PUBLIC HEARING: SB 871, SB 344, SB 807

 

TAPES 86-87, A-B

 

SENATE REVENUE COMMITTEE

April 9, 2003†† 1:00 PM†† STATE CAPITOL BUILDING

 

Members Present:††††††††††† ††††††††††† Senator Ryan Deckert, Chair

††††††††††††††††††††††† ††††††††††† ††††††††††† Senator Ted Ferrioli, Vice Chair

††††††††††††††††††††††† ††††††††††† ††††††††††† Senator Tony Corcoran

††††††††††††††††††††††† ††††††††††† ††††††††††† Senator Lenn Hannon

††††††††††††††††††††††† ††††††††††† ††††††††††† Senator Charlie Ringo

††††††††††††††††††††††† ††††††††††† ††††††††††† Senator Bruce Starr

 

Witnesses Present:††††††††††† ††††††††††† Rob Douglas, Diageo

††††††††††††††††††††††† ††††††††††† ††††††††††† Joe Gilliam, Oregon Grocery Industry Association

††††††††††††††††††††††† ††††††††††† ††††††††††† Paul Romain, Oregon Beer and Wine Distributors Association

††††††††††††††††††††††† ††††††††††† ††††††††††† Pamela Erickson, Oregon Coalition to Reduce Underage Drinking

††††††††††††††††††††††† ††††††††††† ††††††††††† Kathy Stromvig, MADD

††††††††††††††††††††††† ††††††††††† ††††††††††† Dave Hendricks, Legislative Counsel

††††††††††††††††††††††† ††††††††††† ††††††††††† John Stubin, Oregon Liquor Control Commission

††††††††††††††††††††††† ††††††††††† ††††††††††† Mark Nelson, Anheuser Busch Co.

††††††††††††††††††††††† ††††††††††† ††††††††††† Gregory Altschuh, Flavored Malt Beverage Coalition

††††††††††††††††††††††† ††††††††††† ††††††††††† Jim Parker, Oregon Brewers Guild

††††††††††††††††††††††† ††††††††††† ††††††††††† Bob Doppelt, Lane County

††††††††††††††††††††††† ††††††††††† ††††††††††† Chuck Sheketoff, Oregon Center for Public Policy

††††††††††††††††††††††† ††††††††††† ††††††††††† Alan Apodaca, J.C. Penney

††††††††††††††††††††††† ††††††††††† ††††††††††† Joe Schweinhart, Associated Oregon Industry

††††††††††††††††††††††† ††††††††††† ††††††††††† Lee Beyer, Oregon Public Utilities Commission

††††††††††††††††††††††† ††††††††††† ††††††††††† Louis Pitt, Confederated Tribes Warm Springs

††††††††††††††††††††††† ††††††††††† ††††††††††† Michael Mason, Confederated Tribes Warm Springs

††††††††††††††††††††††† ††††††††††† ††††††††††† Roger Martin, Confederated Tribes Umatillos †††††††††††

 

Staff Present:††† ††††††††††† ††††††††††† Paul Warner, Legislative Revenue Office

††††††††††††††††††††††† ††††††††††† ††††††††††† Lizbeth Martin-Mahar, Legislative Revenue Office

††††††††††††††††††††††† ††††††††††† ††††††††††† Richard Yates, Legislative Revenue Office

††††††††††††††††††††††† ††††††††††† ††††††††††† Steve Meyer, Legislative Revenue Office

††††††††††††††††††††††† ††††††††††† ††††††††††† Tara Lantz, Committee Assistant

 

TAPE 86, SIDE A

 

004

Chair Deckert

Calls meeting to order at 1:07pm.

 

OPENS PUBLIC HEARING ON SB 871

 

026

Rob Douglas

Discusses products of Diageo. Testifies in support of SB 871 because the OLCC has determined that flavored malt beverages donít fit under the definition of malt beverages and has issued a letter to all distributors informing them that these beverages will no longer be sold in grocery stores. Discusses house bill that also provides an acceptable solution. States that the federal government is working towards a solution, but that Oregon needs to do something to avoid falling into a gap until a federal solution is achieved.††

 

 

 

065

Sen. Deckert

Asks if each state would have to reformulate beverages to conform to their differing definitions.

 

 

 

069

Douglas

Responds that they are asking for a uniform standard and that the federal definition doesnít automatically flow through to the state.

