Legislative Update
Nicole Gehl reported on the legislative highlights for the session
as detailed in the Commission packet. The LSB bills listed refer
to issues where the division was requested to submit language to
the Legislative Service Agency.
LSB 5215 HH Alcoholic Content Beer - Representative
Kressig asked for the fiscal note in response to a constituent who
operates a grocery store and wants to sell high-alcohol content
beer; however, the constituent wants to avoid paying the high fee
for the Class “E” liquor license. Representative Kressig
investigated changing the definition of high alcoholic content beer
so his constituent could sell the high alcohol content beer on his
current license. Subsequently, that individual has created a smaller
shop inside his grocery store and has purchased a Class “E”
liquor license for that space. As a result Representative Kressig
chose not to file the language.
Mr. Walding commented there is also a fiscal note by Senator Schoenjahn
who has a constituent that wants to quit farming and get into the
wine growing business. The constituent’s wife works for Fareway
Grocery Store and carries the health insurance for the family. This
creates a problem due to Iowa law 123.45 which states that neither
the person engaging in the wine business nor his spouse can be at
more than one level. The Iowa ABD amended the original language
and is neutral regarding the bill. Ms. Gehl added that the bill
had failed to get out of subcommittee and probably will not go forward.
Mr. Walding understands that the beer wholesalers are opposed to
the bill.
LSB 6443 SK High Alcohol Content Wine - The bill
filed both in the House and Senate changes the definition of wine
to mirror federal regulations increasing the weight from 17% to
24%. Mr. Walding added that 24% by weight translates into 60 proof.
The irony is that at the meeting on the direct shipping issue with
the Iowa Wine Growers the consensus was not to introduce any legislation
this year. In fact, the Iowa Wine Growers have introduced several
bills, one of which would let them increase the weight to 24%, allowing
the wine industry to create port. Roger Halverson who heads the
Iowa Wine Growers Association, told Mr. Walding the wine growers
want to be able to produce port in their operations. The question
is whether 17% alcohol by weight is fortified enough for the market
place. There are currently several wineries producing port as part
of their operation and the division recently brought in alcohol
for a couple of the wine operators to produce their port. Mr. Walding
has concerns regarding the Granholm implications because the alcohol
would be taxed, distributed and advertised differently. The division
may ultimately register against that bill.
LSB 6278 HH Native Distillery - The bill introduced
this year differs slightly from the bill introduced last legislative
session. The native distillery has to traffic any sales over a certain
amount through the division so it does not completely violate the
3-tier system. It also requires that at least 51% of the raw materials
used must be grown and produced in Iowa. The bill mirrors the native
wine language that allows them to buy the $25 on-premise license.
LSB 6381 SC CO2 Filters / Instantly Redeemable Coupons
- It appears that the instantly redeemable coupons will be dropped
from the Anheuser Busch (A-B) bill according to Ms. Gehl. A-B alleges
that many of the companies are giving the coupons to the retailers
who take it off the price rather than going through the coupon redemption
process. If it is not legislated, there may be an administrative
remedy to require suppliers to show who they are giving the coupons
to so the division can make sure it is handled fairly. Wholesalers
are concerned that it creates two-tier pricing. Because the grocers
are in favor of allowing coupons, the Iowa Grocers Association opposes
the legislation.
There is a state statute that says the industry cannot give fixtures
or equipment to retailers. The division’s administrative rule
defines fixtures and equipment to exclude services. CO2 filters
were determined to be equipment by Assistant Attorney General John
Lundquist and, therefore, are not allowable. This legislation would
allow CO2 filters to be treated as a service. The beer wholesalers
are neutral on this legislation.
HSB 527 EAV Devices – Representative Baudler
wanted a retailer who had a violation for sales to minors to be
allowed to purchase the EAV device after being charged with the
violation and to have his suspension time cut in half. The division
is not in favor of this legislation. The division participated in
a 2002 Responsible Retailing Forum Study that concluded that although
the EAV devices correctly read the license, individuals did not
use them in an effective way. In addition, the division is not in
favor of the retailer being able to purchase the machine after the
violation and receiving the reduction in suspension time. Mr. Walding
did a presentation at a Public Safety Committee Meeting that resulted
in the committee choosing not to vote the bill out of committee.
