EXECUTIVE SUMMARY

ALTERNATIVE TO PRIV ATIZATION

EXECUTIVE SUMMARY ON PRIVATIZATION-

Privatization of the Pennsylvania Liquor Control Board (ltpLCB'J is bad public policy and fiscally irresponsible. It will not yield a two billion dollar ($2,000,000,000.00) windfall. but rather, it will create a future financial hole that will take the Commonwealth years to address. Further, any attempt to privatize the PLCB will only result in a long, bitter and divisive legislative and legal battle.

Alternatively, monetization and modernization of the PLCB will provide at least one billion dollars to the Commonwealth quickly enough to provide meaningful budgetary relief These initiatives will allow the Commonwealth to retain ownership of the wine and spirit store system which in Fiscal Year 2009-10 transferred one hundred five million dollars ($105,000,000.00) in profits and more than three hundred eighty-three million dollars ($3"83,000,000.00) in tax revenue to the General Fund. It will not impose the social and societal costs inherent in privatization. Finally, it will avoid the afore-mentioned legislative and legal battle.

The Phantom Two Billion Dollar Windfall

The current control system for the sale of wine and spirits reflects a thoughtful balance between making alcohol available and mitigating the societal damage which can be inflicted through the misuse or abuse of alcohol. The recent economic downturn has provided an opportunity for those philosophically opposed to the current system to argue for the privatization and/or deregulation (hereinafter, collectively "privatization") of alcohol as a means of addressing the Commonwealth's budgetary woes. House Bill 2350, introduced last session by (now) House Majority Leader Michael Turzai, would sell offboth the PLCB's wholesale and retail function to the private sector, and, according Representative Turzai, would result in a two billion dollar ($2,000,000,000.00) windfall for the Commonwealth, with no adverse effects to the Commonwealth or its citizens and no adverse effect to the Commonwealth's future income stream.

Representative Turzai's statements are simply wrong. His Legislation Fact Sheet, attributes his assertion of a two billion dollar ($2,000,000,000.00) windfall for the Commonwealth on a 1997 Price Waterhouse study and a 2007 "study" by the Reason Foundation's Geoffrey Segal, entitled "Divesting the Pennsylvania Liquor Control Board." However, the 1997 Price Waterhouse study estimated that selling off the PLCB could generate six hundred million dollars ($600,000,000.00), not two billion dollars ($2,000,000,000.00). As to Geoffrey Segal's "study" - which is not a study at all but simply prepared remarks he made in April 2007, before the Pennsylvania Senate Majority Policy Committee - he arrives at his figure by adding the' Price Waterhouse estimate to a 1991 study by Andrew J. Buck and Simon Hakim from Temple University, which had estimated that privatization could generate approximately four hundred million dollars ($400,000,000.00), plus an additional amount for the sale of PLCB assets. He then "adjusts" for inflation by adding a total of seven hundred million dollars ($700,000,000.00) to this total.

Mr. Segal's numbers are worthless. First, even though both the Price Waterhouse estimate and the 1991 Temple estimate were for the value of the PLCB's operation as a whole, Mr. Segal

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treats the Price Waterhouse estimate as an estimate of the wholesale operation and the Temple University estimate as an estimate of the retail operation. He is thus selling the system off twice. Further and more importantly, Segal is simply manipulating the numbers in a manner that no reasonable business person or economist would, to arrive at a pre-determined outcome. Rather than applying the methodology used in the Price Waterhouse study and/or the Temple study, to the most up-to-date financial information about the PLCB's operation, he chooses to employ 14 and 20 year old data so that he can justify inflating the numbers, It would be as if one were attempting to establish the value of the Dow Jones Stock Exchange today by looking at what its value was in 1991 and 1997 and applying a rate of inflation to the numbers, rather than using the value from yesterday's closing. No reasonable person and certainly no reasonable bidder would adopt such an approach. Further, once sold, the Commonwealth would lose the recurring profits the PLeB generates through the sale of alcohol.

The Real One Billion Dollar Windfall

If the Commonwealth wishes to use the PLCB to generate a cash windfall, it could do so by enacting legislation that would authorize the sale of a revenue bond or bonds against the future receipts of the Board from the sale of wine and spirits through the Board's wine and spirits stores, for a fixed number of years (e.g., twenty (20) or thirty (30) years).

The tables below detail projected par amounts, upfront proceeds generated for the Commonwealth, and average annual debt service payments based upon final maturity.

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Annual Annual
Debt ~
ParAmount Net Proceeds Service Paramount Net Proceeds Service
$987,755,000 $913,523,255(3) $79,997,661 $1,191,775,000 $1,095,153,840(3) $79,997,206
811,580,000 _ 750,000,000 65,729,333 816,515,000 750,000,000 54,808,019
541,125,000 500,000,000 43,825,377 544,710,000 500,000,000 36,563,361 1) Based upon market conditions as ofJanuary 7, 2011. Actual rates may vary based on credit spreads and market conditions at time ofpricing.

2) Assumes gross funded debt service reserve fund.

3) Maximum proceeds that can be generated while maintaining at least I.25x debt service coverage.

A bond issue or issues secured by the PLeB's surplus cash flow would be very appealing to the investment community, which remains relatively risk-averse under current economic conditions. Investors would be purchasing the future income of a state agency which has a monopoly on a stable conunodity that consumers purchase in both good and bad economic times.

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Further, modernizing the PLCB would allow it to consistently generate greater profits which in tum would allow it to sell more bonds and/or transfer more monies to the General Fund. Modernization would include legislation that would allow the PLCB to: engage in market-based pricing; hire employees outside of the Civil Service Act; acquire goods and service outside the Procurement Code; increase licensing fees and fines; become a lottery retailer; and have all of its wine kiosks open on Sundays.

The Social and Political Costs of Privatization

Privatization efforts in other jurisdictions have invariably imposed additional social and government costs on those jurisdictions, and the people residing within them. Privatization typically leads to increases in alcohol consumption as well as an increase in the nwnber of alcohol outlets. Numerous published, peer-reviewed studies have established that 'increased consumption and increased outlets lead to increased crimes, increased alcohol-related medical costs and increased alcohol-related accidents. This in tum has lead to increased costs to the governmental entities that have to deal with these issues.

Finally, even an attempt to privatize will require the expenditure of significant political capital by those advocating it. The list of parties that will oppose such an attempt includes the thousands of store employees who will lose their jobs during the biggest economic downturn since the Great Depression; their families; and the two unions who represent the store employees. One of these unions - the Independent State Store Union ("ISSU'') - ceases to exist if privatization occurs. The other, much bigger union - the United Food and Commercial Workers ("UFCW") - helped defeat a recent privatization effort in the State of Washington.

Opposition to privatization will also include law enforcement officials, especially in college towns, who have to deal with the proliferation of alcohol-related problems; industry members, who may fear that aggressive marketing by the newly privatized wine and spirits stores will adversely impact their businesses; first responders and others who will bear the brunt of the increased societal costs referenced earlier; religious and quasi-religious groups who are opposed to the proliferation of alcohol on religious and/or moral grounds; drug and alcohol counselors; veterans' groups who recognize the PLCB' s commitment to hiring military veterans; and even conservative voters, particularly in the nearly seven hundred (700) municipalities that still ban the issuance of one or more types of liquor licenses within their jurisdiction.

These coalitions were recently successful in defeating two (2) privatization ballot initiatives in the state of Washington, and in derailing an ongoing privatization initiative in Virginia. They have also been successful in derailing earlier privatization attempts in Pennsylvania.

Conclusion

Bad facts make bad law. The same can be said about public policy. This administration should reject the illusion that privatization is a pain free way to solve its budget woes and instead adopt a policy of monetizing and modernizing the PLCB.

ALTERNATIVE TO PRIVATIZATION

ALTERNATIVE TO PRIVATIZATION

INTRODUCfION

For more than seventy-seven (77) years, the Pennsylvania Liquor Control Board ("PLCB") has provided the Commonwealth with a dependable and steady source of revenue, while at the same time limiting the societal damage which can be inflicted through the misuse or abuse of alcohol. The current control system for the sale of wine and spirits, as set forth in the Liquor Code, reflects a thoughtful balance between these two (2) diverse Commonwealth interests.

In Fiscal Year ("FY") 2009-10, the PLCB transferred one hundred five million dollars ($105,000,000.00) in profits and more than three hundred seventy-six million dollars ($376,000,000.00) in tax revenue to the General Fund In the aggregate, the PLeB has contributed nearly two billion two hundred eighty million dollars ($2,280,000,000.00) to the State Treasury since 2005. These funds pay fora wide variety of Commonwealth programs and initiatives every fiscal year.

PRIVATIZATION

The recent economic downturn has had a significant impact on the Commonwealth, which will compel the new administration and the General Assembly to address a sizeable budget deficit for FY 2011-12. Accordingly, it is imperative that the Commonwealth look for ways in which to maximize existing revenue streams. The option of selling off the state's wine and spirits stores has been discussed by some as a means to raise a portion of the funds necessary to balance the budget for FY 2011-12. However, there is another viable option in which the PLeB can provide the Commonwealth with a one-time cash infusion needed to help balance the budget, while maintaining the increasingly valuable asset of the wine and spirit store system and the current system of control (i,e., a "best of both worlds" solution).

Proponents of the privatization and deregulation of the wine and spirits industry in Pennsylvania tout the prospect of receiving a proverbial windfall of a~ least two billion dollars (52,000,000,000.00) from the auctioning of wholesale and retail licenses. Wholesale licenses would entitle private individuals and entities to acquire wine and spirits and sell them to licensed retail wine and spirits stores, who would, in tum, sell products to residents and licensees (e.g., restaurants, clubs, hotels, public venues, performing arts facilities, and public service licensees). Further, proponents of such a dramatic policy change believe that a new tax structure on wine and spirits will enhance the annual tax revenue that is currently collected and returned to the General Fund by the PLCB.

The Two Billion Dollar Shell Game

Those in support of privatization repeatedly and steadfastly assert that it will generate a minimum two billion dollar ($2,000,000,000.00) windfall for the Commonwealth. However, even a cursory review of that claim shows that a two billion dollar (52,000,000,000.00) windfall is extremely optimistic, if not ridiculous.

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In support of that claim, proponents of privatization appear to be relying on the statements made by others who favored the concept during previous attempts to dismantle the current system. For example, in April 2007, Geoffrey F. Segal, Director of Government Reform Policy for the Reason Foundation, and Geoffrey S. Underwood, Senior Policy Fellow for the Reason Foundation, testified in support of privatization before the Senate Majority Policy Committee, They testified that the Commonwealth could generate one billion dollars (51,000,000,000.00) for the sale of the wholesale business and seven hundred million dollars ($700,000,000.00) should the retail business be sold as well. In support of these propositions, they cited a 1997 Price Waterhouse study and a 1991 study from Temple University by Andrew J. Buck and Simon Hakim. In addition, the 1991 study suggested that one hundred sixty million dollars ($160,000,000.00) could be generated through the sale of the Board's assets.

