Commission Meeting Minutes for July 25, 2017 · 2017-10-10 · Richard Jauregui, Major, San Antonio Regional Office Dexter Jones, Chief, ... Alejandra Nieto, Staff Sergeant, Training

COMMISSION MEETING

July 25, 2017

Texas Alcoholic Beverage Commission 5806 Mesa Drive

Austin, Texas 78731

Kevin J. Lilly, Presiding Officer Member Ida Clement Steen, Member Houston Vacant San Antonio

TABLE OF CONTENTS TITLE PAGE Agenda--TABC Commission Meeting – July 25, 2017 ......................................1 Minutes--TABC Commission Meeting – July 25, 2017 ......................................2

Attachment 1: Commission Report: Agency Activities, Budget Issues, Staff Achievements, Legislative Activities

Attachment 2: 85th Legislative Session Review Attachment 3: Sunset Self-Evaluation Report, Including Update and Possible Action Regarding Approval Process Attachment 4: FY18 Operating Budget Approval Attachment 5: Business Services Division Update Attachment 6: Rules, Agenda Items 10-12 Certification of Minutes .....................................................................................26

AGENDA

REGULAR COMMISSION MEETING

10:00 a.m. – July 25, 2017

5806 Mesa Drive

Austin, Texas 78731

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Tuesday, July 25, 2017

10:00 a.m.

Agenda

1. Call to Order

Kevin J. Lilly

2. Approval of Commission Meeting Minutes of May 23, 2017 and July 11, 2017

Kevin J. Lilly

3. Commission Report: Agency Activities, Budget Issues, Staff Achievements, Legislative Activities

Robert Saenz

4. 85th Legislative Session Review

Mariann Morelock

5. Sunset Self-Evaluation Report, Including Update and Possible Action Regarding Approval Process

Mariann Morelock

6. FY18 Operating Budget Approval

Vanessa Mayo

7. Business Services Division Update

Vanessa Mayo

8. Licensing Application Processing Audit

Monday Rufus

9. Field Operations Investigations Administrative Audit

Monday Rufus

10. Adopt Amendment to Rule §45.75, Mandatory Label Information for Malt Beverages

Martin Wilson

11. Adopt Amendments to Rule §45.76, Brand Names

Martin Wilson

12. Approve Publication of Proposed Amendments to Rule §37.61, Suspensions

Martin Wilson

Kevin J. Lilly Presiding Officer-Houston

Commission Member Vacant

Ida Clement Steen Member-San Antonio

Robert Saenz Interim Executive Director

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13. Executive Session to receive legal advice pursuant to Texas Government Code §551.071(2), to consult with legal counsel regarding pending or contemplated litigation or settlement offers pursuant to Texas Government Code §551.071(1), and to deliberate on the appointment, employment, evaluation, reassignment, duties, discipline, or dismissal of public officers or employees, including the Executive Director, Acting Executive Director, General Counsel, or Acting General Counsel, pursuant to Texas Government Code §551.074, Texas Alcoholic Beverage Code §5.11, and 16 Texas Administrative Code §31.1(a)(8).

Kevin J. Lilly

14. Action on Items Discussed in Executive Session

Kevin J. Lilly

15. Public Comments

Kevin J. Lilly

16. Next Meeting Date: Tuesday, September 26, 2017

Kevin J. Lilly

17. Adjournment

Kevin J. Lilly

Note: Items may not necessarily be considered in the order they appear on the agenda. Executive session for advice of Counsel (pursuant to §551.071 of the Government Code) may be called regarding any agenda item. Action may be taken on any agenda item.

NOTICE OF ASSISTANCE AT PUBLIC MEETINGS

Persons with disabilities who plan to attend this meeting and who may need auxiliary aids or services (such as interpreters for persons who are deaf, hearing impaired readers, large print, or Braille) are requested to contact Luann Dickerson at (512) 206-3221 (voice) (512) 206-3203 (fax). Relay Texas at 1-800-735-2989 (TTY/TDD), at least three (3) days prior to the meeting so that appropriate arrangements can be made.

MINUTES


10:00 a.m. – July 25, 2017

5806 Mesa Drive

Austin, Texas 78731

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COMMISSION ME

ETING MINUTES July 25, 2017

The Commissioners of the Texas Alcoholic Beverage Commission (TABC) met in Regular Session on Tuesday, July 25, 2017, at TABC Headquarters, 5806 Mesa Drive, Austin, Texas. COMMISSIONERS Kevin J. Lilly PRESENT: Ida Clement Steen

STAFF PRESENT: Robert Saenz, Interim Executive Director

Joshua Alexander, MIU Audit Supervisor, Audit and

Investigations Division John Altum, Staff Lieutenant, Field Operations Division Gene Bowman, Director, Audit & Investigations Division David Brandon, Assistant Director, Innovation & Technology

Division Cecelia Brooks, Legal Assistant, Legal Division Dustin Carter, Quality Assurance Specialist, Ports of Entry

Division Cathleen Cavasos, Major, Arlington Regional Office Mindy Carroll, Director, Education & Prevention Division Matthew Cherry, Attorney, Legal Division Amanda Collins, Audit Regional Supervisor, Arlington

Regional Office Keith Crawford, Legal Secretary, Legal Division Marc Decatur, Major, Houston Regional Enforcement Office Luann Dickerson, Executive Assistant, Executive Division Diana Figueroa, Executive Assistant, Office of Professional

Responsibility Sally Flanders, Accountant, Business Services Division Keon Flowers, Recruiter, Human Resources Division

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Tiffany Forister, Budget Analyst, Business Services Division Joe Garcia, Sergeant, Special Investigations Unit Segbe Golanyon, Assistant Regional Audit Supervisor,

Arlington Regional Office Thomas Graham, Director, Excise Tax and Marketing

Practices Division Harrison Gregg, Accounting Technician, Business Services

Division Pete Heller, Investigator, Office of Professional Responsibility Gary Henderson, Systems Analyst, Innovation & Technology

Division Stacey Hendrix, Accountant, Business Services Division Joe Iagnemmo, Web Design Administrator, Innovation &

Technology Division Analisa Imboden, Accounting Technician, Business Services

Division Stacy Jackson, Assistant Audit Supervisor, San Antonio

Regional Office Richard Jauregui, Major, San Antonio Regional Office Dexter Jones, Chief, Audit & Investigations Division Shaun Jordan, Licensing Supervisor, Austin Regional Office Jo Ann Joseph, Assistant Director, Licensing Division Christina Keeth, Accountant, Business Services Division Victor Kuykendoll, Major, Acting Chief of Enforcement , Field

Operations Marilyn Lindsay, Accountant, Business Services Division Andrea Maceyra, Marketing Practices Supervisor, Excise Tax

& Marketing Practices Division Vanessa Mayo, Director, Business Services Division Mark Menn, Major, Lubbock Regional Office Mariann Morelock, Director, Communications and

Governmental Relations Renee Moser, Accountant, Business Services Division Alejandra Nieto, Staff Sergeant, Training Division Jose Pineda, Supervisor, Licensing Division Chris Porter, Public Information Officer Yvette Price, Licensing Supervisor, San Antonio Regional

Office Jessica Ramirez, Payroll Officer, Business Services Division Paula Reed, Assistant Director, Business Services Division John Reney, Chief, Ports of Entry Division Albert Rodriguez, Director, Training Division Audrey Rosales, Project Manager, Business Services Division Julie Ross, Supervisor, Licensing Division Donn Rupp, Director, Human Resources Division Robert Saenz, Executive Chief of Field Operations Reynaldo Santos, Auditor, Audit and Investigations Administration Ron Swenson, Captain, SIU and FCU

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Todd Talley, Audit Regional Supervisor, Austin Regional Office Brian Tullis, Lieutenant, Austin Regional Office Jay Webster, Director, Innovation & Technology Division Martin Wilson, Assistant General Counsel, Legal Division

GUESTS PRESENT: Erik Avots, General Counsel, Texas Lobby Group

Vic Brooks, Vice President, Republic National Distributing Company Rick Donley, President, The Beer Alliance of Texas Kyle Frazier, Texas Wine and Grape Growers Association Tucker Frazier, Kyle Frazier Consulting Kimberly Frost, Attorney, Martin, Frost, and Hill Robert Gonzales, Certified Public Accountant, Monday Rufus & Co., P.C. Steve Grienert, Wholesale Beer Distributors of Texas Rhonda Hanrahan, Account Manager, Neubus Amy Harrison, Private Citizen Kyle Hill, Attorney, Martin, Frost, and Hill Jay Howard, Hillco Partners Cheri Huddleston, Legislative Consultant, Southern Glazer’s Melissa Juarez, Assistant Attorney General, Office of the

Attorney General Mark Kochanski, SAS Lance Lively, Executive Director, Texas Package Stores

Association Nelson Nease, Texas Craft Brewers Guild Bryan Poff, Consultant, Texas Alcoholic Beverage Consulting Jay Root, Reporter, Texas Tribune Jim Rudd, Lobbyist, California Wine Institute Monday Rufus, Certified Public Accountant, Monday Rufus &

Co., P.C. Peter Salatich, Senior Policy Analyst, Senate Business & Commerce Committee

Sara Schmidt, Private Citizen Jared Staples, Policy Advisor, Officer of the Governor J.P. Urrabuzo, Beer Alliance of Texas

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CALL TO ORDER The meeting of the Texas Alcoholic Beverage Commission was called to order at 10:00 a.m. by Presiding Officer Kevin Lilly. APPROVAL OF COMMISSION MINUTES OF MAY 23 & JULY 11, 2017 Presiding Officer Lilly moved for approval of the Commission Meeting minutes of May 23, 2017 and July 11, 2017 as written. Commissioner Steen seconded. The motion carried. COMMISSION REPORT: EXECUTIVE DIRECTOR AND AGENCY ACTIVITIES, BUDGET ISSUES, STAFF ACHIEVEMENTS, LEGISLATIVE ACTIVITES After welcoming the Commissioners back to Austin, Interim Executive Director Robert Saenz began his presentation with a briefing on the New Agents Academy. He stated that nineteen cadets reported on June 18, 2017 for the academy and are currently on their sixth week of training. One of the nineteen cadets resigned. Out of the eighteen remaining cadets there are seven females and eleven males. Interim Executive Director stated that upon completion of the academy, the cadets will be stationed in El Paso, Odessa, Arlington, Houston, San Antonio, Austin and Corpus Christi. He added that the graduation is set for August 31, 2017. Interim Executive Director Saenz stated that the TABC Agent trainee Academy is eleven weeks in duration with over five hundred and eighteen training hours. He added that the trainees receive specialized training on topics including:

• Texas Alcoholic Beverage Code and TABC Administrative Rules • Professionalism • Response to Resistance • Nutrition and Maintaining a Physical Fitness Program • Force Options including Empty Hand Techniques, Chemical Irritants (OC