 

 

 

070

Sen. Hannon

Asks if OLCC created the definition by administrative rule.

 

 

 

075

Douglas

Responds negatively.

 

 

 

084

Sen. Hannon

Asks if this would put them in the same restrictive definition that other states follow by having the statutory language rather than having the OLCC administratively taking different action.

 

 

 

094

Douglas

Responds that it could potentially be a problem and that the house bill that was introduced is a better solution because it holds in advance any change that is going on now until the feds adopt a standard.

 

 

 

100

Sen. Deckert

Asks for an estimate on when the feds would move on this issue.

 

 

 

101

Douglas

Responds that he is not sure.

 

 

 

103

Sen. Ringo

Asks about concerns that the beverages being discussed are targeted towards teenagers.

 

 

 

109

Douglas

Responds that there was a study done that concluded that they were not targeted towards teenagers.

 

Discussion follows.

 

 

 

117

Sen. Ringo

Asks why it would not work to sell these beverages in liquor stores rather than grocery stores.

 

 

 

127

Douglas

Responds that liquor stores have no interest in having these drinks in their stores because of their low percent of alcohol.

 

 

 

142

Joe Gilliam

Testifies that the Grocery Association is undetermined on SB 871 because they are trying to clarify the authority of the OLCC and how to keep these products on the shelf. States that their objective is to keep the status quo. Discusses differences in alcohol definitions and questions that they have on the issue. Refer to written testimony. Exhibit 7.

 

 

 

191

Sen. Deckert

Asks if counsel has advised on whether the legislature has the authority to link to federal legislation.

 

 

 

193

Gilliam

Responds negatively.

 

Discussion follows.

 

 

 

209

Paul Romain

Testifies against SB 871 because no matter what the federal government does, Oregon has the authority to determine how to distribute alcohol products. Points out that you cannot tie to what the federal government might do in the future. Discusses study that was done to find out what was in these products. States that there is no need for a bill and that everything that is not beer should be sold in liquor stores rather than grocery stores.

 

 

 

373

Pamela Erickson

Testifies against SB 871 because ďmalternativesĒ are targeted towards teenagers and should be sold in liquor stores.Disagrees with the fact that these drinks are taxed at the rate of beer. Refer to written testimony. Exhibit 4.

 

TAPE 87, SIDE A

 

019

Sen. Ferrioli

Asks if these drinks could be currently sold at state liquor stores.

 

 

 

023

Erickson

Responds positively.

 

 

 

024

Sen. Ferrioli

States that he was under the impression that only drinks above 5 percent alcohol could be sold in state liquor stores.

 

 

 

026

Erickson

Responds that she isnít sure about the language of the law.

 

 

 

035

Sen. Hannon

Asks if there was any attempt to regulate this type of sale when Erickson was at the OLCC.

 

 

 

036

Erickson

Responds that when she was at the OLCC, they believed that they were malt beverages and that they didnít question it until they got the formulation which showed they are mostly made up of distilled spirits.

 

 

 

048

Sen. Hannon

Asks if these beverages still have to be bought by over-age people in grocery stores.

 

 

 

053

Erickson

Responds positively.

 

 

 

054

Sen. Hannon

Asks how it gets into the hands of teenagers and why it would be any different in a liquor store.

 

 

 

057

Erickson

Responds that research has showed that younger children are likely to get it from their home or from an older kid, but the older they get the more likely they are to buy it from a convenience store or grocery store. States that you must be 21 to get into a liquor store.

 

 

 

068

Sen. Hannon

Suggests that they need tougher laws in regulating grocery stores and their marketing to teens. States that even if they put these beverages in liquor stores, the advertisements will still be there attracting teenagers.

 

 

 

087

Erickson

Responds that the strategy to reduce underage drinking would be the same as any product, such as frequent compliance checks.

 

 

 

090

Sen. Deckert

Asks if there is evidence that these beverages are targeted towards teenagers and young women.

 

 

 

092

Erickson

Responds that there isnít evidence that a company looks to teenagers as their target customer but that marketers are not careful and that teenagers are susceptible to advertisements.

 

 

 

115

Sen. Deckert

States that it would be easier for them if there was hard evidence that Ericksonís assertions were true.

 

 

 

118

Erickson

Responds that there is a major study going on at Georgetown University on marketing to teens and points out that the wine industry is good at targeting adults.