Segal and Underwood arrive at the one billion dollar (51,000,000,000.00), figure by extrapolating from the six hundred million dollar ($600,000,000.00) figure they claim that Price Waterhouse gave to the privatization of the PLCB's wholesale function. However, Price Waterhouse never gave a specific value to the PLCB's wholesale function. Price Waterhouse's valuation scenarios assumed that the Commonwealth would retain its wholesale function or that the Commonwealth would divest from the entire system as single entity. As to the latter, Price Waterhouse did state that converting the PLCB to a state owned corporation which in tum would sell off its ownership through an initial public offering, could generate six hundred million dollars (5600,000,000.00). However, that figure already includes the value of the retail business, so it would be disingenuous to add a separate value for the retail business when assessing a value to the system as a whole.

A similar manipulation was made to arrive at the seven hundred million dollar ($700,000,000.00) figure. The 1991 study concludes that a successful auction would raise between three hundred fifty-seven million dollars (5357,000,000.00) and four hundred five million dollars (5405,000,000.00) for-ten year licenses and an additional one hundred sixty million dollars ($160,000,000.00) for the sale ofPLCB assets. Again, however, this is a value assessed to the system as a whole, not just the PLCB's retail operation. Indeed, in a 1997 paper, Professor Buck opined that a West VIrginia style auction of the PLCB's retail operation would raise at least two hundred million dollars ($200,000,000.00) for ten-year licenses.

More importantly, Segal and Underwood are simply manipulating thenumbers in a manner that no reasonable business person or economist would, to arrive at a pre-determined outcome. Rather than employing the methodology used in the Price Waterhouse and Temple studies to the most up-to-date financial information about the PLCB's operation, or even usingthe actual numbers in those studies, they choose to employ fourteen (14) and twenty (20) year old data and use the passage of time to justify inflating them. It would be as if one were attempting to establish the value of the Dow Jones Stock Exchange today by looking at what its value was in 1991 and 1997 and- applying a rate of inflation to the numbers, rather than seeing what the value was at yesterday's closing. Indeed, the 1991 paper opined that the monies that would be generated though the sale of the system would decline over time, not increase. The Segal and Underwood approach is ridiculous, borderline fraudulent and most importantly, inaccurate. It is

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certainly not the approach that would be taken by those in the private sector who would actually pay for the licenses in question. 1

In fact, when industry experts and national consultants, familiar with the wine and spirits business, have analyzed the prospective values of selling off PLCB assets as set forth in House Bill No. 2350, they have opined that an auction would yield somewhere between five hundred million dollars ($500,000,000.00) and eight hundred million dollars ($800,000,000.00). These numbers would be much more consistent with the revenues generated in recent privatization initiatives in West Virginia and Maine, as well as the actual Price Waterhouse and Temple University estimates.

Another review conducted by a spirits industry leader suggests the troubling result that retail prices will have to rise by approximately 25%, post privatization, in order for the Commonwealth to continue to receive the income it is currently receiving from the sale of wine and spirits.2 In fact, price increases would seem likely since the private sector cannot operate the business of selling wine and spirits as cost effectively as the PLCB, because the private sector will not be prepared to invest the upfront monies necessary to secure their business. The simple reality is that the PLeB is both wholesaler and retailer, where if privatized, both a wholesaler and a retailer segment would need to be created. Both will have significant margin requirements and retail prices will have to rise dramatically to feed those profit appetites.' Similar studies conducted in Virginia have yielded similar results.

Loss of tax revenues resulting from the failure of private industry 'to collect and pay its full tax burden must also be considered. The Internal Revenue Service estimates that as much as sixteen percent (16%) of taxes due are not paid. Given the size of the PLCB's tax contributions, the amount of lost revenue could be substantial.

Finally, while the statewide operation of the sale of wine and spirits has proven to be very profitable for the Commonwealth, through the operation of the wine and spirit stores, it is unknown what amount of money an individual or entity will pay for the privilege of conducting wholesale or retail sales within a specific geographical region. This is particularly true when one considers that the initial license is only for a two (2) year period, when the geographic territories

I In fact, states that have recently undergone privatization initiatives have not reaped the purported ''windfalls'' that they were promised. Iowa and West Virginia, the only two (2) states that have fully privatized their retail stores in the last two (2) decades, each received less than twenty million dollars (520,000,000) in upfront licensing fees when they privatized. Officials in those states have explained that while the change to privatization has facilitated greater efficiency and has resulted in overhead cost savings, the process has not produced the anticipated windfall. (See '"Virginia may add to fees on alcohol" by Anita Kumar (Washington Post September 4,2010».

:z Conversely, if retail prices remain the same, the Commonwealth will lose approximately $230,000,000.00 a year.

3 On revenues (profit and tax) of 1.8 billion dollars, the PLCB generates annual revenue for the Commonwealth in excess of four hundred fifty million dollars ($450,000,000.00), a resultant twenty-five percent (25%) operating profit, which is impressive for any business, public or private. Operating costs for the PLCB are approximately three hundred eighty-one million dollars ($380,000,000.00) or approximately twenty percent (20%) of sales. Comparable private sector costs would be between seven hundred million dollars ($700,000,000.00) and eight hundred million dollars ($800,000,000.00) annuaUy.

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have not been established and when the PLCB is obligated to issue reports to the General Assembly, in five (5) and ten (10) years, on the feasibility of expanding franchise zones, which would necessarily mean the elimination of existing franchise holders," Moreover, once the auction of all licenses is consummated, the Commonwealth's long-held asset, the wine and spirit store system, will forever be lost to the private sector.

MONETIZATION

In view of the above, it is important to look at alternatives to privatization and deregulation that would 1) provide a one-time cash infusion of known amount, which could be reaped quickly before the beginning ofFY 2011-12; 2) permit the Commonwealth to retain the current control

. system, averting the adverse social concerns associated with privatization and deregulation; and 3) allow the Commonwealth to retain the valuable revenue-generating asset of the state store

system.s .

All of these objectives can be accomplished through a two-pronged approach, monetization and modernization of the PLCB. Monetization will come to fruition by enacting legislation that would authorize the PLCB to release for sale one or more issues of bonds that will be secured by surplus cash flow from the operation of the PLCB's wine and spirits stores.

Over the past ten fiscal years, the PLCB has transferred approximately $100 million dollars annually to the Commonwealth. There is an opportunity to monetize a portion of this surplus cash flow to either generate one-time proceeds of approximately $1 billion dollars for deficit reduction, or annual proceeds of bonds issued over three or four fiscal years, also for deficit reduction. There are several practical and financial benefits to pursuing the monetization alternative, the primary of which include:

(1) the Commonwealth retains ownership and control over revenue generating assets, and any future profits;

(2) the certainty of outcome (in contrast to a privatization) because the PLCB's surplus cash flow is a known revenue source, which will help to quickly obtain investment grade ratings; and

(3) the monetization alternative can be implemented quickly, a.60 to 90 day process that could be concluded before June 30, 2011, the commencement of a new fiscal year.

The tables below detail projected par amounts, upfront proceeds generated for the Commonwealth, and average annual debt service payments based upon final maturity .

.. House Bill 2350 (PN 4192), in1roduced in the 2009-10 legislative session, would have mandated the auction of seven hundred:fifty (7S0) retail licenses and one hundred (100) wholesale licenses which would have the exclusive right to sell wine and spirits within a specific geographic franchise zone for a licensing term. of two (2) years.

5 In contrast, privatization and deregulation win lead to both a legislative battle and litigation, which in tum will delay the implementation of any such proposal. Further, the amount that will be raised is at best indeterminate and, under the terms of the cutrently proposed legislation, be spread out over a two (2}-year period of time.

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Average Annual Average Annual
ParAmount Net Proceeds Debt Service Paramount Net Proceeds Debt Service
$987,755,000 $913,523,255(3) $79,997,661 51,191,775,000 $ 1 ,095.153,840(3) $79,997,206
811,580,000 750,000,000 65,729,333 816,515,000 750,000,000 54,808,019
541,125,000 500,000,000 43,825,377 544,710,000 500,000,000 36,563z361 1) Based uponmarlret conditions as of January 7,2011. Actual rates may vary based on credit spreads and market conditions at time of pricing.

2) Assumes gross funded debt service reserve fund.

3) Maximum proceeds that can be generated while maintaining at least 1.25x debt service coverage.

A bond issue or issues secured by the PLCB's surplus cash flow would be very appealing to the investment connnunity, which remains relatively risk-averse under current economic conditions. Investors would be purchasing the future income of a state agency which has a monopoly on a stable commodity that consumers purchase in both good and bad economic times.

Moreover, a bond financing secured by the PLCB's surplus cash flow would be eligible for taxexempt financing, lowering interest rates and thereby providing more proceeds to be available to address Commonwealth budget concerns. In contrast, potential private operators will be raising capital in the taxable markets at higher interest rates, and each operator's financial strength will be uncertain - as opposed to the investment grade credit ratings that should be received for the PLCB's surplus cash flow bonds.

The PLCB bonds would not constitute general obligation bonds and debt of the Commonwealth because they will be payable solely from surplus cash generated by the operation ofthe PLCB's wine and spirit stores. However, the stores themselves would be pledged as security for the bonds.

The PLCB bonds would not be secured by any of the tax revenues collected at the PLCB's wine and spirit stores. Those revenues would continue to flow freely to the Commonwealth and the risk of1oss of tax revenues resulting from their collection by a private operator would not exist.

The monetization financing structure and the PLeB's historic performance could be quickly reviewed by credit rating agencies, and bond documents and disclosure materials could be prepared quickly. The financing would take between 60 and 90 days to complete.

Importantly, as the levels of surplus cash flow grow in the future, especially as the modernization initiatives discussed below take full effect, the Commonwealth retains the full benefit of increased cash flow, a benefit it loses forever in a privatization. In any event, retention of such a valuable revenue-generating asset is of paramount importance in a time, such as this, of economic uncertainty.

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MODERNIZATION INITIATIVES

To strengthen the PLCB, it is recommended that the new administration and the General Assembly consider the following modernization initiatives, which the PLCB believes will generate substantial additional annual revenue for the benefit of the Commonwealth. Proposed legislative language required to implement such modernizations is attached.

1) Allow market-based pricing:

• Under the Liquor Code, the PLCB must apply its markup (currently 30%) equally on all products (i.e., it must adhere to proportional pricing on all products).

• Flexibility would allow the PLCB to function more like a private retailer, with the ability to increase revenue and profitability on higher-end or higher-velocity items, while being able to offer better deals to consumers on other products.

• Private retailers enjoy complete flexibility to mark-up their products.

• The PLCB is not seeking ''variable pricing;" the PLCB .intends to charge the same price for a bottle of Grey Goose Vodka regardless of whether it is sold in.Pittsburgh, Harrisburg, or Philadelphia, thereby eliminating any potential regional bias.

