Call to Order and Roll Call
The 6th meeting of the Interim Joint Committee on Licensing and Occupations was held on Friday, November 13, 2015, at 10:00 AM, in Room 129 of the Capitol Annex. Senator John Schickel, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Senator John Schickel, Co-Chair; Representative Dennis Keene, Co-Chair; Senators Joe Bowen, Tom Buford, Jimmy Higdon, Ray S. Jones II, Christian McDaniel, Dan "Malano" Seum, and Damon Thayer; Representatives Tom Burch, Denver Butler, Larry Clark, Jeffery Donohue, David Floyd, Dennis Horlander, Adam Koenig, Reginald Meeks, Charles Miller, Brad Montell, David Osborne, Darryl T. Owens, Ruth Ann Palumbo, Sal Santoro, Arnold Simpson, and Susan Westrom.
Guests: Senator Morgan McGarvey; Tina Quire, Assistant Director Electrical Division, Michael Davis, General Counsel, Roger Banks, Director, HVAC Division, Steve Willinghurst, Chairman, Electrical Advisory Committee, Department for Housing, Buildings, and Construction; Adam Watson, President, The Kentucky Guild of Brewers/Owner Against the Grain Brewery; Cynthia Bohn, Owner, Equus Run Vineyard; Shanna Osborne, Elk Creek Vineyard; Mark Simendinger, CEO, Kentucky Motor Speedway; Rhonda Richardson, General Counsel, Kristen Reese, Staff Attorney, Kentucky Real Estate Commission.
LRC Staff: Tom Hewlett, Bryce Amburgey, Jasmine Williams, Michel Sanderson, and Susan Cunningham.
Department for Housing, Buildings, and Construction 2016 General Assembly Issues.
Tina Quire, Assistant Director, Electrical Division, told committee members that in 2004 legislation was passed for low-voltage certification. However, since that time changes in the industry now require the statute be updated. Initially the legislation addressed security companies and landscapers and companies such as Direct TV, Time Warner, and Dish that offered cable. Now these companies also offer phone and internet service.
Michael Davis, General Counsel, HBC, told members that low-voltage electrical, under the current code, is considered electrical work subject to licensure and regulation. This means that people in the low-voltage industry are working without the required electrical license, many without realizing they are in violation of the law. Since the statutes have not kept pace with the evolution of the industry, the existing licensing exceptions are obsolete. Currently telecommunications statutes allow certain types of low-voltage work without a licensed electrician. However, this is limited to 50 volts or less. The National Electrical Code now uses categories of Class II or Class III transformer. Therefore, if a cable company is using a 51 volt system they are now operating as an unlicensed electrician.
The legislation being presented is a collaborative work from the low-voltage industry throughout the state. The language updates terminology, establishes a limited low-voltage exception for wireless home surveillance, security alarms and energy management systems. It will also clarify the National Electrical Code for unlicensed electrical work.
In response to a question from Representative Floyd, Mr. Davis said that AT&T, Windstream, and the Satellite Broadcasting and Communications Association were among those who met to work out the proposed language. Previously there was a list of exceptions; however, there was no definition for low-voltage work. The department has the authority to create an additional exception for certain types of low-voltage if they were certified. Because the certification has not been established there is some confusion as to who is exempt. Local jurisdictions have authority to enforce applicable rules.
In response to a question from Representative Clark, Mr. Davis said there is no opposition to the proposed legislation at this point.
In response to a question from Representative Montell, Mr. Davis replied that there will be a multi-tiered classification system. Most trade groups self-certify. The department will require certification, similar to an electrician license, for $25. Currently under the law anyone installing low-voltage is required to have an electrical license. The certification will be issued in the same department.
In response to a question from Senator Buford, Mr. Davis said currently people subject to certification are required to pay $50 annually for an electrical license. The new language applies to people who should be licensed but are not and makes available to them the certification at a lower cost.