 

 

 

123

Kathy Stromvig

Testifies in opposition to SB 871 and discusses advertising strategies to target under-age drinkers.

 

 

 

167

Sen. Ringo

Asks if there is any objective data on teenage consumption of these beverages.

 

 

 

170

Erickson

Responds that there is no data on which products are being consumed because they are so new.

 

 

 

173

Sen. Ringo

Responds that he would be more comfortable with hard data.

 

Discussion follows.

 

 

 

201

Sen. Deckert

Asks if they can link to the federal statute on this issue

 

 

 

203

Dave Hendricks

Responds that you cannot pick up subsequent changes. Discusses where the feds are right now in their rule making process.

 

 

 

249

Sen. Hannon

Asks if the OLCC has any intention of adopting a rule or changing the authority on these types of products.

 

 

 

251

John Stubin

Responds that they have been advised by counsel to continue the current state of marketing this product would require a statutory change.

 

 

 

257

Sen. Hannon

Asks what counsel is basing that decision on when Hendricks just informed them that they do not have to follow the federal standard.

 

 

 

259

Stubin

Responds that they became aware from the federal government that these products would have problems meeting state law and that it revolves around the state definition as a malt beverage.

 

 

 

266

Sen. Hannon

Asks about estimated tax revenues from selling this through the OLCC rather than grocery stores.

 

 

 

274

Stubin

Responds that he is not aware of any analysis on tax revenues.

 

 

 

281

Sen. Hannon

Asks if this has anything to do with revenues.

 

 

 

286

Stubin

Responds negatively.

 

 

 

293

Sen. Hannon

Asks if the companies could reformulate the beverages to make them compliable.

 

 

 

298

Stubin

Responds positively.

 

Discussion follows.

 

 

 

323

Sen. Deckert

Asks if the OLCC can ban the sale of drinks containing less than 5% alcohol.

 

 

 

328

Stubin

Responds negatively.

 

 

 

332

Sen. Starr

Asks if products that contain less than 5% alcohol could be sold in OLCC stores.

 

 

 

335

Stubin

Responds negatively.

 

 

 

346

Romain

Responds that anything less than .05 percent alcohol is not considered alcohol in definition. Points out that there is no mechanism for distribution of these beverages under Oregon law.

 

 

 

376

Sen. Deckert

Asks how they got to this point.

 

 

 

378

Romain

Responds that there was a lot of confusion in the industry about what was in the product and when a study was done it showed that the majority of the alcohol comes from distilled spirits. Discusses Oregonís definition of a malt beverage.

 

TAPE 86, SIDE B

 

030

Sen. Corcoran

States that it is his understanding that this was brought to them because of an act by the chair of OLCC that other members of the commission were not aware of.

 

 

 

035

Stubin

Responds that this issue was discussed in public meetings before the board of commissioners and that there was agreement that they had a legal definition problem.

 

 

 

043

Romain

Responds that the OLCC was very cooperative.

 

 

 

061

Mark Nelson

Explains the current situation and states his intent to reformulate the products to bring them under the current definition. Declares that a bill is unnecessary because all brewers have decided to reformulate.

 

 

 

093

Richard Yates

Clarifies alcohol percentages.

 

 

 

104

Gregory Altschuh

Testifies in support of SB 871 because it is common sense for Oregonís approach to be consistent with federal standards regarding fundamental product definitions. Discusses the malt beverage industry. Refer to written testimony. Exhibits 7-8.

 

 

 

232

Sen. Starr

Asks how other states are reacting to this issue and what his opinion on reformulation is.

 

 

 

241

Altschuh

Responds that other states are leaning towards waiting to see if a federal solution is made available and that reformulations have been tried and have all been bad.

 

 

 

296

Jim Parker

Testifies that these products are not beer and should not be included in the definition of beer.

 

 

 

344

Sen. Deckert

Asks if he would be comfortable with extending the January 1st date to give more time before the federal decision.

 

 

 

346

Parker

Responds negatively.

 

 

 

366

Sen. Ferrioli

States that his problem with this issue is that they are spending a lot of time on it and that if these products are removed from the shelf it would be disruptive and expensive.

 

Discussion follows.

