Comptroller Franchot seeks to lift cap on craft beer production, sales (original) (raw)

Maryland Comptroller Peter Franchot unveiled a legislative package Monday that would make sweeping changes to the state’s regulation of craft breweries.

Franchot’s 12-point “Reform on Tap Act of 2018” would eliminate limits on sales from taprooms and for take-home consumption for the state’s breweries. It also would eliminate limits on beer production for breweries that faced caps and let localities set taproom hours.

The proposal is intended to do away with regulations Franchot said have stifled one of the state’s most promising economic engines.

“Despite the impressive growth and performance of our craft brewing industry, we simply cannot ignore the fact that our laws and regulatory framework have stood in the way of their limitless potential,” Franchot said.

The proposal would follow legislation approved earlier this year that quadrupled the amount of beer breweries can serve — up to 2,000 barrels, or close to 500,000 pints. The legislation, designed to pave the way for a new Guinness brewery and taproom in Baltimore County, also stipulated that breweries could serve an additional 1,000 barrels if they sold the beer to a wholesaler, then bought it back, and limited operating hours for new taprooms.

Micro-breweries attached to restaurants can serve up to 4,000 barrels on-site.

Franchot’s proposal could set up lawmakers for another lengthy debate about breweries for a second consecutive year.

Del. Dereck Davis, who presided over hours of debate about breweries during the General Assembly’s last session as chair of the Economic Matters Committee, which oversees alcohol issues, said he wasn’t sure the state needed additional changes to its brewery regulations.

“I’m trying to figure out what problem we’re trying to correct,” he said.

Still, the Prince George’s County Democrat said he is willing to hear out advocates.

“We want to make Maryland as business-friendly as we can,” Davis said. “If we can make something better, we’ll most definitely do it.”

New legislation also could reignite debate within the industry about how expanded sales by breweries affect restaurants, liquor stores and distributors.

Jack Milani, a legislative co-chair of the Maryland State Beverage Association, said he is concerned about the idea of unlimited production and sales, but that he wants to see the full proposal before passing judgment. Milani, who served on the task force, said that as of Monday afternoon he had not received a copy of the proposal or a memo about its contents from the comptroller’s office.

“Our concern is to make sure any legislation that’s looked at takes into consideration there are a lot of family-owned businesses that are retailers, and anything that’s proposed is fair to everyone,” said Milani, who is co-owner of Monaghan’s Pub in Baltimore.

The comptroller’s office has asked Gov. Larry Hogan to submit the legislation as a departmental bill. Such bills are generally heard by the legislature, though it’s not required.

Franchot said the legislative package is based on the findings of the 40-member task force he convened in response to the state’s 2017 brewery legislation and needed in order for Maryland to compete with neighboring states for brewery development and investment.

An economic impact study by the state’s Bureau of Revenue Estimates commissioned by Franchot’s task force found that the craft beer industry contributed $802.7 million to the state’s economy and supported about 6,500 jobs in 2016. Craft beer production in Maryland grew at an annual rate of 15 percent, lagging behind the national annual growth rate of 18 percent.

Franchot blamed antiquated laws and burdensome regulations for stifling growth and discouraging new breweries from opening. According to the task force’s report, Maryland’s regulations on craft breweries are far tighter than those in Virginia, Delaware, Pennsylvania and Washington, D.C.

For example, breweries in those states are not limited in how much beer they can sell on site and none have a “buy-back” provision akin to Maryland’s, according to the report.

In addition to eliminating caps on how much breweries can produce and sell, the legislation would eliminate the “buy-back” provision and give local jurisdictions oversight of taproom operating hours. The legislation also would roll back rules that prevent self-distribution at very small breweries and limit contract brewing, in which a startup brewer hires a larger one to make its beer.

The comptroller unveiled his plan Monday at Union Collective, the former Sears distribution center in Medfield that Baltimore brewer Union Craft Brewing is converting into an expanded brewery with space for other small manufacturers.

Speaking over the hum of construction and flanked by Union Craft’s three founders, Franchot praised the young brewery for growing “in the face of statutory and regulatory impediments that have made it harder for this industry to do business.”

“What you’re looking at is the face of progress,” he said.

Founded in 2011, Union Craft announced in May announced plans to turn the 10 ½-acre site into a bigger brewery, with capacity to produce 30,000 barrels a year — more than double its current production. Baltimore Whiskey Company, Vent Coffee Roasters, the Charmery ice cream shop and hot sauce brand Huckle’s are among the other companies that will set up shop at the facility.

Adam Benesch, one of the company’s founders, said that Franchot’s proposal would eliminate a sense of uncertainty about Maryland’s commitment to the brewery industry.

While the current regulatory environment hasn’t prevented Union Craft from growing, the company has taken steps more cautiously, for example, planning a smaller taproom in response to caps on how many barrels they can serve there.

“We’re not going to build something that would hold more people than the beer we can serve,” he said. “Whereas we think the community wants something like that, we had to pull back until these laws change.”

“That uncertainty is really what holds us back from being able to go full force and grow as fast as we can,” Benesch said.

Sen. Ronald Young, a Democrat who represents Frederick County, also spoke in favor of the legislation at Monday’s event.

Maryland’s largest craft brewer, Flying Dog Brewery, in October halted a major expansion of its Frederick operations, which CEO Jim Caruso attributed to the state’s updated regulations.

Young said the changes Franchot has proposed would ensure continued growth for businesses like Flying Dog, that make a valuable contribution to the state’s economy, but acknowledged that the path to accomplishing the comptroller’s goals could be difficult.

“It’s going to be a tough job here,” he said.

Originally Published: November 20, 2017 at 1:50 PM EST