Dear ALBA Members,

I  hope this message finds everyone well and business strong. After a long  summer we are in the beginning stages of preparing for the 2025  legislative session with the first meeting of the Liquor Industry  Stakeholders meeting , formerly called the omnibus bill. These meetings  bring together stakeholders of the liquor industry to debate issues and  create solutions, forming a legislative bill, that must be suitable to  all parties. ALBA Lobbyists Don and Marie Isaacson will be in attendance  every meeting to advance Alba Causes or protect our interests. Any  ideas or issues our members want addressed can be brought forward for  discussion. Any one of you can be involved in the process. Please email  me with any concerns you would like to address as this is the path to  address laws and policies that need correction or change. 

ALBA  met with Director Ben Henry of the Department of Liquor License and  Control to discuss gaming. While it seems gaming machines are finding  their way across the state, the departments policy has not changed,  which states these machines are illegal and placing them in your  establishment jeopardizes your liquor license. Although as of today  no licenses have been suspended or revoked because of gaming machines.

Agreeing  with the Liquor Department and the illegality of the machines, the  Maricopa County Attorney has brought no cases against any locations.  Alba will be meeting with the attorney General for clarification  regarding this important issue.

We  will also be meeting with Director Jackie Johnson from the Department  of Gaming and Director Thomson from the Arizona Lottery for an update on  lottery and any new products under development that will help  licensees.

Alba  is following the hemp beverage discussions and how it will affect  licensees and the potential bills that will be introduced this  legislative session.

ALBA  is working with our industry to educate voters on Proposition 138,  which will be on the November ballot and the harm it will cause small  businesses.

On all these issues we will be sending out updates as more information becomes available.

I  would like to thank ALBA membership for your support, including our  board of directors, who volunteer their valuable time and knowledge for  the benefit of our industry.

Thank  you to our industry partners including, Crescent Crown Distributing,  Hensley Beverage, Republic Nation Distributing , Southern Glazer’s Wine  and Spirits, and Breakthru Beverage for continued support.

For  over 80 years ALBA has made a difference and I would encourage you to  pass along our message to the hundreds of nonmembers in our state  enjoying the benefits from your membership.

Benefits  include liquor insurance discount programs, music licensing discounts,  discounted employee title 4 liquor training classes and liquor law  updates that can save hundreds of dollars a year.

WE can’t do this without you our members!

Thank you!

The following are notes taken from the first Liquor Industry Stakeholder meeting which was held on September 18th.

There will be more meetings before ideas and proposals are finalized.

Now is the time if as an ALBA Board member or a licensee to address any concerns or changes you would like to make.

Please contact me with any questions.

Don  and I participated in the Wednesday, September 18, 2024, Liquor  Stakeholder Meeting.

Below are the main discussion points from the  meeting:

1. Should we have a liquor industry bill this year? Points made in favor and against an industry bill:
2.  Can’t  decide until our deadline to submit proposals (deadline to submit ideas  is December 20), because we don’t know what our clients may want at  this time.
3.  Are we wearing out our welcome having a bill every year?
4.  Liquor  is an important industry and a major impact on the hospitality industry  with 15,000 licensees; there are bills every year, sometimes multiple  bills, on the same subjects, such as water, health care, hospitals,  liquor should not be ashamed to have a bill every year if it is needed; 
5.  Proposals  from industry for consideration to include in the liquor stakeholder  bill (getting away from using the term liquor omnibus bill):
6.  Craig  Miller – Evaluate government body license and determine if Tribes  should be added to the government license; casinos in the northern part  of the state, inadequate number of licenses available; there are 117  government licenses now (ball parks, count and state fairs, etc.)
7.  Craig Miller – Local government is doing research and determining if they will be bringing a proposal forward 
8. Craig  Miller – Clean-up rules and statutes regarding co-ops, currently there  are several rules and statutes and they would benefit from clean up. 
9. Craig Miller – Allow importer license in Arizona 
10. Jared  Repinski – Mixed drinks and cocktails to go, should we add to series 7  license (Steve Barclay will send out the written proposal) 
11. Jared  Repinski – Major events, e.g., super bowl, licensees would like the  ability to resell back to the wholesaler if they order too much liquor,  currently not allowed, it parallels special event licenses that allows  returns to be made (Steve Barclay will send out the written proposal)
12. Tom  Aguilar and Andrea Lewkowitz – would not propose these minor changes on  their own, but if there is a bill, would like to add removing “managing  agent” from definition in ARS 4-112.G 
13. Tom Aguilar and Andrea Lewkowitz – would like to replace the phrase “owned by same licensee” with “under common ownership” 
14. Tom Aguilar and Andrea Lewkowitz – would like to clarify ARS 4-203.F. 