HF 2007 Dram Shop Liability – Assistant
Attorney General Lundquist expressed concern that HF2007 might create
a change in social host liability if passed. The amendment specifically
states that if a person is served by a licensee to the point of
intoxication and subsequently gets injured after leaving the establishment
that the person is not entitled to dram shop liability against the
party who served the individual. The law currently states that the
person is not entitled to recovery. By expressly outlawing it within
the context of the licensee, in the next paragraph it refers to
social host liability. By implication it expressly states it is
not a cause of action against a licensee; however, by leaving that
language out of the next paragraph that talks about social host
it may by inference create a cause of action that doesn’t
exist.
HF 2058 Alcohol Penalties – This bill significantly
increases the civil penalties for alcohol sales to minors. The first
offense is increased from $500 to $2500.
SF 2168 Penalties for Providing Alcohol to a Minor
- Known as “Nick’s Law”, SF 2168 increases the
penalties. The bill states that the DOT can suspend the person’s
driver’s license for up to a year if the individual provides
alcohol to a minor.
HF 2333 AWOL Prohibition – Representative
Hunter filed legislation to prohibit the use of the alcohol without
liquid (AWOL) devices. The individual uses the device by placing
a mask on his face and inhaling the liquid which quickly enters
the bloodstream. There are some public safety issues with it because
the BAC can increase quicker. Mr. Walding attended a meeting where
he stated the bill is a non-issue because these are no AWOL devices
currently in the state. Representative Hunter links the device with
underage drinking while Mr. Walding contends that it is about public
intoxication.
HF 2075 (companion bill SF 2043) Alcohol Employees
– The division assisted Senator Schoenjahn with the language
for HF 2075. This bill addresses the issue of allowing the spouse
of an individual who participates in the manufacturing, bottling
or wholesaling of liquor, beer or wine, to work in a retail licensed
establishment. The bill failed to pass out of subcommittee and has
been tabled in the Senate.
SF 2043 Alcohol Employees, HF652 DL Reinstatement for OWI
and SF 345 OWI DL Reinstatement – These bills were
held over from last session.
HF 2022 Cigarette Tax - HF 2022 increases the
cigarette tax to $1 per pack. The Governor advocated for an increase
of $1.00 per pack.
HF 2110 Smoke Free Iowa - According to Ms. Gehl,
HF 2110 is probably more a bill about making a statement rather
than passing legislation. The bill would prevent smoking in any
public place.
HF 2265 Smoke Free Child Care - This bill prohibits
smoking at any time in all areas used by children in home day care
situations.
HSB 679 and SSB 3148 Keg Registration - HSB 679
is the Governor’s bill to deal with alcohol and driving issues.
It is a Public Safety bill called KIDS – Keep Iowa Drivers
Safe. Ms. Gehl relayed that she attended a meeting recently in which
Bill Wimmer, representing Hy-Vee, stated that Hy-Vee supports the
bill because Hy-Vee would rather comply with one state-wide regulation
rather than individual city and county regulations.
The brewers and beer wholesalers have made it clear that they do
not support this bill. Mr. Walding and Commissioner Techau from
the Department of Public Safety participated in a teleconference
with the beer wholesalers’ executive committee regarding the
bill. Commissioner Techau states that the issue is about adults
providing to underage consumers and the way to go after those people.
The beer wholesalers’ executive committee will talk with their
membership to ascertain whether they are still adamant in their
opposition to the bill.
According to Jerry Fleagle from the Iowa Grocers Association, the
grocers are favorable to the keg registration if the process utilizes
a sticker that is easily workable and effective with the information.
Mr. Walding stated the Iowa ABD would issue the sticker and sell
it to the retailer. Law enforcement could easily access information
via the division’s website to trace the serial number of the
keg, and the retailer to whom the keg was sold. The Nebraska Liquor
Commission has had keg registration for a number of years and the
commissioner believes it has been effective in Nebraska in getting
rid of or reducing the number of big campus keg parties.
Another part of the bill creates civil liability for a private
individual that supplies alcohol to a minor according to Ms. Gehl.
Discussion in the subcommittee meeting centered on the fact that
retailers have dram shop insurance so they have protection in the
event of a claim; however, the private individual isn’t going
to have that protection. According to a gentleman representing the
insurance association, the way the bill is crafted will trigger
an exemption in an individual’s homeowners insurance. If these
penalties are applied, there will be no coverage for them to go
back on.