Spray), and Impact Weapons • Firearms and Patrol Rifle • Reality Based Active Shooting Training • Interview and Interrogation • Undercover School • Fleet Vehicle Operations and Emergency Driving

Interim Executive Director highlighted the success of the Reservoir club located in Coppell, TX. He stated that this location had several cases against them for sale of alcohol to an intoxicated person. TABC worked with this permittee and they came into compliance. He added that are now a very successful business and the calls for service from the local police department have been reduced by 70% over the past year. Interim Executive Director Saenz stated that it takes time to see the full impact

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to a community when a permittee comes into compliance. He added that it is a bigger success to get a permittee into compliance than it is to close their business. Interim Executive Director Saenz highlighted two locations in Laredo both by the name of Mami Chulas. He stated that these locations had violations ranging from employment harmful to a minor to narcotic sales. He added that both or their permits were cancelled for repeated violations. Interim Executive Director Saenz stated these are good examples of business outcomes for those that want to come into compliance and those that do not. He added that the impact from Operation Three Thorns has also been a 31.5% decrease in calls for service, in that area of El Paso, after only one year. Interim Executive Director Saenz provided a briefing on malt beverage label approvals. He stated that the malt beverage label approval time has decreased from a high of forty-seven days in January to the current time of nine days. He added that if there were no errors on the application, the approval time could be as little as six days. Interim Executive Director Saenz explained that personnel from other divisions were utilized to get the approval rate down to nine days. He added that the agency might need to continue this practice into the fall and spring as seasonal malt beverages will be coming back onto the market soon. Interim Executive Director Saenz stated that between FY11 and FY16 there has been a 300% growth in malt beverage applications. Presiding Officer Lilly questioned if there were seven hundred seventy-four malt label applications filed in May. Tax and Marketing Practices Director Thomas Graham came forward to answer the question. He stated that there were seven hundred seventy-four malt label applications approved for the month of May. Director Graham explained that there has been a backlog for quite some time. He stated that normally his division receives and processes one hundred applications every week. He added that as more seasonal label applications are filed the backlog grows. Director Graham stated that in May, his division was able to reduce the backlog with the help of the extra personnel from other divisions. Presiding Officer Lilly questioned if a label goes through the label approval process, but is never used on a product or not used until a future date. Director Graham responded to the affirmative. Interim Executive Director Saenz continued his presentation with a briefing on the recent State Auditor’s Office (SAO) Audit. He stated that this audit covered the period from 9/1/2014 to 11/30/2016. He added that the SAO field work began January 9, 2017 and ended May 15, 2017. Areas reviewed included:

• Revenue • Payroll actions – PAFs • Asset management • Accounts payable

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• Travel reimbursement • Information Technology

Interim Executive Director Saenz stated that most of the documents that were provided were from the Business Services Division. He added that follow up information was provided by ITD, Human Resources, Licensing, Tax & Marketing and Fleet areas of the agency. Interim Executive Director Saenz stated that the audit was amended to include some additional items. Interim Executive Director Saenz stated that the majority of the revenue findings were lack of supervisor signatures and dating of documents, incorrect tax collection by Ports of Entry (POE) and improper documentation of approvals on Personnel Action Forms (PAF). He added that the only item in the audit that was labeled high risk was travel. Interim Executive Director Saenz stated that in this area there were some internal policy violations such as the Executive Director approving their own travel vouchers. He added that IT controls and certain employee access were also deemed to be conflicts. Interim Executive Director Saenz stated that an exit conference held and management filed its responses. He added that the POE Division believes a new tax collecting system will resolve their audit finding. The final report will be available soon. Interim Executive Director Saenz stated that Governmental Relations and Communications Director Mariann Morelock and her team are working with the division directors to complete the Sunset Advisory Commission Self Evaluation Report by the September deadline. He added that Ms. Morelock will provide an update on the status of this report later during the meeting. Interim Executive Director Saenz’s report is supported by a PowerPoint presentation. (Attachment 1) Presiding Officer Lilly call upon Governmental Relations and Communications Director Mariann Morelock to present the next agenda item. 85TH LEGISLATIVE REVIEW Director Morelock stated that her briefing will be on the regular legislative session even though there is a special session currently being held. She added that she will continue to monitor all bills and committee meetings during the special session. Director Morelock stated that during the regular session there were just over sixty-six hundred bills filed. Of these bills, approximately twelve hundred passed. She added that there were just under one hundred bills filed that impact the alcoholic beverage code. Seventeen of these bills passed. Director Morelock stated that these numbers are in line with the number of alcohol bills passed during the last three sessions. Director Morelock continued her presentation with an overview of higher impact bills.

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HB 2101 by Frullo - Licensing

• Changes criteria for and provides consistency in calculation among retailers for obtaining a food and beverage certificate.

• Increases the threshold to qualify for a food and beverage certificate from no more than 50% of gross receipts attributed to alcohol to no more than 60%.

• Removes comptroller’s role in certification process for Mixed Beverage Permits (MB, RM) and Private Club Permits (N, NB).

• Changes the calculation for on premise retailers to compare total receipts from the sale of alcoholic beverages with the total receipts for the location (which is practical application employed by Licensing now for beer and wine retailers (BGs and BEs)).

• Establishes consistency regarding cancellation, denials, etc. Director Morelock stated that the implementation will include an amendment to Rule §33.5 as well as updates to appropriate forms, policies, procedures and publications. HB 4042 by Paddie - Licensing

• Modifies temporary auction permit by removing o "charitable" in name o surcharge o limitation of one per year

• Expands permit to those subject to Chapter 254, Elections Code (political action committees)

Director Morelock noted that the agency should receive more applications for this permit type due to the $201 surcharge being removed. She added that now only a $25 fee will be required. Director Morelock stated the volunteer and religious organizations as well as Political Action Committees (PACs) will be able to use this permit for their events. She added that the implementation will include an amendment to Rule §33.23(c) as well as updates to appropriate procedures, forms and publications. Director Morelock stated that the next three bills in her presentation had specific targets in mind. She added that these targets were Vonlane, a luxury bus line, Schlitterbahn Water Park in New Braunfels and Texas Live! a family-friendly mixed-use district being developed in Arlington in conjunction with Texas Rangers Stadium. HB 3101 by Kuempel – Licensing/Vonlane

• Creates a Passenger Bus Beverage Permit with $500 annual fee

• Eligibility restricted to a bus used for regularly scheduled trips between cities AND has passenger deck over baggage compartment; seats 16-36 passengers; has a separate gallery area; is at least 35 feet long; and has an attendant who is not the driver and has taken seller server training.

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Director Morelock stated that this bill allows Vonlane to obtain a permit that allows them to sell alcohol on the bus.

SB 1176 by Campbell – Licensing/Schlitterbahn

• Creates a water park permit with $30 annual fee

• Written so criteria only applies to Schlitterbahn in New Braunfels

Director Morelock stated that this bill allows the New Braunfels Schlitterbahn location to keep their current wine and beer permits. She added that this bill only affects the New Braunfels location.

SB 1519 by Hancock – Licensing/Texas Live!

• Changes definition of Public Entertainment Facility to include a facility that’s part of an approved venue project, including the venue and related infrastructure, as defined by Section 334.001, Local Government Code.

• Allows the referenced facility to receive upper tier sponsorship regarding the promotion or advertising of an entertainment event or an alcoholic beverage brand or product.

Director Morelock stated that this bill changes part of the Alcoholic Beverage Code to allow the Texas Live! group and its venues to take advantage of a public entertainment facility clause in the code which allows them to have sponsorship opportunities.

Director Morelock stated that there was a lot of discussion on HB 3287 in committee, on the floor and after the regular session ended. She added that this is a very complicated bill. Director Morelock stated that once at least 26% of a craft brewery is purchased by a multi-national corporation, that brewery is no longer considered a craft brewery. It is considered part of a multi-national corporation. She added that the word “craft” is not defined in the alcoholic beverage code, but the agency would typically consider a craft brewer as one who produces less that 225,000 barrels annually. Director Morelock stated that if a craft brewer produces less than 225,000 barrels annually, a brewer can sell direct to consumers (in a taproom) and self-distribute their products. If they produce over 225,000 barrels the brewer can’t self-distribute or sell in a taproom, but can still have a taproom. She added that currently there are only three that produce over the 225,000 barrel annual threshold.

Presiding Officer Lilly requested the names of those three breweries.

Director Morelock responded that the three breweries are Anheuser-Busch, Spoetzl and Miller.

Presiding Officer Lilly questioned what the average number of barrels produced annually by a craft brewer in Texas.

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Tax and Marketing Practices Director Thomas Graham came forward to answer the question.

Director Graham responded that he could get the actual average, but most craft brewers produce approximately 10,000 to 20,000 barrels annually. He added that some of the larger craft brewers produce over 100,000 barrels annually.

Presiding Officer Lilly questioned if St. Arnold’s Brewery would be an example of a larger craft brewer.

Director Graham responded to the affirmative.

Director Graham will provide the average numbers of barrels produced by a craft brewer.

HB 3287 by Goldman - Marketing Practices

• Subject to certain exceptions, if combined annual production at a brewery and all of its affiliated or subsidiary breweries exceeds 225,000 barrels, the brewery can NOT sell at its taproom.

o One exception is a brewery that had a taproom before 2/1/2017 AND whose annual production at the brewery is less than 175,000 barrels, even if it’s combined annual production with its affiliates and subsidiaries exceeds 225,000 barrels.

o The second exception is a brewery that purchased an ownership interest in a another brewery AND whose annual production at the purchasing brewery was less than 175,000 barrels, even if its combined annual production with its affiliates and subsidiaries exceeds 225,000 barrels.

o The third exception is a brewery that was purchased by another brewery AND whose annual production at the purchased brewery was less than 175,000 barrels, even if its combined annual production with its affiliates and subsidiaries exceeds 225,000 barrels.

• To qualify for the second or third exceptions, a brewery cannot sell to any brewer that exceeds 225,000 barrels annually at all locations combined an ownership interest of more than 25% in its location OR any ownership interest that gives the purchasing brewery the ability to control the operations at the purchased brewery's location.

• If a brewery is allowed to sell at its taproom because it falls under one of the exceptions, it must file a territorial agreement, purchase the malt beverages sold in the taproom from a distributor, and comply with the cash law requirements in §102.31 and other provisions of the Code governing distributor/retailer dealings.

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• A brewery may self-distribute only if annual production at the brewery and all of its affiliates and subsidiaries is less than 125,000 barrels combined.

• A brewery cannot self-distribute more than 40,000 barrels annually combined from the brewery and all of its affiliates and subsidiaries.

• Grandfathers in Karbach, Revolver, and Independence

o Can sell in a taproom under law that existed before HB 3287

o Can establish no more than 2 more taprooms (each selling up to 5000 barrels annually) as long as those additional taprooms each produce less than 225,000 barrels and the brewer files a territorial agreement and goes through a distributor

Director Morelock stated that implementation for the agency will be small, but the bill will have a large impact on the industry.

