 on-sale general (Type 47) licenses statewide. 

Alcohol license limitation. There are more than 60 different types of ABC licenses authorized in California, each with its own set of privileges and obligations specific to the category of license involved. Existing law provides for a limit on the number of new on-sale general licenses ABC may issue each year 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 specific year, the department will issue five new licenses in that county.

If ABC receives more applications than there are licenses available, a public drawing is held. To take part in such a drawing, an applicant must have been a resident of California for at least 90 days prior to the scheduled drawing. ABC notifies successful drawing participants that they have 90 days to complete a formal application for their specific premises. The cost of these new licenses is $17,335 each.

Individuals seeking to open a full-service restaurant with a bar or cocktail menu who cannot obtain a liquor license through this process must locate an existing licensed owner willing to sell their license. This usually happens by contacting an alcohol license broker. The cost of acquiring a license on the secondary market is driven by supply and demand and can reach upwards of

$400,000.

Impact on counties. As previously noted, when a county experiences population growth, ABC issues additional licenses based on the population growth; currently 2,000 residents per one on-sale general license. While this system tends to work for most counties, there are a substantial number of counties where the demand for alcohol licenses far outweighs the current number of alcohol licenses in those counties. The reasons for the lack of licenses are generally a lack of population growth or because of the amount of tourism in the particular county, which results in higher demand for these types of businesses.

For example, in the County of Napa, the number of visitors continues to increase while the population of the county has not grown. While the majority of visitors to Napa take day trips, more than one million of these visitors spend at least one night in local lodgings. Tourism has thus become one of the major economic drivers in the region. In 2016, AB 1670 (Dodd, Chapter 347) authorized ABC to issue up to five additional new original on-sale general licenses to bona fide public eating places in the county, for a one-year period. While the bill allowed for the issuance of the five new licenses, demand far outweighed the availability of these licenses. In 2017, when ABC issued the five new licenses, there were a total of 38 applications for those five licenses.

County of Nevada. As of the 2020 census, the population in Nevada County was 102,241. The county seat is Nevada City. Nevada County comprises the Truckee-Grass Valley micropolitan statistical area, which is also included in the Sacramento-Roseville combined statistical area, part of the Mother Lode Country. According to the U.S. Census Bureau, the county has a total area of 974 square miles, of 16 square miles are covered by water. The county is home to several state parks that offer history and recreation opportunities at one scenic location. The county contains many original brick buildings from the 1800’s, hiking trails and parks with museums and old mining equipment, and saloons or hotels that have been operating since the Gold Rush. One of them is the Nevada Theatre in Nevada City, which opened its doors in 1865 and is the state's oldest theater. It is still in use today and once hosted historical figures like Mark Twain. The county also boasts some of the state's oldest vineyards and top-tier wines.

Purpose of the bill. According to the author’s office, “small businesses must be a top priority for all of California, especially in less populated areas like my district. Places like Nevada County rely on the success of tourism and the restaurant industry. Increasing the number of on-sale general licenses available will greatly bolster the economy of these areas and will support local businesses. As California continues to be a difficult place to conduct business, any kind of small business support that we can provide is desperately needed. This bill will help support local businesses in less populated areas enabling them to continue serving their communities.”

In opposition. Alcohol Justice writes in opposition, “Alcohol-related motor vehicle crash deaths continued to rise, from 5-year averages of 1,114 in 2016 to 1,159 in 2020 despite the fact that 2020 was the year of lockdowns. Rural areas are dramatically more likely to experience fatal motor vehicle crashes, including alcohol-related ones (NHTSA 2022), making outlet overconcentration control even more vital. Please recognize that expanding alcohol licenses beyond the statutory threshold for overconcentration is always a risky proposition, and never more so than right now.”