 Director Henry, DLLC: 

1. Open house on October 8 from 9-11 
2. Vacancy on the DLLC Board, liquor industry, outside Maricopa County 
3. Budget request – records management system is the main request 
4. DLLC website is horrible; needs to be revamped; would like stakeholder participation 
5. DLLC  will be opening rules; rules don’t align with statutes; will have  stakeholder meetings, if not on DLLC stakeholder list, please request to  be added to the list 

League of Cities and Towns: 

1. Would  like to be a member of the liquor stakeholder group – everyone agreed  that “no” cities can’t be members, it won’t work; stakeholder group will  work to get cities legislation sooner in the process; if industry does  not involve cities sooner, may be at our own peril 

Other business: 

1. Craig Miller – would like clarification on limits on serving RTD’s – hard to quantify 
2. Don  Isaacson – consultant contacted him on behalf of ALBA this week –  working against initiative that would change current acceptable alcohol  consumption (2 drinks per day/males; 1 drink per day/females) to no  alcohol per day – federal agency may be moving toward this – Steve  Barclay – industry is working on this in DC 

Let us know if you need any additional information.

Marie

Marie Isaacson, Principal

Isaacson Law Firm, P.C.

Cell: 602-750-5023

Please find attached a description of Proposition 138, which will be on the Arizona ballot at the November election. The proposition was passed by  the Legislature, but must be approved by the voters if it is to become  effective. It relates to tipped workers in the hospitality industry and  in other settings where employees are regularly tipped. 

As all of you know Proposition 138 if passed will be another attack on  our bottom line. I would ask you as an ALBA member to share this  information and make all nonmembers aware of the impact this will have. 

Proposition 138 – Tipped Workers Protection Act

The  legislative ballot referral would amend Article XVIII of the Arizona  Constitution to allow for a 25% tipped wage credit. Currently, employers  may pay tipped employees up to $3.00 per hour less than the minimum  wage if the employer's records or the employee's declaration for Federal  Insurance Contributions Act (FICA) establishes that when adding tips or  gratuities to wages the tipped employee was paid at least the minimum  wage for all hours worked. Specifically, the referral:

•  Authorizes  an employer, for any employee who customarily receives tips or  gratuities, to pay that employee up to 25% less of the statutory minimum  wage.
•  Predicates  the 25% tipped credit on the furnishing of employer records or FICA  declaration that show the employee’s earnings, when adding tips or  gratuitiesn received to wages paid, stipulate the employee received not  less than the minimum wage plus $2 for all hours worked.
• Outlines  that compliance with the required tipped employee wage is determined by  averaging tips or gratuities received by the tipped employee over the  course of the employer’s payroll period or any other period selected by  the employer that complies with laws enacted by the Legislature. 
• Permissively designates the measure as the “Tipped Wages Protection Act”.

ALBA is working on getting the message out to all licensees across the state but we need your help.

https://www.azleg.gov/alispdfs/Council/2024BallotMeasures/adopted%20analysis%20Proposition%20138%20SCR1040%20-%202024.pdf

All  ALBA members should be aware that there is a new committee in  Washington DC that is developing new alcohol consumption guidelines, for  national publication purposes.

The  current alcohol consumption guidelines adopted a number of years ago as  part of the U.S. Government’s “Dietary Guidelines for Americans”,  recommend that a male adult consume no more than two alcoholic drinks  per day, and that a female adult consume no more than one alcoholic  drink per day. 

There  is widespread concern among the alcohol industry that a current working  group in DC could recommend far lower consumption levels or zero  consumption. If this happens, the recommended guidelines could find  their way into a variety of US government agency policies. 

