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Senate of Pennsylvania
Session of 2013 - 2014 Regular Session

MEMORANDUM

Posted: March 6, 2013 09:45 AM
From: Senator Jim Ferlo
To: All Senate members
Subject: Co-sponsorship of Legislation to Modernize Operations of the Liquor Control Board
 
In the near future, I will introduce legislation to provide for the modernization of the Pennsylvania Liquor Control Board (PLCB), and the operation of the Wine & Spirits Stores. The bill will amend the Liquor Code that often prevents the LCB from operating at peak performance. The bill will improve and protect a great public asset, and increase the customer convenience and experience of purchasing different types of alcohol. The bill will help produce as much as $100 million in additional revenue for the General Fund through improved sales and streamlined PLCB operations. The amendment will make the following changes:

Pricing:
Currently, the LCB feels it cannot provide flexibility in its pricing due to restrictive language in the Liquor Code requiring “proportional” markups on all of its products. “Proportional” has been interpreted to mean that a uniform markup must be used on all products regardless of the quality or quantity of a particular brand that is sold.

The LCB wishes to remove the required proportional pricing so that the Board can design pricing structures more reflective of successful retail operations. If given this flexibility, the agency could increase profitability by $50 to $70 million per year.

In order to assist licensees with any potential increases in prices associated with this change, the bill also will increase the licensee discount from 10% to 16%, and will reduce the special liquor order mark up by 50%.

Personnel:
The bill will allow the PLCB to hire a limited number of wine specialty customer relations employees or to promote them from within the existing staff without going through the civil service system. The wine specialty position has been difficult to fill for the PLCB. Even though the agency may have a qualified person on staff, they have been unable to promote them because of restrictive civil service provisions. This will provide a limited amount of flexibility to hire this specialty position without undermining the typically fair and transparent civil service process.

Procurement:
Currently, the PLCB must go through the rigorous and time-consuming procurement process which may cause the agency to miss important market opportunities. This bill will permit the PLCB to have a limited number of opportunities, such as entering leases, to bypass the procurement process and act on the Board’s discretion. The Department of General Services will review the procurement process and purchases at the PLCB.

Store Operations:
The legislation will permit the PLCB to:
  • Open more stores;
  • Encourage those additional stores to be within or near grocery stores;
  • Remove the cap on the number of stores that can operate on Sundays;
  • Extend the permitted hours of operation on Sundays to 9 AM to 9PM;
  • Offer customer service programs to improve customer experiences in stores; and
  • Sell lottery tickets within Wine & Spirits Stores.

Direct Shipment:
The bill will permit wine manufacturers to ship directly to residential customers, requiring proof of identification at the time of delivery. The State’s liquor tax and sales tax will continue to be calculated and collected in the same fashion that it is at the Wine & Spirits Stores, and the PLCB will be required to license any direct wine shipper.

Beer Sales Reform:
Distributors, restaurants, and taverns need additional authority to sell different quantities of beer. The bill will permit distributors to sell no less than 42 ounces of beer per sale, for instance, permitting them to sell six packs or two 22-ounce bottles. Restaurants and taverns will be given the possibility to sell up to 24 12-ounce containers of beer.

In addition, Pennsylvania’s brewers will be provided with new market opportunities by amending the interlocking license requirements to permit brewers to have additional brew pubs or to purchase additional restaurant licenses. Current law prohibits brewers from owning additional licenses limiting the growth of in-state breweries.

These changes will improve customer experience at Wine and Spirit Shops, streamline the operations of the PLCB, and increase the profitability of the agency by as much as $100 million. Protecting this profitable, family job-sustaining agency that further helps to protect the public health is the right policy at the right time, and something we should strive to improve.



Introduced as SB800