HB 2299 by S. Thompson - Marketing Practices

• In addition to TABC and an independent lab, a producer of malt beverages can utilize its own laboratory to test its products.

o Requires the producer’s lab be certified by TTB

• Gives TABC authority to request an affidavit as proof that an independent laboratory is independent.

Director Morelock stated that beer and ale must be tested for alcohol content because they are taxed at different rates. She added that these tests can be performed either at TABC’s lab or by an independent lab. Director Morelock stated that this bill will also allow testing at a Tax and Trade Bureau (TTB) certified lab. She added that this bill will potentially give some relief to the TABC lab.

HB 2097 by Geren - Marketing Practices

• Affirms a brewpub with a Wine & Beer Retailer's Permit can sell wine on the premises…even if self-distributing malt products produced on premises

Conforms to practice and eliminates confusion in Code.

Director Morelock stated that this bill provides clarification on what brewpubs can sell in terms of wine. She added that this only affects a small number of retailers.

HB 3003 by Kuempel - Marketing Practices

• The prize awarded in a sweepstakes by a brewer (added in bill), manufacturer or nonresident manufacturer may include food, beverages, entertainment, recreation, gifts, or attendance at private event at a licensed/permitted premise for the sweepstakes winners and guests of the event sponsor.

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• Upper tier conducting/sponsoring event must pay retailer fair market value for use of premises.

• The retailer must retain control of the sale and service of alcoholic beverages at the event.

Director Morelock stated that this bill allows an ale brewery to award sweepstakes prizes. She added that the most significant change allows upper tier members associated with beer and ale producers to rent out a retailer’s premises to have a promotional event for sweepstakes winners and guests.

Director Morelock stated that implementation will include amendments to Rules §§45.103, 45.106, 45.113 and 45.117.

SB 371 by Watson - Audit

• Eliminates inconsistencies in Code so there is no longer any requirements for an on premise retailers to have running water or a toilet.

• Aligns beer and wine licenses/permits with mixed beverage permits

Director Morelock stated that currently, a mixed beverage permit holder has no requirement to have bathrooms or running water at their location. She added that wine and beer retailers do have this requirement. This bill removes these requirements for all on premise retailers to have a bathroom or running water.

HB 1612 by Romero - Field Operations

• Adds "controlled substances or drugs" to list of offenses for which the agency is not required to offer a civil penalty in lieu of suspension of license/permit.

• TABC can now suspend a license/permit if the basis for the suspension is a drug violation rather than first offering the option to pay a fine.

Director Morelock stated that previously, if a permitted location was selling drugs the agency could not suspend that permit. This bill allows a location to be suspended for a drug violation rather than first receiving the option to pay a fine.

Director Morelock stated that implementation will include updates to both the Industry Guide and the Responsibility Course.

Commissioner Steen inquired if this was added to an administrative rule that was before the Commission at today’s meeting.

Director Morelock responded to the affirmative.

HB 256 by Hernandez - Field Operations

• Allows cities (in addition to counties and OAG) to seek an injunction to abate a common nuisance under the Alcoholic Beverage Code.

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• Gives cities another tool to combat BYOBs

Director Morelock stated that the agency does not regulate BYOBs. She added that this bill provides cities another tool to combat BYOBs by allowing them to seek an injunction against BYOBs.

Presiding Officer Lilly questioned what the definition of a common nuisance.

Executive Chief Robert Saenz came forward to respond to the question.

Executive Chief Saenz responded that a common nuisance is defined as locations with continued violations of the Alcoholic Beverage Code such as selling of alcoholic beverages without a permit or consumption of alcoholic beverages during prohibited hours. He added that the Government Code defines common nuisance as continued violations such as prostitution and assault.

Presiding Officer Lilly questioned if the agency can act on activities that are a public nuisance even though we do not regulate BYOBs.

Executive Chief Saenz responded to the affirmative. He added that the agency usually gets involved in these situations when the location is violating provisions of the Alcoholic Beverage Code.

SB 341 by Perry - Field Operations

• Adds offenses involving synthetic cannabinoids to the list of offenses for which a license/permit can be denied for all retail licenses/permits

• Adds possession of or allowing a person to have possession of synthetic cannabinoid on retail premises to list of prohibited activities

This definition will make it easier to prove synthetic cannabinoid offenses at TABC hearings.

Director Morelock stated that this bill adds the possession of synthetic cannabinoids to the list of prohibited activities. She added that this bill also defines synthetic cannabinoids making it easier to prove an offense at TABC Hearings.

HB 1555 by Kuempel - Audit

• Creates exemption to allow sale of lottery tickets on the premise of a Wine & Beer Retailer's Permit that derives 30% or less of its gross receipts from the sale of alcohol.

o Examples: grocery store w/a BG, bowling alley, golf course, some restaurants (Chuck E. Cheese’s).

• Lottery determines if BG fails to meet (or exceeds) 30% threshold via checkbox on lottery application. TABC would verify only upon a complaint or audit.

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Director Morelock stated that this bill allows lottery ticket sales on wine and beer retailer locations where the majority of gross receipts are generated from games or sale of non-alcoholic beverage items. She added that these locations could include Chuck E. Cheese, Top Golf or a bowling alley. Director Morelock stated that a grocery store could qualify if it has a separate location inside the store that sells wine and beer.

Director Morelock’s report is supported by a PowerPoint presentation. (Attachment 2) Presiding Officer Lilly called upon Director Morelock to present the next agenda item. He stated that after Ms. Morelock’s status report on the Sunset Self-evaluation Report the Commission would consider the logistics of filing the report. SUNSET SELF-EVALUATION REPORT, INCLUDING UPDATE AND POSSIBLE ACTION REGARDING APPROVAL PROCESS Director Morelock stated that the Sunset process answers the basic question for the Texas Legislature: Are an agency’s functions needed, and if so, how can the agency work better and save money for Texans? She added that this process works by setting an automatic termination date for an agency unless a bill is filed to continue an agency. Director Morelock stated that this process occurs for state agencies every twelve years. There are currently twenty-eight agencies being reviewed by the Sunset Advisory Commission. Director Morelock provided the breakdown of Sunset Advisory Commission membership.

• 5 House Members/ 4 year term - Chosen by the Speaker • 5 Senate Members/ 4 year term - Chosen by the Lieutenant Governor • 2 Public Members/ 2 year term - Lt. Governor and Speaker (1 each)

Director Morelock stated that in the next couple of months, there will be three new house members, three new senators and two new public members named to this commission. She added that these members will be involved in reviewing the agency’s paperwork and recommendations. Presiding Officer Lilly questioned if being a member of the Sunset Advisory Commission is considered an additional duty and would that member need to give up a position to accept a place on this commission. Director Morelock responded that it is an additional duty. She added that the member would not have to give up a position to be on this commission. Director Morelock continued her briefing with an overview of the Sunset Advisory Committee process. She stated that depending on the size of the agency, the review can take up to nine months to complete. She added that the process starts with the agency submitting a self-evaluation report. Director Morelock advised that the

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agency’s report is due to the Sunset Advisory Commission on September 1, 2017. She provided the timeline for the Sunset review.

• Agency submits self-evaluation report • Conduct an orientation with TABC staff • Meet with divisional staff, all levels, both at HQ and in the Field Offices • Meet with industry members and other stakeholders • Produce a staff report- summer/fall of next year • Meet to discuss the staff report • Take testimony from TABC and the public • Meet again to vote on recommendations • Make recommendations to Legislature at the next regular session • Recommendations will become a bill and go through the normal bill process

Director Morelock stated that the agency will be providing information and testimony throughout this process. Director Morelock next presented a status of the agency’s Sunset Self Evaluation report (SER). She stated that the SER consists of twelve sections plus attachments. She added that the SER is submitted electronically. Director Morelock stated that sections two, seven and nine will take longer to complete as they require extensive data in a narrative format. SER Sections / % Completed

Director Morelock stated that section two, Key Functions and Performance, is about the agency’s mission, objectives and functions. She added that the thirty-eight page response paints a great picture of the impact this agency has and the work we do. Director Morelock stated that section seven, Guide to Agency Programs, is the bulk of the document. She added that currently this section is at two hundred pages. This section covers seventeen agency programs/divisions with regards to the objectives, effectiveness, administration, challenges and how the program works with other government entities.

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Presiding Officer Lilly questioned if 100% complete means that section of the document is ready to be delivered. Director Morelock responded to the affirmative. Director Morelock stated that this section is thorough, comprehensive and detailed. She added that the agency wants to be transparent on issues, but also show the agency’s accomplishments. Presiding Officer Lilly questioned how close section seven is to being complete. Director Morelock responded that this section is 75% complete. She added that she is planning on it being 100% complete by the end of next week. Director Morelock stated that section nine is one of the more critical sections. She added that sixteen issues to improve agency operations have been identified and the directors are reviewing it for a final time this week. Director Morelock is confident that the agency will have the SER complete and ready to submit on time. Presiding Officer Lilly questioned if the major issues are one identified by Sunset or ones that the agency has identified. Director Morelock responded that the major issues were identified internally. Presiding Officer Lilly questioned if the major issues that have been identified during this SER process are the same ones that were identified during the last Sunset Advisory Commission review of the agency. He added that major issues tend to be major issues for a reason. Executive Chief Saenz responded to Chairman Lilly’s question. He stated that over the last twelve years, the agency has worked to resolve the major issues were identified during the last Sunset review. He added that the agency has moved towards a more public safety model as related to the direction of the enforcement efforts. Executive Chief Saenz stated that 95% of the cases are of a public safety nature as opposed to 30% in the past. Presiding Officer Lilly stated that this commission has challenged this agency to swiftly, deliberately and professionally put together this Sunset Self-evaluation Report. He added that both he and Commissioner Steen applaud the efforts of the agency on the process so far. Commissioner Steen stated that the deadline for submitting this report is before the next Commission meeting. Commissioner Steen moved to delegate to the presiding officer the authority to submit the agency’s self-evaluation report to the Sunset Commission or to

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authorize the Executive Director to do so. Presiding Officer Lilly seconded the motion. The motion is approved. Director Morelock’s report is supported by a PowerPoint presentation. (Attachment 3) Presiding Officer Lilly called upon Business Services Director Vanessa Mayo to come forward and present the next agenda item. FY18 OPERATING BUDGET APPROVAL Director Mayo welcomed the commissioners back to Austin before beginning her presentation. She announced that the Deputy CFO, Paula Reed, would be joining her for this presentation. Director Mayo stated that the numbers in the slide below represent the FY 2018 Operating and Capital Budget by strategy. She added that this includes all funding received during this Legislative Session and details method of finance. Director Mayo stated that this final budget includes twenty thousand dollars that was added for a Schedule C increase for senior agents. She added that senior agents have twenty years or more of service with the agency. Director Mayo stated that the total budget for FY 2018 is a little over forty-eight million dollars. She added that this includes general revenue funding, federal funds, and appropriated receipts. Director Mayo noted that both federal funds and appropriated receipts have increased significantly from the last biennium. Federal funds are at half a million and appropriated receipts are just over two hundred fifty thousand. Director Mayo stated that the Enforcement strategy includes $6.9 million for border security, the funding for the senior agent salary increase of $20, 000 and a decrease of a little over $93,000 for the contract cost containment. She added that the contract cost containment reduction to General Revenue will come out of the enforcement strategy. Although this funding will come from the enforcement strategy, money can be moved between enforcement, licensing, and compliance strategies. Director Mayo noted that money cannot be moved out of the Ports of Entry strategy, but it can be moved into Ports of Entry.