Related legislation. AB 1668 (Joe Patterson) of 2023. Would authorize ABC to issue no more than a total of 10 additional new original on-sale general licenses for bona fide public eating places in the County of Placer. The bill would prohibit the department from issuing more than 4 of these licenses per year. The bill would prohibit transferring the new licenses out of the county or sold for a price greater than the original fee paid by the seller. (Pending in the Senate Committee on Governmental Organization)

Prior legislation. SB 1452 (B. Dahle), Chapter 889, Statutes of 2022. This bill authorized the ABC to issue no more than a total of 10 new original on-sale general licenses for bona fide public eating places in both the County of El Dorado and in the County of Shasta, as specified.

AB 2459 (Bigelow), Chapter 53, Statutes of 2020. Authorized ABC to issue no more than a total of 10 additional new original on-sale general licenses for bona fide public eating places in Mariposa County and up to 10 additional new original on-sale general licenses per year to bona fide public eating places in the County of Napa over a 5-year period.

AB 471 (Ting), Chapter 442, Statutes of 2017. Authorized 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, authorized ABC to issue a maximum of 20 new original on-sale general licenses, over a four-year period, in Napa County, as specified.

AB 1670 (Dodd), Chapter 347, Statutes of 2016. Authorized ABC to issue no more than 5 additional new original on-sale general licenses to bona fide public eating places in the County of Napa with a seating capacity of 25 or more diners, for a period of one-year.

SB 1285 (Leno), Chapter 790, Statutes of 2016. Authorized, beginning January 1, 2017, 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 1558 (Mathis), Chapter 256, Statutes of 2016. Authorized 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.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file

Opposition

Alcohol Justice

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

 THIRD READING  

Bill No: SB 787

Author: Dahle (R)

Introduced: 2/17/23

Vote: 21

SENATE GOVERNMENTAL ORG. COMMITTEE: 13-0, 3/28/23

AYES: Dodd, Wilk, Alvarado-Gil, Ashby, Bradford, Glazer, Jones, Nguyen, Ochoa Bogh, Padilla, Roth, Rubio, Seyarto

NO VOTE RECORDED: Archuleta, Portantino

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SUBJECT: Number of licensed premises: County of Nevada

SOURCE: Author

DIGEST: This bill authorizes the Department of Alcoholic Beverage Control (ABC) to issue no more than 10 new original on-sale general licenses for bona fide public eating places in the County of Nevada, as specified.

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, beginning January 1, 2017, the Department of ABC to issue no more than 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.
7. Provides that in Napa County, from January 1, 2017, to December 31, 2017, the Department of ABC, in addition to those licenses currently issued under the law may issue no more than five additional new original on-sale general licenses for bona fide public eating places. Any premises to qualify for a license shall have a seating capacity for 25 or more diners.
8. Authorizes, beginning January 1, 2018, 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.
9. Authorizes, beginning on January 1, 2018, 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.
10. Authorizes, beginning on January 1, 2021, the Department of ABC to issue up to 10 additional new original on-sale general licenses in Mariposa County and up to 10 additional new original on-sale general licenses per year in Napa County for a period of five years.
11. Authorizes, beginning on January 1, 2023, the Department of ABC to issue up to 10 new original on-sale general licenses for bona fide public eating places in both the County of El Dorado and in the County of Shasta, as specified.

This bill:

1. Authorizes the Department of ABC to issue no more than a total of 10 new original on-sale general licenses for bona fide public eating places in the County of Nevada.
2. Prohibits the Department of ABC to issue more than four of these licenses per year.
3. Provides that this bill does not prohibit a person that currently holds a valid on-sale general license for seasonal business from applying for an original on-sale general license.
4. Prohibits a license issued under this bill from being transferred from one county to another or from being transferred to any premises not qualifying under the provisions of this bill.
5. Provides that no license issued under this bill shall be sold or transferred for a price greater than the original fee paid by the seller.

Background

Purpose of the Bill. According to the author’s office, “small businesses must be a top priority for all of California, especially in less populated areas like my district. Places like Nevada County rely on the success of tourism and the restaurant industry. Increasing the number of on-sale general licenses available will greatly bolster the economy of these areas and will support local businesses. As California continues to be a difficult place to conduct business, any kind of small business support that we can provide is desperately needed. This bill will help support local businesses in less populated areas enabling them to continue serving their communities.”