Currently the legislature is debating the keg registration portion
of the bill. It was indicated in the subcommittee meeting that everyone
would be on board for civil liability if keg registration was removed
from the bill.
Alcohol Enforcement Fiscal Note
At a recent beer wholesaler meeting Lynn Walding was asked by Ron
Kirchhoff, an Anheuser Busch distributor from Dubuque, if the division
would be doing more enforcement of the trade practice laws. Mr.
Walding responded that there have been no agents to do the enforcement
since the cutback three years ago. Following that meeting, Senator
Kibbie requested a fiscal note on the costs associated with hiring
agents to work with local law enforcement to enforce the law and
trade practice issues within the industry. Some beer wholesalers
favor the division getting back into the area. Senator Gronstal
has also indicated approval. If the division receives approval to
hire more agents, a decision will need to be made on whether to
run the alcohol and tobacco programs parallel or combine the programs
and cross-train the agents.
Another issue being hotly debated is the touch-play machines. Legislators
are potentially looking at restricting the machines to bars only.
Mr. Walding was asked if the division would be willing to do enforcement
of the touch-play machines. The Task Force recommendation will probably
carry a lot of weight in this decision.
Tobacco Enforcement
The number of law enforcement partners has declined over the past
two years in part due to the contract requirements stipulating that
partners must offer training once a month in their respective counties.
Where there are multiple partners in the same county, the division
only requires that a training session be held in the county each
month. If no one has registered for the class seven days prior to
the scheduled training date, the class is cancelled; however, according
to the division’s policy, if only one person registers the
class must take place. Over 11,000 training spots have been made
available with 1,941 of those spots occupied and approximately 1,300
clerks certified. When Jerry Fleagle questioned the discrepancy
in the number of seats reserved and the number of clerks actually
taking the test, he was told by Mr. Saron that some don’t
take the test. In addition, many times clerks register and the space
is held for them; however, they don’t attend the class. Both
the division and the law enforcement partners are frustrated by
the retailers’ lack of participation, especially since the
program was criticized last year for not offering enough classes.
Approximately 1200 compliance checks were conducted with the compliance
rate remaining at about 89%.
Electronic Licensing Update
The e-licensing application was launched last month with a pilot
group of cities and counties in the greater Des Moines area who
volunteered to be the first to attend training classes to learn
how to navigate the system. A letter was sent to the group notifying
them of the timeframe and details on accessing the application.
A second letter was sent to all licensees statewide informing them
that e-licensing was on the horizon and explaining what it entails.
Computers are available in the office for use in learning the system
and staff is available to offer assistance to the local authorities
or licensees to guide them through the process.
The division has scheduled training in February and March in computer
labs throughout the state. Individuals are invited to register for
the classes and are trained at the facility in their area. Approximately
11% of the licensed community whose licenses are due for renewal
is trained and currently using e-licensing. Thus far, feedback has
been favorable. Some dram shop insurance companies are offering
to input the license information as a service to their clients.
Mr. Walding stated the information is available on the website
by city, bar owner or license name and he hopes to soon add regulatory
information showing any violations. Ms. Gehl commented information
is available in the public records portion allowing an individual
to generate his own report for mailing labels, etc. The system is
updated real time and is self-serve.
Beer and Wine Wholesaler Tax Report
The beer and wine wholesaler tax reporting system is almost ready
for implementation. The new system will allow beer and wine wholesalers
and shippers to electronically report their taxes and to electronically
upload their information. IT Staff are working with E-Bev to make
the system compliant with E-Bev, a service that many wholesalers
currently use. A group of volunteers from the wholesaler and shipper
communities will test the system before it becomes mandatory for
use by all shippers and wholesalers.
Electronic Ordering
Mr. Walding recently met with Steve Wilson who designed the electronic
licensing system. Mr. Wilson recently left ITE and has gone into
business for himself. Mr. Wilson will 1) submit a proposal to see
what IT services he can offer at a competitive price relative to
ITE to reduce the cost for hosting the ABD server which currently
costs approximately $800 per month and 2) explore the development
of electronic order entry.