• An amendment to the Liquor Code which would have allowed the PLCB to engage in such market-based pricing was introduced in House Bill 2038, but was never voted out of the House Liquor Control Committee.

• On a separate but related note, consideration should be given to allowing the PLCB to adjust the licensee discount (currently 10% pursuant to section 305(b) of the Liquor Code) on a periodic basis to provide an incentive for licensee participation in various initiatives, such as, utilizing the PLCB's licensee service centers. In addition to amending section 305(b), any proposed amendment would need to explicitly supersede the Regulatory Review Act, given that the Regulatory Review Act currently defines a regulation, among other things, as any action by the PLeB which has an effect on the discount rate for retail licensees.

• FISCAL IMPACT: While it is difficult to quantify the actual fiscal impact of the initiative, granting the PLCB the discretion to make such pricing decisions could easily lead to an increase of twenty million dollars ($20,000,000.00) to seventy million dollars ($70,000,000.00) per year, depending on market conditions.

2) Changes to Staffing and Human Resource Management:

• Restrictions imposed on the PLCB by the Civil Service Act and the Administrative Code impair its ability to effectively hire the right employees with the right skill sets in a timely fashion, remove under-performing or insubordinate employees, and establish the right amount of pay and benefits to its employees. These existing limitations hamper the PLCB's ability to effectively operate as a business and create inefficiencies within the agency.

• Exemption from Civil Service coverage for future hires -

o Section 302 of the Liquor Code provides that employees of the PLCB shall be appointed and employed subject to the provisions of the Civil Service Act.

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o Section 741.3(d)(1) of the Civil Service Act provides that all positions (with limited exceptions such as department heads, PLCB members, attorneys. unskilled labor and public relations positions) created by the PLCB are covered by Civil Service.

o The PLCB currently pays the Civil Service Commission approximately $1,000,000.00 per year to administer examinations. This money would be directly saved by the PLeB.

o The Civil Service process is cumbersome and discourages recruitment of qualified candidates from outside state government. It is also extraordinarily difficult to remove unsatisfactory employees once hired under Civil Service.

o When qualified candidates from the private sector are persuaded to come to the PLCB, a lengthy process is required to get that candidate actually working. • Ability to classify its own positions

o Because of the PLCB's retail functions, many positions are unique to the ·PLeB.

o Under current practices, the Governor's Office of Administration ("OA'') approves the classification of positions. However, OA lacks the operational knowledge of the unique functions of the PLCB to properly classify many positions.

o Allowing the PLCB to classify these positions in accordance with the candidates' actual duties will allow the PLCB to fill the positions with qualified candidates who possess the right skill sets.

o This proposal is revenue neutral as some costs associated will be higher and some lower.

• Ability to set compensation of all employees

o The PLCB is a unique organization within Pennsylvania government in that it possesses not only a significant and far reaching regulatory function, but that it also has a massive retail function as the sole retailer of alcoholic beverages in Pennsylvania. As a result, many of its job titles are unique to the PLCB and many of the titles it shares with other state agencies involve a number of duties beyond a traditional governmental function.

o Given these highly specialized needs, it is imperative that the PLCB be given the discretion as to compensation and pay scale, because it is most familiar with its position requirements.

o This proposal is revenue neutral, as some costs associated will be higher and some lower for individual employees.

• Ability to establish its own benefits package / withdrawal from the Pennsylvania Employees Benefit Trust Fund ("PEBTF'')

• Removal from the current Worker's Compensation plan (via Comp Services)

o The PLCB is currently reviewing opportunities to reduce its worker's compensation costs, including the implementation of risk prevention measures; increased employee education, and the actuarial valuation of the PLCB's existing risk pool.

o Cost savings is the ultimate goal in allowing the PLCB to negotiate for its own coverage.

• Establish the PLCB's own leave programs

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o Abuse of sick leave policies costs the Commonwealth millions of dollars in lost productivity. Further, payouts for unused sick leave can be substantial from year to year. The PLCB would like to explore the possibility of offering employees a set number of days per year which could be taken for any purpose.

• FISCAL IMPACT: As described above, the PLCB is in the best position to understand the operational needs of the agency, and the qualifications an individual needs for a specific role. The primary goal of this initiative is the autonomy and independence needed by the PLCB to place the right people in the right positions at the right rates of pay and benefits. The PLCB firmly believes that this will result in efficiency across the agency, leading to cost savings, better service for the residents of Pennsylvania (the PLCB's shareholders), and vastly improved profitability.

3) Allow the PLeD to acquire goods and services without the restrictions of the Procurement Code, or establish a threshold amount under which the PLeD may acquire goods and services under its own authority:

• The General Assembly, recognizing that the PLCB's legislatively mandated functions are unique, exempted the PLCB's purchases of wine and spirits and alcohol-related accessories from the provisions of the Commonwealth's Procurement Code.

• In addition to being the largest purchaser of wine and spirits in the United States, the PLCB has a significant need for supporting goods and services in" carrying out its statutory functions under the Liquor Code (e.g., goods - shopping bags, computers and software; services - information technology services, warehousing functions, and marketing and advertising services).

• To acquire other goods and services, however, the PLCB must comply with the Procurement Code and the regulations of Department of General Services ("DOS").

• While the PLCB recognizes that the careful review and analysis of bids and proposals are necessary for projects of large magnitude or potential impact, the PLCB can cite to numerous examples of instances in which the procedural dictates of the Procurement Code have resulted in lengthy delays and unfavorable results.

o For example, the PLCB recently was involved in a Request for Proposal ("RFP") for credit card processing services. The PLCB's share of utilization for such credit card services represents approximately 80% of all transactions involving Commonwealth agencies. Even though the PLCB was in the best position, as the primary user of such services, to determine what was in the best interests of the PLCB and the Commonwealth, the PLCB was required to negotiate the contract via DGS. This resulted in delays and less than favorable" terms.

• Therefore the PLCB requests that the General Assembly, in furtherance of its recognition that the PLCB is unique given its statutory mandates, permit the PLCB to establish its own procurement procedures in acquiring all of its goods and services, or, in the alternative; establish a threshold amount under which the PLCB may acquire goods and services outside of the Procurement Code.

• Further, the PLCB believes that its demand for goods and services, and its ability to exercise significant market leverage in applicable markets, could represent a significant revenue opportunity for the Commonwealth if the PLCB is permitted to

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sell its goods and services to out-of-state entities and governments. By way of example, another "control" state or local entity looking to acquire liquor and liquorrelated products may benefit from being able to purchase such products via the PLCB, through its market leverage, at lower prices than it could on its own in the marketplace. Further, other "control" jurisdictions may need the services provided by the PLCB's customized Enterprise Resource Program and compensate the PLCB.

_ Accordingly, if such an arrangement were permitted, the PLCB would realize additional revenue from sales to the other state. The converse may be true for certain goods or services in which the PLCB may benefit from lower prices in acquiring certain goods or services through another state or local entity, resulting in cost savings to the PLCB. Such potentially beneficial armngements, however, would only be permissible with a specific statutory amendment to section 207 of the Liquor Code.

• FISCAL IMP ACT: Ultimately, the PLCB believes that, if given the authority to establish its own criteria for procuring goods and services (via an informal bid process for goods and services under a certain threshold amount, or via a formal bidding process for higher value goods and services), it can acquire goods and services on its behalf in a more expeditious fashion, and, in certain instances, at more competitive prices.

4) Increase Licensing Fees

• The existing fee structure has remained the same since 1991, almost 20 years ago.

While most fees are set forth in the Administrative Code of 1929, some are defined by the Liquor Code or the PLCB's Regulations.

• Altogether, approximately 60,000 individual fee transactions are processed through Licensing each year.

• ForFY 2009-10, more than $15,900,000 was collected by the Bureau of Licensing for fees associated with licensing transactions. Of that amount, approximately 28% (or $4,500,000) was returned to municipalities (via the Liquor License Fund) in which the licensees are located, pursuant to section 801 of the Liquor Code.

• The current fee schedule only partially funds the administrative costs associated with processing licensing applications, and does not provide sufficient revenue to cover the PLCB's costs in funding the operational budget of the Pennsylvania State Police, Bureau of Liquor Control Enforcement ("Bureau'') for compliance and enforcement efforts.

• Accordingly, an increase to the CUITent fee schedule is recommended for licensing applications. This could be accomplished in several ways:

o 1) Increase all licensing fees and application fees by a uniform percentage - An increase by a uniform percentage is one of the simplest methods by which the General Assembly could raise licensing transaction fees. By uniformly raising all fees, no particular category would receive a disproportionate hardship.

o 2) Increase fees for select licenses and permits - Anticipated additional revenue would fluctuate based on which licensing transaction fees are increased and to what extent they are increased.

Page 10

o 3) Assess a surcharge on all licensing transactions - Rather than amending the Administrative Code for each licensing application fee, an increase could be more readily implemented as a surcharge which would be levied on any application submitted to Licensing. Monies collected through such a surcharge could be specifically directed to the State Stores Fund. If, for example, a $250 surcharge would be assessed on all applications submitted to Licensing, it is estimated that such a fee surcharge would result in approximately $15,000,000 in additional revenue per year.

• Below is a chart which compares many of the PLCB's existing licensing fees with those ofneighboring states. It should be noted that many of Pennsylvania's licensing fees are far less than those assessed in other states. It is recommended that, at the very least, licensing fees be raised so that they are comparable to the fees assessed in other neighboring states for similar licensing transactions.

Compiled Licensing Fee Comparison

License or Permit Type Pennsylvania Average Other States
Restaurant Liquor License $250- $700 $1,509.50
Club/Catering Club License $150 $1,025.19
Eating Place Malt Beverage License $200- 400 $582.63
Hotel License $250 - $700 $1,584.19
IijstributorIicense $600 $2,054
Special Occasion Permit $30 - $85 $547.50
Per day
Brewery License $1,425 $3,261,57
Limited Winery License $385 $519.89
Winery License $385 $1,049.43
Distillery License $5,400 $6,819.07
Private Golf Course Restaurant License $250 - $700 $1,744.43
Private Golf Course Club License $150 $1,753.17
Public Golf Course Restaurant License $250- $700 $1,946.67
Transporter-for-Hire License $160 - $265 $1,71.67 Page 11

License or Permit Type Pennsylvania Average Other States
BaileelWarehouse License $265 $.1,159.50 • FISCAL IMP ACT: If all of the fees associated with licensing applications were doubled, annual Commonwealth revenue could be increased by approximately $11 AOO,OOO based on FY 2009-10 data for licensing transactions (certain licensing fee increases would benefit municipalities via the Liquor License Fund). In the alternative, if a $250 surcharge would be assessed on all applications submitted to Licensing, it is estimated that such a fee surcharge would result in approximately $15,000,000 in additional revenue per year.

