A $15,000 federal grant was received from the Governor's Traffic Safety Bureau a couple of years ago to provide TIPS training. The pilot project was initially scheduled to take place in Polk County; however, recent events in the Iowa City community, as well as regular law enforcement in the area, prompted the Division to move the pilot project to Johnson County. The Division will offer free training sessions during the month of August with the goal of training approximately 600 servers.
Certified TIPS trainers from the Alcoholic Beverages Division staff, Iowa City Police and some private trainers will provide the training. According to Nicole Gehl, the Iowa City Police Department has been a very active partner in the project. The Hotel Sheraton volunteered their facility to hold all the training sessions, with the exception of one class that will be held in the Iowa City Council Chambers.
Iowa City recently attempted to enact a 21 ordinance and settled on a compromise of 19. As part of that compromise, the downtown bars agreed to have all their employees TIPS trained. Nicole Gehl reported that 123 servers are registered for the program; however, several retailers have indicated they plan to send all their employees to the training.
Retailers in Johnson County, who already have TIPS trained servers with current certification, will be given credit for the time remaining on the current certification. The Division can check the TIPS data bank to verify that an employee has been TIPS trained.
Lynn Walding pointed out that there are several bars in Iowa City facing revocation for sales-to- minors violations. Revocation occurs when a licensee incurs four violations within a three-year period. The Iowa ABD is offering a one-time affirmative defense incentive to Johnson County retailers who participate in the pilot project training. The licensee may use the affirmative defense once as a "get-of-jail-free ticket" for an alcohol sales-to-minor violation that occurs after the training takes place. Although the Iowa ABD has offered retailer training before with little success, the Division hopes this project will be successful due to the huge incentive offered to retailers to train their people. Diageo is funding a study conducted by Brandies University on what impact the pilot project has on retailer behavior and whether the incentive changes the behavior.
Paul Trostel, speaking on behalf of the hospitality industry, commended the effort the Division is putting forth to give the retailers in Johnson County a great tool at no cost, especially the one-time "get-out-of-jail free ticket." Mr. Trostel stated he has paid to put several employees through the TIPS training provided by beer distributors in the Des Moines area. Commissioner Doll relayed that his distributorship provides server training free of charge; however, the retailer must pay $15 for the book.
Lynn Walding stated the pilot program would be evaluated after the two-year period to see if it is something that should be offered statewide. If the program is successful, training could be offered within one to two years; however, funds may not be available to offer free training. If the Division continues the project offering the affirmative defense in other counties, any certified TIPS trainer could provide the training.
In the White Paper on "High-Risk Drinking on College Campuses", the Commission's third recommendation was that a single state agency should coordinate the efforts of communities, institutions of higher education and government entities to reduce the incidence of high-risk drinking on Iowa's college campuses. The Division has been working toward a statewide initiative for a couple of years to establish a partnership with the stakeholders in the state. A meeting was held in Ankeny on July 9th with representatives from substance abuse programs, law enforcement and the three state universities. The group will continue to work together to seek government federal funding, to develop long-range goals and to identify resources available to support those goals. One suggestion was initiating a university module of TIPS for incoming freshman and their parents.
The Commission's Recommendation # 6 in the White Paper supported .08. As part of that effort, the Division developed a large chart, available on the Division's website, depicting the male and female blood alcohol concentration guide. Ms. Gehl cautioned alcohol affects individuals at different rates and the chart should be used only as a guide. The Department of Public Safety and the Governor's Traffic Safety Bureau have a link to the Division's site as part of their .08 public information efforts.
- Beer. Beer tax is currently at 19˘ per gallon. It was 14˘ until 1986 when it was raised a nickel.
- Wine. Wine tax is currently $1.75. The original wine gallonage tax created in 1985 with the privatization of wine was set at $1.50. The following year, in response to a need for increased revenue, the wine tax was raised to $1.75 per gallon.Wine tax is currently $1.75. The original wine gallonage tax created in 1985 with the privatization of wine was set at $1.50. The following year, in response to a need for increased revenue, the wine tax was raised to $1.75 per gallon.
- Spirits. Distilled spirits tax is accomplished through a markup on the cost of the supplier product. The ABD averages a 50% markup on products sold at the wholesale level which is the equivalent of a $14.00 per gallon tax on spirits in Iowa.