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Director Mayo stated that the Object of Expense (OOE) are defined and categorized by the Legislative Budget Board (LBB). She added that Salaries and Other Operating Expense are the largest categories in the FY2018 Operating Budget. Director Mayo stated that the agency’s $250,000 payment to the Department of Agriculture comes out of the Other Operating Expense category.

Director Mayo stated that the capital budget is set forth in the General Appropriations Act. She added that a capital item can be one item, a group of items, or a project with a total cost of over $100, 000 over the biennium. This could include an IT project, such as the Data Center Consolidation project or public safety equipment such as weapons, body armor and radios. Director Mayo stated that money can be transferred in and out of capital budget line items as long as it the amount transferred is not over 25%. She added that general revenue can also be transferred into an existing line item, but not into a new line item. Director Mayo stated that Items purchased with money outside the state treasury like asset forfeiture or federal grant money is subject to the same limitations set forth herein.

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Presiding Officer Lilly questioned if there is a process to address these items in between legislative sessions. Director Mayo responded to the affirmative. She added that the request would be presented to the TABC board for approval and the request would then be submitted to the LBB. Director Mayo stated that the biennial surplus for the FY 2018-2019 estimated revenue is almost $22 million dollars. She added that this is the result of an expected upward trend in revenue and the 4% budget cut this legislative session. Director Mayo stated that the agency did not receive any exceptional item funding outside of the Centralized Accounting and Payroll/Personnel System (CAPPS) item. Director Mayo stated that the Contract Cost Containment rider that passed in Article IX reduces the agency’s general revenue number by $187,000 dollars over the biennium. She stated that the agency received instructions to identify, and execute savings and efficiencies in their use of contracted goods and services. She added that some of these savings have been identified by:

• Reducing Temp Services • Eliminating Certain IT Contracts • Closing One Field Office • Reducing Cell Phones and Air Cards

Presiding Office Lilly commented that he understands that the agency’s only source of revenue is appropriations from the legislature. He added that this agency is unique that it also generates a great deal of revenue for the state of Texas. Vanessa Mayo will provide artificial margins on revenue collected. Cash flow generated for the state and cash flow expenditures.

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Presiding Officer Lilly moved to approve the Texas Alcoholic Beverage Commission’s FY 2018 Operating and Capital Budgets as presented which includes the salary for the Executive Director as set out in the General Appropriations Act; and authorize the Executive Director, or their designee, to make transfers between appropriation line items and capital budget items in accordance with the General Appropriations Act as are appropriate and necessary to implement the budget. Commissioner Steen seconded the motion. The motion passes. Director Mayo’s report is supported by a PowerPoint presentation. (Attachment 4) BUSINESS SERVICES DIVISION UPDATE Director Mayo stated that she will be providing an overview of the Business Services Division (BSD) and what this division contributes to the agency. She added that her Deputy CFO, Paula Reed will be presenting during this briefing as well. Director Mayo then asked her team to stand and be recognized. Director Mayo stated that the Business Services Division has twenty-three FTEs and is the support division that handles every financial function in the agency. She added that the division’s responsibilities include:

• Payroll and leave accounting • Budget • Expenditures – includes accounts payable and travel • Revenue • CAPPS maintenance • Purchasing, contracts and procurement card

administration • Research & planning • Mail operations • Asset management • Records retention

Director Mayo stated that BSD is also responsible for many external agency reports. She added that unlike other agency divisions, BSD does not have performance measures. BSD’s efficiency is measured by the timeliness and accuracy of required reporting to oversight agencies such as the Governor’s Office, Legislative Budget Board, State Auditor’s Office and the Comptroller of Public Accounts. Director Mayo listed some of the external reports that BSD is responsible for submitting.

• Legislative Appropriations Request (LAR) • Governor’s Operating Budget • Annual Financial & Non-financial Reports • Performance Measure Reporting • Fiscal Note Submissions

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• Border Security Reporting • Historically Underutilized Business (HUB) Reporting

Director Mayo then identified key statistics for FY2016. She stated that since BSD does not have performance measures, she must garner the division’s performance through statistics. She added that the Business Services Division is still very paper dependent, but hopes that the push for online and EFT services will decrease that need in the future. Director Mayo stated that the revenue processed by the division totals over $3 million. Director Mayo and Assistant Director Reed next identified BSD personnel and their roles and responsibilities within the division. Marilyn Lindsay - Fiscal Services Manager Roy Hale - Planner Tiffany Forister - Budget Analyst Audrey Rosales - Project Manager Revenue Team Vacant - Revenue Manager Renee Moser - Grant Accountant Tim Williams - Revenue Accountant Analisa Imboden - Accounting Technician Harrison Gregg - Accounting Technician Expenditures Team Brenda Kunco - Expenditure Manager Jessica Ramirez - Payroll and Time & Leave Officer Sally Flanders - Accounts Payable Christina Keeth - Accounts Payable

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Stacey Hendrix - Travel Coordinator Purchasing, Inventory & Mailroom

Warren Sauer - Procurement and Property Manager Domingo Lugo - Purchaser Tu-Anh Perez - Purchaser Vacant - Receiving/Inventory Clerk Theodore Cole - Mail Center Clerk Director Mayo next presented some of the successes and challenges of the Business Services Division. She stated that the implementation of the automated time and leave system Replicon and the roll out of state mandated CAPPS Financials were two of the division’s successes. She added that when compared to a similar sized agency with eight to ten purchasers, Business Services (with only two purchasers) outperformed the other agency in number of requisitions and POs completed in the first month. Director Mayo stated that the challenges have been a lack of automation in revenue processing and payroll. She added that five thousand checks come in on paper monthly. She added that these checks have to be processed and deposited daily. Director Mayo stated that she hopes that the push for online licensing renewals will also help BSD as well. She added that the implementation of the CAPPS HR system in July 2019 will allow the payroll process to be more automated. Director Mayo stated that records retention and lack of imaging also contribute to the paper intensive nature of BSD. She added that an imaging initiative would help this situation. Lastly, Director Mayo stated that a common challenge that support divisions have is employee turnover. She added that currently she has four vacancies which puts the division at a 35% vacancy rate. Director Mayo stated that in the last six months there has been a State Auditor’s Office Audit, a new system roll out without processes and a legislative session all in the same time frame. She added that the Business Services Division has taken on that challenge and have done very well. Director Mayo stated that she is very excited that the SAO report will be published on July 31, 2017. Director Mayo’s report is supported by a PowerPoint presentation. (Attachment 5) Internal Auditor Monday Rufus came forward to present the next agenda item. LICENSING APPLICATION PROCESSING AUDIT Mr. Rufus began his presentation by introducing himself and his associate Robert Gonzales, CPA. Mr. Rufus stated that his firm has conducted an internal audit of the Licensing Application and Processing at the Texas Alcoholic Beverage Commission as of June 26, 2017. The objectives of the audit included:

• Reliability and Integrity of Information • Compliance with Policies, Procedures, Laws, and Regulations • Safeguarding of Assets

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• Efficiency and Effectiveness of Operating Procedures Mr. Rufus stated that the commission has procedures and controls in place related to the licensing application processing. Mr. Rufus encourages the commission to continue its efforts to ensure online submissions of original and renewal applications are processed in a timely manner. He added that the commission should make an effort to ensure timely deposits of license and permit application fees collected at regional offices. Mr. Rufus stated that of the thirty-seven license/permit applications tested, four were not deposited within the three day requirement. He added that some strengths were identified during the audit and are outlined in the report. Presiding Officer Lilly commented that the expedition of checks is always challenging when relying on regular mail. He added that this is something that the agency is working on through automation and should be rectified in the future. FIELD OPERATIONS INVESTIGATIONS ADMINISTRATIVE AUDIT Mr. Rufus stated that the procedures for this audit were directed specifically toward the Special Investigations Unit and Financial Crimes Unit (SIU/FCU). The objectives of the audit included:

• Reliability and Integrity of Information • Compliance with Policies, Procedures, Laws, and Regulations • Safeguarding of Assets • Efficiency and Effectiveness of Operating Procedures

Mr. Rufus noted that the commission collected in excess of $300 million annually in taxes and fees. He added that the report misreported this figure as $200 million. Mr. Rufus stated that the SIU/FCU units have policies, procedures and controls in place. He added that the strengths are noted throughout the report. Mr. Rufus stated that the commission can enhance the unit’s processes and efficiencies by ensuring changes in assigned cases are consistently reflected in the Agency Reporting and Tracking System (ARTS) and the Case Management Log. He added that a sample of nine out of ninety-nine. Mr. Rufus stated that three of those cases were not consistent with the current standard. Presiding Officer Lilly thanked Mr. Rufus for his work with the agency. Presiding Officer Lilly called upon Assistant General Counsel Martin Wilson to come forward and present the next agenda item. ADOPT AMENDMENT TO RULE §45.75, MANDATORY LABEL INFORMATION FOR MALT BEVERAGES Assistant General Counsel Wilson stated that there were no public comments received on this rule nor attendees at the public hearing. He added that Rule §45.75 prescribes the information that must be included on a malt beverage label and references the other rules that contain further details about each of the requirements.

