Sunday, October 31, 2010

Taverns Slaughtered By Harrisburg Votes And Policies

A few tavern owners approached me about the business climate in Pennsylvania. There has been so much attention focused on the severance tax mainly due to the election that their plight has largely gone unnoticed,... except by SOP.

Look around your community and take inventory on how many libation establishments closed over the last two years. I've heard from bar and tavern owners from Plains to Hazleton. According to one owner, James Christman, who is quoted later in this post over 900 establishments in this state have closed over the last year. Imagine how many jobs were lost.

The three biggest detriments to their livelihoods have been the Mohegan Sun Casino, inequitable application of the smoking ban, and the failure of the legislature to pass the small games of chance legislation so desparately needed to keep libations near and dear to home.

The policy makers in Harrisburg have their heads buried in the sand. First, the more establishments that close the farther someone who has had libations has to drive under the influence. Okay so they aren't supposed to but let's cut the b.s.; it happens on a daily basis. Farther driving distances also mean that many will simply decide to stay home leading to less sales and inevitable closure. When those situations happen, the state is the ultimate loser of revenue, at a time when it is trying to tax the heck out of us because it needs money.

Now, the Pennsylvania Liquor Control Board is deciding to raise its handling fees at its warehouses on liquor according to this report from the Post-Gazette.

For the first time in 17 years, the state Liquor Control Board has decided to increase its "handling fees'' starting Jan. 4, citing higher costs for shipping, storage, transportation and marketing of its products.

Price increases will vary from product to product, but could be about $1 to $1.50 per bottle (depending on the size) on the several thousand varieties of wine and spirits sold at the 620 state-owned liquor stores, as well as higher prices for drinks by the glass at your neighborhood watering hole.

LCB chief executive officer Joseph Conti, at a state Senate committee hearing in late September, said he sees the price changes more as "readjustments'' than "increases," and said they are "both reasonable and necessary."

He told the panel, which is chaired by Sen. John Pippy, R-Moon, that it's "critical to understand that the board has not increased the [handling fees] for 17 years, despite increased operational costs and continuing upward pressure on prices from the board's [liquor] suppliers."

But Kevin Joyce, owner of The Carlton restaurant Downtown and past president of the Pennsylvania Restaurant Association, is upset at the increases, which he said many bar and restaurant owners didn't learn about until August.

He said higher drink prices mean people in the hospitality industry must either absorb the increases or anger customers by raising prices.

"Wine and spirits are 'raw materials' to bar and restaurant owners, and we already pay more for these materials than we would if we were doing business anywhere else in the world," Mr. Joyce complained.

These cost hikes, he added, come on top of "an extraordinary array of taxes and fees on wines and spirits sold in [state] stores, driving up costs that impact both licensed restaurants and the consumer public."

A national group, the Distilled Spirits Council, called the price increases "a stealth tax that will cripple Pennsylvania's struggling industry and pick the pockets of unwitting consumers."

Council vice president Frank Coleman said the LCB's decision "to jack up fees on wine and spirits amounts to taxation without representation. We urge the PLCB to roll back this measure that will only further damage the hospitality industry during the worst economy since the Great Depression."

The Democrats call the Republicans the party of "NO". Well it is the Democrats who are saying NO to partying. In this press release from the Pennsylvania House Repuiblican Caucus it urged legislators to pass legislation permitting small games of chance in taverns.

Senate and House lawmakers from both parties joined tavern owners, private club operators and emergency responders today to urge passage of legislation that would allow small games of chance in taverns.

House Bill 2379 and its companion Senate Bill 1301 would expand the Local Small Games of Chance Act to include licensed establishments like local bars and taverns and private clubs.

Pennsylvania faces several fiscal challenges in the weeks and years ahead, prompting a sense of urgency to bring these measures before the full Senate and House for debate, said state Sen. Mike Stack (D-Philadelphia). The 2010-11 budget assumed that the state would receive $850 million in federal Medicaid funding from Congress. However, the state received less than anticipated, which leaves the new budget with a $280 million hole.

In addition, the expiration of the federal American Recovery and Reinvestment Act stimulus funds will create a $2.3 billion gap in funding next year. Plus, other structural funding problems have led some to predict that the structural deficit will be as much as $5 billion next year.

“We don’t know if the Marcellus Shale tax will be approved and we’ve already made numerous painful cuts to the budget. We can’t just cut and slash our way to fiscal solvency. We need to find a new source of revenue,” Stack said. “Legalizing small games of chance in taverns and private clubs is a common-sense way to generate millions of dollars for the state without burdening taxpayers.”

The Citizen Voice printed this observation in a story from July.

Under House Bill 2379, taverns would turn more than 30 percent of their small games proceeds to the state. The amount would be split between the State and Public School Employees retirement systems, which are expected to have a multi-billion dollar deficit by 2012.

An additional 20 percent assessed on proceeds would be earmarked for a "charitable organization to be used for a public interest purpose," according to the House bill. Qualifying organizations would include fire companies, veterans groups and local athletic programs.

Taverns would keep the remaining 50 percent.

The Senate version is similar, but would allot 30 percent of the revenue to the state's general fund. The contribution to charitable organizations would be the same amount, however, an additional 2 percent would be split between the Pennsylvania State Police and the Department of Revenue to cover enforcement and administrative costs related to the law. The tavern would keep 48 percent.

Neither bill calls for taxing small games of chance at civic groups, veterans clubs and other nonprofit organizations.

The House bill was referred to the House Gaming Oversight Committee in March. The Senate version has been sitting in that chamber's Finance Committee for about the same amount of time.

Christman said the bills, if passed, "certainly wouldn't decrease" bars' bottom lines. He said taverns are hurting, with the latest estimates showing 900 bars have closed since the beginning of the year.

"If each of those bars employed five people - and that's a very conservative estimate - do the math. That's almost 5,000 people out of work," he said.

Christman, who admitted he's feeling the financial pinch, blamed closures on a number of factors, including the smoking ban and high insurances.

"What the small games of chance would do is probably save at least a few of us," said Christman, a member and former vice president of the Pennsylvania Tavern Association, a nonprofit group that lobbies for licensed liquor establishments in the state.

Look for tavern owner backlash at the Democrats on Tuesday. From what was told to me many lost significant revenue so they are intent to see that certain legislators have the same problem.

1 comment:

Michael J. McFadden said...

Pennsylvania taverns were lucky that when the smoking ban was passed they were able to get a provision for exemptions for those taverns that mainly survived on alcohol sales rather than food. While some places that would have qualified were misled by propaganda promises that their businesses wouldn't be hurt, over 2,000 taverns got the exemptions and are still doing fine.

The complaints from some taverns about "inequitable application" of the ban are coming largely from those places that believed the lies that the ban would be good for business. Of course now that it's passed and they're experiencing the pain they're hit with a new lie: that business would be fine if it wasn't for those evil places that still allowed smoking.

Hopefully they're doing some planning and organizing because Greenleaf and the other Antismokers out there will soon be coming back to try to put their heads on the chopping block too. The impact of such things as this handling fee will be *nothing* compared to a total ban.

Michael J. McFadden
Author of "Dissecting Antismokers' Brains"