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You may finally be able to buy booze at Walmart and Costco now

I agree with this.

A protectionist Texas law that has kept Walmart, Costco and other giant retailers from selling hard liquor was found unconstitutional by a federal judge this week, prompting cheers from free-market advocates — and vows of a quick appeal from one of the parties on the losing side.

The Texas law that was struck down — unique in the United States — forbids publicly traded businesses from owning liquor stores while allowing family-owned companies to grow into giant chains without fear of competition from large national or international corporations.

If the late Tuesday ruling by U.S. District Judge Robert Pitman survives appeals, Texas consumers — like those in at least 31 other states and many foreign countries — will be able to buy vodka, tequila and bourbon from Walmart-owned stores and from other multinational retailer outlets.

“For decades, these laws have stood in stark contrast to Texas values,” said Travis Thomas, spokesman for Texans for Consumer Freedom, which advocates for free-market reforms in Texas. “The State of Texas should not pick winners and losers in private industry.”

[…]

Experts said an appeal could take more than a year to play out in the federal court system — longer if it were to wind up in the U.S. Supreme Court. In the meantime, Texans can expect the status quo in liquor retailing. If publicly traded companies are allowed eventually to sell distilled spirits, existing law would still require the companies to build separate facilities, though they can be adjacent to existing stores.

See here and here for the background. The Texas Package Stores Association, which represents the state’s liquor store owners, has vowed to appeal, and I’d expect this to go the distance. As you know, I’m no fan of Walmart, but on this issue I think they’re in the right. Now if we could only bring a similar sense of sanity to the state’s ridiculous beer laws, we’d really have something.

Crowler conundrum concluded

Finally.

Mike McKim held an empty aluminum can under a tap and pulled the handle, filling the can with Real Ale Brewery’s Helles beer. He fitted a pull tab lid on top, slotted the can into his “crowler” machine, and pushed a button. He told the story of the equipment’s origins, invented by Colorado-based brewery Oskar Blues.

Then the founder of Cuvée Coffee in Austin explained how the state of Texas took it away from him, fined him more than $30,000, kept it for months after judges told them to return it and sparked a lawsuit that cost him more than $40,000 in legal fees.

“[TABC charged us with] illegally manufacturing an illicit product,” McKim said. “Basically, brewing beer. We’re not brewing beer. We buy beer, put it on tap, and put it in a can. Who cares whether I’m putting it in this little Dixie cup or in a bottle or a can, what difference does it make? And that’s why we went to court.”

McKim’s battle with the Texas Alcoholic Beverage Commission officially drew to a close on Thursday, when he got his crowler machine back after more than a year of separation. The coffee bar sold its first crowler since 2015 on Friday. And McKim’s story has inspired two pieces of legislation this session.

[…]

Cuvée Coffee’s story became the impetus for HB 908, which allows draft beer to be sold for off-premise consumption in both crowlers and growlers. Its author, state Rep. Ramon Romero, Jr., D-Fort Worth, wrote a letter to TABC Executive Director Sherry Cook early March this year admonishing the agency for its failure to return Cuvée’s machine months after a judge ordered them to do so.

“TABC has so many other things to worry about,” Romero said. “We’ve been working with TABC to crack down on human trafficking, bars taking advantage of women, to some degree creating environments that are very dangerous for women. We’ve been working on all these things and if it was up to me, that would be what they’re focusing their attention on — not small businesses trying to innovate.”

On Monday morning, McKim testified in support of SB 813 and told the Senate Affairs Committee he had to spend $41,300 fighting the TABC over the crowler machine. Sen. Bryan Hughes, R-Mineola, said he filed the bill to give individuals and businesses the ability to sue regulatory agencies for unreasonable regulatory actions. He hopes it will deter agencies from pursuing potentially frivolous regulatory actions.

“If I’m an agency and I’m messing with a Texan, there is no downside, no risk from the agency’s standpoint,” Hughes said. “There’s nothing keeping the agency from pursuing a frivolous action. If they lose in court and appeal like they did with Mr. McKim, there’s nothing keeping them from pulling out all the stops and punishing a business owner. The idea behind SB 813 is to even things up a bit.”

See here and here for the background. This was always a ridiculous difference-without-a-distinction action by the TABC, and it’s good that they have admitted defeat. I support HB908, though I’d like to know more about SB813 before taking a side on it. The bottom line is that our beer laws and how we enforce them continue to be silly, though hopefully now slightly less silly. There’s a lot more room for a lot less silliness, if we want there to be.

What makes a Texas wine?

Texas grapes, obviously. Or maybe not so obviously.

Rep. Jason Isaac

Chris Brundrett sat in a barn surrounded by barrels of wine he helped curate and swirled a glass of water in his hand, perhaps imagining it was something else.

Brundrett, accompanied by others from the state’s wine industry, drove home his pitch: “If we can just pump out wine from California and slap a picture of the Alamo or a longhorn on it and sell it,” he said, should wineries be able to put a “made in Texas” label on it?

A co-owner and winemaker at William Chris Vineyards between Fredericksburg and Johnson City, Brundrett was explaining why he backed House Bill 1514 by state Rep. Jason Isaac, R-Dripping Springs, which would require that wines with a Texas label be made only with Texas-grown grapes.

Under federal law, wine can have an appellation of origin from a state if a minimum 75 percent of its grapes are grown in that state. The other 25 percent can come from anywhere.

“I believe having something labeled as Texas should be from Texas,” Isaac told the Tribune, adding that his bill would encourage more Texas grape production.

Last year Texas produced about 3.8 million gallons of wine, according to the Texas Alcoholic Beverage Commission, and the state had more than 400 active permits to bottle, produce and sell wine. A separate study in 2015 found the wine industry contributed more than $2 billion to the state’s economy.

Grape growers and vineyard owners are scattered on the labeling issue. Paul Bonarrigo, co-owner of Messina Hof Winery, the state’s third-largest wine producer in 2016, said he was opposed to the measure, and the Texas Wine and Grape Growers Association said they don’t back Isaac’s bill, either.

[…]

Back at the Capitol, Isaac said that while 100 percent Texas wine was the goal, some in the industry contend that it might be too challenging to use only Texas grapes by September when the bill would go into effect if passed.

Isaac said he would look into offering an amended version of HB 1514 that would phase in the change, with benchmarks at 80 or 90 percent before requiring 100 percent Texas grapes. Isaac also said his bill would allow the Texas Department of Agriculture to allow exceptions to the threshold if severe weather or drought damaged state grape crops.

I don’t have any particular objection to this bill, though I think the federal 75/25 standard is perfectly adequate. Surely there’s some value in giving the wineries a bit of slack in a bad year. As long as there is a standard that everyone can accept and it is fairly enforced, I’m okay with whatever.

A win for beer

Hooray!

All you want for Christmas is a crowler to go? It probably won’t happen that quickly, but an administrative judge’s recommendation could move the state a step closer to letting bars and restaurants sell takeaway beer in the sealed, 32-ounce aluminum cans that sparked a passionate debate last year when officials cracked down on retailers who used them.

“I’m ecstatic,” said Todd Hayden, owner of Hop Scholar Ale House in the Spring area. ” … We sold a ton of beer in crowlers.”

Until last fall, that is, when Texas alcohol regulators ordered bars simply to stop using crowler-filling machines or risk losing their sales licenses or facing thousands of dollars in fines. Seven retailers, including three in the Houston area, received written warnings.

Selling beer for off-premise consumption in growlers, typically glass or stainless-steel bottles that are capped by hand, remained legal for retailers with the proper sales license. But the Texas Alcoholic Beverage Commission declared the crowler machines require a manufacturing license to operate. Only licensed brewpubs that make beer and can sell it to-go were allowed to continue using them.