It  appears that most national-based alcoholic beverage associations are  fully aware of the risk and are actively engaged in opposing the US  government effort. The agency that traditionally develops the  recommended guidelines is the Scientific Advisory Committee for the US  Department of Health and Human Services; they will continue to have a  role in addressing the level of recommended alcohol consumption. But new  this year is a six-member select committee known as the “Interagency  Coordinating Committee on the Prevention of Underage Drinking“ (ICCPUD).  Because the membership on this committee includes several known members  who advocate for zero alcohol consumption, there is a great deal of  concern with respect to the committee’s likely recommendations. 

The  good news is that there is a significant effort among the  national–based spirits and beverage industries that is actively raising  the alarm bell as to this new committee’s work. Additionally, a number  of Congressmen have directed letters to the White House objecting to the  new committee.

Will Cutting the BAC Limit to .05 Really Make Our Roads Safer?

Utah’s  experiment with stricter drunk driving laws has led to more fatalities,  not fewer. The push for lower BAC limits is missing the real problem.

Source: https://reason.com/

C. Jarrett Dieterle

September 22, 2024

In  the 1980s and '90s, a push to lower the legal blood alcohol content  (BAC) limit for getting behind the wheel took the country by storm.  Mothers Against Drunk Driving (MADD) was formed in 1980, and in 2000,  President Bill Clinton signed into law the nationwide .08 BAC  limit—conditioning the provision of federal highway funds on state  compliance with the new limit.

Drunk  driving rates are far lower today than several decades ago—falling by  around half since the early 1980s, according to the National Institutes  of Health. Even so, controversy over the legal limit has found renewed  life, with a campaign to push for even further reductions in the  permissible BAC level for driving.

The  World Health Organization's (WHO) 2024 global status report on alcohol  and substance use disorders garnered attention for noting that most  countries have moved to a .05 or lower BAC legal limit. Media outlets  like The New York Times and National Geographic were quick to run  articles about America's seemingly outlier status when it came to  drinking and driving.

Advocates  for the lower limit cite laboratory and simulator research that  purports to demonstrate alcohol impairment setting in at lower BAC  levels than .08 and which conclude that lowering the legal limit would  therefore reduce crashes and deaths. A study drawing on international  BAC levels concluded that reducing the U.S. BAC level to .05 would  result in an 11 percent reduction in alcohol-related crashes.

Utah  became the first state to reduce its BAC level to .05 in 2018, which  makes it a critical case study of what would happen if more states  followed suit. The WHO has pointed to a 2022 National Highway Traffic  Safety Administration (NHTSA) study finding that Utah's law change had  resulted in a dramatic and almost immediate 20 percent reduction in  drunk driving deaths.

As expected, that isn't the whole story.

Despite  being published in 2022, the NHTSA study only tracked one year of  post-.05 data: Utah's 2019 drunk driving deaths (the .05 law was passed  in 2018 and went into effect starting in 2019). From 2016-2018, there  were an average of just over 33 drunk driving deaths per year in the  Beehive State, including a particularly deadly 2018, which saw 48 deaths  alone. In 2019, the first year of the .05 law, deaths plummeted to 27  and the law was heralded as a massive success.

Following  that dramatic dip, however, drunk driving deaths in Utah bounced back  to 48 in 2020. In 2021, there were 61 fatalities, and in 2022, there was  a state record of 69 deaths.

And  yet, two prominent New York Times articles from earlier this year on  America's higher-than-average BAC level cited Utah's 20 percent  reduction in drunk driving deaths in 2019, but said nothing whatsoever  about Utah's drunk driving death data since then. The aforementioned  National Geographic article, and even WHO's much-ballyhooed report,  likewise did not acknowledge the existence of the post-2019 Utah data,  despite 2024 publication dates.

Local Salt Lake Tribune columnist Robert Gehrke, on the other hand, is willing to state the truth:

In  the four years since the law took effect, 187 people died in  alcohol-related crashes, up about 20 percent from before the law passed,  and the last three years have been the highest on record.

Obviously,  I'm not suggesting the law is to blame. The drivers are. But the law  hasn't worked because it isn't targeting the real problem—those who  drink well beyond any legal limit and get behind the wheel.