National Beer Excise Taxes - The map shown in the Commission handout depicts the beer excise tax rates in the country. The taxes range from 2˘ in Wyoming to $1.07 in Alaska. In most states, the tax rates on wine and beer are set by state legislatures, usually in response to industry concerns in the state, as well as the need for revenue, according to Jim Kuhlman.
Lynn Walding added that the map was put on the Division's website in response to the proposal by the Senate Republicans to increase the excise taxes for alcoholic beverages. Although the Division took no position on the proposal, it was important to inform the legislators how Iowa taxes compare to other states. Iowa ranks as follows: third highest in alcohol taxes, 5th highest in wine taxes and 25th highest in beer taxes.
The national map, dated May 14, 2003, depicts Nebraska as having a 23˘ beer excise tax; however, the Nebraska Legislature recently passed legislation increasing taxes on all beverage alcohol effective July 1, 2003. Due to competitive border pricing, this is an important issue to the bordering counties. Nebraska increased the price of their spirits 25% from $3.00 a gallon to $3.75 a gallon. Fortified wine in Nebraska was previously taxed at $1.35 and unfortified wine taxed at 75˘; new legislation taxes wine at a set rate of 95˘. Beer taxes in Nebraska increased 35% from 23˘ to 31˘ compared to Iowa's 19˘ beer tax.
2003 State Alcohol Tax Proposals - Legislators in 35 states introduced legislative proposals in the past year to consider beverage alcohol tax increases. During the Iowa special session, legislators considered raising the tax on alcohol to help fund the Iowa Values Fund; however, the idea was discarded in favor of other proposals. The Iowa Values Fund was created to increase biotech and other industries in Iowa.
FY 03 Liquor Sales
- Sales Comparison - Sales comparison figures for Fiscal Year 03 are preliminary figures. Sales were up over $7,000,000 during the past fiscal year, which equates to a 6.63% increase. Volume across the board was up approximately 5%. The Division contributed approximately $49 million directly to the General Fund last fiscal year.
- FY 03 Financial Highlights - Total revenue was up over $8,000,000 for the year.
The amount of money received from the Iowa Department of Health to enforce tobacco laws is shown under Tobacco Transfers. Due to state budget cuts, the Iowa ABD received only $1,000,000 for enforcement this year compared to $1.4 million the previous year.
Bailment fees were considerably higher this year due to an increase in fees from 55˘ per case to 70˘ per case, as well as higher volume sales.
Expenses were up approximately 5.4%.
The Iowa ABD transferred $40,000,000 directly to the General Fund plus an additional $9,000,000 for Substance Abuse. Beer tax collections go to the General Fund through the State Treasurer. Local authority fees consist of the city and county shares of the license fees according to Kuhlman.
In response to a question by Commissioner Doll regarding the increase in tobacco civil penalties, Nicole Gehl stated that the tobacco civil penalties were increased effective April 11th. The changes in the law should create a considerable increase in tobacco penalties. The legislature stipulated that civil penalty fines go into a retailer-training fund to provide free tobacco training to tobacco licensees. There will be no "get-out-of-jail-free ticket" incentives for tobacco retailers according to Lynn Walding.
Mr. Walding stated that the Iowa ABD pays local law enforcement officials to check every cigarette retailer in the state at least once each fiscal year. Those retailers who are non-compliant are checked a second time. Fred Miller stated that he had six letters thanking him for not selling to minors in a town of about 1600. Mr. Walding commented that local law enforcement officials could check an establishment as many times as they want. There has been some discussion that retailers who remain compliant 3 to 5 years in a row may not need to be checked every year.
- July - June Liquor Sales - Liquor sales continue to show steady growth with this year's liquor sales surpassing $121,000,000. Gallonage also showed an increase.
- July - May Wine Tax and Beer Tax - Due to the way the taxes are collected, the beer tax and wine tax collections report in the handout reflect an 11-month period according to Jim Kuhlman. All three segments of the industry are experiencing growth.