Hayden and others put the machines in storage, but Cuvee Coffee of Austin challenged regulators by continuing to sell crowlers. TABC agents seized its equipment in September 2015. The company eventually sued in state District Court, but it was ordered to go through the administrative hearings process first.

Round 1 goes to Cuvee. In a decision dated last week, administrative judge John Beeler sided with the retailer on all counts and recommended that TABC return the equipment and change its rules.

See here for the background. Basically, the administrative judge agreed that crowlers are not usable in a manufacturing process and thus should not be subject to this requirement. The TABC can accept this ruling and adjust accordingly, or it can file an exception in the hope of getting the judge to change some part of his ruling. The deadline for that is December 2. It may still be awhile after that before the crowler machines come out of storage, but barring anything unusual this is a great result for Texas and everyone who drinks beer. Austin 360 and the Current have more.

Microbreweries win their distribution rights lawsuit

Excellent news.

beer

A Texas law that prohibits brewers from selling territorial rights to distribute their beer is unconstitutional, a judge ruled Thursday, serving up a major victory to beer companies seeking to expand their presence in stores, bars and restaurants throughout the state.

The decision says the government has no compelling interest in prohibiting brewers from seeking cash compensation when negotiating a contract with distributors, who have almost exclusive authority to handle sales between producers and retailers.

“This law, it was written by beer distributors to enrich big beer distributors and that is not a legitimate state interest,” said Matt Miller, senior attorney and head of the Austin office of the Institute for Justice, which litigated the case on behalf of Texas craft brewers Live Oak, Revolver and Peticolas.

The law, passed three years ago, allows brewers and distributors to negotiate for things like equipment and marketing efforts, but not direct compensation. That denies brewers who have worked to build up their business the ability to “capture the value of their brand” once they are large enough to require a distributor, said Charles Vallhonrat, executive director of the Texas Craft Brewers Guild.

A cash infusion from a distribution contract also would allow smaller breweries to expand operations, hire new employees and build up marketing teams to increase sales, Vallhonrat said.

Thursday’s ruling by state District Judge Karin Crump in Austin came after both the brewers and the Texas Alcoholic Beverage Commission sought summary judgments in the lawsuit. After considering depositions from both sides, Crump declared the law violates state constitutional protection for economic liberty.

[…]

Plaintiff Chip McElroy, founder of Live Oak Brewing Co. in Austin and one of the law’s most vocal critics, called it “unjust … unconstitutional … just plain wrong.”

“It took our property and gave it to them for free,” McElroy said Thursday.

Arif Panju, another Institute for Justice attorney in the case, said the ruling applies to out-of-state breweries as well. Miller said it protects all entrepreneurs looking to build up their businesses.

Miller said the ruling will help breweries going forward but does not address those who struck distribution deals while the 2013 law was in effect.

The Texas Alcoholic Beverage Commission has 30 days to file an appeal. A spokesman said agency lawyers are in touch with the Texas Attorney General’s Office and likely will appeal.

See here and here for the background, and here for a copy of the ruling. I hope the TABC will reconsider its inclination to appeal. This law serves no one’s interests except those of the Wholesale Beer Distributors of Texas. The state should not be spending its own resources pursuing a reversal of this ruling. As noted elsewhere in this story, if the original bill that forbade the microbreweries from selling their distribution rights had been about any other commodity, it would have been laughed out of the Capitol. Surely we have better things to do than this.

More from Austin 360:

Brewers and their fans might be rejoicing their victory right now, but they’re still holding their breaths over two other beer-related cases in Texas courts.

One case involves an issue that brewers unsuccessfully pushed for in the 2013 legislative session. As a result, Dallas’ Deep Ellum Brewing sued the Texas Alcoholic Beverage Commission last year to try and get breweries the ability to sell beer to-go from their facilities — something that wineries and distilleries in Texas are both able to do. (Operators of brewpubs, which sell food in addition to beer, also can sell their products to the public.)

Also, Cuvee Coffee decided to go to battle with the TABC over the issue of whether retailers can sell crowlers, which the TABC argues are one-use cans, rather than aluminum growlers, that only manufacturers of beer can sell.

Both cases are expected to be resolved within the next couple of weeks.

See here for more on the Deep Ellum lawsuit, and here for more on Cuvee Coffee. Let’s hope for a clean sweep. I’ll keep my eyes open for further news. The DMN has more.

Making the Heights a little less dry

From Swamplot:

beer

A GROUP CALLED the Houston Heights Beverage Coalition PAC is hoping to bring about a vote on allowing beer and wine sales in the technically dry section of the Houston Heights. The group published a notice on May 5th announcing an application to the city to start collecting the petition signaturesrequired to get the measure on a local option ballot.

[…]

The group’s immediate goal isn’t to do away with all alcohol restrictions, and the proposed ballot measure wouldn’t get rid of the current private-club workaround frequently employed by area bars and restaurants. But the proposal would lift existing barriers for stores trying to sell beer and wine to becarried away elsewhere — an issue that forced the recently closed Fiesta Mart at N. Shepherd and 24th St. to install its traditionally-in-the-parking-lot Beverage Mart a full 4 blocks away on the corner with 28th St. (across the northern boundary of the zone).

Here’s a map of the dry area, which hasn’t slowed the proliferation of places to dine and imbibe in the Heights. Many of them are east of Oxford, which puts them outside the zone. Others, like the Down House, do the “private club” dodge, while Torchy’s on 19th inherited a grandfathered license from a defunct icehouse. When I first read this story, I thought it would be about repealing the ban for eateries and drinkeries, but apparently not. The Press has since given some clarification about who and what is behind this.

The chair of the [Houston Heights Beverage Coalition PAC] is an attorney named Steve Reilley, a founding partner of the Thompson & Reilley law firm. He says that the main impetus for this action is that the group simply wants to have “a nice grocery store in the neighborhood.” He pointed out the recent closing of the Fiesta location in the area and says that retailers are unwilling to expand or move in owing to the inability to sell beer and wine. “They can’t make the money without the beer and wine sales. We hope we are able to bring these stores in if we are able to alter the statute,” he said. “We want the same nice stores you see in other parts of town and [to] have them be economically viable in The Heights.”

H-E-B is one of the grocery store chains that are eyeing building a store in The Heights, but nothing definitive has happened on that yet, according to Swamplot. We asked Reilley if H-E-B was one of the members of the Houston Heights Beverage Coalition. “I believe they have definitely expressed interest in it and they’re definitely going to support this,” he said. “It is my understanding that if it passes, they are going to very likely move into The Heights. To that degree, yes, they’re part of it, and I believe they will be part of it going forward.” We left a message for H-E-B’s director of public affairs in Houston to see if the grocery store chain has any comment, and will update this article if we receive a response.

Reilley said other grocery chains are part of the special interest group but said he wasn’t able to confirm that. He referred us to John Hatch of Texas Petition Strategies of Austin, a company that has been hired to oversee collecting signatures and, if the issue makes it onto the ballot, stumping for a passing vote. We left a phone message for Hatch but have not yet received a call back.

The press release says, “TPS has conducted over 300 petition efforts in 170 different Texas communities, with more than an 83% the efforts passing — including efforts in Brazoria County, Lumberton, Lubbock, Dallas and Fort Worth.”

I gather from recent activity on the Heights Kids message board that people have been out knocking on doors to gather petition signatures, with an aim of having something on the ballot this November. I also gather that some folks are not clear on the details of this issue – specifically, why part of the Heights is “dry”, what exactly that means, and why there needs to be an election to change it. That may add to their challenge. A this subsequent comment notes that there are some potentially tricky legal issues involved as well, meaning that however this shakes out someone may wind up suing over whatever the result is. Any lawyers in the crowd want to comment on that? In any event, we’ll keep an eye on this. I live outside the “dry” zone, so I (presumably) wouldn’t get to vote on this. If you’ve been asked to sign a petition, leave a comment and let us know. More here from Swamplot.

