SENATE BILL REPORT

2SHB 569

BYHouse Committee on Ways & Means/Revenue (originally sponsored by Representatives Rayburn, Baugher, Hankins, Jesernig, Brooks, Day, Sayan, Moyer, Grant, Dellwo, Silver, K. Wilson, Doty, Lewis, P. King, Schmidt, Holm, Betrozoff, May, C. Smith and Haugen)

Establishing the Washington wine commission.

House Committe on Agriculture & Rural Development

Senate Committee on Agriculture

Senate Hearing Date(s):March 27, 1987

Majority Report:     Do pass as amended and refer to Committee on Ways & Means.

     Signed by Senators Hansen, Chairman; Bauer, Vice Chairman; Anderson, Bailey, Barr.

Senate Staff:Kaleen Cottingham (786-7415)

                March 27, 1987

Senate Committee on Ways & Means

Senate Hearing Date(s):April 2, 1987; April 6, 1987

Majority Report:     Do pass as amended.

     Signed by Senators McDermott, Chairman; Bauer, Bluechel, Cantu, Deccio, Fleming, Hayner, Lee, McDonald, Moore, Owen, Saling, Vognild, Wojahn, Zimmerman.

Senate Staff:Charles Langen (786-7715)

                April 7, 1987

AS REPORTED BY COMMITTEE ON WAYS & MEANS, APRIL 6, 1987

BACKGROUND:

The Washington wine industry has experienced substantial growth in the past several years.  To assure continuing development, the industry believes that it is necessary to expand promotion, marketing and research efforts.  Washington is the second largest U.S. producer of premium varietal wines and the Washington wine industry believes that the formation of a wine commission will increase viticultural, enological and economic research.  Such research will help this industry improve conditions and foster further investment in the industry.

There are three programs that currently address promotion and research needs of the Washington wine industry:  (1) the wine marketing program in the Department of Agriculture; (2) the viticultural, enological and agricultural economic research at WSU; and (3) programs of specific trade associations.  Currently, the research at WSU is funded through a dedicated tax of 1/4 cent per liter on wine sales.

Commodity commissions are currently formed for numerous Washington grown agricultural commodities.  There are several enabling acts which allow the formation of such commissions.  These commissions are formed by an affirmative vote of a majority of the producers.  Such formation allows an assessment to be imposed on the quantities of commodity sold or processed.  These funds are then expended for promotional and/or research purposes.

Of the 20 commodity commissions, five were formed under individual enabling legislation (apples, dairy products, fruit, beef, and tree fruit research), nine were formed under the 1955 enabling act and six were formed under the 1961 enabling act.

The wine industry has determined that formation under one of the existing enabling acts would not accommodate the method of assessment most advantageous to the industry.  The industry thus requests specific legislation to allow the formation of a wine commission.

SUMMARY:

The Washington Wine Commission is composed of 11 voting members (five growers, five wine producers, and one at large).  At least one of the growers shall have 50 acres or less and at least one shall have over 250 acres in production.  Of the wine producers, at least one shall produce not more than 25,000 gallons, at least one shall produce over 1,000,000 gallons, and at least two shall produce wine from their own grapes.  One nonvoting member shall represent the non-vinifera grape wines.  Each member must be a citizen, 21 years of age, and must be engaged as a grower or wine producer.

The Director of the Department of Agriculture appoints the members of the Commission after recommendations by the Growers Association and the Wine Institute.  Members shall be reimbursed for travel.

Obligations and liabilities incurred by the Commission shall be enforced only against the assets of the Commission.  No liability exists against the state, subdivisions of the state or employees in their individual capacity for actions of the Wine Commission. 

The Wine Commission is given powers associated with rulemaking, hiring employees, entering into contracts and acquiring property.  The Wine Commission is given all powers necessary to carry out this act and specifically to promote Washington grapes and products made from Washington grapes.  In its promotional efforts, the Commission may disseminate products without charge in order to foster agricultural development, trade promotion (including promotional hosting) or research into marketing, advertising or sale.

The Commission shall keep records and make them available to the state auditor.  The Commission shall maintain a list of producers and shall use it to gather and disseminate information.

The Commission shall create, provide for, and conduct a research, promotional and educational campaign as required.  The Commission shall determine the needs of producers, conditions of markets and degree of public awareness of Washington's wines.  The major objectives of study shall be to:  (1) establish Washington wines in markets; (2) promote winery tourism; (3) promote favorable media coverage; (4) encourage favorable legislative and regulatory treatment; (5) foster investment; (6) advance production of grapes; (7) improve grape vines; and (8) advance wine production.

The voting mechanism of the Commission shall be weighted.  Position one (produces over one million gallons annually) shall have the lesser of 5 1/2 votes or 11 votes times the percentage of wine produced by the producer in the state.

In the event the growers' self-assessments generated in Section 13 of the legislation do not become effective by July 1989, the grower positions on the Commission shall cease.  In such instance, the Commission membership shall drop to six voting/one nonvoting.  The votes shall be weighted.

The Commission shall be funded as follows:  for the 1987-89 biennium a wine tax increase of 3/4 of a cent per liter; during the 1989-91 biennium the additional tax on wine drops to 1/2 of a cent per liter; and during the 1991-93 biennium the additional tax on wine drops to 1/4 of a cent per liter.  The additional tax expires July 1, 1993.  To provide for the operation of the Commission prior to the first disbursement, $110,000 is forwarded to the Commission with a repayment provision.

To provide for permanent funding of the Wine Commission, assessments shall be levied by the Liquor Control Board as follows:  (1) starting July 1, 1989 two cents per gallon on sales of packaged Washington wines; (2) assessments on growers to equal the assessment on wines; method to be established in future legislation.

After July 1, 1993 assessments may be changed by referendum of wine producers and/or growers.  The voting in the referendum shall be weighted by production.

The Wine Commission is given the authority to purchase or receive donations of Washington wine to use for promotional purposes.  The activities of the Wine Commission must comply with the liquor laws established in statute.

Fiscal Note:    available

Effective Date:Sections one through nine and 11-19 have emergency clause.

SUMMARY OF PROPOSED AGRICULTURE AMENDMENT:

This striking amendment incorporates changes to 2SHB 569 as follows:

Commission member growers must have five acres in production, and one must have at least 100 acres; Commission member wine producers must be licensed by the Liquor Board; the at large Commission member is changed to be a wine wholesaler; donations of wine to the Commission by wine wholesalers is deleted; the weighted voting is modified so that the large wine producer member cannot control more than 50 percent of the votes; the weighted voting ceases to exist if the large wine producer member produces less than 25 percent of the wine produced in the state; a referendum is added in 1996 to determine whether to continue the Commission; wine donated to the Commission shall be subject to the liquor tax; the Commission is authorized to expend funds for promotional hosting; and the language of the Commission formation reflects its function as an agricultural commodity Commission.

SUMMARY OF PROPOSED WAYS & MEANS AMENDMENT:

A permanent 0.25 percent per liter tax is to be added to the present tax on wine.

Senate Committee - Testified:   AGRICULTURE:  Representative Rayburn; Senator Benitz; Charles Henderson, Mt. Elise Winery; John Anderson, grower; Mary Jane Willard, Corey Run; Gregory Herman, Columbia Winery; Jim Halstrom, Wine Institute; Syd Abrahm, (California) Wine Institute

Senate Committee - Testified:   WAYS & MEANS:  Representative Rayburn, original sponsor; Senator Max Benitz; Jim Halstrom, Jeff Gordon, Mike Hogue, Washington Association of Wine Grape Growers; Sid Abrams, The Wine Institute (California)