Responses to a recent Class “E” survey indicated that
while many licensees were not in favor of electronic ordering because
of limited access to computers, there were also many licensees who
would like electronic ordering. Hy-Vee stores, which account for
about 25% of the business, requested the Computer Assistance Reordering
System (CARS). Mr. Wilson does IT work for Hy-Vee and is familiar
with the CARS system so the division may choose to use the CARS
system rather than the Internet. In response to Commissioner Collins
query, Mr. Walding responded that under liquor orders are confidential
records under Iowa law. The custodian of the record can determine
who can view the information.
On-Line Regulation
Another avenue being explored is on-line regulation according to
Ms. Gehl. The system would tie violations to the e-licensing.
Counsel’s Report
Assistant Attorney General John Lundquist reported the DCI recently
completed a sweep of electronic amusement devices. He anticipates
there will be fewer claims relating to those machines because the
regulation on them is much different than the touch play devices
which are in more venues. The number of electronic amusement devices
was capped at 6900 machines and according to the DCI there are only
500 spaces still available in the state. Gambling violations relating
to those types of devices will probably decrease according to Mr.
Lundquist.
Mr. Lundquist stated the Iowa Racing and Gaming Commission has
an interest in preventing people from gambling while intoxicated.
Typically a joint stipulation with Racing and Gaming and the Iowa
Alcoholic Beverages Division imposes a large penalty to get the
attention of the casino that both over-serving and intoxicated gaming
will not be tolerated. An intoxication violation would typically
garner a 21-day suspension. In the past there has been an opportunity
for the casino or riverboat to pay a fine and reduce that suspension.
Obviously, if there is a history of over-serving, there are serious
consequences resulting for the incident. Mr. Walding added that
a reporter from the Omaha World Herald called prior to the meeting
regarding Harvey’s Casino serving an intoxicated patron last
November. The reporter asked how the casinos have been treated in
the past. Following the meeting Mr. Walding will advise the reporter
that the penalty typically runs $15,000 and TIPS training is required
for a first violation.
In response to a question from Commissioner Collins, Mr. Lundquist
replied that the Terribles case is still being reviewed. Terribles
holds two licenses because it is a riverboat. The casino is covered
by an LD license while the land-based convention center/restaurant/hotel
space is covered by a different license. There are allegations that
an underage person was served in both. Although there has been no
hearing complaint filed against Terribles, there is an on-going
investigation.
Financial Report
FY 06 Financial Highlights
Sales continue to be very strong according to Jim Kuhlman. Total
revenue year-to-date is almost 7% ahead of last year. Currently
sales are up over $7 million and should be up over $8 million by
the end of February. The division is running about $1.5 million
in net revenue over the same period as last year. Mr. Kuhlman expects
that to double by the end of the year.
Mr. Kuhlman explained that although the report shows no tobacco
funds have been transferred thus far, it is simply a timing issue.
Over the course of the year the Department of Public Health will
transfer the budgeted $1 million to the Iowa ABD for tobacco expenditures.
Transfers to other entities are approximately the same amount as
last year. The amount shown under local authority is the amount
of fees the cities and counties receive from their share of the
liquor license sales.
Liquor Sales – Wine and Beer Taxes
Liquor sales continue to climb as they have for the past 10 years.
Wine tax is up around 4% for the year. Beer tax collections remain
constant.
Sales Report
Sales Comparison
Dollar sales through January are up approximately 9½% while
volume sales are about 2% less due to inflation. Iowa and Idaho
are vying for the top spot within the control state system for the
greatest percentage increase in sales. Other states obviously have
bigger dollar increases, bigger populations, etc.; however, Iowa
and Idaho are the leaders in percentage increase.
Product Buyouts
Jim Kuhlman pointed out that the division continues to meet its
targets in the additional product buyouts which is one of the division’s
charter agency initiatives.
Kaizen and Winning Compliance
Kaizen
Nicole Gehl gave an overview of the Kaizen process which became
very popular in the business community after the Toyota Production
Company used it to create efficiencies in their manufacturing process.
The Japanese term is taken from the words “kai” meaning
continuous and “zen” meaning improvement. The point
of Kaizen is process improvement - looking at a specific process,
mapping it out, finding areas that do not add value to the customer
and removing those areas from the process. Kaizen can create efficiencies
and save money; however, Kaizen is primarily about process improvement
and enhanced services to customers.