The latest example of how nuts our beer laws are

Ridiculous.

The latest flashpoint between Texas beer lovers and state beer law is a 32-ounce aluminum can that bars and restaurants fill with beer and sell to be consumed off-site. The can, called a crowler, is praised for its convenience and ability to keep beer fresh for longer than traditional to-go packaging.

The problem, state regulators say, is that the law prohibits retailers who do not have a manufacturing license from operating the filling machine.

On Tuesday, the Texas Alcoholic Beverage Commission made its most forceful statement to date, sending in agents to seize one from a bar that failed to cease operations after being ordered to do so.

The Cuvee Coffee Bar in Austin recounted the event on social media, giving it a Twitter hashtag of #crowlergate and setting the stage for another potential legal fight in the ongoing effort to change the alcohol code in Texas.

The friction began in late spring, when regulators heard about the growing popularity of crowlers and began investigating, often undercover. Several bars and restaurants were told to stop crowler sales and seven, including three in the Houston area, received letters threatening fines and a suspension of their beer and wine licenses.

They were given 30 days to remove the machine, which retails for $3,600.

In announcing Tuesday’s seizure at Cuvee, the TABC acknowledged the likelihood of a legal challenge.

“We know this issue is important to craft beer retailers and their customers, and we support all citizens’ right to petition the Commission, the Legislature or the courts if they feel a provision in the Alcoholic Beverage Code is unfair,” assistant chief for audit and investigations Dexter K. Jones said in a statement.

“However, we do not support the continued violation of the law just because a retailer disagrees with it. Cuvee Coffee ignored our repeated warnings and discussions, and that conduct resulted in TABC seizing the illegal equipment and subjecting its permit to a civil penalty. Other retailers who engage in illegal canning risk similar consequences.”

Local bar owners say crowlers have several advantages over growlers, the glass or metal containers more commonly used for to-go sales. Sealed cans keep beer fresher by insulating it from oxygen and any sunlight, they say, and they are convenient because customers don’t have to plan ahead and bring a growler with them when they go out.

This was the latest chapter in this story, but the first shots were fired back in July, and got heated up earlier this month. At its heart it’s a question of semantics – is a sealed one-use can fundamentally different than a reusable glass bottle? – but however you look at it, the bottom line is that our current laws make something that ought to be allowed illegal. This needs to change, partly because we’re not in 1933 any more, partly because the state allows wineries and distilleries freedom to operate that breweries and brewpubs don’t have, but mostly because it’s a bad deal for consumers. There’s already litigation over the state of Texas beer laws – it’s unclear whether this action will turn into a separate lawsuit or not – and I suppose there’s always hope for further change from the Lege. But one way or the other, this needs to change. Austin 360 and Eater Austin have more.

Craft beer lawsuit

This ought to be interesting.

On the same day merger talk surfaced regarding the world’s two biggest beer companies, a small Dallas brewery announced its own effort to shake up the industry in Texas.

Deep Ellum Brewing Co. launched the crowd-funded “Operation Six-Pack to Go” on Wednesday and said it had filed a federal lawsuit this week attempting to accomplish what multiple efforts in the Texas Legislature have failed to do: Give in-state breweries the right to sell their beverages directly to consumers for off-premise consumption.

While such sales are allowed at wineries, distilleries and brewpub restaurants, brewery visitors must drink any beer they buy before they leave.

John Reardon, the Deep Ellum founder leading the latest charge to allow these so-called dock sales, said antiquated laws hinder growth in the state’s rapidly expanding craft-beer industry. He and other craft brewers have long contended that to-go sales would provide startups with extra capital to expand and give all brewers a powerful marketing tool as people who visit the breweries take their product home and share with friends.

[…]

The lawsuit, filed in federal court in Austin against the Texas Alcoholic Beverage Commission and its three commissioners, calls the ban unconstitutional.

“The U.S. Constitution prohibits a state from creating irrational and arbitrary distinctions between similarly situated entities,” the lawsuit reads. “Texas, however, does just that by creating distinctions between various types of alcoholic beverage producers, which in turn harm those directly involved, including Texas businesses, citizens and tourists, and ultimately the Texas economy.”

Danielle Teagarden, a Seattle-based attorney who specializes in brewery law, said in these types of lawsuits states must provide some “rational” reason for the different treatment and show that it helps meet a legitimate state goal, such as facilitating taxation or maintaining orderly operation of the market. She said it is not a high standard and states have successfully defended their laws.

“It just has to move the dial a little bit toward that goal,” said Teagarden, who writes and edits the Brewery Law Blog.

[…]

The craft brewers should not expect any support from the wholesalers, said Rick Donley, president of the Beer Alliance of Texas, which represents some of the state’s biggest distributors.

Donley worked closely with craft brewers in 2013 to develop a package of successful bills that, among other things, gave production breweries the right to sell a limited amount of beer on site as long as it is poured and consumed there. This March, when the craft brewers returned to Austin in hope of lifting the ban on dock sales, Donley fought back strenuously. On Wednesday, he again insisted that the laws are not harming the craft segment of the industry.

“My god, they’re growing at 20 percent (annually),” he said. “Most companies would love to have that kind of growth.”

Donley said the crafts should wait until the 2-year-old reforms have been in place long enough to see their full impact in the marketplace before trying to further tinker with the three-tier system.

“We have done everything in the world, bending over backward to help craft brewers,” Donley said. “They’re just never satisfied. … They want more, more, more.”

Teagarden, the legal expert, noted that in 2011 a federal judge in Austin ruled against an importer that made similar claims about the different ways breweries and wineries are treated. However, Judge Sam Sparks said the company had failed to provide any evidence the TABC reasons were not rational. The regulators do not have the burden of proof, he wrote.

In another aspect of that same case, the plaintiffs claimed victory because Sparks overturned a TABC requirement that beer be labeled either “Beer” or “Ale,” a distinction that had no scientific basis and was often cited by out-of-state breweries as a reason they could not afford to do business in Texas.

At the time, fellow plaintiff Jester King Brewery of Austin highlighted one of the judge’s comments regarding the failed part of the lawsuit: “The State of Texas is lucky the burden of proof was on (the plaintiffs) for many of its claims, or else the Alcoholic Beverage Code might have fared even worse than it has.”

You can go here if you’d like to contribute to the crowdfunding effort for the lawsuit. There was another lawsuit filed in state court in December 2014 over the requirement for microbreweries to give away their territorial distribution rights for free. I don’t know where that stands right now, but keep it in mind when you read Rick Donley’s words about what a bunch of whiners the microbrewers are, as opposed to those paragons of virtue the distributors and big brewers who are only just trying to hold on to the advantages they’ve always had. We’ll see what the court makes of this one.

Making Pearland wet

It always amazes me that there are still cities that don’t allow alcohol sales in this day and age.

Absher is one of about 1,000 Pearland residents who have signed a petition to remove all restrictions on the city’s alcohol laws: opening up the possibility for bars, clubs and liquor stores within city limits. A group of residents is hoping to put the measure on the November ballot – they need to get almost 8,000 signatures by June 22.

Proponents say Pearland’s current liquor rules are unnecessarily restrictive and antiquated in a city that’s now grown to more than 130,000 people. They say tax dollars are unnecessarily going to nearby cities.

“It’s not stopping anyone from drinking in Pearland, it’s just putting that revenue into Houston or Friendswood or Sugarland,” said Kevin Murphy, a member of Leadership Pearland, a leadership program sponsored by the city’s chamber of commerce that’s spearheading the petition drive.