Type 47 Alcohol License. An on-sale general eating-place license, or Type 47 license, authorizes the consumption of beer, wine, and distilled spirits for consumption on the licensed premise. The licensee is required to operate and maintain the licensed premises as a bona fide eating-place, which must include suitable kitchen facilities. The licensee must make actual and substantial sales of meals for consumption on the premises. Generally, this means that the business must generate at least 51% of all gross sales from food. As such, a Type 47 license is one of the most common types of liquor licenses for restaurants in California.

Some common businesses that use the Type 47 license include full-service restaurants, hotels and resorts, bowling alleys, golf courses, and other eating establishments. There are approximately 15,750 on-sale general (Type 47) licenses statewide.

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 of 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 $17,335 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. With such a high initial cost, the only restaurants that can generally afford to open in those counties are those that are backed by wealthy investors or corporations.

Impact on Counties. As previously noted, when a county experiences population growth, the Department of ABC issues additional licenses based on the population growth; currently 2,000 residents per one on-sale general license. While this system tends to work for most counties, there are a substantial number of counties where the demand for alcohol licenses far outweighs the current number of alcohol licenses. The reasons for the lack of licenses are generally a lack of population growth or because of the amount of tourism in the particular county, which results in higher demand for these types of businesses.

For example, in Napa County the number of visitors to Napa continues to increase while the population of the county has not grown. While the majority of visitors to Napa take day trips, more than one million of these visitors spend at least one night in local lodgings. Tourism has therefore become one of the major economic drivers in the region. Unfortunately, for counties like Napa County, while tourism clearly increases the demand for these types of businesses, the alcohol license limitation does not allow counties to meet that demand.

Related/Prior Legislation

SB 1452 (Dahle, Chapter 889, Statutes of 2022) authorized, beginning on January 1, 2022, the Department of ABC to issue up to 10 new original on-sale general licenses for bona fide public eating places in both the County of El Dorado and in the County of Shasta, as specified.

AB 2459 (Bigelow, Chapter 53, Statutes of 2020) authorized the Department of ABC to issue up to 10 additional new original on-sale general licenses in Mariposa County and up to 10 additional new original on-sale general licenses per year in Napa County for a period of five years.

SB 866 (Dodd, 2020) would have authorized the Department of ABC to issue up to 10 additional new original on-sale general licenses per year to bona fide public eating places in Napa County for a period of five years. (Never heard in Senate Governmental Organization Committee)

SB 352 (Dodd, 2019) would have authorized 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 licenses for bona fide eating places following the year the limit is reached. (Held in the Assembly Appropriations Committee Suspense File)

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

SUPPORT: (Verified 4/12/23)

None received

OPPOSITION: (Verified 4/12/23)

None received

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

4/12/23 14:04:28

**** END ****

SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION

Senator Bill Dodd

Chair

2023 - 2024 Regular

Bill No: SB Hearing Date: 3/28/2023

SUBJECT:

DIGEST: This bill authorizes the Department of Alcoholic Beverage Control (ABC) to issue no more than 10 new original on-sale general licenses for bona fide public eating places in the County of Nevada, as specified.

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, beginning January 1, 2017, the Department of ABC to issue no more than 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.
7. Provides that in Napa County, from January 1, 2017, to December 31, 2017, the Department of ABC, in addition to those licenses currently issued under the law may issue no more than five additional new original on-sale general licenses for bona fide public eating places. Any premises to qualify for a license shall have a seating capacity for 25 or more diners.
8. Authorizes, beginning January 1, 2018, 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.
9. Authorizes, beginning on January 1, 2018, 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.
10. Authorizes, beginning on January 1, 2021, the Department of ABC to issue up to 10 additional new original on-sale general licenses in Mariposa County and up to 10 additional new original on-sale general licenses per year in Napa County for a period of five years.
11. Authorizes, beginning on January 1, 2023, the Department of ABC to issue up to 10 new original on-sale general licenses for bona fide public eating places in both the County of El Dorado and in the County of Shasta, as specified.