Charter Agency
Lynn Walding reported that the Iowa Alcoholic Beverages Division has voluntarily agreed to become a charter agency. The final terms of the agreement are currently being negotiated. There are several benefits available to charter agencies that are not available to most state government agencies. One benefit is the ability of the Administrator to add and remove positions as deemed appropriate.
Jim Kuhlman and Lynn Walding spent the morning comparison-shopping liquor prices in Nebraska as compared to Iowa. It appeared that the price difference on a 750 ml size bottle was $1.50 to $2.00 lower in Nebraska with the price disparity growing on premium brands. Nebraska has a flat tax rate of $3.75 per gallon whereas Iowa law stipulates that the Iowa ABD has to have an average 50% markup. As the price from the supplier goes up, the 50% markup becomes greater and greater so the price disparity in Iowa on premium goods is greater compared to a flat gallonage tax in another state. Keeping in mind the average 50% markup, staff is exploring the possibility of using a sliding scale markup. The markup on premium products would be lowered to encourage people to buy higher end products, thus increasing revenue without increasing consumption.
When Mr. Walding asked for retailer reaction to the proposed sliding scale markup, Fred Miller from Avoca stated that he, like most bar owners, uses a "well" brand for mixed drinks such as whiskey sours. His "well" brands sell the most and make him the most money. Mr. Miller said the sliding scale would cut into his profits because he could not sell more expensive drinks to his daily customers who support his business. Mr. Walding acknowledged that the plan would hurt the "well" brands; however, it will help on the premium so the question will be what is the overall impact to the licensees and the public.
Paul Trostel commented that he also uses a "well" brand for vodka and there is a better profit margin for the person who drinks the vodka tonic; however, Mr. Trostel likes the Division's sliding scale proposal on the more expensive liquor because there is a price point where there is reluctance from the customer to "call" an expensive vodka martini. Mr. Trostel stated he does not make his traditional 20% liquor cost on the expensive "call" vodkas because the martinis would be considerably more if he used the same formula. In theory, Mr. Trostel likes the idea of lowering the 50% gross profit on the premiums to make it more affordable to the consumer whether its in the liquor store, grocery store or a restaurant / bar.
Mr. Walding stated it may become 55% on lower end goods; however, its 5% of a low price product versus maybe a 45% on a high-end product. The Iowa ABD would make more money on the high-end product.
Bill French, a Council Bluffs operator, stated the retail price on high-end alcohol products at supermarkets in Nebraska is often lower than Iowa's wholesale price.
Paul Trostel asked if the Division would have to seek the legislature's approval for the change. Mr. Walding responded that he has the option to lower the markup on some products and increase it on others as long as he maintains an average 50% markup. The issue is especially important on the borders, according to Walding, because there is the possibility of sales leakage to surrounding states.
GATS Global Markets & the WTO
Lynn Walding gave a GATS presentation to the NABCA Legal Symposium last year and recently repeated the presentation in Baltimore. GATS is an important issue affecting the alcohol beverage industry and if it does go through, it will drastically change the way liquor business is conducted in the United States. The European Union, as part of the General Agreement Trade & Services (GATS), asked in trade negotiations for the United States to discontinue certain practices including the elimination of control states and the 3-tier system. The European Union would like to have open markets, 24 hour shopping, and no drinking age. The General Agreement of Trades & Tariffs (GATT) negotiations a few years ago dealt more with the industry of our economy. As a result of those negotiations, several plants in the United States closed and relocated in Mexico.
Anna Skow, the European Union representative, participated in the Baltimore meeting. Ms. Skow stated that the Union is not asking for a change in liquor at this time; however, they probably will later on.
Alcohol Marketing
A Georgetown University group called the Center for Alcohol Marketing of Youth (CAMY) has received a Robert Wood Johnson grant to scrutinize and review beer, wine and liquor advertising. CAMY argues that youth age 12 - 20 is 15% of the population and therefore, should only see 15% of the ads. CAMY states that either intentionally or unintentionally, the alcoholic beverages ads are being targeted to the 21 - 29 year olds and there is spill-over to the younger age group. An advertisement in Sports Illustrated, for example, represents a 30% saturation of the 12 - 20 year old population. CAMY argues that alcoholic beverages should be banned from advertising in any markets that are more than 15%.
