Dan Morain

Liquor bill’s fate could be smooth, or harsh

Shot of the style of whiskey introduced by Charbay at the Lake Tahoe Autumn Food & Wine Festival.
Shot of the style of whiskey introduced by Charbay at the Lake Tahoe Autumn Food & Wine Festival.

Assemblyman Marc Levine, a fresh-faced lawmaker from Marin County, held his first news conference as a legislator last week.

It wasn’t a particularly propitious event, though not because the legislation he is promoting is an awful idea, or because I was the only news guy who happened to drop by.

Levine’s Assembly Bill 1233 won’t save the Earth, educate the children, feed the hungry or make much of a difference in the business it purports to affect, though it might wet your whistle.

Recognizing that we Californians like all things trendy and have a taste for booze, entrepreneurs have opened boutique distilleries in Alameda, Auburn, Napa, San Diego and all places in between. The Department of Alcoholic Beverage Control counts no fewer than 149 distillers and rectifiers, up from 92 in 2009.

Distillers make and rectifiers flavor whiskey, gin, vodka and anything else that can be fermented from grain or fruit and distilled. You can visit their shops, and they can charge you for tasting their wares, thanks to a law approved in 2013.

But if you offer to buy a bottle, they will tell you, sorry. They risk losing their licenses if they sell directly to you. That’s what Levine, a second-term assemblyman with a taste for whiskey, in moderation, hopes to change. He proposes to let craft distillers sell three bottles to visitors. Three bottles, no more.

You can buy beer at breweries and wine at wineries. Why shouldn’t an artisan who makes whiskey not be able to sell three bottles? he asked, joined by several distillers at the Capitol news conference.

Based on history, Levine probably will face opposition from the established liquor industry. He is, you see, proposing to tweak a business model that dates to end of Prohibition. Then, as now, some of this town’s most influential lobbyists do the bidding of the interests Levine is challenging.

“They’re shouldn’t feel threatened,” Levine said.

California law creates a three-tier system in which manufacturers, distributors and retailers supposedly are separate. Makers cannot be tied to sellers, hence the name “tied-house laws.” But as my friend Dan Walters has written many times, the code section is filled with exemptions, the handiwork of moneyed interests and their lobbyists.

Manufacturers can’t advertise where retailers sell, except for all the exemptions won by operators of stadiums, aquariums and zoos. Manufacturers can’t sell retail, except for all the loopholes lobbyists have carved. Pages are filled with exceptions to the tied-house rules.

Lance Winters, part owner of St. George Spirits in Alameda, explains the absurdity of the law by saying he rents space adjacent to his shop to a retail liquor-license holder.

The retailer cannot walk a few steps to St. George’s front counter to pick up the booze he sells. Rather, he must place an order with a distributor, a company called Young’s Market.

A Young’s driver arrives at St. George, gathers up cases, returns to Young’s warehouse in Morgan Hill and drives back to Alameda to make the delivery, a roughly 120-mile greenhouse-gas-emitting round trip.

“California has to get its act together,” Winters said.

The weirdly anachronistic law dates to the middle 1930s, when California and the rest of the post-Prohibition nation set out to re-regulate the liquor industry. The law is part of the legacy of Arthur H. Samish, Artie to his friends.

Samish was a self-promoting, gregarious 300-pound lobbyist who dispensed fine food, liquor and seemingly whatever else legislators wanted from his suite on the fourth floor of the Senator Hotel, back when the Senator served as legislators’ home away from home. Samish’s many clients included breweries. An associate represented the liquor industry.

“I operated on the theory that only by regulation and enforcement could the alcoholic beverage business thrive and prosper,” he wrote in his 1971 autobiography, “The Secret Boss of California.”

“Cutthroat competition could have been ruinous. So I put through fair trade laws to protect wholesalers, distributors and retailers. All of them make a profit in California and they always have.”

In part because of his exploits, the Legislature commissioned an investigation into corruption in 1938. That prompted reform. In 1949, Colliers Magazine printed an exposé in which Samish famously claimed the Legislature was like a puppet. That prompted more reform. The current reform law dates to 1974, the year that Samish died and Jerry Brown, then a reformer, became governor the first time.

How well it all has worked is not particularly clear. The 1938 report listed 286 registered lobbyists. Good-government types clucked their tongues because there were more than two lobbyists for each of the 120 legislators. In the 1940s, there were maybe 600 lobbyists.

In the past two legislative sessions, the California secretary of state received registration for 1,350 lobbyists, more than 11 lobbyists for each of 120 legislators. Another 1,000 agents focus their efforts on lobbying state pension funds.

Lobbying firms reported billing $362 million in the 2013-14 legislative session, nearly $100 million more than 10 years ago, when they billed $268 million. Hundreds of attorneys and consultants influence policy without calling themselves lobbyists.

In past years, the large liquor distributors, Young’s Market and Southern Spirits, and their lobbyists have taken a dim view of changes to the tied-house laws that might encroach into their turf. They’re evaluating Levine’s bill to determine whether to oppose it. If they do, they’ll be formidable.

Lang, Hansen, O’Malley & Miller, the second largest billing lobbying firm at $11 million in the last legislative session, represents Young’s. The Flanigan Law Firm, another influential lobbying shop, represents Southern Spirits.

As it did in Samish’s day, campaign money speaks. Young’s and Southern Spirits donated almost $700,000 to California state races in the 2013-14 election cycle, including $172,000 to legislators who sit on the Senate and Assembly Governmental Organization committees which have jurisdiction over alcohol.

Though I am fond of Manhattans, Levine’s bill doesn’t interest me because of any love for whiskey. Booze is not the thing. Lobbying and influence are. Levine’s bill seeks to disrupt the status quo, slightly. It might sail through. Then again, perhaps the ghost of Artie Samish will show up.

Follow Dan Morain on Twitter @danielmorain.

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