The division was able to access money from a fund through the Charter
Agency initiative to pay for a Kaizen event. A subsidiary (Guidon
Performance Solutions) of Time Based Management (TBM) who does consulting
work with the State of Iowa, will provide a facilitator to lead
ABD in a Kaizen event February 28 through March 3rd. The goals and
scope of the program were determined at a pre-meeting earlier in
February. The decision was made to look specifically at the bailment
function of the organization which is comprised of order entry,
special orders and inventory management processes. On the final
day of Kaizen, the division will implement the changes.
If the Kaizen event is successful, Mr. Walding anticipates that
Kaizen events will be held in the accounting and licensing areas
and possibly the warehouse.
Commissioner Collins asked for a report at the completion of
the Kaizen event.
Winning Compliance
Ms. Gehl recently attended a class on winning compliance and learned
that it is less costly and much easier to get people who are regulated
to voluntarily comply through the nine elements of winning compliance
listed in the handout. Although the tobacco program utilized many
of these steps at its inception, the program has reached a plateau.
Three factors contributed to a decision to re-evaluate the tobacco
program: 1) the announcement of the tobacco manager’s upcoming
retirement; 2) added duties; and 3) the compliance rate of 89%,
which climbed from 79% when the division began the program, has
remained static for the past two years. The division plans to hold
a Kaizen for the tobacco program using the winning compliance framework
to look at the program from the bottom up.
ABD Partnership in Iowa Great Places Program
Governor Vilsack signed an executive order last January implementing
Great Places in Iowa. Of the 147 cities who submitted applications
to be a “great place”, three were chosen to be pilot
cities - Sioux City, Clinton and Coon Rapids. Mr. Walding asked
Brent Saron to present to the committee an idea for placing advertisements
on the liquor truck trailers. The trucks travel approximately 680,000
miles per year on Iowa’s highways and DOT traffic flow patterns
indicate that thousands of cars see the trucks each day creating
fantastic exposure.
The idea for the advertisements was met with enthusiasm resulting
in the division providing each pilot city with advertising space
on a trailer at no cost to the city. Funding for the advertisements
will come from the Liquor Trust Fund.
The state-of-the-art 3M product will be applied to the trailers
in March by Newton-based Vernon Graphics. The easy-on and easy-off
product is thin like paint and if damaged, it will not tear. In
response to a question by Commissioner Collins, Mr. Walding explained
that although the trucks and trailers are leased, the leasing company
has no problem with the division placing the advertisements on the
trailers.
In addition to the three pilot city trailer advertisements, a fourth
trailer will have a general “great places” advertisement.
If the Great Places Program does not expand the program to other
areas as planned, Mr. Walding will offer advertising space to the
Regents to advertise the state universities and possibly space to
the Department of Natural Resources.
The division’s media specialist, Derek Lippincott, created
a poster representing the division’s contribution to the program.
The poster will be displayed at the Historical Building “great
places” exhibit and possibly in an exhibit at the state fair.
Mr. Walding commented that when the graphics are completed the trucks
will be parked on the west side of the capitol for legislators to
view the finished product.
Commissioner Collins questioned why communities such as Pella are
not considered “great places”. Mr. Saron responded that
some cities in Iowa, like Pella, are already great places. This
program is designed to help cities who are on the brink of being
a “great place” but need a little help. Mr. Saron suggested
the commissioners visit the website at http://www.iowagreatplaces.gov/
for more information and video clips on the three pilot cities.
Lynn Walding added that the Iowa ABD logo will also be placed on
the trucks next week. The division does not want to advertise what
is in the trucks so the graphic will read State of Iowa rather than
the Iowa Alcoholic Beverages Division. The State of Iowa designation
also helps the trucks get through the weigh stations more quickly.
Warehouse RFP Update
Jim Kuhlman worked extensively on the Warehouse RFP which was issued
by the Department of Administrative Services last summer. The invitation
to bid gave companies the opportunity to bid on 1) the entire operation
– trucking and warehouse, 2) trucking only, and 3) warehouse
only. The document was drafted so if there were two vendors, the
contract clearly designates each vendor‘s responsibilities.
The Iowa ABD won the trucking portion of the bid with the lowest
bid of 96¢ per case. Crystal Distributing from Waterloo won
the warehouse contract with a bid of 48¢ per case. The combined
case bid was $1.44. The next closest bid for the combined operation
was the Alcoholic Beverages Division bid of $1.64 per case. A Maryland
company submitted the highest case price bid at $1.71. If the J.