In addition, the AMA is pushing for a complete ban on all alcoholic beverages ads. Currently, Britain is contemplating a ban on all liquor advertising.
Flavored Malt Beverages
The new Tax and Trade Bureau (TTB), formerly the BATF, adopted an administrative rule this spring stating that flavored malt beverages can only contain a minimum amount of spirits. Although the TTB considered adopting a rule that the alcohol could only constitute 50%, the TTB adopted the stricter standards. All flavored malt beverages would have to be reformulated, taken off the market or sold as alcohol. Flavored malt beverages in Iowa are treated as beer because the alcohol contained in the beverages is less than 5% by weight. Flavored malt beverages like Smirnoff Ice will probably disappear from the national market place.
A copy of Mr. Walding's letter to the BATF before the rule was published is included in the Commission packet. Mr. Walding is contemplating submitting a comment on behalf of the state of Iowa during the comment period.
Ladies Night Update
Ladd v. Iowa West Racing Association determined that ladies night specials were not permitted because the specials are a violation of equal rights protection in Iowa and a civil rights violation of the law in the provision of public accommodation. Following the April 30th Commission meeting, an article about Ladies Night Specials appeared in the Des Moines Register. The article prompted many calls to the Administrator from bar owners who were glad to see the practice prohibited, as well as calls from bar owners asking if "Lipstick Night" would be permissible. A letter will be published in the August 1st Iowa Liquor Quarterly stating that after August 1st, any licensee that holds "Ladies Night Specials" will be subject to penalties. Any gender-based promotion will be considered a violation and the licensee will be subject to various penalties.
Mr. Walding stated that "Happy Hours" are legal in Iowa as long as they are not gender based. The all-you-can-drink promotions was one of the issues in the White Paper; however, "Happy Hours" as a general theme of half-priced drinks or "2 for 1's" within a limited period of time are legal and are not restricted.
Dram Shop Reform
(The forum was conducted in a roundtable
format.)
Lynn Walding opened the public forum with a PowerPoint presentation and an overview of the Dram Shop Reform Public Hearings held in April and May
Highlights from the previous hearings included:
- Ban on All-You-Can-Drink Specials.
- Rate the risk.
- Reduce the rates.
- Include off-premises establishments in the Dram Shop Act.
- Server training laws and stricter enforcement.
- Concern about the potential impact of .08.
- Rewrite § 123.92 to include "give away" or providing alcohol.
- Effect of new dram rates in reducing premature settlement by dram carriers.
- Designate BAC for public intoxication.
- Prohibit single can sales or carryout sales after 9 PM.
Recently, the Iowa ABD amended its rule setting the minimum amount of dram shop insurance coverage required to hold an on-premises license. Although the rule became effective May 8th, the rule's implementation date is delayed to September 1st. Licensees continue on the old minimums until their license renewal date. For example, if a license does not expire until July 1, 2004, the licensee continues on the old rate until July 1, 2004. By September 1, 2004 all licensees will be required to have the new higher minimum rates. All licensees have been notified of the change by letter and through the Iowa Liquor Quarterly. In addition, the dram shop carriers have also received notification and a copy of the rule so they can rate the rule.
Fred Miller, Fred's in Avoca
Fred Miller asked if anyone knew what the premiums would be on the new minimum requirements. He wanted to know if there would be a significant increase in the premiums for a person who carried the current minimum amounts and would carry the new minimum amounts. The answer was that no one knows for sure yet - it could be a couple hundred dollars or maybe a 20% increase.
Chris Karns, Brocker, Karns & Karns Insurance Company, Anita
According to Chris Karns, the insurance carriers expect the premium for the new minimums will probably increase $500 - $600 or approximately 50%. Mr. Karns does not insure anyone with the current lower minimum requirements and about 20% of his insured accounts are based at the new minimum level.
One complication is that many licensees carry a $500,000 single limit with $100,000 to be used for any combination of coverage. That will have to be increased to the $150,000 bottom line; however, that increase will likely be about $200.
Paul Trostel asked Mr. Karns if, when the insurance companies have to pay out higher claims as a result of the new minimum requirements, if Mr. Karns anticipates an increase in policy premiums at renewal time for the operator who already has a million dollar dram shop policy, and a million dollar umbrella. Mr. Karns responded he did not foresee an increase because actuarially the insurance companies figure what the premium should be based on the losses.