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Assistant General Counsel Wilson stated that the amendment to the rule updates the title in one of the cross referenced rules. Presiding Officer Lilly moved to adopt the amendment to Rule §45.75, Mandatory Label Information for Malt Beverages, as recommended by staff. Commissioner Steen seconded the motion and the motion passes. ADOPT AMENDMENTS TO RULE §45.76, BRAND NAMES Assistant General Counsel Wilson stated that no comments were received on this rule. He added that one of the amendments to Rule §45.76 updates the references to the position of the Administrator with Executive Director. He added that this change will be made to all of the rules as they go through the rule review process. Assistant General Counsel Wilson stated the other amendment to this rule makes these references gender neutral. Presiding Officer Lilly moved to adopt the amendments to Rule §45.76, Brand Names, as recommended by staff. Commissioner Steen seconded the motion and the motion passes. APPROVE PUBLICATION OF PROPOSED AMENDMENTS TO RULE §37.61, SUSPENSIONS Assistant General Counsel stated that generally there would have been a stakeholders meeting held on rules that are proposed for publication. He added that no stakeholders meeting was held as this rule reflect legislative change from this past session. Assistant General Counsel Wilson stated that the proposed amendments to Rule § 37.61 implement House Bill (HB) 1612. He added that this bill specifically adds drugs or controlled substances to the list of offenses that the agency may exercise discretion regarding the civil penalty option. Presiding Officer Lilly moved to approve publication of the proposed amendments to Rule §37.61, Suspensions, as recommended by staff. Commissioner Steen seconded the motion and the motion passes. EXECUTIVE SESSION TO RECEIVE LEGAL ADVICE PURSUANT TO TEXAS GOVERNMENT CODE §551.071(2), TO CONSULT WITH LEGAL COUNSEL REGARDING PENDING OR CONTEMPLATED LITIGATION OR SETTLEMENT OFFERS PURSUANT TO TEXAS GOVERNMENT CODE §551.071(1), AND TO DELIBERATE ON THE APPOINTMENT, EMPLOYMENT, EVALUATION, REASSIGNMENT, DUTIES, DISCIPLINE, OR DISMISSAL OF PUBLIC OFFICERS OR EMPLOYEES, INCLUDING THE EXECUTIVE DIRECTOR, ACTING EXECUTIVE DIRECTOR, GENERAL COUNSEL, OR ACTING GENERAL COUNSEL, PURSUANT TO TEXAS GOVERNMENT CODE §551.074, TEXAS ALCOHOLIC BEVERAGE CODE §5.11, AND 16 TEXAS ADMINISTRATIVE CODE §31.1(a)(8)

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ACTION ON ITEMS DISCUSSED IN EXECUTIVE SESSION Presiding Officer Lilly announced that there are no matters to discuss in Executive Session. He added that agenda items 13 and 14 will be skipped. PUBLIC COMMENT Presiding Officer Lilly opened the floor for comments before the Commission. He asked Ms. Amy Harrison to come forward and address the Commission. He advised Ms. Harrison that she would have two minutes to make her comments. Ms. Harrison praised her Licensing Division employees and asked them to embrace future changes. She next spoke to her colleagues on how much she has learned from working with them. She lastly thanked the industry members for their patience, professionalism and friendship. Presiding Officer Lilly thanked Ms. Harrison for her comments. NEXT MEETING DATE Presiding Officer Cuevas announced the next meeting date is scheduled for Tuesday, September 26, 2017. Presiding Officer Lilly thanked everyone for the professionalism with which they have conducted themselves over the past few weeks. He added that it has been a difficult time and the agency has gone through some changes that are never easy. Presiding Officer Lilly stated that throughout all of this change, the agency has held itself above reproach with respect to its professionalism. He added that the agency has a new executive director who will be presiding at the next commission meeting. Presiding Officer Lilly stated that he looks forward to General Nettles’ leadership. He added that for eighty-five years this agency has been proponents of the law, protectors of public safety and have produced revenues that have enhanced this state’s education system as well as other great matters. Presiding Officer Lilly stated that it is a great honor to serve the citizens of Texas and an honor to serve with Commissioner Steen. He added that the Commissioners look forward to the next meeting. ADJOURNMENT Presiding Officer Lilly adjourned the meeting at 11:45 a.m.

Attachment 1

Commission Report: Executive Director and

Agency Activities, Budget Issues, Staff Achievements, Legislative Activities

Commission MeetingInterim Executive Director

Robert SaenzJuly 25, 2017

TABC Class A-17

The TABC Agent Trainee Academy is eleven weeks in duration with over 518 training hours.

Training begins early in the morning with Physical Training and Arrest and Control Tactics and continues with classroom or physical skills training that can go as late as 8:00 pm.

TABC Special Investigations Unit (SIU)

“Mami Chulas” SIU Investigation of “Narcotic Sales” and “Employment Harmful to a Minor”

at 2 Laredo Drive-Thru locations:◦ Joint investigation with Laredo PD and US HSI◦ Total of 22 joint ops run since Sep 2016◦ Zapata location = Frequent narcotics buys◦ Barrios location = Adopted LPD cases on Emp. Harmful to Minor

SIU Search Warrant run on June 29th 2017 at the Zapata Location:◦ One employee arrested on four felony warrants of Delivery of a Controlled

Substance (Cocaine) and issued a $100,000.00 bond◦ Laredo PD K-9 located additional small amount of Cocaine and Marijuana

during the search warrant SIU Supervisor met with both permittee’s:◦ Both licenses were cancelled for cause immediately as a result of the joint

investigations


“Mami Chulas”

Mami Chulas Drive ThruBQ789145

1806 Barrios St. Ste 1, Laredo, TX

Mami ChulasBQ882648

1519 Zapata Highway, Laredo, TX


“Operation Three Thorns”

SIU Investigation of Narcotic Sales, Prostitution, Drink Solicitation and possible Human Trafficking at 3 El Paso locations:◦ Joint investigation with TX DPS◦ Over 44 Grams of cocaine seized◦ 87% of the operations resulted in narcotic violations◦ 60 felony arrest warrants were issued on 29 individuals◦ 100 administrative violations were filed

Cancelled all 3 permits for cause:◦ An analysis of calls for service responded to by the local police department

at those 2 establishments using a time frame of 1 year prior and 1 year after within a .25 mile radius of each establishment for a 31.5% decrease in calls for service

The two establishments were sold to a nearby car dealership and remain closed.

Malt Beverage Label Approval

Malt Beverage Label Approval 300% growth of malt beverage applications between FY11-

FY16 Recent effort to reduce average days to approve malt

beverage applications◦ Redirected resources within agency◦ 1 FTE to review and approve malt beverage applications◦ 104% growth of in-state and out-of-state malt beverage

producers Successfully reduced the average days to approve an

application to 9 days◦ Applications without errors took less than 6 days to

approve

State Auditor’s Office Audit SAO conducted audit of TABC’s financial

processes Audit period was from 9/1/14 – 11/30/16 Areas reviewed include◦ Revenue◦ Payroll actions – PAFs◦ Asset management◦ Accounts payable◦ Travel reimbursement ◦ Information Technology

State Auditor’s Office Audit

Findings of Note◦ The majority of Revenue findings were lack of supervisor

signatures and dating of documents◦ Ports of Entry collecting the incorrect tax on certain items◦ PAFs did not have proper approvals documented◦ Asset management had no findings or suggestions for

improvement◦ Travel was rated as “high risk” Mostly violations of internal policy and data entry errors

◦ IT controls and certain employee access deemed to be conflicts

Questions?

Attachment 2

85th Legislative Session Review

July 2017

1

85th Legislature, Regular Session Legislative Update

TEXAS ALCOHOLIC BEVERAGE COMMISSION

- LICENSING-HB 2101 by Frullo

• Changes criteria for and provides consistency in calculation among retailers for obtaining a food and beverage certificate.

• Increases the threshold to qualify for a food and beverage certificate from no more than 50% of gross receipts attributed to alcohol to no more than 60%.

• Removes comptroller’s role in certification process for Mixed Beverage Permits (MB, RM) and Private Club Permits (N, NB).

• Changes the calculation for on-premise retailers to compare total receipts from the sale of alcoholic beverages with the total receipts for the location (which is practical application employed by Licensing now for beer and wine retailers (BGs and BEs)).

• Establishes consistency regarding cancellation, denials, etc.

2

Effective9/1/17

Implementation on next slide

- LICENSING-

3

Effective9/1/17

HB 2101 by Frullo (continued)

Implementation:• Amend Rule 33.5 (September)• Update Audit forms and procedures (by September)• Update Licensing policies and procedures (by September)• Update Responsibility Course• Update Industry Guide• Update FAQs regarding Food & Beverage Certificates• IT coding

Amends AB Code: 25.13, 28.18, 32.23, and 69.16Repeals AB Code: 28.18(d) and 32.23(d)

- LICENSING-HB 4042 by Paddie

• Modifies temporary auction permit by removing – "charitable" in name– surcharge– limitation of one per year

• Expands permit to those subject to Chapter 254, Elections Code (political action committees)

4

Effective9/1/17

Implementation:• Update Rule 33.23(c) to remove surcharge (November)• Update Licensing procedures • Update Industry Guide • Update Responsibility Course• Update application • IT Coding

Amends AB Code: 53.001 – 53.009

- LICENSING-

5

Effective5/29/17

HB 3101 by Kuempel

• Creates a Passenger Bus Beverage Permit with $500 annual fee • Eligibility restricted to a bus used for regularly scheduled trips

between cities AND has passenger deck over baggage compartment; seats 16-36 passengers; has a separate gallery area; is at least 35 feet long; and has an attendant who is not the driver and has taken seller server training.

Implementation:• Update Rule 33.23(b) to add surcharge (November)• Create new application for new permit • IT Coding• Update Responsibility Course • Update Industry Guide

Amends AB Code: 11.38(d) and 101.46(b)Adds AB Code: 48A.01 – 48A.06

- LICENSING-SB 1176 by Campbell

• Creates a water park permit with $30 annual fee • Written so criteria only applies to Schlitterbahn

in New Braunfels

6

Effective5/18/17

Implementation:• Update Rule 33.23(a) to add a surcharge (November)• Create a new licensing application for subordinate permit• IT coding

Adds AB Code: 56.01 – 56.04

- LICENSING-SB 1519 by Hancock

• Changes definition of Public Entertainment Facility to include a facility that’s part of an approved venue project, including the venue and related infrastructure, as defined by Section 334.001, Local Government Code.

• Allows the referenced facility to receive upper tier sponsorship regarding the promotion or advertising of an entertainment event or an alcoholic beverage brand or product.

7

Effective6/1/17

Amends AB Code: 108.73(2), 108.755(a)

- MARKETING PRACTICES -HB 3287 by Goldman

• Subject to certain exceptions, if combined annual production at a brewery and all of its affiliated or subsidiary breweries exceeds 225,000 barrels, the brewery can NOT sell at its taproom.

– One exception is a brewery that had a taproom before 2/1/2017 AND whose annual production at the brewery is less than 175,000 barrels, even if its combined annual production with its affiliates and subsidiaries exceeds 225,000 barrels.

– The second exception is a brewery that purchased an ownership interest in a another brewery AND whose annual production at the purchasing brewery was less than 175,000 barrels, even if its combined annual production with its affiliates and subsidiaries exceeds 225,000 barrels.

– The third exception is a brewery that was purchased by another brewery AND whose annual production at the purchased brewery was less than 175,000 barrels, even if its combined annual production with its affiliates and subsidiaries exceeds 225,000 barrels.

• To qualify for the second or third exceptions, a brewery cannot sell to any brewer that exceeds 225,000 barrels annually at all locations combined an ownership interest of more than 25% in its location OR any ownership interest that gives the purchasing brewery the ability to control the operations at the purchased brewery's location.

