Proposed fee increases on alcohol a worry for Inland wineries

After a similar idea pushed by Gov. Arnold Schwarzenegger was dropped earlier this year, a proposal to increase fees on producers of beer, wine and other alcoholic beverages is again making the legislative rounds in Sacramento.

Currently in committee and up for its next discussion Tuesday, Assembly Bill 1019 would impose a per-gallon mitigation fee -- ranging from $1.07 for beer to $8.53 for distilled spirits -- to help California handle health and social problems caused by alcohol consumption. If approved, fees would take effect in January.

Proponents say producers and consumers, rather than taxpayers at large, should be required to bear the brunt of escalating costs tied to alcohol use. Opponents contend higher fees will make matters worse for restaurants, bars and other hospitality businesses already hard-hit by a severe pullback in consumer spending.

Higher fees are opposed by organizations that include the Temecula Valley Winegrowers Association. The proposed legislation would require Inland wine producers to pay $2.56 per gallon, sold at wholesale, for products with up to 14 percent alcohol, and $4.27 a gallon for wine over 14 percent alcohol.

"We're not Big Alcohol," said Bill Wilson, president of the winegrowers group and co-owner of Wilson Creek Winery in Temecula. "We're just trying to squeak by, and anything they charge us can only be passed to the consumer."

While visitor traffic at his winery is holding up in the current economy as people take weekend and vacation trips closer to home, wine purchases by visitors have declined. Wilson said Temecula wineries have seen sales to stores and restaurants drop as much as 30 percent from a year ago.

He added that California winemakers already pay state and federal excise taxes totaling between $1.19 and $3.83 per gallon sold, depending on alcohol content, and now is not a good time to raise costs further. Currently, wholesalers of beer and wine pay state fees of about 20 cents per gallon, while spirits sellers pay about $3.30 per gallon, and those fees go primarily toward law enforcement efforts.

The legislation's author, Assemblyman Jim Beall Jr., D-San Jose, said Thursday that state fees on alcohol producers haven't been raised since 1991, and the state needs help dealing with the effects of problems that have worsened since then, including drunken driving, child abuse and fetal alcohol syndrome.

Beall said researchers estimate the measure would generate $1.4 billion in yearly revenue to fund medical care and alcohol treatment services, while boosting prevention and education efforts.

"I was looking at this from the standpoint of the harm that alcohol does to society," Beall said. "Passing this is going to be tough because the alcohol lobby is very powerful."

Michael Scippa, advocacy director for the Marin Institute, a San Rafael-based nonprofit watchdog group that monitors the alcohol industry, said the organization approached Beall and other state lawmakers about a year ago. They sought support for a system that pays for the social effects of alcohol similar to the way the impact of tobacco is addressed, letting users carry the bulk of costs.

But Sarah Longwell, managing director of the Washington, D.C-based American Beverage Institute, which primarily represents restaurants, including about 700 in California, said raising fees will further damage prospects for an industry already reeling from the recession.

Various government agencies already make twice as much from a drink than hospitality businesses because of existing fees, Longwell said, and restaurants are facing rising food costs but falling foot traffic as consumers cut back on restaurant meals.

"We're not asking for a bailout like some industries," Longwell said. "But don't kick us in the teeth while we're down."