TITLE 3. ALCOHOLIC BEVERAGES

ALCOHOLIC BEVERAGE CONTROL AUTHORITY

Proposed Regulation

Title of Regulation: 3VAC5-70. Other Provisions (amending 3VAC5-70-210).

Statutory Authority: §§ 4.1-111 and 4.1-227 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: May 6, 2019.

Agency Contact: LaTonya D. Hucks-Watkins, Legal Liaison, Virginia Alcoholic Beverage Control Authority, 2901 Hermitage Road, Richmond, VA 23220, telephone (804) 213-4698, FAX (804) 213-4574, or email latonya.hucks-watkins@abc.virginia.gov.

Basis: Section 4.1-101 of the Code of Virginia establishes the Virginia Alcoholic Beverage Control Authority. Section 4.1-103 of the Code of Virginia enumerates the powers of the board of directors, which includes the authority to adopt regulations and to do all acts necessary or advisable to carry out the purposes of Title 4.1 of the Code of Virginia, including promulgate regulations in accordance with the Administrative Process Act and § 4.1-111 of the Code of Virginia. Section 4.1-227 of the Code of Virginia permits the board to impose and collect civil penalties.

Purpose: The purpose of the proposed amendments is to amend civil penalties for first-offense violations so that the new schedule of penalties will continue to encourage settlement for first-offense matters where there are no disputed facts and the licensee desires to resolve the matter without a hearing. The penalties remain lower than the maximum penalties listed in the Code of Virginia; however, there is a reasonable increase in previous amounts to reflect the increases in maximum civil penalties listed in § 4.1-227 of the Code of Virginia that were enacted in 2017. This action protects public health, safety, or welfare because increasing the penalties acts as a deterrent to licensees committing violations while still promoting education of the Alcoholic Beverage Control Act in exchange for a lower penalty and making the disciplinary process more efficient.

Substance: Any licensee charged with one of the offenses listed in 3VAC5-70-210, provided that the licensee has no other pending charges and has not had any substantiated violations of regulation or statute within the three years immediately preceding the date of the violation, may enter a written waiver of hearing and accept a period of suspension or pay a civil charge in lieu of a suspension. The amounts of the civil charges are listed in 3VAC5-70-210 and are less than the maximum monetary penalties permitted by § 4.1-227 of the Code of Virginia. The amendments increase the civil charges listed in 3VAC5-70-210 by either $250 or $500. The current civil charges are based on out-of-date maximum penalties that existed prior to the amendments in 2017.

Issues: The primary advantage to the public, that is, licensees, is that the regulation continues to function as a means to allow licensees to resolve low-level first offenses expeditiously through a process that resolves the matter without licensees having to go through the hearing process, which can oftentimes be intimidating and stressful. The "disadvantage" is that these new penalties are higher than the previous penalties, but the General Assembly has increased the statutory maximums, so these penalties should increase as well to maintain a degree of consequence.

The primary advantage to the agency is that the regulation continues to encourage prompt resolution for undisputed, low-level violations. This is very beneficial to the agency as a whole because since becoming an authority, the agency is operating with a part-time board of directors, and the more cases that are resolved through settlement, the less taxing it is on the board. There are no disadvantages to the agency.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. Following the 2017 legislative increase in maximum amount of penalties the Alcoholic Beverage Control Authority Board of Directors (Board) is authorized to impose,¹ the Board proposes to increase penalties for first-offense violations by either $250 or $500.

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. The 2017 General Assembly increased the maximum penalty from $2,500 to $3,000 for first-offense violations involving sale of alcohol to persons prohibited from purchasing alcohol and from $1,000 to $2,000 for other first-offense violations.² Accordingly, the Board proposes to increase the 26 different civil charges prescribed in this regulation by either $250 or $500. Based on the type and number of violations that occurred in 2017, the Alcoholic Beverage Control Authority (ABC) expects the collections of penalties to increase from $532,225 to $794,250, a $262,025 annual increase. The money collected from penalties is a source of General Fund revenue. Thus, the anticipated increase will be available to pay for general state expenditures.

In addition to the positive revenue impact, higher penalties would likely discourage violations and improve compliance. According to ABC, the Board opted not to increase the penalties to the maximum authorized in the legislation in order to encourage resolution of low-level first offenses expeditiously through a process without licensees having to go through the hearing process, which can oftentimes be intimidating and stressful.

Businesses and Entities Affected. The proposed new civil penalties apply to approximately 18,000 Board licensees. Most of the licensees are likely small businesses such as restaurants, bars, grocery stores, wineries, etc.

Localities Particularly Affected. The proposed changes would not disproportionately affect particular localities.

Projected Impact on Employment. The proposed changes are unlikely to affect employment.

Effects on the Use and Value of Private Property. The proposed changes are unlikely to affect the use and value of private property.

Real Estate Development Costs. The proposed changes would not affect real estate development costs.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. The proposed changes would not have costs or other effects on small businesses licensees unless they commit a first-offense.

Alternative Method that Minimizes Adverse Impact. The proposed changes would not impose adverse impacts on small businesses unless they commit a first-offense. There is no known alternative to minimize the adverse impact on such businesses while accomplishing the same goals.

Adverse Impacts:

Businesses. The proposed changes would not impose adverse impacts on non-small business licensees unless they commit a first-offense.

Localities. The proposed changes would not adversely affect localities.

Other Entities. The proposed changes would not adversely affect other entities.

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¹http://lis.virginia.gov/cgi-bin/legp604.exe?171+ful+CHAP0698

http://lis.virginia.gov/cgi-bin/legp604.exe?171+ful+CHAP0707

²Ibid.

Agency's Response to Economic Impact Analysis: The Virginia Alcoholic Beverage Control Authority concurs with the Department of Planning and Budget's economic impact analysis.

Summary:

The proposed amendments increase the civil penalty amounts charged in lieu of suspension for first-offense violations for a licensee that has no other pending charges, has not had a violation in three years, and enters a written waiver of hearing. The proposed increases reflect maximums effective July 2017 in § 4.1-227 of the Code of Virginia.

3VAC5-70-210. Schedule of penalties for first-offense violations.

A. Any licensee charged with any violation of board regulations or statutes listed below in this subsection, if the licensee has no other pending charges and has not had any substantiated violations of regulation or statute within the three years immediately preceding the date of the violation, may enter a written waiver of hearing and (i) accept the period of license suspension set forth below in this subsection for the violation, or (ii) pay the civil charge set forth below for the violation in lieu of suspension. In the case of a violation involving the sale of beer, wine, or mixed beverages to a person at least 18 but under younger than 21 years of age, or to an intoxicated person, or allowing consumption of such beverages by such person, any retail licensee that can demonstrate that it provided alcohol seller/server seller or server training certified in advance by the board to the employee responsible for such violation within the 12 months immediately preceding the alleged violation may accept the lesser period of license suspension or pay the lesser civil charge listed below for the violation in lieu of suspension. Any notice of hearing served on a licensee for a violation covered by this section shall contain a notice of the licensee's options under this section. Any licensee who fails to notify the board of its intent to exercise one of the options provided for under this section within 20 days after the date of mailing of the notice of hearing shall be deemed to have waived the right to exercise such options, and the case shall proceed to hearing. For good cause shown, the board may, in its discretion, allow a licensee to exercise the options provided for under this section beyond the 20-day period.