If Pearland gets its election, it would be part of a greater trend across Texas. In 2003, the state had 35 completely “wet” counties, or counties that had no restrictions on alcohol, and 51 completely “dry” counties, which banned alcohol sales, said Chris Porter, spokesman for the Texas Alcoholic Beverage Commission.

As of November, Texas had 49 completely “wet” counties and 10 completely “dry” ones, Porter said.

[…]

In 2007, Pearland removed a longtime restriction that required restaurants to register as “private clubs,” and patrons to sign up for those private clubs, to serve alcohol.

Now the city is looking to go even further. City councilman Tony Carbone said people visiting the city for conferences or other events “are not able to go out and have any drinks or anything.”

Removing restrictions would also help Pearland develop an identity as a city at a time when many of the new residents that have contributed to the suburb’s exponential growth look for entertainment elsewhere, like Houston.

“We want to have these things in Pearland,” said city councilman Greg Hill. “We don’t want to have to drive to Houston.”

Hill said most residents he’s spoken with are in favor of easing restrictions. But he said the hard part would be securing enough signatures to get it on the ballot, as many residents are not connected to local politics.

“The hard part is not going to be getting the vote to pass,” he said.

Anything that gets people more involved in their local politics is a good thing, if you ask me. I support this kind of effort on general principle, and I support it here. See this Community Impact story for more.

Wal-Mart sues Texas

It’s about booze.

Wal-Mart filed a lawsuit in an Austin federal court on Thursday challenging a Texas law that forbids the company from owning and operating liquor stores in the state.

The lawsuit says the Texas Alcoholic Beverage Commission code prevents Wal-Mart from obtaining a permit to sell hard alcohol because it is a publicly traded corporation.

Wal-Mart spokesman Lorenzo Lopez said the company is seeking a “fair and level playing field so we can offer our customers a full assortment of adult beverages.”

“This is counter to Texas’ belief in free enterprise and fair competition, limits our customer’s choice and keeps the price of spirits artificially high, all of which harm Texas consumers,” Lopez said in an email.

I’m not exactly a fan of Wal-Mart, but it’s hard to see the rationale for that law. I’m guessing it’s another remnant of Prohibition that never got updated or deleted, and now it has a constituency behind it in the existing retailers. Any lawyers want to weigh in on this one?

The battle over booze sales comes to Tomball

I always enjoy a good story about when a county or town votes on whether or not to repeal Prohibition-era restrictions on local alcohol sales.

Eight decades ago, the oil started flowing in Tomball and the whiskey soon followed. The boomtown began attracting a rough and rowdy crowd, prompting the town’s leaders a few years later to pass a law prohibiting the sale of hard liquor.

Two world wars, several social revolutions and a digital age later, the statute remains on the books. Only now, residents call this part of town historic “Old Town Tomball” and count the trendy shops and restaurants where one might imagine enjoying a Margarita or a Bloody Mary, in addition to the beer and wine sales that are now permitted.

That’s why many around town are looking with anticipation to Nov. 4, when voters will have a chance to repeal the Depression-era restriction.

“We would really be only going from moist to wet. We were never completely dry,” explains Bruce Hillegeist, president of the Greater Tomball Chamber of Commerce.

[…]

Tomball garnered the nickname “Oiltown USA” as the oil started gushing in 1933, the same year that Prohibition was repealed. Saloons and brothels soon sprouted up along the railroad tracks near the train depot, residents said.

“Boys were being bad. The area was getting too wild. So the town leaders decided to take control and ban the sale of all distilled spirits except beer or wine,” Wilson said.

Both the oil boom and brothels have long since gone bust.

“I don’t think the statute ever really toned things down back then,” she said. “They probably just drank more beer.”

The town’s mayor and chamber of commerce fully support this change as another step to draw people to Old Town Tomball, which is being revitalized by the opening of quaint shops and restaurants and the restoration of historic buildings.

As it happens, Tomball is named after a prohibitionist and fervent opponent of the demon rum, Thomas Ball. That’s because Ball – a lawyer and congressman credited with being the “father” of the Port of Houston – was responsible for routing the railroad tracks through this tiny community 32 miles northwest of Houston. The citizens of the town, which was then called Peck, were so grateful for their own train depot in 1907 that they changed the town’s name to honor him.

His connection to Tomball would later thwart an attempt to be elected governor, though. His opponent, James Ferguson, obtained photos of the town that bore his name. The images showed four saloons boasting nickel beer and 10-cent shots as well as houses of ill repute doing a brisk business.

Awesome. If there’s any organized opposition to this proposal, it went unreported in the story. Some of these referenda have been pretty hotly contested, but that doesn’t appear to be the case here. As I’ve said before, I don’t really understand the point of these laws and I support the efforts to repeal them. Good luck, Tomball.

The dry Heights

What’s a guy got to do to get a drink around here?

Heights dry map

Eighty years after the repeal of Prohibition – the anniversary of which came and went with hardly a toast last week – there is a sliver of Houston where the booze is still banned.

And for more than 100 years, that’s been just fine with the residents of the Houston Heights.

Back when it was a city on its own and not a historic Houston neighborhood in the shadows of the skyscrapers, Heights Mayor David Barker led a campaign to rid it of the saloons that were springing up on 19th Street.

One of those saloons had become famous due to Jennie Yon Yon, a monkey who would ascend into the sky every Sunday afternoon in a hot air balloon to entertain the festive crowds.

It was never, it seems, a moral issue pitting pros against antis. The good people of the City of Houston Heights simply wanted to protect their property values, says Sister Mary Agatha, an Incarnate Word teacher who grew up there, in the book she wrote on the neighborhood.

The boundaries of this island in alcoholic seas are not neat. But they basically follow an elongated area between the North Loop and I-10, bounded on the east by Studewood and on the west by North Durham.

There are irregularities to this rectangle, though, which have spread confusion over the years.

“The question of boundaries affected by the law comes more frequently to the Heights library for solution than any other purely local inquiry,” Sister Mary Agatha tells us. The Heights was annexed by Houston in 1918 and one would have thought that 15 years later, when the repeal of Prohibition opened the beer taps across the country, that would have applied to the dry Heights.

It didn’t. The legal underpinnings of that reality, however, were not resolved until 1937, when the Texas Supreme Court said the Heights was dry and would remain so until the people within the original boundaries of the neighborhood voted to make it other.

This is a subject that has been discussed in some depth – see, for example, Houstorian from 2007 and this Houston Heights newsletter from 2009; the Leader News had a story in November as well – but it’s one of the quirkier things about Houston’s history, so it’s always interesting. One of the irregularities as I understand it is that at least in some places, the eastern border is Oxford, not Studewood. This is why so many bars and restaurants with full bars have popped up on White Oak just west of Studewood, but very little has happened past where Onion Creek is. I’m not sure if this is the case at 11th Street or not; Berryhill has a full bar, but I’ve heard that they’re on a site that used to be an icehouse and they inherited a grandfathered exception to the dry regulations as a result. Like the story says, it’s confusing. I seriously doubt anything will change about the status quo. Residents of the neighborhood don’t want any more places that sell alcohol near them. Several of the existing bars and restaurants on White Oak encountered resistance from nearby residents that were concerned about noise and drunks, and some contention remains to this day. There are ways around the restrictions. Some places do BYOB, some operate as “private clubs” for which you have to buy a token membership before you can imbibe. One way or another it all works out.

Drinking al fresco

From the Things You Might Not Have Realized department.

beer

“It is a commonly-held belief that it’s illegal to walk down the street drinking a beer in Texas. However, that is not always the case.”