5) Allow the PLCB to be a Pennsylvania Lottery Retaller:

• Lottery ticket sales are commonplace at the licensed liquor stores of other states. The State Lottery Law already allows "all departments, commissions, agencies and instrumentalities of the State" to be licensed as Lottery Sales Agents. However, section 207 of the Liquor Code does not specifically authorize the PLCB to sell lottery tickets.

• The PLCB has met with lottery representatives of the P A Department of Revenue ("Revenue"), which agrees that the concept of allowing automated, self-service lottery machines on the premises of the PLeB's wine and spirits stores would increase the Commonwealth's revenue from lottery ticket sales, while adding to the convenience of the Pennsylvania consumer.

• FISCAL IMPACT: Recent data submitted by Revenue indicates that if the PLCB were permitted to sell lottery tickets through counter sales and vending machines in its state store system, it could see an increase in revenue of approximately $8,000,000 per year (or approximately $2,000,000 per year for sales through vending machines only), assuming that the PLeB would be authorized to retain the 5% retail commission (Plus bonuses) as other lottery sales agents are permitted to retain.

6) Increase fines for violations of the Liquor Code and the PLeD's Regulations:

• The structure offines in the Liquor Code has not been changed since 1987.

• The amount of fines collected in 2009 was $300,000 less than in 2008. ($2,187,493 vs. $2,468,538) and fall short of covering the costs of enforcement (total of $22;291,167 for 2009):

o OperatingcostofBLCE: $20,177,911.

o Operating cost of the Office of Administrative Law Judge ("OALr,): $2,113,256.

• With the enactment of table games (Act t of 2010), slot machine licensees are now subject to a higher range of fines (between $250 and $25,000) for all types of liquorrelated offenses. However, no other licensees have experienced an increase to the fine structure of the Liquor Code in 23 years.

• Among other "control" state jurisdictions, Pennsylvania's structure offines falls into the lower range of fines for violations. The chart provided below demonstrates where

Page 12

Pennsylvania's fines for two (2) of the more serious violations' among a sampling of a few other control jurisdictions:

a es to a or es oa IY oXicste erson
Alabama $750 - $1,000 $300 - 51,000
Pennsylvania . $1,000 - $5 000 $1,000 - $5,000
$1,000 - 55,000 + 20 - 60 days
North Carolina $1,200 - $3,500 + S days on suspension
Montgomery Co., MD $1,000 - $20,000 $1,0Q0 - $20,000
Virginia , $2,000 - 25 days suspension $2,000 - 2S days suspension S I

Min

Sal t Visibl Int' d P

• An amendment to section 471 of the Liquor Code would be required.

• FISCAL IMP ACT: If all fines imposed during that period had merely been doubled by the OAU, the Commonwealth would have realized an approximate increase in revenue of nearly 52,200,000.

7) Allow the PLCB to implement a Consumer Relations Marketing ("CRM"l Program and issue its own coupons to customen:

• The Liquor Code currently prevents the PLCB from recognizing and rewarding regular customers through the use of what is commonly referred to as a Consumer Relations Marketing ("CRM") program (e.g., supennarket or retailer loyalty' programs).

• Such a CRM program which would allow the PLeB to offer exclusive product coupons, award points to returning customers which could be redeemed for discounts on products, and alert customers to upcoming sales and promotions.

• With respect to the issuance of coupons, the PLCB currently envisions issuing three different types of coupons: 1) discounts that are not specific to products or brands, but may be used towards any product of the customer's choosing (e.g., 10% off all purchases throughout the store); 2) volume discounts (e.g., 10% off your entire purchase if you make a purchase of more than $100; and 3) product giveaways based upon an aggregate purchase amount (e.g., get a free sample bottle of X when you purchase more than $25).

• New Hampshire, a control state, has a successful CRM program (including the issuance of coupons), and it has been well-received by consumers.

• Language which would have allowed the PLCa to implement such a CRM program had been included in Senate Bill No. 81, which was signed by both the House and Senate but was ultimately vetoed by Governor Rendell in May 2010 (it should be noted that the veto was !!!!! due to this provision).

• FISCAL IMPACT:

o There are three primary objectives for this initiative: 1) coupons and loyalty

'programs are industry-proved consumer drivers which get customers into stores; 2) offering discounts on slower selling / lower velocity items allows the PLCB to sell inventory which may otherwise languish in its warehouses, while passing significant savings on to Pennsylvania consumers; and 3)

Page 13

offering discounts on higher-quaIity items may encourage buyers. to ''tradeup" for higher priced items, yielding higher markups for the PLCB.

o As an example, following a recent e-mail blast advertising a sale on the PLCB's Sommelier Collection items, resulting sales totaled more than $150,000 and many of the sale items were depleted within a week.

8) Exempt "Wine Kiosks" from the restridion regarding the percentage of stores which may be open on Sundays, and extend Sunday sales hours:

• As of November 30th, the PLCB has rolled out a "total of 27 wine kiosks in various retail outlets. Ultimately, the PLCB intends to roll out the 100 kiosks under its contract with Simple Brands over the next several months.

• Under the Liquor Code, only 25% of stores may be open on Sundays. Since each kiosk constitutes a store, kiosks would be subject to the 25% restriction. To achieve any meaningful success, kiosks must remain open on Sundays, the second busiest retail day of the week.

• Without legislative change creating an exception for kiosks, as kiosks are rolled out for operation, the PLCB must shut the kiosks down on Sundays or close down a number of ' 'brick and mortar" stores to remain within the legislatively imposed 25% limitation.

• The PLCB has suggested exempting the wine kiosks from the 25% restriction, and also allowing the wine kiosks to operate until 9:00 p.m., on Sundays, instead of the current 5:00 p.m. closing time. The PLCB further believes that extending Sunday hours for all of the PLCB's stores to 9:00 p.m. will enhance revenue and offer greater

, customer convenience.

• Language which would have exempted the wine kiosks from the Sunday sales restriction had been included in Senate Bill No. 81, which was signed by both the House and Senate but was ultimately vetoed by Governor Rendell in May 2010 (it should be noted that the veto was !!!!! due to this provision).

• FISCAL IMPACT:

o The potential fiscal impact of allowing kiosks to remain operational on Sundays is difficult to quantify, given that the kiosks have very recently been introduced to the market. It should be noted, however, that average kiosk sales have been steadily increasing from week-to-week. Saturday sales are the strongest. As foot traffic is about the same on both Saturdays and Sundays, assuming that consumers who normally do their shopping on Sundays take advantage of the opportunity to use the kiosks, Sunday sales could approach Saturday sales levels. Sales numbers would be further enhanced with the proposed extension of Sunday hours.

o Currently the PLCB operates 156 stores on Sunday. Sunday sales total $19,255,221 for the past three months or 13· Sundays, $1,481,170 per a Sunday, or $9,618 per store and $1,924 per hour, based on 154 stores open over the period 09/05/10 to 11/28/10, 12:00 p.m. to 5:00 p.m. Opening additional hours of 5:00 p.m. to 9:00 p.m. should increase sales from 10% to 25% overall; it will also spread a portion of a store's existing Sunday sales over the extended hours. It is estimated that opening additional stores from

Page 14

12:00 p.m. to 5:00 p.m. or longer in areas that currently do not have a store would increase Sunday sales by $10,000 or more per store.

PRIVATIZATION IS A BAD IDEA FROM A

SOCIAL AND PUBLIC HEALTH AND SAFETY PERSPECTIVE

The 21 It Amendment to the United States Constitution ended this country's failed experiment in Prohibition and was an acknowledgement that banning alcohol did not eliminate the social evils of alcohol but, rather, it exacerbated them. As a result, the individual states were granted the right to establish their own laws pertaining to "intoxicating liquors." The system created by the Pennsylvania General Assembly and Republican Governor Gifford Pinchot established the PLeB as the exclusive wholesaler and retailer of all alcohol and liquor except beer. The Liquor Code 'also made the PLCB the regulator of all entities that sell alcohol, a role that has been expanded over time through subsequent legislation, such as the creation of the Bureau of Alcohol Education.

As the principal purveyor of alcohol in the Commonwealth, the PLCB has a duty to make alcohol reasonably available everywhere throughout the Commonwealth, even in locations where it is economically unfeasible. While the private sector as a whole is adept at maximizing the availability of a product as a whole, it often fails to distribute the product throughout society. This' failing by the private sector can be seen in the inability to provide adequate cable television and high speed internet service to rural areas. As a result, PLCB retail operations can be found in many rural areas that would not support a private ,entezprise. As an instnunentality of state government, the PLCB has a vested interest in ensuring that the societal, hea1thcare and personal costs associated with alcohol use and, in particular, alcohol abuse are minimized.

While perhaps at first counterintuitive, this dual role allows for a unique balance of these two (2) seemingly disparate Commonwealth interests. Prohibition established that an outright ban on alcohol does not eliminate the societal problems associated with its use. Therefore, development of a system that effectively sells alcohol while minimizing the societal cost associated with such sales was an essential goal. Further, because increases in the availability of alcohol lead to increases in the alcohol-related costs ,to society and since the Commonwealth bears many of those societal costs - through increases in law enforcement costs, health care costs, etc. - giving the Commonwealth a strong role in the distribution of alcohol is a logical and sensible way to manage such costs.

Control Jurisdictions More Effectively Reduce Alcohol Consumption

In a 2006 study, ''Retail alcohol monopolies, underage drinking and youth impaired driving deaths," Miller et al, Accident Analysis and Prevention, 38 (2006) 1162-1167, the authors first noted the numerous studies that had established that control jurisdictions reduce per capita alcohol consumption. They then establish that the death rate from alcohol-impaired driving in control states, for persons less than twenty-one (21) years of age, is 9.3% lower than the rate in comparable non-control, states. Further, states with existing retail alcoholic beverage monopolies have (collectively) forty-five (45) fewer deaths per year involving alcohol-impaired drivers who are less than twenty-one (21) years of age, when compared to non-retail monopoly states.

Page 15

Finally, states with a retail monopoly over spirits or wine and spirits, average 14.5% fewer high school students reporting drinking alcohol in the past 30 days, and 16.7% fewer students reporting binge drinking in the past 30 days when compared to non-retail monopoly states.

Privatization Increases Alcohol Conswnption

An analysis of seventeen (17) earlier studies analyzed by the US Centers for Disease Control (CDC) published in 2009 in the American Journal of Preventative Medicine, found that privatization of at least one beverage type (wine, spirits, and beer) resulted in a median increase of 42% in consumption of that beverage type.6 Wagenaar & Holder, in their 1995 study, found significant increases in wine sales after privatization in New Hampshire (15%), Alabama (42%), Montana (75%), Maine (137%), and Idaho (IS0%)_7 The same study considered data from all the border states of the states that privatized and found no impact on border state sales after privatization.