Roger Bank, Director of HVAC Division, said permitting and inspection for the HVAC Division was first introduced in 2003 to allow for permitting of all new instillations and major repairs. In 2007, SB 10 was amended to remove major repairs language and allow permitting of new instillations only. The division is now proposing to expand the permitting and inspection authority to include equipment replacement or change outs, defined as major repairs in all buildings covered in the Kentucky Building Code. The bill does not cover permitting and inspection in the Kentucky Residential Code.
In response to a question from Representative Osborne, Mr. Davis said HBC has not consulted with the Associated General Contractors or the Kentucky Home Builders regarding the electrical bill. The Home Builders are represented on the HVAC Board.
Representative Donohue commented that if inspections are going to be done they should be as a follow-up for safety reasons.
Kentucky Microbreweries Statutes.
Adam Watson, President of the Kentucky Guild of Brewers and owner of Against the Grain Brewery in Louisville said that 100% of their beer is craft beer, and the industry has experienced phenomenal growth. In 2009 Kentucky had only five breweries producing under 15,000 barrels of beer. Today there are 33 active breweries. In 2014, production increased to 71,640 barrels generating approximately $45 million. Kentucky brewed beer is available in 38 states, Washington D.C. and in foreign countries. Nationally craft beer makes up about 12% of the beer volume sold.
Tax monies generated by Kentucky breweries include $2.50 per barrel in excise tax, plus 10% wholesale and 6% retail tax in addition to local and federal tax. The guild is not asking for any tax reduction. In 2014 malt beverages generated over $57 million in wholesale tax revenue and over $6 million in retail sales tax for the state of Kentucky. A poll of some of the guild’s members shows the creation of over 460 jobs. Approximately $23 million has been spent in start-up and infrastructure with plans for expansions and upgrades of $16 million.
The KGB is asking the general assembly to raise the volume cap from the current 25,000 barrels to 50,000 barrels. This allows Kentucky to stay competitive with surrounding states who have recently raised their caps. Taprooms are important to brewers for economic reasons they are also employers and add to economic growth in the community. The guild would also ask that the general assembly copy the language in legislation for the small farm wineries into the microbrewery statutes. This would allow those licensees to sell their products directly to consumers at “fairs, festivals, and other similar types of events. This will allow smaller brewers to gain recognition in their communities. These changes will not require funding from the legislature, but will increase tax revenues.
Representative Keene commented that he would be interested to know what the average annual income of the 460 jobs are.
In response to a question from Representative Koenig, Mr. Watson said the acceleration of growth has been unexpected. The number of breweries has more than doubled in the last year. Against The Grain Brewery produced 1,300 barrels and expanded to 9,000 barrels in 2015. West Sixth, and Country Boy are near the cap and Eight Ball is installing an expansion that will enable them to reach the cap quickly.
In response to a question from Representative Owens, Mr. Watson replied that at the federal level taxation is different for different levels. The big difference between being below or above the cap is the ability to operate a taproom.
In response to a question from Senator Bowen, Mr. Watson said currently, the advantage to being under the cap is being allowed to operate a taproom or restaurant. There is a lower tax rate at the federal level under the 25,000 barrel cap, the federal cap level for barrels is 2 million. All microbrewers have the right to operate a taproom, however, not all brewers take advantage of that privilege.
Senator Thayer opined that the caps were an artificial restriction on commerce, adding that it should not be up to government to set these caps, rather the free market should dictate the amount of beer produced.
Representative Burch commented that he was glad to see the comeback of the taprooms in local communities.
Extended hours supplemental license.
Mark Simendinger, General Manager, Kentucky Motor Speedway thanked the General Assembly for its help in growing the speedway. The speedway is allowed to sell alcohol on Sunday after 1:00 PM. If a race is cancelled Saturday evening due to weather then rescheduled on Sunday at noon, the track would not be able to sell to patrons until 1:00 PM. The facility is also used for other venues which have activities that are scheduled past midnight on Saturday. The speedway is asking for legislation that would allow for the sale of alcohol at an event on Sunday before 1:00 PM.
In response to a question from Senator Schickel, Mr. Simendinger said legislation says alcohol sales are restricted to facilities of 75,000 seats or greater. The speedway is the only venue with that seating capacity.