• If a brewery is allowed to sell at its taproom because it falls under one of the exceptions, it must file a territorial agreement, purchase the malt beverages sold in the taproom from a distributor, and comply with the cash law requirements in §102.31 and other provisions of the Code governing distributor/retailer dealings.

8

Effective6/15/17

- MARKETING PRACTICES -HB 3287 by Goldman (continued)

• A brewery may self-distribute only if annual production at the brewery and all of its affiliates and subsidiaries is less than 125,000 barrels combined.

• A brewery cannot self-distribute more than 40,000 barrels annually combined from the brewery and all of its affiliates and subsidiaries.

• Grandfathers in Karbach, Revolver, and Independence– Can sell in a taproom under law that existed before HB 3287– Can establish no more than 2 more taprooms (each selling up to 5000 barrels

annually) as long as those additional taprooms each produce less than 225,000 barrels and the brewer files a territorial agreement and goes through a distributor

9

Effective6/15/17

Implementation:• Update Industry Guide• Discuss processes in Licensing and Marketing Practices

regarding changes in ownership and gallonage thresholdsAmends AB Code: 12A.02(a), (b), 12.052,

62A.02(a), (b), 62.122

- MARKETING PRACTICES-HB 2299 by S. Thompson

• In addition to TABC and an independent lab, a producer of malt beverages can utilize its own laboratory to test its products.– Requires the producer’s lab be certified by TTB

• Gives TABC authority to request an affidavit as proof that an independent laboratory is independent.

10

Effective9/1/17

Implementation:• Amend Rules 45.71 and 45.85 (September)• Update Industry Guide• Update FAQ (by September)

Amends AB Code: 101.67(a), (d)-(e)

- MARKETING PRACTICES -HB 2097 by Geren

• Affirms a brewpub with a Wine & Beer Retailer's Permit can sell wine on the premises…even if self-distributing malt products produced on premises

Conforms to practice and eliminates confusion in Code.

11

Effective9/1/17

Implementation:• Update Industry Guide• Update Responsibility Course

Amends AB Code: 74.08(a)

- MARKETING PRACTICES-HB 3003 by Kuempel

• The prize awarded in a sweepstakes by a brewer (added in bill), manufacturer or nonresident manufacturer may include food, beverages, entertainment, recreation, gifts, or attendance at private event at a licensed/permitted premise for the sweepstakes winners and guests of the event sponsor.

• Upper tier conducting/sponsoring event must pay retailer fair market value for use of premises.

• The retailer must retain control of the sale and service of alcoholic beverages at the event.

12

Effective9/1/17

Implementation:• Update Rules 45.103, 45.106, 45.113 & 45.117 (November)• Update Industry Guide• Update Responsibility Course

Amends AB Code: 108.061

- AUDIT-SB 371 by Watson

• Eliminates inconsistencies in Code so there is no longer any requirements for an on-premise retailers to have running water or a toilet.

• Aligns beer and wine licenses/permits with mixed beverage permits

13

Effective9/1/17

Implementation:• Update audit inspection forms • Update Industry Guide• Update Licensing policies and procedures • Update Responsibility Course • Update Licensing FAQ

Amends AB Code: 5.61(b), 11.49(b)(2), 61.43, 61.71(a), (b), (d), 109.59(d)

- FIELD OPERATIONS -HB 1612 by Romero

• Adds "controlled substances or drugs" to list of offenses for which the agency is not required to offer a civil penalty in lieu of suspension of license/permit.

TABC can now suspend a license/permit if the basis for the suspension is a drug violation rather than first offering the option to pay a fine.

14

Effective9/1/17

Implementation:• Update Rule 37.61 (July)• Update TABC County Judge’s Handbook

Amends AB Code: 11.64(a)

- FIELD OPERATIONS -HB 256 by Hernandez

• Allows cities (in addition to counties and OAG) to seek an injunction to abate a common nuisance under the Alcoholic Beverage Code. Gives cities another tool to combat BYOBs

15

Effective9/1/17

Implementation:• Update TABC Guide for County Clerks• Update TABC County Judge’s Handbook

Adds AB Code: 101.70(b-1)

- FIELD OPERATIONS-SB 341 by Perry

• Adds offenses involving synthetic cannabinoids to the list of offenses for which a license/permit can be denied for all retail licenses/permits

• Adds possession of or allowing a person to have possession of synthetic cannabinoid on retail premises to list of prohibited activities

This definition will make it easier to prove synthetic cannabinoid offenses at TABC hearings.

16

Effective9/1/17

Implementation:• Amend Rule 35.41 (September) • Update applications• Update Responsibility Course • Update Industry Guide• Update TABC County Judge’s Handbook

Amends AB Code: 69.06 and 104.01

- AUDIT-HB 1555 by Kuempel

• Creates exemption to allow sale of lottery tickets on the premise of a Wine & Beer Retailer's Permit that derives 30% or less of its gross receipts from the sale of alcohol. – Examples: grocery store w/a BG, bowling alley, golf course,

some restaurants (Chuck E. Cheese’s).

• Lottery determines if BG fails to meet (or exceeds) 30% threshold via checkbox on lottery application. TABC would verify only upon a complaint or audit.

17

Effective5/26/17

Amends Government Code: 466.155(a)

- AGENCY -HB 2 by Zerwas

Rider 13 in SB 1 by Nelson• TABC may not spend appropriated money for

– travel outside the state, other than for bona fide and documented law enforcement or investigative activities; or

– to attend or participate in an event, training, conference, class, or similar activity outside the state.

• TABC may not accept payments from or spending authority on behalf of any trade, professional, or industry organization for any purpose or in any form, including a travel subsidy, payment of travel or other expenses for conference presenters, prepaid meals, or lodging.

• Effective for remainder of FY2017 and all of FY2018-2019 i.e., until August 31, 2019

18

Effective6/12/17

- AGENCY OPERATIONS -

19

Effective9/1/17

SB 533 by Nelson• Requires a state agency employee or official involved in procurement or contract management to disclose

any potential conflict of interest--during the procurement process or the term of a contract with a private vendor--if the contract is for the purchase of goods and services solicited through a purchase order exceeding $25,000.

• Changes anniversary from which a former employee can accept employment with an employer with whom the employee participated in a procurement or contract negotiation. Employment is prohibited until the second anniversary of the date the contract is signed or the procurement is terminated or withdrawn whereas current statute is second anniversary of the date the employee's service with the state agency ceased.

• Requires CPA to employ a chief procurement officer for Texas and update the Contract Management Guide to include policies each state agency is required to adopt on the interactions and communications between employees of the agency and a vendor that contracts with the state agency or seeks to conduct business with the agency. Agencies must adopt policy by January 1, 2018.

• Increases IT commodity purchase thresholds concerning number of vendors solicited for requests for pricing. If contract is valued

– Between $50,000 to $1 million (currently $150,000), must submit to at least three vendors– between $1 million and $5 million (currently $150,000 to $1 million), must submit to at least six vendors. – More than $5 million (currently $1 million), an agency is prohibited from entering a contract

Implementation: Create policy on vendor communication by 1/1/18 and develop process for employees to notify of potential conflict

- EMPLOYEES-HB 88 by Martinez

• Employees can take sick leave to care for a sick foster child (as well as a biological or adopted child). Little impact because our policies allow this

already. Our policies will be updated to address an employee's right to file a claim of discrimination as added by this bill.

20

Effective9/1/17

- EMPLOYEES-SB 73 by Nelson

• Requires state agencies to adopt a policy providing clear and objective guidelines to establish under what circumstances an employee could be entitled to or granted vacation, sick and emergency leave.

• Report annually to CPA on employees granted more than 32 hours of emergency leave

• Reports quarterly to the SAO and LBB each agency employee granted 168 hours or more of leave in that quarter due to involvement in an investigation

• CPA will adopt a uniform system and accounting codes for agencies to report each type of leave in CAPPS

21

Effective9/1/17

Implementation: amend current or create new policy regarding circumstances of employee leave and post on intranet and website (HR by August)

- RULES -HB 1290 by Roberts

• Restricts a state agency from adopting a proposed rule that imposes a cost on regulated persons unless the agency repeals or amends a rule to reduce costs of an equal or greater amount – Exceptions are rules amended or created to

• reduce a burden or responsibilities imposed on regulated persons;

• decrease cost for compliance with the rule; • is necessary to protect health, safety and welfare of residents; or • is necessary to implement legislation.

22

Effective9/1/17

Questions?

23

Attachment 3

Sunset Self-Evaluation Report, Including Update and Possible Action Regarding approval Process

1

Self-Evaluation Report (SER)prepared for the

Sunset Advisory CommissionJuly 25, 2017 Update

Sunset Review• Regular assessment of continuing need for a state

agency to exist• TABC previously went through process in 2007.• Timelines

– Self-Evaluation Report (due 9/1/17)– Sunset review begins September 2017 or March 2018– Publication of (Sunset) Staff Report (summer/fall 2018)– Sunset Advisory Commission hearings (fall 2018)– Sunset submits recommendations to Legislature (Feb.

2019)– Recommendations considered by 86th Legislature

beginning January 2019

2

SER Sections• I Agency Contact Information• II Key Functions and Performance• III History and Major Events• IV Policymaking Structure• V Funding• VI Organization• VII Guide to Agency Programs• VIII Statutory Authority & Recent Legislation• IX Major Issues• X Other Contacts• XI Additional Information• XII Agency Comments• -- Attachments

3

Attachment 4

FY18 Operating Budget Approval


APPROVAL OF FY 2018 OPERATING & CAPITAL BUDGET

VANESSA MAYO, CHIEF FINANCIAL OFFICER

FY 2018 OPERATING AND CAPITAL BUDGET

Budget by StrategyA.1.1. Enforcement

FY 2018 $25,317,340

B.1.1. Licensing and InvestigationC.1.1. Compliance MonitoringC.2.1. Ports of EntryD.1.1. Central Administration

4,965,5336,645,5175,564,4192,811,895

D.1.2. Information Resources 2,823,138D.1.3. Other Support Services

Total, TABC Budget512,780

$48,640,622

Budget By Method of FinanceGeneral Revenue – Regular Appropriations $47,887,926Federal Funds 500,000Appropriated Receipts 252,696Total, TABC Budget $48,640,622

FY 2018 OPERATING BUDGET

Budget by Object of Expense1001 Salaries and Wages1002 Other Personnel Costs

FY 2018 $36,880,777

1,502,190

% of Total 75.82%3.09%

2001 Professional Fees 1,052,017 2.16%2002 Fuels and Lubricants 595,730 1.22%2003 Consumables Supplies2004 Utilities

192,812499,422

0.40%1.03%

2005 Travel 764,316 1.57%2006 Rent – Building2007 Rent – Machine and Other

2,350,809343,220

4.83%.71%

2009 Other Operating Expense5000 Capital Expenditures

Total

3,630,385828,944

$48,640,622

7.46%1.70%

100.00%

FY 2018 CAPITAL BUDGET

Acquisition of Information Resource TechnologiesPC Replacement/Mobile Data Computers - LeasedHardware/Software Acquisitions