Mr. Karns stated that his carriers are doing an excellent job of defending things that should be defended; however, he does not have any insured with only the current minimum coverage limits. There is more competition for dram shop insurance business now than there was 10 - 15 years ago according to Mr. Karns. Previously a small claim could result in the premium doubling whereas Mr. Karns has had some policy limit claims that paid out $100,000 and the rate increased 25% from $2,000 to $2500 for the premium. Mr. Karns anticipates the new minimum levels will attract more carriers, which should help competition and in turn help keep the costs down for licensees.
One thing that complicates this is the profitability of the insurance carrier. It often takes two years for a liquor liability claim to be settled and the insurance companies don't know what kind of payout they're going to have. During the course of 20 years, Mr. Karns has seen several carriers that were competitive in the beginning; however, were either out of business within 5 years or their rates had increased.
Mr. Karns agreed with the inequality of the way the insurance companies rate premiums based on dollar sales. He expressed that a rate based on volume of alcohol sold would be a fairer practice; however, he acknowledged that it would be an auditing nightmare for the insurance companies. Mr. Karns pointed out that the vast majority of liquor licenses in Iowa are small bars in small towns and often the amount of record keeping is atrocious.
On a final note, Mr. Karns complimented the Iowa ABD licensing section as being very consumer and agent friendly.
Bob Roe, Point After in Sioux City
Mr. Roe stated that the City of Sioux City is self-insured and asked if the Division had ever considered self-insurance through a surcharge on beer and alcohol sales. Ms. Seib responded that it has been discussed on two different levels where a self-insurance pool would be established and used as an umbrella. Licensees would continue to carry their basic coverage but if there were an extraordinary multi-million dollar claim to be paid, the money would be drawn from the pool. There are different ideas of how to fund the pool with one idea being a surcharge on the wholesale sale of beer, wine or liquor. Problems with the self-insured pools include under funding as well as the possibility of the legislature taking the money in tough economic times.
Paul Trostel, Chairman of the Board of the Iowa Hospitality Association (IHA), Board Member of the National Restaurant Association and Business Owner
Paul Trostel clarified remarks he made at previous meetings about developing the self-insured fund. He and the Iowa Hospitality Association are not advocating an extra tax on the product to the wholesale beer distributors or to anyone else. In the spirit of the public forums, he is offering ideas that may help spark reform. His suggestions are not intended to alienate other industry associations.
Mr. Trostel stated that the beer and wine wholesalers know exactly how much product is sold to each licensee. Mr. Trostel proposed adding a penny to each bottle of beer to develop the fund. In addition, he proposed adding a quarter charge on each bottle of wine and each fifth of liquor. Those additional charges could then be passed on to the consumer, thus developing the fund. Mr. Trostel did not mean to imply that the cost would be born by the wholesale beer distributors. The fund would grow, be invested and administered by the Iowa ABD to provide a cushion to keep from raising the dram shop rates again in the near future.
Mr. Trostel also commented that convenience stores were included when dram shop insurance was originated. When convenience stores were eliminated from the requirement to carry dram shop, there weren't too many convenience stores selling beer, which is not the case today. Mr. Trostel suggested that convenience stores might possibly be at a different level while still being included in the risk. He pointed out that 20% of all beer, wine and liquor sold in the state is sold in on-premises accounts and on-premises accounts are the only ones liable for dram shop coverage.
With regard to .08, Mr. Trostel commented that the Iowa Hospitality Association lobbied successfully for three years to keep .08 from passing; however, with the budget crunch and the loss of highway dollars they knew the legislation would pass this year. Mr. Trostel has not seen a slow down in his business with the passage nor had any of the other business owners at the forum.
Mary O'Neill, Family Services of Council Bluffs
Ms. O'Neill stated that Family Services conducts the substance abuse evaluation for people who have a DUI charge. Calls for DUI evaluations have been down over the last three weeks, which might be an indication that people are staying home or utilizing designated drivers due to the passage of .08. Family Services tracks the numbers and reports actual admissions to the Iowa Department of Public Health and the Department of Education.