Half  of all drunk drivers who are involved in fatal car wrecks are extremely  intoxicated—sitting at BAC levels of 0.15 or higher. In contrast, only  16 percent of those involved in fatal wrecks have BAC levels under 0.08  (and the number is even lower for those specifically in the .05 to .07  range who would presumably be impacted by a switch to a .05 legal  limit).

The  worst drunk driving perpetrators are also often repeat offenders who  appear to be impervious to any legal limit. About 30 percent of DUI  arrestees in Utah had a prior arrest for drunk driving and 10 percent  had two or more arrests. This is the political reality that few want to  address. The couple who has a couple of glasses of wine with dinner is  not the problem—it's the person who is well over the legal limit and  often a repeat offender who is causing the majority of carnage on  American roads. In fact, even Candace Lightner, the founder of MADD is  against the proposal, stating that "running around trying to arrest  everyone at .05 is impractical."

Proponents  of lowering the legal limit may still argue that even one life saved  with a lower BAC level is worth whatever costs might be associated with  more DUI arrests. Even if this line of logic is adopted, however, the  penalties could at least be reduced for those in the .05–.07 range, or  the infraction could be converted to a civil fine rather than criminal  sanction.

No one wants to see more drunk driving deaths in America, but we won't decrease them by ignoring the data.

Some experts are calling for age restrictions on the sale of nonalcoholic drinks. Here’s why

Some researchers who study alcohol use say states should restrict the sale of nonalcoholic drinks to minors.

Source: https://www.cnn.com/

September 23, 2024

They  won’t get you buzzed, but some experts say low-alcohol and alcohol-free  beers and mocktails shouldn’t be sold to minors, and they’re calling  for laws that curb underage sales to kids and teens.

The  market for nonalcoholic drinks has been growing as more people —  notably younger adults — look to cut their alcohol use. In order to be  considered nonalcoholic, these drinks have to contain less than 0.5%  alcohol by volume.

The  sober-curious movement has given rise to ready-to-go drinks in cans and  bottles that often look just like their boozy counterparts. There’s a  version of Budweiser beer called Budweiser Zero, for example, and a  nonalcoholic version of Corona beer in the same signature longneck  bottles.

“It’s  a way to blend in for a lot of folks who are using these in social  settings,” said Dr. Molly Bowdring, an instructor in the Stanford  Prevention Research Center.

But the products may offer an entry point into drinking culture that some experts are worried could foster unhealthy habits.

Actress  Kristen Bell ruffled some feathers last year when she said on Kelly  Clarkson’s talk show that she lets her young daughters drink their dad’s  nonalcoholic beer at home.

“They’re  unlikely to lead to intoxication, but they contain many of the same  cues as alcohol – so flavor, look, smell, experience of sipping and  sometimes even the same brand as alcoholic beverages,” said Bowdring,  who recently published a commentary on the issue in the journal JAMA  Pediatrics.

If  nobody’s getting tipsy, what’s the harm? Bowdring says there’s emerging  evidence that nonalcoholic beverages may prime kids to switch to the  real thing.

The research that’s raising eyebrows comes from Japan, Taiwan and Australia.

Source: https://www.law360.com/

September 23, 2024

Lately,  a wave of restaurant bankruptcies has made headlines, from Buca Di  Beppo filing for Chapter 11 on Aug. 4 due to its unmanageable debt load,  to Red Lobster struggling to stay afloat and filing for Chapter 11 on  May 20.

In  the past few months alone, other well-known chains have also sought  Chapter 11 protection, like Tijuana Flats, which filed for bankruptcy on  April 19, Rubio's Coastal Grill, which filed on June 5, World of Beer,  which filed on Aug. 2, and Roti, which filed on Aug. 23. With this  sudden surge in filings, many are left wondering: Why now, and why so  many all at once?

During  the COVID-19 pandemic, the federal government stepped in to provide a  lifeline to struggling businesses, offering substantial financial relief  through programs like the Paycheck Protection Program; the Economic  Injury Disaster Loan, or EIDL; and the Main Street Lending Program, or  MSLP. These initiatives were crucial in helping small businesses stay  afloat during an unprecedented economic crisis.