Increased Alcohol Consumption Increases Social Hanns

The aforementioned 2009 CDC study in the American Journal of Preventative Medicine, also considered the results of approximately 88 earlier studies, articles and/or reports and found that greater outlet density - as would be the case in the privatization/deregulation proposal at issueis associated with increased alcohol consumption and related-harms, including violence, crime, and injury.8 A 1995 study of the city of Los Angeles by Scribner, Mackinnon & Dwyer, showed that each additional alcohol outlet was associated with an additional 3.4 assaults per year.9 An earlier study of Los An~eles showed a 1 % increase in outlet density results in a .54% increase in

alcohol-related crashes. 0 .

Moreover, a study of Newark, New Jersey, conducted by LaBouvie & Ontkush found that alcohol outlet density was the single most important environmental factor in determining why violent crime rates were higher in certain areas of the city than in others. 11

6 "The Effectiveness of Limiting Alcohol Outlet Density as a Means of Reducing Excessive Alcohol CODSIJDlption and Alcohol-Related Harms," by Campbell ct aI. Am. J. Prevo Med 2009; 37(6).

7 Wagenaar & Holder, "Changes in Alcohol Consumption Resulting from the Elimination of Retail Wine Monopolies: Results from Five U.S. States." Journal 0/ Studies on Alcohol 1995; 56(5):566-72.

8 "The Effectiveness of Limiting Alcohol Outlet Density as 8 Means of Reducing Excessive Alcohol Consumption and Alcohol-Related Harms," by Campbell et al. Am. J. Prev. Med 2009; 37(6).

9 Scnbner, R, Mackinnon. D. & Dwyer, J.: ''The risk of assaultive violence and alcohol availability in Los Angeles County." American Journal of Public Health (85) 3: 335-340. 1995.

10 Scribner, R., MacIcinnon, D. & Dwyer, I.: "Alcohol outlet density and motor vehicle crashes in Los Angeles County cities!' Joumal of Studies on Alcohol (44): 447-453, July 1994.

11 LaBouvie, E. & Ontkush, M.: "Violent crime and alcohol availability: relationships in an urban community." Journal a/PubliC Health Policy 19(3):303-318. 1998.

.. -~ _. --- ... ",._ ..... _.~_! ~_._ .... _._. __ ~_~ __ ._,_ ... _. "'.'0'

Page 16

A study of Cleveland by Runcek & Maier, found that adding one bar to a block results in 3.38 more crimes committed on that block in a year, including murder, rape, assault, robbery, burglary, grand theft and auto theft. The risk of a murder occurring on that block increases by 5%, and the risk of a violent crime of any type occurring on that block increases by 17.6%.12

In contrast, after beer sales were re-monopolized in Sweden, alcoholism, alcohol intoxication, and alcohol psychosis decreased by more than 20% among youths aged 10 to 19 years. In addition, motor vehicle crashes decreased by 15% in all age categories except one (those aged 20

to 39 years), and suicides decreased as well. .

The Added Societal Costs. of Privatization are Significant

In 2008, the Marin Institute published the results of a study that estimated the total annual cost of alcohol problems in the state of California.)3 The study evaluated deaths, incidents, and economic costs to individuals and to society and found that:

• The total economic cost of alcohol use is $38 billion annually. This translates to

roughly $1 ,000 per California resident or $3,000 per family each year;

• 9,439lives are lost each year due to alcohol use;

• One person dies every hour due to alcohol use;

• The total number of incidents related to alcohol use is over 920,000.

In 2010, the City and County of San Francisco issued the results of a commissioned study whose purpose was to estimate a portion of the health-related economic costs of the measureable, direct effects of alcohol consumption. Such costs include medical care for people with alcohol-related illness, treatment and prevention costs, costs to the law enforcement system, costs resulting from alcohol-related motor vehicle crashes and other injuries, and the indirect costs associated with disability and diminished capacity.

The study identified $17.7 million in unreimbursed alcohol attributable costs borne by the city. The authors of the study noted that the use of conservative assumptions likely resulted in an under-estimation of the. costs. In addition, non-health care costs - such as alcohol-related costs of criminal justice, child protection, and policing and law enforcement - were not included.

If Pennsylvania's control system were privatized, such a financial burden would be placed on Pennsylvania's cities and communities at a time when revenue would be significantly decreased. Further, privatization typically results in less money to state government, not more. On average, control states generate more than three times the revenue per gallon of alcohol sold as spirits compared to license states (an average of $53.07 per gallon versus an average of $15.47 per gallon).

12 Runcek, D. & Maier, P. "Bars, blocks and crimes revisited: linking the theory of routine activities to the empiricism of 'hot spots.'" Criminology (29) 4: 725-753. 1991.

13 Rosen SM, Miller TR, Simon M~ "The cost of alcohol in California." Alcohol elin. Exp. Res. 2008 Nov; 32(11): 1925-36. Epub 2008 Aug 20.

Page 17

A recent Washington Post article'" outlined the significant losses in revenue experienced by Iowa (from $71.6 million to $46.3 million), West Virginia (from $91.7 million to $6.6 million) Maine (from $28-30 million to $6 million) when each state choose to privatize a portion of their control system. Similarly, in a study by Flanagan, he estimated that the Province of Alberta received over $500 million dollars less in the ten years after privatization than it would have had it not privatized. IS

If Pennsylvania's revenues fell to the license-state average revenue per gallon of$15.47, instead of its current $53.40 per gallon, it is estimated that the Commonwealth would lose more than $200 million per year at a similar level of sales. 16

The PLCB's Ability to Control the Time. Place and Manner in Which Alcohol will be Sold has a Societal Value

As a creature of the Legislature and part of state government, the PLCB can be responsive to societal concerns in a manner that cannot be replicated in the private sector. The PLCB has, in the past, for example:

• refused to sell potentially profitable items .because of the possible detrimental effect it may have on the community or because of the potential for abuse by a segment of the population (i.e. - grain alcohol, fortified wines);

• limited access to lawful products - such as 190-200 proof alcohol, in response to concerns that such products may be abused by a segment of the population;

• removed specific items, such as low-priced fortified wines, from particular stores in response to community concerns that the sale of such items have a detrimental effect on the immediate community;

• disallowed the sale of items that were offensive to women and children;

• chosen to maintain particular store locations to prevent further urban decay in that neighborhood, notwithstanding that a move to a new location would maximize profits, and closed stores in response to requests by local residents who claimed the stores negatively impacted their communities;

• chosen to maintain store locations in rural areas for the convenience of rural customers, notwithstanding that such stores are at best, marginally profitable;

• chosen to maintain stores in downtown settings to secure the vibrancy of small communities.

Finally, it must be noted that the PLCB verified that the identity of almost one million (1,000,000) purchasers of alcohol last year and that the number of sales to minors at wine and spirits stores is virtually zero. In contrast, when the Pennsylvania State Police, Bureau of Liquor

14 Kumar, Other States Did Not Make Money on ABC Privatization, Washington Post, September 7. 2010.

15 G. Flanagan, Sobering Result: The Alberta Liquor Retailing Industry Ten Years after Privatization (2003). 16 "The Effects of Privatization of Alcohol Control Systems," prepared by The Alcohol Research Group.

Page 18

Control Enforcement conduct compliance checks of licensees (restaurants, bars, distributers) to ascertain whether the licensee will refuse service to a minor, they find that the minor is provided alcohol nearly forty percent (40%) of the time.

THE POLITICS OF PRIVATIZATION

While the issue of whether the Commonwealth should be in the business of selling alcohol is a philosophical one to a certain percentage of the population, and perhaps even an important philosophical question to a smaller group of conservatives, it is a deeply important, personal question to many others, almost all of whom will be aligned against such a proposition, including:

• The thousands of store employees, who will lose their jobs during the biggest economic downturn since the Great Depression;

• The families of the store employees who rely on those jobs;

• The two unions who represent the store employees, one of which - the Independent State Store Union ("ISSU") - ceases to exist if privatization occurs. The other, much bigger union - the United Food and Commercial Workers ("UFCW") - helped defeat a recent privatization effort in the State of Washington.

Similarly, there are those who will oppose privatization even if their personal interest is not as immediate as those set forth above, including:

• Groups such as SADO and MADD that are concerned about alcohol proliferation in general;

• Law enforcement officials, especially in college towns, thai have to deal with the proliferation of alcohol-related problems;

• Industry members, who may fear that aggressive marketing by the newly privatized state stores will adversely impact their businesses;

• First responders and others who will bear the brunt of the increased societal costs referenced earlier;

• Those who have a financial stake in the current system such as landlords and vendors;

• Religious and quasi-religious groups that oppose the proliferation of alcohol on religious and/or moral grounds;

• Drug and alcohol counselors;

• Veterans' groups who recognize the PLCB's commitment to hiring military veterans; and

• Conservative voters, particularly in the nearly seven hundred (700) municipalities that still ban the issuance of one or more types of liquor licenses within their jurisdiction, especially if their opposition to alcohol proliferation is greater than their desire to minimize the size of government.

Finally, those parties listed above will find support in three (3) different sets of elected officials: those who personally oppose privatization/deregulation; those who have traditionally supported

Page 19

the affected constituencies; and those who are in opposition to the administration as a matter of course.

The Politics of Privatization - Washington

Washington, like Pennsylvania is a control state. In 2010, an attempt was made to privatize the system by eliminating the state from the sale and distribution of beer, wine and liquor. The attempt consisted of placing two ballot questions - Initiative 1100 and 1105 - on the November ballot, effectively bypassing the Legislature and Governor. Supporters of the initiative touted many of the same benefits that are being touted in Pennsylvania and, at least initially, could point to polls that indicated that the public was, by a wide margin, in support of the initiatives. The privatization initiative was robustly funded by Costco and others, as was the anti-privatization side.

Nonetheless, when-the voters actually voted, the initiatives was rejected by 53% (Initiative 1100) and 64% (Initiative 1105) of the voters. Public opinion was ultimately swayed by concerns about the true costs of privatization, both actual and societal. Leading the opposition were union groups - including the union that represents most of the PLCB' s store employees - church groups, other industry members and first responders. Because the economics of the Washington system. are not as compelling, the defeat was re-affirmation that the adverse societal impact of privatization was the key driver.

The Politics of Privatization - Virginia

In Virginia, Governor Robert F. McDonnell continues to attempt to privatize and/or deregulate the alcohol industry and he continues to suffer setbacks. His initial statements that privatization could raise up to eight hundred million dollars ($800,000,000.00) M according to an August 29, 2010 Washington Post story M have been publicly debunked and he is attempting to come up with a new privatization. plan. He has decided not to call a special legislative session because he does not have the votes to pass a privatization bill. In addition to the questions pertaining to the economic impact, concerns regarding the societal impact - such as those raised by the Virginia Interfaith Center for Public Policy - have dogged the Governor's efforts.

CONCLUSION

It has been said many times before that bad facts make bad law. The same can be said about public policy. The bad fact in this case is the massive budget deficit facing the Commonwealth. The bad law would be to privatize or deregulate the sale of alcohol in Pennsylvania for the pipe dream of a two billion dollar ($2,000,000,000.00) windfall. This administration should reject the proposition that privatization is a pain free way to solve its budget woes:

• Privatization is bad public policy;

• Privatization will not yield a two billion dollar ($2,000,000,000.00) windfall;

• Privatization will create a financial hole that will take the Commonwealth years to dig out of; and

o Privatization will result in a long, bitter and divisive legislative and legal fight.