Dawn Carlson, Petroleum Marketers & Convenience Stores of Iowa (PMCSI)
Ms. Carlson stated the Petroleum Marketers & Convenience Stores of Iowa definitely oppose being pulled into dram shop insurance based on the fact they do not serve the customers. In conversations with people in the insurance field, Ms. Carlson was told the insurance people do not believe pulling more entities into dram shop would lower the premiums.
Mr. Walding mentioned that Wisconsin apparently has a law that bans single service sales. Jerry Fleagle from the Iowa Grocers Association commented at the Cedar Rapids public forum that his association probably would not resist, and might even support, a similar ban in Iowa. Ms. Carlson commented she didn't know why PMCSI would resist - it was good public policy; however, banning cold beer sales would be an issue with the PMCSI according to Ms. Carlson.
Editor's Note: Following the meeting Ms. Carlson asked that the following comments be made a part of the public record.
"It was not my intention to leave the impression our industry would favor banning single can sales. For those stores that already do not offer single serve containers (and there are many), I believe that they made that store decision based on what they thought was good public policy just as some stores will not let you carry beer out without it being in a sack. I do not wish to be on record as advocating the banning of single serve containers in stores. Our industry serves the "lunch box" working crowd and many customers come in and buy a can of beer to take back to their lunch break location to drink with their lunch. I assume that there may be some professionals who eat at restaurants who would likewise have a cocktail during their lunch."
Ms. Carlson asked for a definition between liquor liability and dram shop insurance. She stated that the convenience stores carry liquor liability, many of which also include dram. She questioned why it would be necessary to include the convenience stores in dram when they are covered with liquor liability insurance. Mr. Moylan, an attorney for the Nebraska Licensed Beverage Association, explained that there is generally third party liability on dram shop in contrast to two party liability where the individual sues the bar. Dram shop covers the innocent third party.
In response to a question by Ms. Seib about townships in Wisconsin having local ordinance where no single can or cold sales can occur after 9:00 PM, Ms. Carlson stated that PMCSI would be against local ordinances. In addition, if it were a statewide law, it would make it more difficult for storeowners and operators to police.
Over the past three years, the legislature has taken $50 million dollars from the petroleum underground storage tank fund that was funded by insurance premiums and per gallon charges and taxes according to Ms. Carlson. She suggested that the same thing would happen to a self insurance fund set up for dram shop claims.
Eric Skoog - Cronk's Cafe
Mr. Skoog agrees that if convenience and grocery stores are added to the pool, the pool will explode; however requiring convenience and grocery stores to carry dram shop insurance would be more equitable. Mr. Skoog's bar sales are 12 - 13% of his restaurant business; however, time and again when the lounge closes, the patron purchases more beer at a convenience or grocery store. If the patron has an accident on the way home, the restaurant is sued because they carry the dram shop insurance.
James H. Moylan, Nebraska Licensed Beverage Association, Attorney
Mr. Moylan asked if anyone had asked the Attorney General for an opinion on the classification, whether or not we classify these stores, impose liability on the on-sales and not the off-sales. That might be a more reasonable classification, the fact that alcohol is the issue. Mr. Walding responded there have been Supreme Court cases reviewing Iowa's dram law, but not to his knowledge that looked at that issue.
General Discussion
Mr. Miller mentioned the fact that convenience and grocery stores can have 16 year olds selling alcoholic beverages whereas bar and restaurant servers must be 18 years old.
Mr. Moylan stated that Nebraska has a keg registration law. Retailers have to complete a form each time they sell a certain amount of kegs and keep it on record.
In conclusion, Mr. Walding asked the commissioners to evaluate the comments made thus far and contact Judy Seib before the next meeting with suggestions for the white paper on dram shop reform. He asked them to consider both positive and negative aspects. Suggestions for inclusion in the white paper are: 1) all-you-can-drink specials, 2) whether off-premise accounts should be included in dram shop, 3) tracking dram claims (proprietary information) and any other specific items the commission deems appropriate. Part of the white paper will also include a discussion about the history of dram in Iowa.
Meetings
The next meeting will be held in Davenport in the City Council Chambers on August 12th at 1:30 PM.
Adjournment
The meeting adjourned at 3:25 PM.
DICK STOFFER, Secretary