Those words, which we recently happened upon at the Texas Alcoholic Beverage Commission website, sparked wary excitement. We’d always chafed under the assumed strictness of Houston drinking laws, even fearing that we might receive a ticket for drinking in Houstonia’s unfenced Heights yard. Until, that is, we researched the Texas legal code, which states that public drinking is prohibited only in certain areas of state parks and wherever a city has specifically deemed it illegal. In 1994, the City of Houston successfully petitioned to ban drinking in public within the entire Central Business District (the area roughly bounded by Dowling Street and I-45, McGowen Street and Buffalo Bayou). On the one hand, you can’t drink on downtown’s streets, or Midtown’s or EaDo’s. On the other, it’s open season for open containers everywhere else.

Public intoxication, which the TABC defines as inebriation that “may endanger the person or another,” is illegal everywhere, of course. But there’s no law against strolling Allen Parkway with a Lone Star while taking in the skyline, or sipping margaritas to-go in Eleanor Tinsley Park. Just keep things classy and under control, not like you would in NOLA.

I’m a pretty moderate drinker these days, so this knowledge is of limited practical use to me. It’s still good to know, and hey, maybe it will be of more use to you. Link via Swamplot.

Amazon wine

You may soon be able to order wine from Amazon.com, depending on where you live.

Amazon.com Inc. AMZN -0.88% is planning an online marketplace for wine sales directly to consumers, said executives for several California wineries, marking the Seattle Web giant’s second foray into the business in three years.

Amazon hosted a workshop [last week] at a resort in Napa, Calif., and invited members of the Napa Valley Vintners association, said Terry Hall, a spokesman for the group. He said about 100 wineries attended the event.

At the event, Amazon said the marketplace would begin in the coming weeks and the online retailer will charge wineries a 15% commission of the sale price, as well as a monthly fee of about $40, according to people familiar with the workshop.

[…]

In 2009, Amazon pulled back from an effort to sell and ship wine after its partner, New Vine Logistics, suspended operations amid financial troubles. This latest effort would spare Amazon the cost and difficulty of shipping fragile and heavy wine bottles by passing that responsibility on to the vineyards themselves.

Wine sales online are challenging due to a patchwork of state-by-state rules that limit which companies can sell alcoholic beverages. And shippers must ensure that recipients signing for packages are at least 21-years-old, the legal limit.

The question you may be asking now is “Will I be able to order wine through Amazon to be shipped to Texas?” And the answer is…I’m not sure. Last year, the TABC cracked down on out of state resellers who were shipping to Texas without a state sales tax permit. The TABC addresses the question of direct shipping of wine to Texas consumers, and one of the things they say is “Under current state law, wholesalers / distributors are not authorized to ship wine directly to consumers in Texas”. However, out of state wineries may ship to Texas if they obtain a direct shipper’s permit, pay sales and excise taxes, and ship to a TABC permitted carrier. So I guess the question is whether Amazon would be considered a wholesaler/distributor in this scenario, or if the fact that the wineries themselves are doing the shipping opens a loophole for this to be permitted. I sense a legislative opportunity here, or failing that, future litigation. Anyone want to be a test case?

What does it mean to be a beer?

Boy, is that a deep question or what?

Until recently, beer drinkers who took their time to read the labels on their bottles or cans may have encountered some head-scratching fine print concerning Texas.

Underneath the name of Brooklyn Brewery’s Brooklyn Lager, for instance, was the note “In Texas, malt liquor.” Even closer inspection would reveal that the word “beer” did not appear on the label.

The labeling quirks were the result of a law that required all malt beverages (read: beer) containing more than 4 percent alcohol by weight to be labeled as either “ale” or “malt liquor” to be sold in Texas. The same law also prevented any drink with an alcohol content of more than 4 percent from being advertised in Texas as a “beer.”

“It made for a very awkward label,” said Eric Ottaway, the general manager of Brooklyn Brewery. “Try writing a description without using the word ‘beer.’”

That rule was overturned in December following a lawsuit, and the Texas Alcoholic Beverage Commission officially changed its labeling rules on July 24. Now, brewers can essentially label their products by whatever name they’d like, as long as the label includes the alcohol content. The judgment against TABC said its rules for labeling violated the First Amendment rights of beer makers by dictating what language they could and could not use to describe their products.

That would be the Jester King lawsuit, and it was a good thing for the industry and for us consumers. But you can’t talk about beermaking in Texas without bringing up the elephant in the room:

Small breweries have tried and failed to lobby the Legislature for changes to the code for a number of years, according to Leslie Sprague of Open the Taps, a craft brewing advocacy association. Sprague said the label law change could pressure the state into more changes in the future. Sprague said the laws Open the Taps is most interested in changing include rules that prevent breweries from selling beers on their premises and brewpubs from distributing their products to stores.

Earlier this year, the state Senate commissioned a working group of interested parties — including craft brewers, wine makers, distilleries, distributors and wholesalers — to consider other parts of the code that could be updated. The reason behind the group is at least in part to help avoid more future lawsuits, according to state Sen. Leticia Van de Putte, who helped organize it.

“Our alcohol beverage code has a lot of inconsistencies,” Van de Putte said.

“The alcoholic beverage code did not keep up with the market and technology,” she added, although she pointed out that law changes in the 1990s benefited the Texas wine industry. “It’s all over the place. I think there are things that we need to clean up,” she said.

Indeed. You can read more about Open The Taps and their efforts here and here. I do believe we will eventually fix what’s wrong with our anachronistic beer laws, as there is no good justification for them, but it won’t happen without a lot of people pitching in to make it happen.

There’s an app for binge drinking

There will be, anyway. And it’s not what you’re thinking because it’s the TABC that’s developing it.

As college students from across the nation head to Texas beaches for spring break, the Texas Alcoholic Beverage Commission is already making plans to have new tools at its disposal for next year’s partiers — mobile phone apps that it hopes will curb excessive and underage drinking.

One app will allow users to gauge their motor skills through a series of increasingly difficult tests, and the other would let anyone file a complaint against an establishment if it is suspected of serving alcohol to a minor or of breaking rules against serving too much alcohol to customers.

Although both apps are still in development, the former is designed to make people more aware of how much alcohol can affect them. Even basic tasks become difficult to perform as a person’s blood alcohol content rises.

The motor skills tests will be an educational component of a website, which will also have videos that discuss the dangers if individuals are unaware of their blood alcohol content.

The other app will enable anyone to file a complaint with the TABC to report suspected sales of alcohol to minors or overserving. Although those complaints can already be filed online,the TABC hopes that the app’s short-term costs will help to bring more minors — and the retailers who sell to them — into compliance.

I don’t know why any law enforcement agency would not have (or at least be developing) an app that would enable people to file complaints with them. It’s their most basic function, and it’s well-suited for that. How many underage drinkers will be narc’ed on as a result of this I couldn’t say, but having the app is still something I’d expect the TABC to do.

Can ban lawsuit moves to Travis County

Some new plaintiffs, too.

A group of river-related businesses has sued the City of New Braunfels, Texas Land Commissioner Jerry Patterson and Mark Vickery , executive director of the Texas Commission on Environmental Quality, over a ban on disposable containers on rivers within New Braunfels city limits that went into effect this year.

The suit, filed [last] Monday in a Travis County District Court, seeks a permanent injunction against the ordinance, claiming it is unconstitutional and effectively bans alcohol on the river. An attempted alcohol prohibition on the rivers was tossed out in 2000, in part because of a Texas Alcoholic Beverage Commission letter saying the city didn’t have the authority to ban alcohol.

[…]

Patterson is among the parties in this latest suit because he is the effective trustee of state-owned public waterways, the suit said. It said Vickery is named because the so-called can ban “unlawfully seeks to regulate and control municipal solid waste management activities that are within TCEQ’s jurisdiction.”

