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Pennsylvania House of Representatives
http://www.legis.state.pa.us/cfdocs/Legis/CSM/showMemoPublic.cfm?chamber=H&SPick=20130&cosponId=11784
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MEMORANDUM

Posted: February 19, 2013 04:40 PM
From: Representative Mike Turzai
To: All House members
Subject: Co-Sponsorship of Legislation
 
Please find attached legislation that will provide consumers in Pennsylvania with greater selection, better prices, and more convenient access to wine, spirits and beer.  This privatization concept has been carefully crafted by the administration, with consumers in mind, and has the full support of the Governor.  The bill will be introduced on March 4 as House Bill 790. 
 
Immediately after passage of this act, the PLCB will begin issuing liquor licenses to grocery stores, convenience stores, pharmacies and big box stores.  These licenses will grant the following privileges to the holder:
  • Grocery stores, for an initial license fee and annual renewal fee of $25,000, will gain the ability to sell two 6-packs of beer and up to six bottles of wine for consumption off of the licensed premises.
  • Grocery stores with gross annual sales in excess of $2 million shall have an initial licensing fee and annual renewal fee of $30,000.
  • Convenience stores, for an initial license fee and annual renewal fee of $10,000, will gain the ability to sell one 6-pack of beer for consumption off of the licensed premises.
  • Big-box retail stores, for an initial license fee and annual renewal fee of $35,000, will gain the ability to sell beer by the case and up to six bottles of wine for consumption off of the licensed premises.
  • Pharmacies, for an initial license fee and annual renewal fee of $17,500, will gain the ability to sell two 6-packs of beer and up to six bottles of wine for consumption off of the licensed premises.
 
In addition, beer distributors will have the opportunity, for an initial licensing fee of $150,000 and an annual renewal fee of $10,000, to sell unlimited quantities of wine for consumption off of the licensed premises; and, for the ability to “break the case” of beer and sell down to a minimum of 42 ounces.
 
While the PLCB is issuing the above mentioned licenses and providing substantial convenience and selection for consumers, the Department of General Services will begin the retail divestiture.  The legislation calls for retail divestiture to take no more than three and one-half years to complete.  Two classes of Wine and Spirits Retail Licenses have been created:
  • Class A licenses which will be issued to an establishment with more than 15,000 square feet of retail space and a minimum of 600 linear feet dedicated to the sale of wine and spirits.  There will be a maximum of 800 of these licenses.
  • Class B licenses which will be issued to an establishment with less than 15,000 square feet of retail space.  There will be a maximum of 400 of these licenses.
These licenses will be assigned and auctioned by county.  No county shall have fewer licenses than the number of existing State Stores; or, the number of existing beer distributors if that number is greater than the number of State Stores.  Beer distributors will be able to bid on these licenses and become a one-stop shop for wine, spirits and beer.
 
Wine and Spirits retail licensees may be open Monday through Saturday from 9 a.m. until 11 p.m.  They may open on Sundays from 9 a.m. until 9 p.m. provided they purchase a Sunday Sales permit at a cost of $2,000 annually.  In addition, they may not hire anyone under the age of 18; and, only those over the age of 21 may actually engage in the sale of alcohol.  Finally, they will be required to utilize a transaction scan device to determine the age of everyone purchasing alcohol.
 
Once the auctioning of retail Wine and Spirits licenses is substantially completed, DGS will be charged with divesting the State of the wholesale wine and spirits business.  The wholesale divestiture shall be complete no more than six months after completion of retail divestiture.  Only one wine and spirits wholesale license will be issued to each successful applicant.  The cost of the license shall be dependent upon the blended brand valuation for each wine and spirits brand the applicant wishes to sell.  The blended brand valuation is defined as the sum of the wholesale profit margin on each product of a brand.  If a brand has not been previously sold in Pennsylvania, DGS shall assign a license fee of $1,000.  Wine and Spirits wholesale licensees shall renew their licenses every two years for a fee of $5,000.
 
Wine and Spirits wholesale licensees will be able to sell between 2 a.m. of any Monday and midnight of the following Saturday.  Wholesale licensees may not:
  • Engage in variable pricing
  • Engage in unfair or deceptive trade practices
  • Intentionally exclude competing brands of liquor
Wholesale licensees and manufacturers may end their business agreement if both parties agree; or if the wholesale licensee is reasonable compensated by the manufacturer.
 
DGS shall be charged with setting the protocol for closing the State Stores.  The PLCB will have 60 days to close a store once it receives notice from DGS.  No State Store may still be selling wine and spirits three and one-half years after the effective date of this act.  Any wine and spirits remaining in the PLCB’s inventory shall be
  • Repurchased by the vendor;
  • Sold to a newly licensed retail Wine and Spirits licensee; or,
  • Transported to another State Store.
 
 The legislation creates a Transition Assistance Committee to help displaced State Store employees with their search for new employment.  These employees will be given three additional points on the Civil Service Exam.  In addition, if a State position is available that does not require the Civil Service Exam and the employee possesses the requisite skills necessary to do the job, then that employee shall be given preference in hiring.  Displaced employees will also be eligible for a two year educational grant.  This grant will provide $1,000 to an employee attending school on a full-time basis; or, $500 for an employee attending school on a part-time basis.  Finally, a re-employment tax credit will be available to any employer in the private sector that hires a displaced State Store employee. 
 
In addition, the legislation will increase the Pennsylvania State Police Bureau of Liquor Control Enforcement’s yearly budget by $5 million in this legislation.  In addition, fines for minor offenses are increased from a minimum of $50 to a minimum of $250 and from a maximum of $1,000 to a maximum of $5,000.  Fines for major offenses, such as sales to minors and visibly intoxicated persons, increase from a minimum of $1,000 to a minimum of $5,000 and increase from a maximum of $5,000 to a maximum of $10,000.  Finally, any licensee that is found to have sold to a minor or a visibly intoxicated person a second time faces a mandatory suspension of the license for two consecutive weekend days. 
 
Public Financial Management (PFM) estimates that the auction of retail Wine and Spirits licenses will result in $224 million.  In addition, the sale of wholesale Wine and Spirits licenses is estimated to generate $575 million.  The current tax structure for wine and spirits remains the same in the legislation.  Residents will continue to pay the 6% sales tax and the 18% Johnstown Flood Tax.  Maintaining this tax structure ensures that we continue to realize the tax revenues we receive now and guarantees revenue neutrality. 
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Introduced as HB790