In response to a question from Representative Montell, Mr. Simendinger said he has not talked to the Alcoholic Beverage Control about this legislative request.
Kentucky Winery Association.
Cynthia Bohn, owner of Equus Run Vineyards, President of Kentucky Wineries Association, told members there are now 68 small farm wineries in Kentucky and the industry is growing. Legislation that was proposed last year, but not passed, would allow wineries to do custom crushing of grapes other farmers have grown but have not able to process themselves. Another key issue is the cap on annual gallons set at 50,000 gallons. There are five wineries who are at this cap and are unable to move forward. Also, the ability to store wine offsite, in a bonded facility, will help wineries who are at capacity.
Ms. Bohn said that some products are not marketable. Wineries would like to either sell these products as a brandy, sherry, port, or madeira; or be able to sell these unmarketable products to a distiller for further production.
In response to a question from Representative Owens, Ms. Bohn replied that at the federal taxation level there is a tax break at 100,000 gallons but she was unsure why there was a state cap.
Shanna Osborne, General Manager of Elk Creek Vineyard, added that in her opinion it was prohibition.
Senator Schickel commented that the history of alcohol regulation does go back to prohibition. Kentucky has a three tier system that works well. The alcohol industry currently is a highly regulated industry.
In response to a question from Representative Keene, Ms. Bohn said currently small farm wineries are exempt from wholesale tax. However, if licensed as wineries, paying the wholesale tax should be considered.
Representative Clark commented that small farm winery legislation was first introduced the Department of Agriculture, and interested parties worked together to give small farm wineries advantages to start up. Looking at the total picture to make the whole industry competitive, changes in the tax structure will have to be made.
Shanna Osborne commented that the wineries would propose a tiered tax system, as gallon production increased the amount of whole sale tax would increase.
Senator Thayer opined that legislators recognized the growth of the industry. Raising the production cap is a necessary consideration. Also, working with the KDA is critical so that while helping the wine industry with unmarketable products, the distillery industry is not harmed.
In response to a question from Senator Higdon, Ms. Bohn commented that currently wineries are not permitted to sell their unmarketable wine products to distilleries.
Malt beverages as a prize at a special charity event.
Senator Morgan McGarvey said his bill would help the Catholic Church picnics and other churches that hold events on their grounds. Currently distilled spirits and wine are permitted to be raffled at charitable events. ABC has said that because allowing churches to raffle warm six packs of beer was not in the statute, they would have to stop offering this at their events.
Thurman Senn, President of the Board of Trustees of St. Joseph Children’s Home spoke on the history of the children’s home. It was originally formed to take care of orphans after a cholera epidemic. Today it is a treatment facility, primarily for wards of the state. Fundraisers are necessary in order to help fund this facility. A beer raffle was a popular piece of the fundraising event. However, it was brought to their attention that this was not legal, therefore it was stopped. Hence the request for legislation to make it legal to offer a beer raffle at the church picnic.
Under Other Business: Review of Administrative Regulation 201 KAR 11:235, Kentucky Real Estate Commission.
Rhonda Richardson, General Counsel and Kristen Reese, Director of Education and Licensing were present to explain a new fee.
Ms. Richardson said during the last session KRS 324.085 was amended to add post licensing education. The fee is the same fee being charged for other instructors, it is new because it is in a new regulation.
In response to a question from Senator Higdon, Ms. Reese said the fee goes to the Education, Research and Recovery Fund.
In response to a question from Senator Buford, Ms. Richardson responded there is no language regarding fees being swept.
In response to a question from Representative Westrom, Ms. Reese said by statute the commission is required to hold $400,000 in the fund. This year there was a sweep of $100,000. If there is a complaint against a realtor involving fraud and the complainant is unable to recover the funds from the licensee, a claim to recover the funds can be filed with the Real Estate Commission to be compensated.
Senator Schickel said there was no need to vote on the regulation, rather he wanted to hear why there was a new fee.
There being no further business to come before the committee the meeting was adjourned at 11:19 AM.