However,  as these loans come due, many small businesses are now grappling with  the heavy burden of repayment. Restaurants, which were among the  businesses most affected by the pandemic, relied heavily on these  government support programs and are now feeling the pressures of  repayment.

According  to a report by the Federal Reserve Bank of Cleveland, 52% of businesses  with outstanding EIDL loans reported challenges in meeting their debts  obligations in 2023.

Similarly,  the Paycheck Protection Program, which was supposed to be forgivable,  has seen an ever-increasing number of prosecutions for fraud. One law  firm has started a tracker that shows the civil and criminal cases that  have been brought against recipients.[1]

Finally,  the MSLP, introduced in April 2020 and closed to new applicants on  January 8, 2021, still has approximately $5 billion in outstanding loans  as of July 2024.[2]

These  loans are structured with an amortization schedule where 15% of  principal is due at the end of Year 3, 15% of the principal is due at  the end of Year 4 and the balance of 70% is due at the end of Year 5.  Consequently, all MSLP loans will begin requiring principal repayment by  the end of 2024, with some of the earliest loans being fully due by the  end of 2025.

Compounding  matters, many businesses did not just utilize one of the government  programs, but many utilized all three. For small businesses that are  already facing general economic headwinds of inflation and potentially  slowing economic growth, the onerous repayments of the EIDL and MSLP  programs can be enough to force a small business to consider bankruptcy  or another restructuring option.

Further,  complicating the relationship between lenders and borrower is that the  private banks who originated the MSLP loans and act as servicers are not  free to modify the loans as they see fit. If it is a core right, then  an entity — controlled by the federal government through the Federal  Reserve — must sign off on any consensual change.

Core  rights include any reduction in the principal, interest rate or any  fees. They also include the postponement or delay of any payment.[3]  This makes an out-of-court workout exceedingly difficult, since time and  relief from payment are generally the two most important concessions a  struggling debtor is seeking.

EIDL  loans are also government administered by the Small Business  Administration. Therefore, the likelihood of a successful out-of-court  workout or modification is also small. However, these loans offered  lower interest rates and a longer repayment period.

These  out-of-court restructuring restrictions make Chapter 11 or Subchapter V  extremely attractive to debtors. MSLP loans are treated like all other  secured loans and there is the possibility of using all the tools of the  bankruptcy code including but not limited to potentially removing liens  from collateral if the situation warrants.[4]

Indeed,  City National Bank of Florida sued a Louisiana-based Applebee's  franchisee in the U.S. District Court for the Southern District of  Florida in August for default on an MSLP loan of $8.3 million.[5]  

Although a forbearance was apparently entered in this case, in the end  the borrower apparently could not sustain its business under the weight  of the repayment obligations that were mandated by the MSLP loan.

Another  example is WOB Holdings LLC, doing business as World of Beer, which  filed for bankruptcy in the U.S. District Court for the Middle District  of Florida in August. In its case management summary, World of Beer  noted that it had taken an $8 million MSLP loan. It used those funds to  expand and build three new locations. But the new locations never became  profitable. This resulted in negative cash flow that years later  resulted in the filing of the bankruptcy case to address these  issues.[6]

Bankruptcy  is a very powerful tool to adjust the balance sheet of a struggling  entity. The common thread in all these cases is that the business could  be successful if the debt load was rightsized. This is the  quintessential and most successful set of facts for a positive outcome  in a Chapter 11 case.

The  concerns in 2020 at the height of the COVID-19 pandemic encouraged  businesses to access government programs that had deferred repayment  terms. Loans like MSLP had long periods of time when little to no  repayment was required, allowing borrowers, like restaurants, to ignore  the looming balance sheet issue and hope that tomorrow would bring more  revenue.

However,  the bill for accessing that easy money is now arriving, and the price  is not cheap. An uncertain economy, increased interest rates and now  debt repayments create the perfect storm for many small businesses.

Most  restaurants already operate on thin margins, so the added burden of a  sudden and substantial loan repayment can easily push the entire  business into failure.

Accordingly,  it is likely that the trend of restaurant Chapter 11 cases will  accelerate over the coming months, as more establishments struggle to  survive the mounting financial pressures.