Total, Acquisition of Information Resource Technologies

$235,323$339,292$574,615

Fleet Acquisition – Replacement Vehicles $699,525

Public Safety Equipment – Replacement $129,419

Data Center Consolidation $872,566

Centralized Accounting and Payroll/Personnel System (CAPPS)Total, TABC Capital Budget

$72,365

$2,348,490

FY 2018-19 ESTIMATED REVENUE*FY 2018 FY 2019 Total

Appropriated GR $48,640,622 $49,106,590 $97,747,212Other Indirect Costs 15,821,754 15,920,199 31,741,953Total Appropriations $64,462,376 $65,026,789 $129,489,165

License and Permit Fees $41,505,600 $38,605,850 $80,111,450Surcharges 30,662,000 23,185,000 53,847,000Fines 2,500,000 2,500,000 5,000,000Bond Forfeitures 300,000 300,000 600,000POE – Admin Fee 4,500,000 4,500,000 9,000,000Licensing – Admin Fee 24,143 20,022 44,165Seller/Server Training 790,000 790,000 1,580,000Label Approval 543,475 543,475 1,086,950Miscellaneous Revenue 167,000 160,000 327,000Total Revenue $80,992,218 $70,604,347 $151,596,565

*As listed in LAR Estimated Biennial Surplus $ 22,107,400

CONTRACT COST CONTAINMENT

Article IX Sec 17.10 reduces agency’s GR number by $187,500 for the biennium

“Agencies shall identify and execute savings and efficiencies in their use of contracted goods and services”

Savings have been identified by:

Reducing temp services

Eliminating certain IT contracts

Closing one field office

Reducing cell phones & air cards

QUESTIONS?

Attachment 5

Business Services Division Update


BUSINESS SERVICES DIVISIONAL UPDATE

VANESSA MAYOPAULA REED

BUSINESS SERVICES DIVISION

Business Services Division

BSD FUNCTIONS

BSD is a support division that includes all financial functions in the agency and has 23 budgeted FTEs

Payroll and leave accounting

Budget

Expenditures – includes accounts payable and travel

Revenue

CAPPS maintenance

Purchasing, contracts and procurement card administration

Research & planning

Mail operations

Asset management

Records retention

BSD REPORTING

BSD is also responsible for many external agency reports

Oversight agencies such as the Governor’s Office, Legislative Budget Board, State Auditor’s Office and Comptroller of Public Accounts

Legislative Appropriations Request (LAR)

Governor’s Operating Budget

Annual Financial & Non-financial Reports

Performance Measure Reporting

Fiscal Note Submissions

Border Security Reporting

Historically Underutilized Business (HUB) Reporting

KEY STATS FOR FY2016

Payroll processed 45 payrolls which included 1,767 PAFs

Purchasing issued 1,459 purchase orders

Accounts payable processed 9, 722 vouchers valued at over $23 million

Travel paid 3,030 vouchers totaling over $860,000

The mailroom processed over 115,000 pieces of mail

Over 2,900 items are managed as reportable assets

The revenue team processed 3,340 EFTs, 12,507 online transactions, 64, 762 deposits and over $650,000 in credit card revenue

Total revenue processed equals $306,266,318

Marilyn Lindsay – Fiscal Services Manager Manages the revenue processing and expenditures Teams. Completes the Annual Financial Report.

Roy Hale – Planner Responsible for performance measure reporting, tracking of local option elections and serves as the agency procurement card administrator.

Tiffany Forister – Budget Analyst Manages all aspects of the agency’s budget and assists in LAR preparation.

Audrey Rosales – Project Manager CAPPS project manager and agency CAPPS trainer

Revenue Team

Revenue Manager vacant

Vacant – Revenue Manager Oversees revenue processing.

Renee Moser – Grant Accountant Process electronic funds transfers and grant billings.

Tim Williams – Revenue Accountant Processes refunds of revenue and reconciles online transactions

Analisa Imboden – Accounting Technician Processes cash receipts and prepares daily deposits.

Harrison Gregg – Accounting Technician Processes cash receipts and prepares daily deposits.

Expenditures Team

Brenda Kunco – Expenditure Manager Oversees expenditure processing, which include payment vouchers, travel vouchers, payroll processing, time and leave accounting.

Jessica Ramirez – Payroll and Time & Leave Officer Processes agency payroll and serves as Replicon administrator.

Sally Flanders – Accounts Payable Process purchase vouchers for recurring agency monthly services and goods.

Christina Keeth – Accounts Payable Processes purchase vouchers for agency fleet, procurement cards purchases, and one-time purchases.

Stacey Hendrix –Travel Coordinator Processes and manages all travel reimbursements.

Purchasing, Inventory & Mailroom Team

Warren Sauer – Procurement and Property Manager Oversees mailroom operations, property management and procurement.

Domingo Lugo – Purchaser Processes agency procurement requests into contract purchase orders and is the agency’s HUB Coordinator.

Tu-Anh Perez – Purchaser Processes agency procurement requests into contract purchase orders and is the agency’s Assistant HUB Coordinator.

Receiving/Inventory Clerk - vacant

Vacant – Processes receiving reports and invoicing. Assists with property inventory.

Theodore Cole – Mail Center Clerk Mailroom operations and maintenance of HQ pool vehicles. Also assists in receiving assets.

Mail Center Clerkvacant

Vacant – Mail Center Clerk Mailroom operations and maintenance of HQ pool vehicles. Also assists in receiving assets.

SUCCESSES AND CHALLENGES

Successes

Implementation of automated time and leave system Replicon

Roll out of state mandated CAPPS financials effective 9/1/16

CAPPS project manager

Challenges

Lack of automation in revenue processing and payroll

Records retention and lack of imaging

Employee turnover

THANK YOU FOR YOUR ATTENTION

QUESTIONS?

Attachment 6

Rules, Agenda Items 10-12

Page 1 of 2

July 25, 2017 Commission Meeting Agenda Item No. 10: Adopt Amendment to Rule §45.75, Mandatory Label Information for Malt Beverages

The Texas Alcoholic Beverage Commission adopts an amendment to §45.75, relating to Mandatory Label Information for Malt Beverages, without changes to the proposed text as published in the June 9, 2017 issue of the Texas Register (42 TexReg 2990). No comments were received.

Section 45.75 prescribes the information that must be on a label of beer, ale or malt liquor. The section references other rules of the commission that contain further details about each of the required pieces of information.

The amendment to §45.75(1)(B) simply corrects the reference to the title of §45.77, which should read Class and Type instead of Class and Types.

The commission reviewed the section pursuant to Government Code §2001.039 and determined that the need for the rule continues to exist but that this change to the prior version of the rule is appropriate.

The amendment is adopted pursuant to Alcoholic Beverage Code §5.31, which grants authority to prescribe rules necessary to carry out the provisions of the Code.

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Text of rule as adopted: §45.75. Mandatory Label Information for Malt Beverages. There shall be stated the following: (1) on the brand label: (A) brand name, in accordance with §45.76 of this title (relating to Brand Names); (B) class in accordance with §45.77 of this title (relating to Class and Type); (C) name and address (except when branded or burned in the container) in accordance with §45.78 of this title (relating to Name and Address). (D) net contents (except when branded or burned in the container) in accordance with §45.80 of this title (relating to Net Contents);

Page 2 of 2

(2) on the brand label or on a separate label (back or front): (A) in the case of imported malt beverages, name and address of importer, in accordance with §45.78 of this title (relating to Name and Address); (B) in the case of malt beverages bottled for a licensee or permittee, the name and address of the bottler in accordance with §45.78 of this title (relating to Name and Address). Text of rule showing amendment to prior version of rule: §45.75. Mandatory Label Information for Malt Beverages. There shall be stated the following: (1) on the brand label: (A) brand name, in accordance with §45.76 of this title (relating to Brand Names); (B) class in accordance with §45.77 of this title (relating to Class and Type [Types]); (C) name and address (except when branded or burned in the container) in accordance with §45.78 of this title (relating to Name and Address). (D) net contents (except when branded or burned in the container) in accordance with §45.80 of this title (relating to Net Contents); (2) on the brand label or on a separate label (back or front): (A) in the case of imported malt beverages, name and address of importer, in accordance with §45.78 of this title (relating to Name and Address); (B) in the case of malt beverages bottled for a licensee or permittee, the name and address of the bottler in accordance with §45.78 of this title (relating to Name and Address).

Page 1 of 2

July 25, 2017 Commission Meeting Agenda Item No. 11: Adopt Amendments to Rule §45.76, Brand Names

The Texas Alcoholic Beverage Commission proposes amendments to §45.76, relating to Brand Names, without changes to the proposed text as published in the June 9, 2017 issue of the Texas Register (42 TexReg 2991). No comments were received..

Section 45.76 addresses the use of brand names on labels of beer, ale and malt liquor. Subsection (a) requires that a brand name appear on the label. Subsection (b) addresses the use of brand names with geographical significance. If the use of a geographical name or adjective, whether alone or in conjunction with any statement, design or device on the label, creates the impression that the product is produced in a place other than where it is actually produced, the agency may require additional information on the label to correct the misleading impression.

The amendments update the reference to the word "administrator" in the rule. Alcoholic Beverage Code §5.11(b) provides that the administrator is also known as the executive director. In conducting its review of rules under Government Code §2001.039, the commission as a matter of style is changing references to the "administrator" to refer instead to the "executive director". The amendments, also as a matter of style in the rule review process, change a term to render the wording of the rule gender neutral.

The commission reviewed the section pursuant to Government Code §2001.039 and determined that the need for the rule continues to exist but that these changes to the prior version of the rule are appropriate.

The amendments are adopted pursuant to Alcoholic Beverage Code § 5.31, which grants authority to prescribe rules necessary to carry out the provisions of the Code. The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority. Text of rule as adopted: (a) General. Malt beverages shall bear a brand name, except that if not sold under a brand name, then the name of the person required to appear on the brand label shall be deemed a brand name for the purpose of this subchapter. (b) Brand names of geographical significance. Where a geographical name or adjective is used as the brand name, or a part of the brand name, and the executive director finds that the use of such a geographical name or adjective, or any statement, design or device appearing upon the label in conjunction therewith, tends to create the impression that the product was produced in a

Page 2 of 2

place or region other than that of actual production, the executive director may require the word "brand" to be stated in direct conjunction with such geographical name or adjective, in lettering at least one-half the size of the lettering in which such name or adjective appears on the label. If the executive director finds that the addition of the word "brand" does not remove the misleading impressions conveyed by the use of such geographical name or adjective, the agency may require, in addition to the word "brand," other appropriate language which will disclose the true place of production. Text of rule showing amendments to prior version of rule: (a) General. Malt beverages shall bear a brand name, except that if not sold under a brand name, then the name of the person required to appear on the brand label shall be deemed a brand name for the purpose of this subchapter. (b) Brand names of geographical significance. Where a geographical name or adjective is used as the brand name, or a part of the brand name, and the executive director [administrator] finds that the use of such a geographical name or adjective, or any statement, design or device appearing upon the label in conjunction therewith, tends to create the impression that the product was produced in a place or region other than that of actual production, the executive director [administrator] may require the word "brand" to be stated in direct conjunction with such geographical name or adjective, in lettering at least one-half the size of the lettering in which such name or adjective appears on the label. If the executive director [administrator] finds that the addition of the word "brand" does not remove the misleading impressions conveyed by the use of such geographical name or adjective, the agency [he] may require, in addition to the word "brand," other appropriate language which will disclose the true place of production.