Page 20

Alternatively monetization and modernization will:

• Not impose the social and societal costs inherent in privatization;

• Provide an immediate (60 - 90 days) one billion dollars ($1,000,000,000.00) to the Commonwealth;

• Allow the Commonwealth to retain the money-producing asset which is the wine and

spirit store system; and .

• Avoid the necessity of spending the politica1 capital necessary to fight a long, bitter and divisive legislative and legal battle.

• _ •••• _ ... ~ •••• __ • 0 ..... ~M. • ..... ._ .... ~ '. ... _.... • •.• ~ ."_.~' ~ •• ~. • ~.~ ••• _ ...... ~7_'_ .~ • ~~ •• " •• ~ • ,.,. _ •• ..~' """':""'. .., ~ ~._ ••• " ....... ~..,.~ ,., ~~~~.y _.~ ,~ •• '_ •• ~,.

DRAFT LEGISLATION

PLCB MODERNIZATION INITIATIVES

•• .R R_ 'R ,,_, ", ." N ,. .• _ .... _ .• __ .,N·,_ ••• • ••• _~ ••. • .. .. _ __._._.. . • _. h _ •.••

PROPOSED LEGISLATION EFFECTUATING mE PJ,CB'S INIDATIYES

Proposed Changes To Title 47, The Liquor Code

Section 1. Section 102 is amended to mclude the following definitions:

Section 102. Definitions

The following words or phrases, unless the context clearly indicates otherwise, shall have the meanings ascribed to them in this section:

•••

"AUTHORITY." An authority created by the Commonwealth which I1UTChases the board's cyrrent or expected future revenue Pursuant to section 207 <relating to general and specific POWers) and issues bonds to fund the purchase o(the board's current or expected future revenue in the manner proVided· for the issuance of . authority indebtedness in the law establishing the authority .

•••

i'BQNl)S." Bonds. notes. instivm,ents. refunding notes and bonds and other evidences of indebtedness or obligations. which an authority issues to fund the purchase of the board's current or expected future revenue .

•••

Section 2. Section 206 ~s r~pealed:

ISection 206. Board subject to administrative code

Except as' otherwise expressly provided by law, the board shall be subject to all the provisions of The Administrative Code of one thousand nine hundred twentynine,as amended, which apply generally to independent administrative boards and commissions.I

Section 3. Section 207 is amended as follows:

Section 207. General Powers of Boai'd.--Under this act, the board shall have the power and its

duty shall be: .

• • •

(b) To control the manufacture, possession, sale, consumption, importation, use, storage, transportation and delivery of. liquor, alcohol and malt or brewed beverages in accordance with the provisions of this act, and to fix the wholesale and retail prices at which liquors and alcohol shall be sold at Pennsylvania Liquor

--------,---

,-----'.-._- _. - _ .... - -

" .. -,.~---~.- . '_" -- ~ -.--.- .. - .. ~-- - ----.--- _ .. _ •...... - _- _ .

Stores. Prices shall be as set forth by the Board so long as the price of a particular item is uniform throughout the COmmonwealth (proportional with prices paid by the board to its suppliers and shall reflect any advantage obtained through volume purchases by the board. The board may establish a preferentialprice structure for wines produced within this Commonwealth for the promotion of such wines, as long as the price structure is uniform within each class of wine purchased by the board], The board shall require each. Pennsylvania manufacturer and each nonresident 'manufacturer of liquors, other than wine, selling such liquors to the board, which are not manufactured in this Commonwealth, to make application for and be granted a permit by the board before such liquors 'not manufactured in this Commonwealth shall be purchased from such manufacturer. Each such manufacturer shall pay for such permit a fee which, in the case of a manufacturer of this Commonwealth, shall be equal to that required to be paid, if any, by a manufacturer or wholesaler of the state, territory or country of origin of the liquors, for selling liquors manufactured in Pennsylvania, and in the case of a nonresident manufacturer, shall be equal to that required to be paid, if any, in such . state, territory or countryby Pennsylvania manufacturers doing business in such state, territory or country. In the event that any such manufacturer shall, in the opinion of the board, sell or attempt to sell liquors to the board through another person for the purpose of evading this provision relating to permits, the board shall require such person, before purchasing liquors from him or it, to take out a permit and pay the same fee as hereinbefore required to be paid by such manufacturer. All permit fees so collected shall be paidinto the State Stores Fund. The board shall not purchase any alcohol or liquor fermented, distilled, rectified, compounded or bottled in any state, territory or country, the . laws of which result in prohibiting the importation therein of alcohol or liquor, fermented, distilled, rectified, compounded or bottled In Pennsylvania. .

•••

(f) To appoint, fix the compensation and define the powers and duties of such managers, officers, inspectors, examiners, clerks and other, employes as shall be

. required for the operation of this act, [subject to the provisions of The Administrative Code of 1929 and the Civil Service Act,l who shall serve at the board's pleasure. An emplOYee of the board shall be considered a state employee for pumoses of71 Pa.C.S. 01, Xxv <relating to retirement for state employees and officers). The board shall establish a system of classification and compensation of its employees and shall not be subject to the provisions of the Act of April 9.

'1929 Cp.l. 177. no. 175). known as the Administrative Code of 1929. as" to classification and compensation for its employees. and shall conduct its activities consistent with the practices and procedures of Commonwealth agencies .

•••

(h) Without in any way limiting or being limited by the foregoing, to do all such things and perform all such acts as are deemed necessary or advisable for the purpose of

... _._-_ ... _--- __ ._-----

carrying into effect the provisions of this act and the regulations made thereunder. Notwithstanding aqy other provision of law to the contrary. the board is authorized to purchase all goods· and services in its sole diScretion which are deemed necessary to perfoun all such acts· The bOard is authorized to promulgate regulations providing for the procurement of sugh goods and services .

•••

en To be liCensed as a Lottezy Sales Apt as defined in the act ofNoyernber 21. 1996 (p,L,741. No,134), known as the State Lottery Law, and to take any actions authorized by such designation excem that no bond. insurance or indemnification may be regujred from the Board, Notwithstanding any other provision of law to the Contrary. the Board may pay the holder of a winning ticket up to ·an amount that shaH be established jointly by the Board and the Department of Revenue. All proceeds retained by the Board as compensation for the sale of tickets. including incentive aWards or bonuses. as well as credit for direct payment of prizes. shall

be deposited in the State Stores Fund, .

em) To establish and implement a customer relations marketing program for the pytpOse of offering incentives.' such as coypons or discounts on Certain products.

to customers of the board. . .

en) Not:wjt1yitanding anY other proyjsiou of law to the· contrazy.. to enter into agreements with gOVernmental units of this Commonwealth and other states. for the purchase oi sale .of Wds and/or Services wjth. from or to the governmental

~ ..

(0) Notwithstanding anv· other proytSlon of law. to sell. in wbole Of in part the Commonwealth's right. title and interest in the board's ·cummt or emected fufure revenue to the authority, The sale shall be subject· to the terms and conditions ·cmjtaiped in agreements between the board and the authority.· Proceeds from the sale of the board's current or expected future reyenue shan be allocated and used in the manner prescribed by law. . The authority is authorized to purchase the board's current or expected future revenue based upon the tenus and . conditions agreed to by the boaid and to issue bonds to fund the purchase of the board's current Or expected future reVenue in the manner provided . for the issuance of authority indebtedness in the law establishing the authority. nW State Treaswer is authorized and directed to enter into any agreements with the board and the authority and establish accounts and funds· as the authority may direct as being ne£essaty or appropriate to effect the sale of the board's current or wwecte4 futwe reyenue to the authority 'and the· collection and transfer of the. board's current or expected future reyenue' sold· to the authority. The board's current or expected future reYenue sold to the authority shall be the property of the authority and shall not be the property of the Commonwealth.

.-_. __ .. _--_._--_. __ ... ---

Section 4. Section 208 is amended as foDows:

Section 208. Specific subjects on which board may adopt regulations

Subject to the provisions of this act and without limiting the general power conferred by the preceding section, the board may make regulations regarding:

(a) The equipment and management of Pennsylvania Liquor Stores and warehouses in which liquor and alcohol are kept or sold, and the books and records to be kept therein.

(b) The duties and conduct of the officers and employes of the board.

(c) The purchase, as provided in this act, of liquor and alcohol, and its· supply to Pennsylvania Liquor Stores, and the procurement of all other goods and services which are deemed necessarv by the board. in its sole discretion. to perform all

such acts.

(d) The classes, varieties and brands of liquor and alcohol to be kept and sold in Pennsylvania Liquor Stores. In making this determination the board shall meet not less than twicea year.

(e) The issuing and distribution of price lists for the various classes, varieties or

brands of liquor and alcohol kept for sale by the board under this act. .

(f) The labeling of liquor and alcohol sold under this act and of liquor and alcohollawfully acquired by any person prior to January first, one thousand nine hundred thirty-four.

(g) Forms to be used for the purposes of this act.

(h) The issuance of licenses and permits and the conduct, management, sanitation and equipment of places licensed or included in permits.

(i) The place and manner of depositing the receipts of Pennsylvania Liquor Stores and the transmission of balances to the Treasury Department through the ~epartment of Revenue.

0) The solicitation by resident. or nonresident vendors of liquor from Pennsylvania licensees and other persons of orders for liquor to be sold through the Pennsylvania Liquor Stores and, in the case of nonresident vendors, the collection therefrom of license fees forsuch privilege at the same rate as provided herein for importers' licenses.

Section 5. Section 302 is repealed:

[Section 302. Selection of personnel

Officers and employes of the board, except as herein otherwise provided, shall be appointed and employed subject to the provisions of the Civil Service Act]

Section 6. Se.ction 303 is amended as follows:

Section 303. Management of Pennsylvania Liquor Stores

Every Pennsylvania Liquor Store s11&.1 be conducted by a person appointed lin the manner provided in the Civil Service Acij by the board who shall be known as the "manager" and who shall, under the directions of the board, be responsible for carrying out the. provisions of this act and the regulations adopted by the board under this act as far as they relate to the conduct of such stores.

Section 7. Seetfon 304 is amended as follows:

Section 304. When Sales May Be Made at Pennsylvania Liquor Stores-

•••

(b) Certain Pennsylvania Liquor Stores operated by the board shall be open for Sunday retail sales between the hours of noon and [five] D o'clock postmeridian, except that no sunday sales shall occur on Easter Sunday or Christmas day. The board shall open Iup to twenty-five per centum of the total number of Pennsylvania Liquor Stores at its discretion}, at its discretion, as many Pennsylvania Liquor Stores as it deems necessary for Sunday sales as provided for in this subsection. The board shall submit yearly reports to the Appropriations and the Law and Justice Committees of the Senate and the Appropriations and the . Liquor Control Committees of the House of Representatives summarizing the total dollar value of sales under this section.