The story says that a “nonsuit” was filed by plaintiffs on Wednesday, which I presume means that the earlier litigation is no longer active. I welcome feedback on that from the lawyers out there.

Brewers win one in court

From CultureMap:

A small but significant victory was had for craft beermakers and drinkers Monday when a federal judge ruled (partially) in favor of Austin’s Jester King Brewery in a lawsuit against the Texas Alcoholic Beverage Commission.

Jester King filed a motion for summary judgement in Federal court in October over what it deemed to be violations of both its First and 14th Amendment rights.

Its First Amendment right to free speech, Jester King argued (along with two co-plaintiffs — a distribution company and an Austin restaurant) was violated by the TABC’s oft-criticized demand that any beer stronger than 4 percent be labeled as ale and anything with less than 4 percent alcohol by weight be labeled beer. The celebrated craft brewery argued that misusing technical terms as shorthand for alcoholic strength ignored hundreds of years of beer-making tradition and, in effect, misrepresented its brews and brewing processes to the public.

Jester King also claimed its 14th Amendment right to equal protection is obstructed by Texas’ three-tier system, which mandates that breweries (which produce beer on-site and distribute it to consumers) may not sell their wares on site while brewpubs (which produce and sell on-site) may not distribute it to consumers.

Here’s some background and analysis of the ruling, along with the wit and wisdom of Judge Sam Sparks, courtesy of Freetail’s Brewed And Never Battered blog. Briefly, this is what the ruling means:

To summarize, the ruling has the following effects:

TABC cannot prohibit you from telling customers or advertising where they can buy your products
TABC cannot require you to label your products by their definition of “beer” and “ale”
TABC cannot prohibit you from advertising the strength of your products by prohibiting words like “strong”, “prewar strength”, “full strength”, etc

There’s more to it than that, so go read all the links. The bits about how the TABC was essentially unable to justify its regulations was fascinating, and I hope inspiring to the next Legislature. That will be necessary, because the ruling did not strike down the regulations that forbid breweries to sell their wares directly to visitors even though wineries can do so. Keep pestering your State Rep and State Senator about this, because in the end it’s their job to make this happen. Plaintiff Jester King, I Love Beer, and Beer, TX have more.

Allowing alcohol sales in Buda and Kyle

More Texas towns seek to loosen restrictions on selling alcohol.

A political action committee hoping to make Buda and Kyle wet said it has collected enough signatures to put language easing laws regulating alcohol sales on each city’s ballot.

The Better Business for Hays political action committee, recently formed by business owners, is working on a proposition that would allow all alcoholic beverages to be sold in both cities where permitted under Texas law, clearing the way for a wider variety of bars and other establishments that serve and sell alcohol.

Currently, grocery and convenience stores in Buda and Kyle can sell beer and wine. Liquor stores can set up shop in Kyle but not Buda. Restaurants in both cities can obtain alcohol permits if less than half of their revenue comes from alcohol sales, according to the Texas Alcoholic Beverage Commission.

A restaurant’s permit allows the sale of liquor, wine and beer, but a less expensive permit to sell only beer and wine is not an option in either city.

[…]

City election officials have to certify the signatures against a list of registered voters to then make it on the ballots.

If approved, the proposition would be on the May 2012 ballot in Kyle and the November 2012 ballot in Buda.

We’ve seen quite a few of these elections in recent years – in Dallas, Lubbock, Luling and Friendswood – and as far as I can tell since I’ve been paying attention to this sort of thing, none have failed to pass. I’m always amazed at how many of these places there are, and how it is that these laws have remained on the books for so long. I wish the people of Buda and Kyle the best as they seek to update themselves.

Put that wine bottle down and slowly back away

Don’t buy wine over the Internet, kids. The State of Texas says so.

State officials have teamed up with FedEx, UPS and other shippers to ferret out wines being sent to Texas by websites that don’t have proper permits.

That has prompted Wine.com and several other resellers to restrict sales to consumers in the Lone Star State.

Wine.com has 30,000 active customers statewide, CEO Rich Bergsund told the American-Statesman on Thursday. Those customers were notified via email this month that the company had halted shipments of wine to Texas.

Other sites not currently shipping wine to Texas include TheWineBuyer.com, WineBid.com, WineExpress.com and WineLibrary.com.

A law blocking the deliveries isn’t new, but the Texas Alcoholic Beverage Commission has ratcheted up enforcement efforts this year.

“Anybody who is going to sell to Texans has to have a permit,” TABC spokeswoman Carolyn Beck said.

And, right now, Beck said, there’s no law enabling out-of-state resellers to obtain permits allowing them to sell wine here. “They haven’t been authorized by the Legislature,” she said.

Nasty little conundrum there, isn’t it? You need to get a permit to sell wine in Texas, but there’s no law that allows an out-of-state retailer to get such a permit. Thus are crackdowns like this born. There is one potential workaround for businesses like Wine.com, but it’s at best a partial solution:

In its message to customers, Wine.com indicated it was working to set up a warehouse in Houston in hopes of securing a state permit. A lease could be signed soon, Bergsund said.

“We are hoping the state government will see this as a win-win,” the company wrote in its email, “because we will bring valuable jobs into Texas, but there are no guarantees.”

A question-and-answer section on Wine.com indicates the company has used a similar approach in other states with similar restrictions.

“We’ve opened a network of Wine.com warehouses in a number of states, giving us a local presence in those states. This enables us to legally ship wine to our customers in those states while also reducing the shipping time to get you your wine. Unfortunately, in some states not even that will suffice, so keep those letters and emails flowing to your state legislators!”

Beck said Wine.com would only be able to ship to residents of Houston, Harris County and areas within a two-mile radius of Houston’s city limits if its proposed warehouse materializes.

Given that Texas wineries can sell and ship to any customers within Texas, one presumes that Wine.com would either have to open a storefront or start growing grapes here to qualify.

Unlike many industries, online wine sales are a minimal share of the total – about one percent, according to the story, though the potential for growth is there. It’s never going to be a dominant force, but that’s not stopping state regulators here and elsewhere from intervening. It’s hard to see this as anything but an anti-competitive move, one that like the byzantine restrictions we have on selling beer in this state will do nothing for the consumers. From my perspective, as long as the Internet retailers pay the same taxes as the brick and mortar folks, it’s all good. And speaking of such things, let me give the last word to the Austin Contrarian, from whom I saw this story:

Thankfully, Texas booksellers didn’t have the political clout wielded by wine merchants and wholesalers when Amazon was getting off the ground back in the 1990s, else the State would have banned buying books off the internet, too.

Good thing there isn’t a state agency equivalent to the TABC for books.

Mixing alcohol and caffeine

I don’t drink “energy drinks” or the new “caffeinated alcohol” drinks because they look hideous and I’m way too old for that crap, but apparently they have drawn the attention of the regulatory agencies for being potentially dangerous.

The Texas Alcoholic Beverage Commission this month asked vendors to cease distributing the products and remove them from store shelves. The request followed Food and Drug Administration, Treasury Department and Federal Trade Commission warnings to companies that make the beverages that they’re unsafe and illegal.

“It’s great that public officials are moving to discourage these canned products, but the mixing of the drinks is still very prevalent in bars and clubs,” said Dr. John Higgins, a Houston cardiologist. “It’s a very risky combination.”

Higgins, a professor at the University of Texas Medical School at Houston and the director of exercise physiology at the Memorial Hermann Sports Medicine Institute, recently released results of a study on the dangers from excessive consumption of just energy beverages, let alone such beverages mixed with alcohol.

His study found the combination, popular among young people in recent years, can impair cognitive and heart function.

