Cheers For Pennsylvania Liquor

EXISTING STRUCTURE

The Pennsylvania Liquor Control Board (PLCB) is the Commonwealth’s exclusive wholesaler and retailer of wine and liquor products. It controls the manufacture, possession, sale,

consumption, importation, use, storage, transportation and delivery of liquor, alcohol,

and malt or brewed beverages within the Commonwealth.

47 P.S. §2-207(b).

Courtesy of Rep. Turzai website

Manufacturers/Importers

The State as Wholesaler

The State as Retailer

Consumers Licensed Retailers

Consumers

EXISTING STRUCTURE

EXISTING STRUCTURE

The PLCB is a large enterprise with significant functions• 5,700 full and part-time employees perform

regulatory licensing functions for approximately 20,000 liquor licenses and permits for establishments statewide.

• Oversight of three warehouse distribution centers and operation of over 600 wine and liquor stores throughout the Commonwealth.

• $1.5 billion in total sales in Fiscal Year 2009-2010. See Liquor Privatization Analysis, Executive Summary, p. 5-6.

Courtesy of Rep. Turzai website

Manufacturers/Importers

Private Wholesalers

Licensed Retailers

Consumers

HOUSE BILL 11 STRUCTURE

HOUSE BILL 11 STRUCTURE

Under the proposal, private, licensed entities would be responsible for wholesale purchase, importation, storage, transportation and retail sale of liquor and wine. • As a result, it is estimated that the PLCB

staff would be reduced by approximately 3,200 employees. See Liquor Privatization Analysis, Executive Summary, p. 12.

Our Cast

Bill Nast as Cliff ClavinBen Barros as Dr. Frasier Crane

Our Cast

Maria Allegretto as Carla Tortelli LeBec

Our Cast

John Lavelle as Norm PetersonAlaina Koltash as Dr. Lilith Sternin

Our CastHeather Moyer as Rebecca HoweJosh Bonn as Woody Boyd

But first, a public service

announcement…

21st AmendmentUnited States Constitution

"The transportation or importation into any State, Territory, or

possession of the United States for delivery or use therein of intoxicating

liquors, in violation of the laws thereof, is hereby prohibited."

U.S. Const. amend. XXII, § 2

Pennsylvania Liquor CodeAn out-of-State wine shipper shall:• (1) Not ship more than nine liters per month on the Internet

order of any person in this Commonwealth.• (2) Report to the board each year the total of wine shipped into

this Commonwealth in the preceding calendar year.• (3) Permit the board or the Secretary of Revenue, or their

designated representatives, to perform an audit of the out-of-State wine shipper's records upon request.

• (4) Be deemed to have submitted to the jurisdiction of the board, any other State agency and the courts of this Commonwealth for purposes of enforcement of this section and any related laws, rules or regulations.

47 P.S. § 4-488(d)

Pennsylvania Liquor CodeA direct shipper may ship wine on the Internet order of a resident into this Commonwealth provided that the wine is shipped to a Pennsylvania Liquor Store selected by the resident. The wine will be subject to taxes in the same manner as wine sold directly by the board. The wine will not be released by the State store until all moneys due, including all taxes and fees, have been paid by the resident.

47 P.S. § 4-488(e)• The rules for the importation of liquor and beer are also

governed by statute. See, respectively, 47 P.S. §4-410 and 47 P.S. §4-444.

Won’t this bill just make everyone drunker?

• So what’s the concern?– Easier access to alcohol

• Who is concerned?– M.A.D.D. – Religious Organizations

• How does HB 11 address the access concern?– Swipe technology will be required to verify the age of a

person who appears to be under 30 – Age compliance checks by LCB– Municipal police departments and State Police will have

concurrent jurisdiction to enforce liquor code– Other safeguards currently in place in state-run stores

Won’t this bill just make everyone drunker?

• By the numbers – 4• Out of the 4 states that have the lowest

percentage of DUI-related deaths, three have completely private systems and one is semi-private

– 7• Pennsylvania’s rank for lowest youth and binge

drinking rates– 30• Pennsylvania’s rank for lowest percentage of DUI-

related deaths

Won’t this bill just make everyone drunker?