Section 8. Section 471 is amended as follows:

Section 471. Revocation arid suspension oflicenses; fines

***

(b) Hearing on: such citations shall be held in the same manner as provided herein for hearings on applications for license. Upon such hearing, if satisfied that any such violation has occurred. or for other sufficient cause, 'the administrative law judge shall immediately suspend or revoke the license, or impose a fine of not less than (fifty dollars ($ 50)) one hundred dollars ($ lOQ) nor more than [one thousand dollars ($ 1,000)J two thOusand doUars ($ 2,Qoo), or both, notifying the

licensee by registered letter addressed to his licensed premises. If the licensee has been cited and found to have violated section 493(1) insofar as it relates to sales to minors or sales to a visibly intoxicated person, section 493(10) insofar as it relates to lewd, immoral or improper entertainment or section 493(14), (16) or (21), or has been found to be a public nuisance pursuant to section 611, or if the owner or operator .of the licensed premises or any authorized agent of the owner or operator has been convicted of any violation of the act of April 14, 1972 (P .L. 233. No. 64), known as "The Controlled Substance, Drug, Device and Cosmetic Act," or of 18 Pa.C.S. § 5902 (relating to prostitution and related offenses) or 6301 (relating to corruption of minors), at or relating to the licensed premises, the administrative law judge shall immediately suspend or revoke the license, or impose a fine of not less than [one thousand dollars ($ 1,000)J five thousand dPllars ($ .5,000) nor more than [five thousand dollars ($ 5,000») ten thousand dollars ($ lQ.OOOl, or both. However,·. if a licensee has been cited and found to have violated section 493(1) as it relates to sales to minors or sales to a visibly intoxicated person but at the time of the sale the licensee was in compliance with the requirements set forth in section 471.1 and the licensee had not sold to minors or visibly intoxicated persons in the previous four years, then the administrative law judge shall immediately suspend or revoke the license, or impose a fine of not less than [fifty dollars ($ 50)J one hundred dollars ($ lOOl nor more than [one thousand dollars ($ 1,000») two thousand dollars ($ 2.000), or both. The administrative law judge shall notify the licensee by registered mail, addressed to the licensed premises, of such suspension, revocation or fine. In. the event the fine is not paid within twenty days of the adjudication, the administrative law judge shall suspend or revoke the license, notifying the licensee by registered mail addressed to the licensed premises. Suspensions and revocations shall not go into effect until thirty days have elapsed from the date of the adjudication during which time the licensee may take an appeal as provided for in this act, except that revocations mandated in section 481(c) shall go into effect immediately. Any licensee whose license is revoked shall be ineligible to have a license under. this act until the expiration of three years from the date such license was revoked. In the event a license is revoked, no license shall be granted for the premises or transferred to the premises in which the said license was conducted for a period of at least one year after the date of the revocation of the license conducted in the said premises, except in cases where the licensee or a member. of his immediate family is not the owner of the premises, in which case the board may, in its discretion, issue or transfer a license within the said year. In the event the bureau or the person who was fined or whose license was suspended or revoked shall feel aggrieved by the adjudication of the administrative law judge, there shall be a right to appeal to the board. The appealshall be based solely on the record before the administrative law judge. The board' shall only reverse the decision of the administrative law judge if the administrative law judge committed an error of law, abused its discretion or if its decision is not based on substantial evidence. In the event the bureau or the person who was fined or whose license was suspended or revoked shall feel aggrieved by the decision of the board, there shall be a right to appeal to the court of common pleas in the same manner as herein provided for

appeals from refusals to grant licenses. Each of the appeals shall act as a supersedeas unless. upon sufficient cause shown, the reviewing authority shall determine otherwise; however, if the licensee has been cited and found to have violated section 493(1) insofar as it relates to sales to minors or sales to a visibly intoxicated person, section 493(1 Q) insofar as it relates to lewd, immoral or improper entertainment or section 493(14), (16) or (21). or has been found to be a public nuisance pursuant to section 611, or if the owner or operator of the licensed premises or any authorized agent of the owner or operator has been convicted of any violation of "The Controlled Substance, Drug, Device and Cosmetic Act," or of 18 Pa.C.S. § S902 or 6301, at or relating to the licensed premises, or if the license has been revoked, under section 481(c), its appeal shall not act as a supersedeas unless the reviewing authority determines otherwise upon sufficient cause shown. In any hearing on an application for a supersedeas under this section, the reviewing authority may consider, in addition to other relevant evidence, . documentary evidence, including records of the bureau, showing the prior history of citations, fines, suspensions or revocations against the licensee; and the reviewing authority may also consider, in addition to other relevant evidence, evidence of any recurrence of the unlawful activity occurring between the date. of the citation which is the subject of the appeal and the date of the hearing. If the reviewing authority is the board, no hearing shall he held on the application for a supersedeas; however, a decision shall be made based on the application, answer and documentary evidence under this subsection. If the application for a supersedeas is for a license that has been revoked under section 481(c), the reviewing· authority shall grant the supersedeas only if it findsthat the licensee will likely prevail on the merits. No penalty provided by this section shall be imposed for any violations provided for in this act unless the bureau notifies . the licensee of its nature within thirty days of the completion of the investigation.

***

Section 9 •. Section 493 is amended as follows:

Section 493. Unlawful acts relative to liquor, malt and brewed beverages and licensees-

. The term "licensee, n when used in this section, shall mean those persons . licensed under the provisions of Article IV, unless the context clearly indicates otherwise.

It shall be unlawful••••

(24) (i) THINGS OF VALUE OFFERED AS INDUCEMENT. Except as provided in subclause (ii), for any licensee under the provisions of this article, or the board or any manufacturer, or any employe or agent of a manufacturer, licensee or of the board, to offer to give anything of value or to solicit or receive anything of value as a premium for the return of caps, stoppers, corks, stamps or

labels taken from any bottle, case, barrel or package containing liquor or malt or brewed beverage, or to offer or give or solicit or receive anything of value as a premium or present to induce directly the purchase of liquor or malt or brewed beverage, or for any licensee, manufacturer or other person to offer or give to trade or consumer buyers any prize; premium, gift or other inducement to purchase liquor or malt or brewed beverages, except advertising novelties of nominal value which the board shall define. This section shall not prevent any manufacturer or any agent of a manufacturer from offering and honoring coupons which offer monetary rebates on purchases of wines and spirits through State Liquor Stores or purchases of malt or brewed beverages through distributors and importing distributors in accordance with conditions or regulations established by the board. The board may redeem coupons offered by a manufacturer or an agent of a manufacturer at the time of purchase. Coupons offered by a manufacturer or an agent of a manufacturer shall not be redeemed without proof of purchase. This section shall not apply to the return of any monies specifically deposited for the .

. return of the original container to the owners thereof.

(ii) Notwithstanding subclause (i) or any other provision of law, a holder of a restaurant license that is also approved to hold a slot machine license or a conditional slot machine license under 4 Pa.C.S. Part II (relating to gaming) may give liquor and malt or brewed beverages free of charge to any person actively engaged in playing a slot machine. .

(iill Notwithstanding subclause (j) or anY other provision of law. the board may establish and implement a customer relations marketing program for the purpOse of oiferin& incentives. such as COUPOns or discwmts on certain products which may be conditioned upon the purchase ofliguor. to customers of the board.

Proposed Changes To The Administrative Code Of 1929

Section 10. Section 240.14A is amended as follows:

Section 240.14A. (Adm. Code § 614-A). Liquor Control Board

The Pennsylvania Liquor Control Board is authorized to charge fees for the following purposes and in the following amounts:

(1) Hotel, restaurant liquor licenses:

(i) Application filing fee

[$700.00) $IAOQ,oo

(ii) Renewal filing fee

[30.00] &!lQ

(iii) License fee:

(A). Municipalities, population less than 1,500

[250,00) 500,00

. (B) Municipalities, except townships, population 1,500-9,999

[300.00] 600,00

(C) Municipalities, townships, population 1,500-11,999

[300,00] 600,00

(D) Municipalities, except townships, population 10,000-49,999

[400.00] 800,00

(E) Municipalities, townships, population 12,000-49,999

[400,00] 800.00

(F) Municipalities, population 50,000-99,999

[500.00) 1.000.00

(0) Municipalities, population 100,000-149,999

[600.00] . 1.200.00

(H) Municipalities, population 150,000 or more

[700.00] 1.400.00

(iv) Transfer fee:

(A) - Person to person

(B) Place to place

(C) Double transfer

(2) Hotel or retail dispenser-eating place malt or brewed beverage licenses;

(i) Application filing fee

(ii) Renewal filing fee

(iii) License fee:

(A) Municipalities, population less than 10,000

(8) Municipalities, population 10,000-49,999

(e) Municipalities, population 50,000-99,999

'(0) Municipalities, population 100,000-149,999

(E) Municipalities. population 150,000 or more

(iv) Transfer fee:

(A) Person to person

(B) Place to place

(C) Double transfer

(3) Clubs (except catering) liquor licenses:

[650.00] }.300.00

[550.00) 1.100,00

[700.00] 1.400.00

[700.00] 1.400.00

(30.00] &nQ

[2,00.00] '400,00 '

(250.00) 500.00

[300.00] ,600.00

[350,00] 700.00

(400.00] SOO.OO

[650:00] 1.350.00

[550.00] , 1.100.00

[700.00] 1 APO.OO

""--"_-- --_._-_.- - -- .. _._._---- .. _ .. _._ _ __ __ ._-"._._ .. -.-._._." .. _-_ .. -_._---_. __ .. _._--_. __ .. - _.- _._.~ ..

(i) Application filing fee [700.00]
1.400.00

(ii) Renewal filing fee [30.00]
&m
(iii) . License fee [1 SO. 001
300.00
(iv) Transfer fee:
(A) Person to person [650.00]
1.300.00

(B) Place to place [5~.o.OO]
1. 1 OQ.OO

(e) Double transfer [700.00]
1.400.00
(4) Club malt or brewed beverage licenses:
(i) Application filing fee (700.00)
1.400.00

(ii) Renewal tiling fee '(30.00]
~
(iii) License fee (125.00]
250.00
(iv): Transfer fee:
(A) Person to person (650.00]
1.300.00

.(B) Place to place [S50.00]
1.100.00

(C) Double transfer [700.00J
1.400.00
(5) Registration 'of agents; distillery Certificate broker:
(i) Application filing fee [65.ooJ
130.00 . __ .. _--_ .. _--------_._ _-- _ .• __ - -"-., _ _ _ - --_ .. _---_._- - .. _.-_ __ ----_. __ .. __ .. _- . ', .