 

CLOSES PUBLIC HEARING ON SB 817

 

OPENS PUBLIC HEARING ON SB 344

 

020

Sen. Corcoran

Introduces SB 344 which requires corporations that are engaged in business in Oregon to file with the Secretary of State Office. Expresses support for SB 344 because corporate disclosure is critical during these economic times when two-thirds of the corporations in Oregon are paying only the minimum fee.

 

 

 

051

Bob Doppelt

Testifies in support of corporate disclosure of environmental, product, and labor/community related liabilities because the state Public Employees Retirement System invests in corporations and if they are not aware of the liabilities of corporations, they are put at risk of major financial problems. Refer to written testimony. Exhibit 10.

 

 

 

112

Chuck Sheketoff

Testifies in support of SB 344 because it would give the state information that would help them in drawing business to Oregon. Gives history of corporate income taxes and discusses disparities within industries.

 

 

 

185

Sen. Hannon

States that non-profit organizations should also have to disclose information.

 

 

 

190

Sheketoff

Responds that non-profits are required to disclose federal and state tax forms.

 

 

 

255

Alan Apodaca

Testifies against SB 344 because the solution does not fit the problem, it would cause undue hardship to the state and the taxpayers, and would violate confidentiality of taxpayer policy. Refer to written testimony. Exhibit 11.

 

 

 

314

Sen. Corcoran

Asks if paying hundreds of thousand of dollars in taxes puts J.C. Penney in the third that pays the corporate excise tax or the two-thirds that donít.

 

 

 

316

Apodaca

Responds that he does not know.

 

 

 

318

Sen. Corcoran

States that it is beneficial to know who is paying what in creating tax breaks.

 

 

 

322

Sen. Ringo

Asks what it is about disclosing tax information would reveal proprietary information.

 

 

 

328

Apodaca

Responds that specific information could put them at a disadvantage.

 

 

 

332

Sen. Ringo

Points out that the bill just says tax liability.

 

 

 

336

Joe Schweinhart

Responds that the bill says tax liability and other related information.

 

Discussion follows.

 

 

 

399

Sen. Deckert

Asks if any other state requires corporate disclosure.

 

 

 

403

Schweinhart

Responds negatively.

 

TAPE 88, SIDE A

 

015

Sen. Starr

States that he can see the value of a competitor knowing how much a corporation is paying taxes in a particular state and using that knowledge as a competitive advantage at the national level.

 

Discussion follows.

 

 

 

128

Lee Beyer

Discusses issue of disconnecting from the consolidated tax form filing.

 

CLOSES PUBLIC HEARING ON SB 344

 

OPENS PUBLIC HEARING ON SB 807

 

224

Louis Pitt

Testifies in support of SB 807 because it would provide a tool for tribes that have a critical need for new school facilities. Refer to written testimony. Exhibit 14.

 

 

 

277

Michael Mason

Discusses conversation with John Marshall and possible amendments.

 

 

 

288

Sen. Deckert

Suggests that they bring the bill back next week for a work session.

 

 

 

305

Michael Mason

Points out that the tribe doesnít receive any federal money for education.

 

 

 

305

Roger Martin

Discusses history of federal impact funds.

 

CLOSES PUBLIC HEARING ON SB 807

 

346

Sen. Deckert

Adjourns meeting at 3:18pm.

 

Tape Log Submitted by,

 

 

 

Tara Lantz, Committee Assistant

 

Exhibit Summary:

1.      SB 871, Richard Yates, Proposed SB 871-2 Amendments, 1p.

2.      SB 871, Richard Yates, Proposed SB 871-3 Amendments, 1p.

3.      SB 871, Richard Yates, Staff Measure Summary, 1p.

4.      SB 871, Pamela Erickson, Written Testimony, 4pp.

5.      SB 871, Gregg Christiansen, Written Testimony, 2pp.

6.      SB 871, KC Han, Written Testimony, 2pp.

7.      SB 871, Joe Gilliam, Written Testimony, 3pp.

8.      SB 871, Gregory Altschuh, Written Testimony, 3pp.

9.      SB 344, Lizbeth Martin-Mahar, Staff Measure Summary, 1p.

10.  SB 344, Bob Doppelt, Written Testimony, 11pp.

11.  SB 344, Alan Apodaca, Written Testimony, 1p.

12.  SB 344, Peter Threlkel, Written Testimony, 3pp.

13.  SB 807, Steve Meyer, Staff Measure Summary, 1p.

14.  SB 807, Louis Pitt, Written Testimony, 2pp.