A. Jones Company had not gone bankrupt and was still doing the operation,
the division would have been paying them $2.24 per case. A savings
of 80¢ per case was realized. It is anticipated that 1.4 million
cases of liquor will be sold this year resulting in significant
savings.
On January 28th Crystal Distributing assumed the warehouse operations.
ABD worked with Crystal in transitioning to the new operation by
continuing to provide in-mate labor for the first two weeks and
letting Crystal use ABD equipment as needed until April 1st. In
addition, the division has given Crystal the rights to some of the
furniture in the warehouse office.
The Iowa Alcoholic Beverages Division continues to do the trucking
operation. After Crystal pulls the order and stages it on the docks,
ABD employees do a physical count to verify the order is accurate.
It is important that the division verify the count at the docks
because if there is an error in the count and the customer is a
case short upon delivery, the division is responsible for the shortage.
Following the verification of the count, ABD employees load and
deliver the liquor to the customer.
Crystal Distributing negotiated with the Department of Corrections
to continue to use in-mate labor as well as their own employees.
Crystal Distributing is required to have $15 million of coverage
for the liquor inventory as well as $10 million coverage on the
building. As of this date, Crystal does not have the required coverage
due to a question over whether they are a first or third provider;
therefore, there is no signed contract at this time. Staff has met
with Crystal’s management team to work toward a solution regarding
questions such as who is responsible for acts of God, etc. The previous
contract with J. A. Jones is being reviewed to see what coverage
they provided. Discussions will also be held with the insurance
commission to make sure there is enough coverage without duplicating
insurance coverage.
Other concerns raised by Crystal Distributing involve snow removal,
janitorial services, etc. that Crystal contends should not be their
responsibility. The bid specifications, however, specified that
the winning bidder would be responsible for those duties so they
will be included in the contract.
Open Forum on Direct Shipment of Wine Review
Lynn Walding’s consensus of the open forum was that all parties,
with the exception of David Sherman, felt it was best to do nothing.
David Sherman expressed the opinion that the state should be more
proactive, positioning itself on what was thought would happen in
the Granholm Case. Since the Granholm Case there has been a recent
decision in the Costco Case which states that the State of Washington
cannot discriminate in its distribution of beer and wine. The Washington
legislature is now debating whether to allow suppliers to go direct
to retailers which would eliminate the three tier system.
Mr. Walding spoke with Senator Gronstal regarding the direct shipping
issue. The discussion centered on the issue of whether Iowa should
pass a law taxing out-of-state retailers that ship into Iowa and
whether Iowa should require out-of-state retailers to get a license
so regulatory action can be taken if they are in violation. Iowa
differs from most states in that Iowa gives the advantage to out-of-state
retailers who have no license fee, no Iowa property and pay no gallonage
tax. Senator Gronstal is concerned about lost revenue. He wants
to potentially collect taxes directly from the states that ship
into Iowa. If the state collects the tax, it would create an economic
disincentive and discourage some of the flow of wine into the state
according to Mr. Walding. In addition, it would create more business
for Iowa retailers who are playing by a different set of rules.
Assistant Attorney General John Lundquist pointed out that the
direct shipping chart provided by UPS reflects that there are some
groups that ship a lot of wine. It would probably not impact groups
like the Wine of the Month Club too much if they had to get a license.
The December report from UPS showed a large amount of wine being
shipped into Iowa from other states with some individuals receiving
as many as 13 shipments in one month. Under the reciprocity law,
an individual can bring in only 18 liters per person per month.
According to John Lundquist an individual can legally receive several
boxes containing one bottle per shipment up to the 18 liters; however,
if an individual receives several cases, it may indicate a problem.
The bottle deposit law specifies that only two cases of wine can
be brought into Iowa without having the 5¢ sticker attached.
Mr. Lundquist stated that it is legal for a licensee to have wine
shipped to them for resale if the licensee holds an importer/wholesaler
license; however, retailers cannot legally import and sell directly
to the public. Judy Seib is reviewing the file to see if there are
potential violations.
Mr. Walding has considered hosting a meeting with common carriers
to go over the restrictions, requirements and limitations for shipping
alcoholic beverages into Iowa. In addition, the carriers might be
asked to voluntarily submit reports.