I couldn’t find a link to Dr. Higgins’ study, which was apparently published in the Mayo Clinic Proceedings, but I found a reference to it in this article, which is also about bad effects of energy drinks. I have a feeling this is going to become a much more high profile fight soon.

One thing from the Chron story that didn’t look right to me:

Medical experts say the mixture creates “wide-awake drunks,” people unaware how intoxicated they are and able to consume more drinks before passing out. Higgins said the mixture’s opposite effects — “like pushing on the brakes and accelerator at the same time” — are hard on the central nervous system.

The cans, which contain as much as 12 percent alcohol and 200 mg of caffeine, pack a much stronger punch than, say, a rum and Coke.

Consuming a single can of Four Loko, for instance, has been compared to drinking five cans of beer and a cup of coffee, enough to give a small woman a blood-alcohol level about twice the legal limit.

I’d like to know who is doing that comparing and on what basis they make that statement, because the alcohol content of your typical American lager is 4.5 to 4.7% by volume, though there’s a lot of variation. Something that is 12% alcohol (I presume they mean by volume and not by weight here; the “by weight” value is about 80% of the “by volume” value) is therefore two to three times as alcoholic as beer, not five times as much. Either I’m missing something, or someone is being loose with the numbers. Hair Balls has more.

Today’s TABC

Interesting story about the Texas Alcoholic Beverages Commission and its struggles to find an identity. To me, the key bit of the whole thing is right here:

Moreover, the agency, formed in 1935, still has many rules and regulations on the books — wholesalers selling beer to retailers by law can’t accept credit as payment — more appropriate to the 1930s rather than 2010. As a result, the beverage commission can find itself in the peculiar position of a 21st century regulatory body enforcing moonshiner-era laws.

A wake-up call was sounded in 2005, when the Sunset Advisory Commission issued a sharply worded report on the beverage commission’s failure to keep up with the times. “TABC and the (Alcoholic Beverage) Code are in clear need of modernization,” it concluded.

We see that to some extent with the recent successful attempts by various municipalities to allow or expand alcohol sales, in effect finally ending Prohibition for themselves. A much bigger issue is all the state laws that still exist from that era, especially those that restrict the way alcohol can be wholesaled and transported. The virtual monopoly that the beer distributors have in this state as a result of that is a disgrace, which mostly benefits the behemoths at the expense of microbreweries. You’d think in a state that’s filled to the brim with self-styled defenders of the free market system that this travesty would have been fixed ages ago, but campaign contributions speak louder than words. It won’t surprise me if we hit the 100th anniversary of Prohibition’s repeal without any change to that status quo.

Lubbock gets officially wet

You may recall that the city of Lubbock voted to overturn its prohibition on alcohol this May, ending its long history of being America’s largest dry city (the vote was for the whole county, but still). Well, the citizens of Lubbock have been waiting since then for the Texas Alcoholic Beverages Commission to approve permits so that the booze can actually be sold. This week, those permits finally came, and the good times started rolling.

Beer trucks fanned out across Lubbock Wednesday morning making their first deliveries to grocers and other new alcohol retailers in the newly “wet” city.

And the demand, it appears, was bigger than distributors’ ability to reach everybody Wednesday.

“We couldn’t guarantee product in all nine stores today because of the demand on the distributors,” said Eddie Owens, director of corporate communications for United Supermarkets. “Everyone wanted the product at the same time.”

“Everyone,” as it turned out, added up to 83 retail locations that received permits from the Lubbock office of the Texas Alcoholic Beverage Commission. That included a mixed beverage permit for a bar and a restaurant mixed beverage permit.

“This was new for us,” Owens said, noting that United had never before dealt with a “reset” – rearranging store design to accommodate a new product – for all nine of its local stores at the same time.

Although there may not have been enough beer to go around, at least there was a lot of beer out there.

Wine fanciers weren’t so fortunate, however. Lubbock has no local wine distributors, so shipments come from elsewhere in the state.

Owens said that on the first day, only United’s Market Street locations had wine, and a small selection at that.

I’m sure that will improve over time. Here’s mud in your eye, Lubbock.

The fees not paid

The battle over the dueling strip club bills in the Lege this session has mostly been over how much revenue each would collect. But the state has to actually collect that revenue for any of that to be relevant.

Dozens of strip clubs across Texas have ignored a 2007 law requiring them to charge a $5-per-patron entrance fee, potentially costing the state millions of dollars meant to fund sexual assault programs, records show.

Not a dime has yet been used to help the victims of sexual assault.

Since the law went into effect last year, only about $12.2 million has been collected by the state under the law for sexual assault prevention and treatment, far less than the $50 million that had been expected.

“We are, of course, disappointed,” said Annette Burrhus-Clay, executive director of the Texas Association Against Sexual Assault. “But hopefully there will be more resources set aside for the comptroller to actually monitor this in the future.”

For whatever the reason, I don’t recall seeing that $50 million figure before, but it’s right there in the fiscal note to the original bill, so it must just be a case of faulty memory on my part. Having said that, the modified bill filed by Rep. Ellen Cohen was projected to bring in $16.5 million in annual revenue, or about a third as much. I suppose that’s why the $50 million figure surprised me; the difference is so great.

Cohen said she wasn’t surprised that some clubs have ignored the current law, especially in light of the uncertainty created by the court challenge and by the pending legislation.

“If they want to wait and see what’s going to happen, that’s their choice. They may end up having to pay it and penalties — I don’t know,” she said. “I do respect those clubs that have stepped up to the plate and paid.”

[…]

Topless and nude clubs in Houston and San Antonio have remitted about $4.3 million, about a third of the state total, records show.

More than 100 clubs, however, have ignored the fee entirely, while others have paid only small amounts. Some say they don’t want to charge customers more at the door.

Obviously, the court challenge changed things, but I have to ask – what would be the enforcement mechanism for this? I’m guessing a civil suit brought by the Attorney General. I suppose any license renewals, say from the TABC, can be denied pending payment of back taxes as well. Anybody know the answer for sure?

Don’t sell that beer just yet in Lubbock

It’s always something.

It will be eight weeks or more before shoppers see beer and wine in grocers’ coolers as stores line up to receive state alcohol permits.

The Texas Alcoholic Beverage Commission will issue permits to sell alcohol throughout Lubbock County after voters overwhelming approved two propositions expanding alcohol sales during Saturday’s county-wide election.

But questions about Lubbock’s zoning ordinances could further slow the process of opening the city up to alcohol retailers.

Challenging the city’s alcohol zoning ordinances, Pinkie’s and Majestic Liquor, which own the liquor stores at The Strip, last week filed a lawsuit against the city of Lubbock and the Texas Alcoholic Beverage Commission claiming the ordinances violate state law. The Lubbock City Council approved alcohol zoning ordinances in November 2008 in anticipation of Saturday’s vote.

Anti-alcohol PAC Truth About Alcohol Sales co-chairman Josh Allen said while he’s not involved in the suit, he does not “believe the City Council has much of an ordinance to stand on.”

He described the zoning ordinances, which use specific language regulating alcohol sales in Lubbock’s West Broadway District, and set a city standard for floor space and percentage of sales allowed of alcohol retailers, as contradictory to TABC regulations.

The liquor stores asked 237th District Judge Sam Medina to bar the city from issuing the necessary paperwork to obtain alcoholic beverage permits until an agreement can be reached on the wording of the ordinance. An Avalanche-Journal story last week reported Medina will consider at a hearing later this month whether to grant an injunction.

Here’s that earlier story.

The suit has nothing to do with whether alcohol should be sold in Lubbock, but rather who can sell it where, said Zach Brady, attorney for the stores.

“As far as we’re concerned, the citizens are going to decide whether we have alcohol sales in Lubbock,” Brady said. “But if we do choose to have those sales, my clients want to make sure that the rules are fair and that they comply with state law.”