• Bureau of Liquor Code Enforcement will retain enforcement, licensing, inspections and alcohol education functions of the PLCB.

• There will be an increased in the presence of law enforcement, however, because the proposal provides for concurrent jurisdiction for state and local police to enforce violations of liquor laws.

Will it be better for the consumer?Will prices actually be lower?

• Currently, there is a 30 percent mark up on all products and a handling fee.

• In addition, there is an 18 percent Johnstown Flood tax, the 6 percent sales tax, and additional local taxes in Philadelphia and Pittsburgh.

• The proposed structure would impose a "gallonage" tax at the wholesale level, and continue the 6 percent sales tax. Also, the additional taxes in Philadelphia and Pittsburgh would continue.

• Prices have to be lower, because numerous costs and fees would be eliminated . . . right?

Will it be better for the consumer?Yeah, but where will the liquor be sold? Will everyone be able to get it?

• Currently, there are 650 state stores throughout the Commonwealth with 59 stores located in Philadelphia. 20,000 to 1 citizen to store ratio.

• The LCB has broad discretion to determine the location of a store. • The proposed legislation would increase the number of stores to

1250, which includes 750 Class A licenses/stores, which will be placed in "retail market zones." These zones will include all current store locations.

• There will also be 500 Class B licenses issued as well, the distribution of which will be determined based on "adequate and reasonable liquor distribution." Presumably, these licenses are designed to ensure that there are stores in certain rural or perceived underserved areas.

Will it be better for the consumer?Auction of Retail Licenses

• There would be 1,250 retail licenses sold to the highest responsible bidder with a reserve price based upon the fair market value.

• There would be 750 Class-A licenses (more than 15,000 sq ft and 600 linear ft of shelf space) and 500 Class-B licenses.

• Limiting the number and types of licenses would elevate the value of those licenses by creating a level of scarcity.

Currently in Pennsylvania, there are 613 state retail liquor stores which are self-regulated by the PLCB pursuant to 47

P.S. §§301 et seq.

Will it be better for the consumer?Auction of Wholesale Licenses

• Wholesale licenses will be transferred to Pennsylvania residents or Pennsylvania business entities based on contractual relationship between manufacturers and a wholesaler to be the exclusive wholesaler for their products within the state.

• Licensees would pay an initial franchise fee along with on-going license fees that support the cost of regulation.

• No one wholesaler would control more than 50 percent of the wholesale market.

Will it be better for the consumer?But, will privatization increase competition and benefit the consumer?

• Under HB 11, there will be nearly double the number of licenses, and there will be fewer restrictions at the retail level, which may benefit the consumer in terms of price and availability.

• In addition, there is a provision for ensuring that stores are distributed geographically.

• However, some restrictions remain. For example, it will still be unlawful to possess any wine or spirits purchased outside the state, except for a few limited exceptions.

• How this will impact the value of licenses in border "retail zones" and prices in these locations is unclear.

What will happen to the employees?

• Under HB 11, there will be a preference in hiring for Civil Service-covered employees.

• There is also a provision for tuition reimbursement for retraining.

• There is no requirement that the licensee hire the former employees or continue the employees' pay and benefits.

What will happen to enforcement?• Currently, approximately 150 officers are assigned to the

Bureau of Liquor Code Enforcement and are supervised by a handful of State Police Troopers.

• Officers conduct investigations of licensed establishments pursuant to 47 P.S. §§2-211 et seq.

• They have the power to: – arrest individuals engaged in enumerated unlawful acts (47 P.S.

§2-211(a)(2)-(5));– search and seizure (47 P.S. §2-211(a)(3)); – investigate and issue citations (47 P.S. §2-211(a)(4)); – serve and execute warrants (47 P.S. §2-211(a)(6)'– arrange administration of chemical tests of breath, blood and

urine (47 P.S. §2-211(a)(7); and – confiscate unlawful items (47 P.S. §2-211(b)).