This bill:

1. Authorizes the Department of ABC to issue no more than a total of 10 new original on-sale general licenses for bona fide public eating places in the County of Nevada
2. Prohibits the Department of ABC to issue more than four of these licenses per year.
3. Provides that this bill does not prohibit a person that currently holds a valid on-sale general license for seasonal business from applying for an original on-sale general license.
4. Prohibits a license issued under this bill from being transferred from one county to another or from being transferred to any premises not qualifying under the provisions of this bill.
5. Provides that no license issued under this bill shall be sold or transferred for a price greater than the original fee paid by the seller.

Background

Purpose of the Bill. According to the author’s office, “small businesses must be a top priority for all of California, especially in less populated areas like my district. Places like Nevada County rely on the success of tourism and the restaurant industry. Increasing the number of on-sale general licenses available will greatly bolster the economy of these areas and will support local businesses. As California continues to be a difficult place to conduct business, any kind of small business support that we can provide is desperately needed. This bill will help support local businesses in less populated areas enabling them to continue serving their communities.”

Type 47 Alcohol License. An on-sale general eating-place license, or Type 47 license, authorizes the consumption of beer, wine, and distilled spirits for consumption on the licensed premise. The licensee is required to operate and maintain the licensed premises as a bona fide eating-place, which must include suitable kitchen facilities. The licensee must make actual and substantial sales of meals for consumption on the premises. Generally, this means that the business must generate at least 51% of all gross sales from food. As such, a Type 47 license is one of the most common types of liquor licenses for restaurants in California.

Some common businesses that use the Type 47 license include full-service restaurants, hotels and resorts, bowling alleys, golf courses, and other eating establishments. There are approximately 15,750 on-sale general (Type 47) licenses statewide.

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 of 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 $17,335 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. With such a high initial cost, the only restaurants that can generally afford to open in those counties are those that are backed by wealthy investors or corporations.

Impact on Counties. As previously noted, when a county experiences population growth, the Department of ABC issues additional licenses based on the population growth; currently 2,000 residents per one on-sale general license. While this system tends to work for most counties, there are a substantial number of counties where the demand for alcohol licenses far outweighs the current number of alcohol licenses. The reasons for the lack of licenses are generally a lack of population growth or because of the amount of tourism in the particular county, which results in higher demand for these types of businesses.

For example, in Napa County the number of visitors to Napa continues to increase while the population of the county has not grown. While the majority of visitors to Napa take day trips, more than one million of these visitors spend at least one night in local lodgings. Tourism has therefore become one of the major economic drivers in the region. Unfortunately, for counties like Napa County, while tourism clearly increases the demand for these types of businesses, the alcohol license limitation does not allow counties to meet that demand.

Prior/Related Legislation

SB 1452 (Dahle, Chapter 889, Statutes of 2022) authorizes, beginning on January 1, 2022, the Department of ABC to issue up to 10 new original on-sale general licenses for bona fide public eating places in both the County of El Dorado and in the County of Shasta, as specified.

AB 2459 (Bigelow, Chapter 53, Statutes of 2020) authorizes the Department of ABC to issue up to 10 additional new original on-sale general licenses in Mariposa County and up to 10 additional new original on-sale general licenses per year in Napa County for a period of five years.

SB 866 (Dodd, 2020) would have authorized the Department of ABC to issue up to 10 additional new original on-sale general licenses per year to bona fide public eating places in Napa County for a period of five years. (Never heard in Senate Governmental Organization Committee)

SB 352 (Dodd, 2019) would have authorized 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 licenses for bona fide eating places following the year the limit is reached. (Held in the Assembly Appropriations Committee Suspense File)

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

SUPPORT:

None received

OPPOSITION:

None received