(A) Person to person

[650.00] 1.300.00

(B) Place to place

[550.00] 1.100.00

(C) Double transfer

(700.00] iAOO.OO

(11) Distillery license:

(i) Application filing fee

[700.00] 1.400,00

(ii) Renewal filing fee

[30.00] &QQ

(iii) License fee (prorated quarterly on volume)

(5,400.00) 10.800.00

(12) Distillery certificate broker permit:

(i) Application filing fee

[700·09] 1.400,00

(ii) Renewal filing fee

[30.00] &Q.Q

(iii) Permit fee

[175.00] 350.00

(13) Distillery of historical significance:

. (i) Application filing fee

[700.00] 1.400.00

(ii) . Renewal filing fee .

[30.00] ~

(iii) License fee (prorated quarterly)

(5,400.00) 10.800,00

(14) Importer's liquor license:

(i)· Application filing fee

[700.00] 1.400,00

(ii) Renewal filing. fee

[30.00] 60.00

(iii) License fee

[265.00] 530,00

(iv) Transfer fee:

(A) Person to person

[650,ooJ 1.3oo,QO

(B) Place to place

[550.00] 1.100.00

(e) Double transfer

[700,00] 1.400,00

(15) Importer's warehouse license:

. (i) Application filing fee, each warehouse

[700.00] 1,400,00

(ii) Renewal filing fee, each warehouse .

[30.00J &!lQ

(iii) License fee, each warehouse

[65,00] 130,00

(16) Limited winery:

(i) Application filing fee

[700.00] 1,400,00

(ii) Renewal filing fee

[30.00) &00

(iii) License fee (prorated quarterly)

[385.00) 770.00

(17) Malt "beverage distn'butor:

(i) Application filing fee

[700.ooJ 1.400.00

. (ii) Renewal filing fee

[30.00) &00

(iii) License fee [600.00]
1.200.00
(iv) Transfer fee:
(A) Person to person (650.ooJ
1.300.00

(B) Place to place [550.00]
1.100.00

(C) Double transfer [700.00]
1,400.00
(18) Malt.beverage importing distributor:
(i) Application filing fee [700.ooJ
1.400,00

(ii) Renewal filing fee [30,00]
&Q2
(iii) License fee [1,350.00J
2.700;00
(iv). Transfer fee:
(A) Person to person [650.00]
l.3oo.QO

(B) Place to place (550.00] .
1.100.00

(C) Double transfer [700.00]
1,4QQ.QO
(19) Performing arts facility license:
(i) Application filing fee (700.00]
1.400.00

(ii) Renewal filing fee . (3Q.OQJ
&!m
(iii) License fee [675.001
1.350,00 (20) Public service liquor license:

(i) Application filing fee

[700.00] , 1.400.00

(ii) . Renewal filing fee

[40.00J .&2Q

(iii) License fee, railroad cars, per car

[65.00] 130,00

(iv) License fee, steamship or vessel, per vessel

[260.00] 520,00

(v) License fee, per air carrier

[260.00] 520.00

(vi) Transfer fee, railroad car, steamship or vessel or per air carrier

[55.00] t 10.00

(21) Public service license malt beverage:

(i) Application filing fee

(100.00] 1.400,00

(ii) Renewal filing fee

[40.00] .8!lJHl

(iii) License fee, railroad cars, per car

[40.{)Q] .8.QJ!Q

(iv) License fee, 'steamship or vessel, per vessel

[160.00] 32Q.00 '

(v) License fee, per air, carrier

[55.00] 110.00

(vi) Transfer fee, railroad cars; steainship or vessel per air carrier

(55.00] 1l0,OQ

(22) Sacramental wine license:

(i) Application filing fee

[100.00] 1.400.00

----'._-_.-._--_ - - __ ._,- ,. _-- ,.". -_._----_ _ _-.-._._-- .--.-------- -~- .. ----.- .

(ii) Renewal filing fee

[30.00] 2QJ2Q

(iii) License fee

[265.00J 530.QQ

(iv) Transfer fee

[45.00J 2QJ!Q

(23) Sales permit; reciprocal:

(i) Permit fee

To be set by board not to exceed [5,000.00] 10.000·00

(24) Special occasion permit:

(i) Permit fee, liquor or malt or brewed beverages, per' day: (A) N<J investigation

[30.00J &QQ

(B) Investigation

[85.00] 170.00

(25) Stadium restaurant liquor license:

(i) Application filing fee

[700.00] 1.400·00

(ii) Renewal filing fee

[30.00] &QQ

(iii) License fee

[700.00] 1.400.00

(26) Stadium and arena malt beverage license:

(i) Application filing fee

[700.00] 1.400.00

(ii) Renewal filing fee

[30.00] &Q2

-t-_., _ .. '_ _.... __ ,- - - _ -_. .•. __ .,._ .~_ __ . __ . ._, .. ,_ .. ~_, __ __ ., .

(iii) License fee

[150.00] 300,00

(27) Sunday sales liquor:

(i) Permit fee

[300.00] 600,00

(28) Sunday sales malt beverage:

(i) Permit fee

[300.00] ~OO.OQ

(29) Trade show and convention liquor license:

(i) Application filing fee

[700.00) 1.400,00

(ii) Renewal filing fee

[30.00] &rul

(iii) License fee

[675.00] 1.350,00

(iv) Transfer fee:

(A) Person to person

[650.00] 1,300.00

(B) Place to place

[550,00] 1.10Q,00

(C) . Double transfer

[700.00] l.400'()Q

(30) Transporter for hire; Class A and C:

(i) Application filing fee .

[700.00] l,iQQ,QQ

(ii) Renewal filing fee

[30.00] &QQ

(iii) License fee

[265.00] 530.QO

(31) Transporter for hire; Class B:

" __ -----------

(i) 'Application filing fee

(ii) Renewal filing fee

(iii) License fee

«2) Vendor's permit:

0) Application filing fee

(ii) Renewal filing fee' .

(iii) Permit fee

(33) Winery:

(i) Application filing fee

(ii) Renewal filing fee

(iii) License fee (prorated quarterly)

(34) To be credited to the State Stores Fund from each of the fees collected for hotel, restaurant and chili liquor licenses and retail dispensers' Iicenses both malt and brewed beverages

(35) Malt or brewed beverage brand registration:

(i) Filing fee (per brand)

Section 11. Section 741j is amended as foDows:

Section 741.3. Definition oftenns

In this act unless the .context otherwise clearly requires,-

*.*

[700.00] 1,400.00 .

[30.00] &Q2

[160.00] 320.00

[7oo.ooJ 1.400.00

[30.00] . &2Q

[265.ooJ 530.00

[700.00] 1,400,00

[30.00] &QQ

[385.ooJ 770,00

[100.00] 200,00

[75.00] 150.00

... _ ....... _ ... _-_ •• _". _ •••• _--'_-'_" _ ... _. • __ • _ ,._- -, ..• ..• __ .. __ ..... •. __ .......... __ ,A. 1'_ • ,. ••

(d) "Classified service" includes:

(1) All positions now existing or hereafter created in the Department of Public, Welfare, including the county boards of assistance but excluding positions in the general hospitals not otherwise included in the classified service;

(2) All positions now existing or hereafter created in the Department of Labor and Industry which are charged with the administration of the Unemployment Compensation Law and also those positions which are charged with the administration of the Workmen's Compensation Act and the Occupational Disease Act, including the positions of workmen's compensation referees but not including the positions of members of the Workmen's Compensation Board and members and employes of the State Workmen's Insurance Board and fund;

1(3) All positions now existing or hereafter created under the Pennsylvania Liquor

Control Board;l '

***

Section 12. Section 741.212 is amended as follows:

Section 741.212. Service to State departments, boards and commissions or agencies and political subdivisions; cooperation with other civil service agencies

(a) The services andfacilities of the commission and its staff shall be available to the State departments, boards and commissions set forth In clause (d) of section three of this act and to other State departments, boards, commissions or agencies and political subdivisions of this Commonwealth upon such terms and conditions as may be prescribed by the rules' of the commission, which rules shall provide for the payment to and reimbursement of the Commonwealth for the reasonable cost of such services and facilities. '

(b) The cost of such services and facilities made available by the commission shall be bome by every State department, board, commission or agency and political subdivision to which the same are made available, in the proportion which the cost of said services and facilities to each bears to the' total cost of said services and facilities. The commission shall prepare and issue semiannual statements of such cost, setting forth the total and the share attributable to each department, board, commission or agency and political subdivision to which - services or facilities are made available. Upon receipt of such statements, each State department, board, commission or agency and political subdivision shall pay its share of the cost to the commission.

(c) Any money payable to the commission by way-of reimbursement shall be paid into the General Fund through the Department of Revenue, shall be credited to the

------_ ........•... - .... __ .-. --'_ , .. "._---_ ...... _., - .. _ ..... -._--._------ -- .... _ ..... _._ ..... _._.-.-._---_. __ .... ".

annual appropriation made to the commission out of the General Fund for the proper conduct of its work under this act and shall be available for the same purposes for which any such appropriation is available. 1iI case any State department, board, commission or agency which is supported out of the General Fund becomes liable to the connnission, under the provisions of this section, such liability shall be defrayed out of the current appropriation to such state department, board, commission or agency for the proper conduct of its W0I:k, and any such appropriation is hereby appropriated for such purpose. In addition, as much money as may be necessary is hereby appropriated to the commission, from time to time, from jthe State Stores Fund, to meet the' cost of the services and facilities of the commission, as may be attributable to the 'work of the commission, with respect to the Pennsylvania Liquor Control Board, and as much as may be necessary is hereby appropriated from] the Administrative Fund to meet the cost 'of'services and facilities of the commission, as may be attributable to the work of the commission, with respect to the work of the Department of Labor and Industry under the Unemployment Compensation Law. In the event any other State department; board, commission or agency which is supported out of a special fund becomes obligated to the commission, under the provisions of this section, as much money as may be necessary is hereby appropriated, from time to 'time, out of such special fund to meet the cost of services and facilities of . the commission, as may be attributable to the work of such administrative department, board, commission or agency. Such amounts as are appropriated out of said special funds shall, from time to time, be transferred from such funds to the General Fund, shall be credited to the current appropriation made to the commission out of the General Fund for the proper conduct of its work, and are hereby appropriated to ~e commission for the same purposes as the aforesaid appropriation out of the General Fund is appropriated.

(d) The commission shall have power from time to time to enter into agreements with other public personnel agencies in this or any other State and with agencies of the federal government for the purpose of using and exchanging information and services. The commission shall have power to become a member of or subscribe to any association or service having as its purpose the interchange of information relating to the technique of personnel administration.

Section 13. All present employees of the Pennsylvania Liquor Control Board who are currently deemed "classified service" employees, as defined under the provisions of The Administrative Code of 1929 and the Civil Service Act, are to continue in" their employment with either the

. board or the Office of Administrative Law JU9ge with the same pay scales, salaries, wages, seniority benefits, pension rights and other incidents of employment, Including, but not limited to, civil service status, as if this act had not been effective.

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