Page 1 of 5

July 25, 2017 Commission Meeting Agenda Item No. 12: Approve Publication of Proposed Amendments to Rule §37.61, Suspensions

The Texas Alcoholic Beverage Commission proposes amendments to §37.61, relating to Suspensions.

Generally, Alcoholic Beverage Code §11.64(a) requires the agency to allow an offender to pay a civil penalty in lieu of having a permit or license suspended. However, that same section lists certain offenses for which the agency may exercise discretion in deciding whether to allow payment of a civil penalty in lieu of suspending the permit or license. House Bill No. 1612, 85th Regular Session of the Texas Legislature amended Alcoholic Beverage Code §11.64(a) to add any offense relating to “controlled substances or drugs” to the list of offenses for which the agency may exercise discretion regarding the civil penalty option. Currently, rule §37.61 lists each of the Alcoholic Beverage Code violations for which Code §11.64(a) allows the agency the discretion concerning the civil penalty option. The proposed amendments would add to the list in rule §37.61 the language added by House Bill No. 1612, so that the offenses listed in the rule continue to match the offenses listed in the code.

In addition to amending the rule to reflect the recent legislative change, the commission has reviewed the section pursuant to Government Code §2001.039 and has determined that the need for the rule continues to exist but that the proposed change to the current rule is appropriate.

Martin Wilson, Assistant General Counsel, has determined that for each year of the first five years that the proposed amendments will be in effect, there will be no fiscal impact on local government attributable to the amendments. There should be no fiscal impact on state government.

The proposed amendments will have no fiscal or regulatory impact on micro-businesses and small businesses or persons regulated by the commission. There is no anticipated negative impact on local employment.

Mr. Wilson has determined that for each year of the first five years that the proposed amendments will be in effect, the public will benefit because the rule will accurately reflect the applicable provision of the Alcoholic Beverage Code.

Page 2 of 5

Comments on the proposed amendments may be submitted in writing to Martin Wilson, Assistant General Counsel, Texas Alcoholic Beverage Commission, at P.O. Box 13127, Austin, Texas 78711-3127, or by facsimile transmission to (512) 206-3280, or by email to [email protected]. Comments will be accepted for 30 days following publication in the Texas Register. The staff of the commission will hold a public hearing to receive oral comments on the proposed amendments on Thursday, August 24, 2017, at 1:30 p.m. in the commission meeting room on the first floor of the commission’s headquarters, which is located at 5806 Mesa Drive in Austin, Texas.

The proposed amendments are authorized by Alcoholic Beverage Code §5.31, which grants authority to prescribe rules necessary to carry out the provisions of the Code.

The proposed amendments affect Alcoholic Beverage Code §5.31, and Government Code §2001.039. Text of rule showing proposed amendment: §37.61 Suspensions (a) This section implements Alcoholic Beverage Code §11.64(a), which requires the commission to adopt rules addressing when a suspension may be imposed without the opportunity to pay a civil penalty. (b) The administrator may deny a licensee or permittee the option of paying a civil fine in lieu of a suspension of the license or permit if the licensee or permittee has violated one or more of the following provisions of the Alcoholic Beverage Code: (1) §11.61(b)(14): sale to an intoxicated person by a permittee; (2) §22.12: breach of the peace on the premises of a package store; (3) §28.11: breach of the peace on the premises of a mixed beverage permittee; (4) §32.17(a)(2): refuse to allow an authorized agent or representative to come onto the premises; (5) §32.17(a)(3): refuse to furnish requested information to the commission or its agents or representatives; (6) §32.17(a)(7): consumption or service of alcohol on the premises during prohibited hours; (7) §61.71(a)(5): sale to a minor by a licensee; (8) §61.71(a)(6): sale to an intoxicated person by a licensee; (9) §61.74(a)(14): sale to a minor by a licensee; (10) §69.13: breach of the peace on the premises of an on-premise retail beer dealer; (11) §71.09: breach of the peace on the premises of an off-premise retail beer dealer; (12) §101.04: refuse to allow inspection;

Page 3 of 5

(13) §104.01(a)(4): solicitation of drinks; (14) §101.63: sale to an intoxicated person; (15) §106.03: sale to a minor; (16) §106.06: purchase of alcohol for a minor; (17) §106.15: engage in prohibited activity related to dancing by a person under 18; (18) Chapter 105: sale or offer of sale of an alcoholic beverage during prohibited hours, or consumption or permitting consumption of an alcoholic beverage during prohibited hours; [or] (19) any offense relating to gambling, prostitution or trafficking of persons; or [.] (20) any offense relating to controlled substances or drugs. (c) For the violations referenced in subsection (b) of this section, and after considering the circumstances required or allowed to be considered in this section, the administrator has discretion to determine whether to allow a licensee or permittee the right to pay a civil penalty in lieu of a suspension but is not required to allow such payment in lieu of suspension. (d) In determining whether to deny a licensee or permittee the right to pay a civil penalty in lieu of a suspension, the administrator shall consider any aggravating or mitigating factual circumstances related to the violation, including but not limited to: (1) the type of permit or license held by the violating licensee or permittee; (2) the type of violation or violations charged; (3) the licensee’s or permittee’s record of past violations, including the number, type and frequency of violations of the Alcoholic Beverage Code and of the rules of the commission; and (4) the date the permit or license was issued. (e) In addition to the circumstances listed in subsection (d) of this section that must be considered in determining whether to allow a licensee or permittee the right to pay a civil penalty in lieu of a suspension, the administrator may also consider other circumstances, including but not limited to: (1) whether the sale of alcoholic beverages constitutes the primary or partial source of the licensee or permittee’s business; (2) whether the violation was caused by intentional or reckless conduct by the licensee or permittee; (3) whether the violation caused the serious bodily injury or death of another; (4) whether the character and nature of the licensee’s or permittee’s operation were reasonably calculated to avoid violations of the Alcoholic Beverage Code and rules of the commission at the time of violation; and/or (5) whether the licensee or permittee has taken action to remediate the violation and to prevent future violations.

Page 4 of 5

Text of current rule: §37.61 Suspensions (a) This section implements Alcoholic Beverage Code §11.64(a), which requires the commission to adopt rules addressing when a suspension may be imposed without the opportunity to pay a civil penalty. (b) The administrator may deny a licensee or permittee the option of paying a civil fine in lieu of a suspension of the license or permit if the licensee or permittee has violated one or more of the following provisions of the Alcoholic Beverage Code: (1) §11.61(b)(14): sale to an intoxicated person by a permittee; (2) §22.12: breach of the peace on the premises of a package store; (3) §28.11: breach of the peace on the premises of a mixed beverage permittee; (4) §32.17(a)(2): refuse to allow an authorized agent or representative to come onto the premises; (5) §32.17(a)(3): refuse to furnish requested information to the commission or its agents or representatives; (6) §32.17(a)(7): consumption or service of alcohol on the premises during prohibited hours; (7) §61.71(a)(5): sale to a minor by a licensee; (8) §61.71(a)(6): sale to an intoxicated person by a licensee; (9) §61.74(a)(14): sale to a minor by a licensee; (10) §69.13: breach of the peace on the premises of an on-premise retail beer dealer; (11) §71.09: breach of the peace on the premises of an off-premise retail beer dealer; (12) §101.04: refuse to allow inspection; (13) §104.01(a)(4): solicitation of drinks; (14) §101.63: sale to an intoxicated person; (15) §106.03: sale to a minor; (16) §106.06: purchase of alcohol for a minor; (17) §106.15: engage in prohibited activity related to dancing by a person under 18; (18) Chapter 105: sale or offer of sale of an alcoholic beverage during prohibited hours, or consumption or permitting consumption of an alcoholic beverage during prohibited hours; or (19) any offense relating to gambling, prostitution or trafficking of persons. (c) For the violations referenced in subsection (b) of this section, and after considering the circumstances required or allowed to be considered in this section, the administrator has discretion to determine whether to allow a licensee or permittee the right to pay a civil penalty in lieu of a suspension but is not required to allow such payment in lieu of suspension. (d) In determining whether to deny a licensee or permittee the right to pay a civil penalty in lieu of a suspension, the administrator shall consider any aggravating or mitigating factual circumstances related to the violation, including but not limited to: (1) the type of permit or license held by the violating licensee or permittee; (2) the type of violation or violations charged;

Page 5 of 5

(3) the licensee’s or permittee’s record of past violations, including the number, type and frequency of violations of the Alcoholic Beverage Code and of the rules of the commission; and (4) the date the permit or license was issued. (e) In addition to the circumstances listed in subsection (d) of this section that must be considered in determining whether to allow a licensee or permittee the right to pay a civil penalty in lieu of a suspension, the administrator may also consider other circumstances, including but not limited to: (1) whether the sale of alcoholic beverages constitutes the primary or partial source of the licensee or permittee’s business; (2) whether the violation was caused by intentional or reckless conduct by the licensee or permittee; (3) whether the violation caused the serious bodily injury or death of another; (4) whether the character and nature of the licensee’s or permittee’s operation were reasonably calculated to avoid violations of the Alcoholic Beverage Code and rules of the commission at the time of violation; and/or (5) whether the licensee or permittee has taken action to remediate the violation and to prevent future violations.

CERTIFICATION


10:00 a.m. – July 25, 2017

5806 Mesa Drive Austin, TX 78731

P.O. Box 13127 Austin, Texas 78711-3127 (512) 206-3333 www.tabc.state.tx.us

An Equal Opportunity Employer

STATE OF TEXAS COUNTY OF TRAVIS This certifies that the attached is a true copy of the proceedings of the Texas Alcoholic Beverage Commission meeting held on July 25, 2017. _________________________________ Robert Saenz Interim Executive Director Sworn and subscribed before me this the 3rd day of October 2017. __________________________________ Diana Figueroa Notary in and for Travis County

Documents

Commission Meeting Minutes for July 25, 2017 · 2017-10-10 · Richard Jauregui, Major, San Antonio Regional Office Dexter Jones, Chief, ... Alejandra Nieto, Staff Sergeant, Training