John Lundquist stated 123.22 talks about the State of Iowa being
the sole importer of alcohol liquor into the state of Iowa so everything
that does not qualify as beer or wine must go through the warehouse
with the exception to the Iowa Code that allows individuals to import
one liter for personal use. The Iowa Code states an individual can
import one liter and possess one liter for personal consumption.
Import is a defined term under the statute that includes arranging
for shipping; therefore, an individual can have one liter shipped
from anyplace in the world. That presents the opportunity for limited
direct shipping outside the three tier system. The Iowa Code also
states that if an individual personally obtains the liquor out of
the country, the individual can import and possess up to four liters.
By ordering direct, consumers avoid the $14.81 a gallon Iowa tax
which would more than pay for shipping the product according to
Mr. Walding.
Miscellaneous Business
Mr. Walding reported that members of the Iowa Wine Growers Association
are divided regarding the issue of mixing and blending of wine.
One group adamantly argues that the law does not currently allow,
nor should it allow, blending. The group believes that all production
of Iowa native wine means it has to come from wine that is fermented
in Iowa. Grape juice can be imported and processed in Iowa; however,
the group does not believe there is any value added unless it is
fermented in Iowa. In addition, the group believes it will eliminate
grape production in Iowa if blending is allowed. The opposing group
believes the way to grow the industry is to allow up to 51% blending.
One wine maker has stated there is not enough grape production in
Iowa to fulfill the demand for the product; therefore, he needs
to be able to blend.
It takes about five years for a vineyard to produce a yield according
to Mr. Walding. Many wine growers don’t want to make an investment
in a winery and have nothing coming in for five years. They want
instant production while developing their own grapes.
Mr. Walding clarified that wineries can bring in any wine they
want. The question is whether the winery will qualify as a native
winery and receive the incentives which include: 1) avoiding the
3 tier system; 2) being taxed differently; 3) selling directly to
the retailer; and 4) paying a $25 license fee for a Class “B”
native wine permit.
John Lundquist has interpreted the Iowa Code to say that blending
is not allowable in the state. No bill has been filed in the legislature;
however, it will probably be decided by the legislature at some
point in time.
Mr. Walding asked the commissioners if they want to take a position
regarding blending. He also asked if the commissioners wanted to
express an opinion on whether Iowa should have a reciprocity law
that requires a licensing structure for out-of-state retailers.
Commissioner Collins stated that she is concerned that wineries
are labeling the wine as “Iowa wine” when in reality
it has nothing to do with Iowa except that it is bottled in Iowa.
The purist who really wants to make wine with Iowa products and
receives the incentives is competing with the guys who are capitalizing
on earlier legislation that gives them the right. Mr. Walding agreed
that without the labeling, it is confusing to the marketplace. People
think it is a wine made in Iowa when in actuality it is California
wine bottled in Iowa by wineries that do not have to pay the tax
due to the native winery status.
Other states are all over the board with their definitions of native
wineries. Missouri recently changed their law so native wineries
cannot blend. Some argue this law kills the wine business; however,
it kills the rectifier businesses who are not adding any value to
their product. Opponents of allowing the blending process believe
that the industry needs the vine production first or it will not
be an agriculture-based business. Minnesota is considering changing
their laws to allow blending. New Hampshire has enacted legislation
requiring regulation, licensing and taxation from out-of-state retailers
according to Lynn Walding.
Mr. Lundquist stated there are two options: 1) leave things the
way they are; or 2) go the route of licensing out-of-state shippers,
manufacturers and suppliers so it becomes a matter of licensing
and collecting the tax. Because the issue of reciprocity under the
Granholm Decision is thrown into flux, Mr. Lundquist can not recommend
in good faith that Iowa require that another state allow Iowa wines
to be shipped.
In response to a question from Mr. Walding regarding beer shipments,
Assistant Attorney General Lundquist stated the bottle deposit law
imposes a two case limit that can be brought into the state without
being subject to the bottle deposit requirements. It doesn’t
say over what time period or how many times. The alcohol code itself
does not address limits on beer.
Upcoming Meetings
The next commission meeting will be held April 11, 2006, at 1:30
PM in the Iowa Alcoholic Beverages Division board room.
Adjournment
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Motion: |
Commissioner Hunter moved the meeting adjourn.
Commissioner Collins seconded the motion and the motion carried
unanimously.
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The meeting adjourned at 3:32 PM.
SCOTT DOLL, Secretary
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