The city council approved last December changes to the city ordinances defining where alcohol could be sold in anticipation of Saturday’s vote. Lubbock overstepped its authority when the council limited the size of package stores and specified what types of businesses could sell alcohol in the same area, Brady said.

The liquor stores asked 237th District Judge Sam Medina to bar the city from issuing the necessary paperwork to obtain alcoholic beverage permits until an agreement can be reached on the wording of the ordinance.

Cities do have options for zoning under the Texas Alcoholic Beverage Code, but the ordinances they establish cannot conflict with the state law, Brady said.

“What they’ve chosen to do is not among their options,” he said. “What they can’t do, expressly under the code, is to discriminate among the different classes of alcohol retailers. They can’t let one type of business sell alcohol in a given area and not let another type of business locate in that area.”

Obviously, the current setup is a better deal for the existing liquor retailers than whatever comes next will be. I’ve no idea what the merits of their suit are, but I can’t blame them for taking this step to protect their business. We’ll see what the judge thinks. Be sure to read this Texas Monthly feature, in the May edition, about the environment in Lubbock leading up to the vote as well.

The Statesman on the state of beer in Texas

The Statesman visits an issue with which we are familiar.

Ever wondered why you can’t go to the store and buy a six-pack of the North by Northwest Restaurant and Brewery’s beer? How about one more: Ever wondered why, in a state of 24 million that ranks second-thirstiest in terms of beer consumption, Texas has about, like what, eight craft breweries? Partly thanks to, say many in the business, the Texas Alcoholic Beverage Commission code, which keeps these small brewers from selling you a six-pack to go at the brewery.

Blame the code or blame beer distributors and their lobbyists, who wield a considerable amount of political power when it comes to TABC code changes, some small brewers say.

It’s very similar to the Houston Press story about the state of beer in Texas from October, with an update about current legislation such as HB2094. The brewpubs and microbreweries have done a pretty good job getting their story out about this, so even if they fail again to change the law this session, as is probably the case given the nature of the Lege and the way this session has gone, they’re putting themselves in a position where they can succeed. These things just take time.

One item from the story:

A compromise measure that would allow breweries to sell admission to tours, and for admission to include a beer sale, had a hearing before the House Committee on Licensing and Administrative Procedures last week, and Rick Donley, president of the Beer Alliance of Texas, testified in its favor.

“We had worked real hard with Rep. Farrar to craft some kind of legislation that would allow (brewers) to do some of the things they want to do without disrupting the three-tier system,” Donely said. “You’re not going to walk up and buy beer without taking the tour.”

As for some brewers’ gripe that distributors have disproportionate pull at the statehouse, Donley said: “I wish we had a tenth of the influence they think we have. The fact is the three-tier system has served the state well for many decades.”

I’d say the system has served the system well for many decades. Certainly, the distributors have no problems with it, which is kind of the point. If it served the state as well as it served the existing interests, we’d have a heck of a lot more microbrewers, brewpubs, and beer festivals than we currently do. Thanks to Guardian of the Non Sequitor for the link.

Response from the racetracks

When I wrote my earlier post about how much revenue expanded gambling would generate for Texas, I said I’d be more than happy to do a similar exercise for someone on the pro-gambling side of things. Sure enough, I got an email from Mike Lavigne on behalf of Texans for Economic Development, who sent me a copy of a study done by TXP that examined the question for the horse racing interests. I’ve uploaded it here (PDF) for your perusal. The main thrust of the argument is as follows:

Texans are already gaming at a high level. Based on data from a variety of sources, including state gaming commissions, convention and visitors bureaus (CVBs), and other academic studies, TXP has estimated the current gaming revenue in a seven-state region that is attributable to Texans at approximately $2.3 billion during 2007, the equivalent of about 3.8 percent of the national total. This is the assumed universe of current Texan gaming; while there undoubtedly are individual instances of Texans gaming elsewhere in the country, it does not appear to be significant.

The Innovation Group was engaged by Texans for Economic Development to estimate the size of Texas’ gaming market. A summary of their results follows. As the table indicates, the total Texas market approaches $4.2 billion in gaming revenue at full implementation. However, there is still leakage out of state, as some Texans will continue to game elsewhere.

A significant share of the revenue that would occur in Texas with the implementation of racinos would be recaptured from other states where Texans currently game. Measurement of the volume of this spending is done through subtracting the leakage out-of-state ($840.2 million) from the $2.4 billion figure, yielding recaptured spending of approximately $1.8 billion.

They estimate a total of about $3.4 billion in gambling revenue, which when taxed at 30% (the rate for racetracks is higher than what has been proposed for casinos) yields about $1 billion a year for the state. They make other claims as well about related economic activity and employment, which I’ll leave to you to examine.

I remain basically skeptical of the claims made here – I think some of these projections are optimistic, especially the ones made separately about the economic benefits for other businesses that flow from expanded gambling. I also think it’s foolish to rely on gambling revenue for anything other than “found money” – the Texas Lottery should be an object lesson there. Finally, there is a moral case to be made against expanded gambling, and I think we greatly underestimate the social costs associated with it, which the state does precious little to mitigate. I’ve got a future post planned for that, since it’s outside the scope of this one. Having said all that, I can at least see where the racetracks’ numbers are coming from, and while I think they’re sunny, they’re comprehensible and reasonable. We can argue over these numbers because they’re here to be argued over, which remains more than I can say for the casino interests, whose claim that they would generate $3 billion for the state looks even more ludicrous to me based on this.

I also asked Lavigne in an email exchange after he sent this to me about the bleak picture the racetracks have painted for their industry today, and why they would be a better vehicle for capturing the “leakage” than regular casinos. Here’s what he said, reproduced with permission:

The Racing Commission did indeed paint a glum picture. There is no denying the shape the industry is in right now. The primary reason is that purses in Texas are so low, there is no incentive for breeders to breed in Texas. If they take the same horse and breed it in Louisiana, NM or OK they will be eligible for much larger prizes. A large chunk of the money made in this bill will go toward growing purses here that will be competitive with not only with our neighbors, but with the eastern seaboard, where racing has had a lot more success. This model is the reason our industry in Texas has fared so poorly. When parimutuel wagering was legalized in Texas, there were very few (if any) racinos in our bordering states.

We don’t oppose the proposal for regular casinos on its face, but we do object to the disparate tax rates. That would surely kill any chance racinos would have to be successful.

As to why we think racinos would better capture the money than casinos? I think that is the wrong question. Both would be able to get at that money. We do have to look at political reality though. What is more palatable to the legislature? Full on casino gambling overnight? Or a smaller expansion at existing sites with legal wagering already taking place.

The Governor and many Republicans have repeatedly said that they do not want to expand the footprint of gambling. We believe our proposal is a more modest one.

The most important thing to remember about these figures is that the Comptroller will ultimately make the decision as to how much money these proposals would raise. She will do her own math.

So there you have it, the case for racinos. My thanks to Mike Lavigne for engaging me on this. If someone with the casino interests wants to show me their numbers, I’ll be more than happy to do this for them as well.

Finally, on a related note, whatever reservations I have about casino and/or racetrack gambling, I do support an expansion of legalized poker in Texas. HB222, introduced by Rep. Jose Menendez as the Poker Gaming Act of 2009, would establish poker as a “game of skill and not a lottery or gift enterprise prohibited by the Texas Constitution” and would thus allow for the creation and regulation of legalized games. In particular, it would allow establishments that hold a license to serve alcoholic beverages issued by TABC or a license issued by the Racing Commission to have the ability to host the game of poker. There was a hearing for this bill yesterday in the House before the Licensing and Administrative Procedures committee. I have no issues with this bill and support its passage.