City of Grand Forks Staff Report

City of Grand Forks Staff Report Committee of the Whole November 27, 2017 City Council December 4, 2017 Agenda Item: Request from Half Brothers Brewing Company for creation of Brewer taproom license Submitted by: Maureen Storstad, Finance Director Staff Recommended Action: Review request from licenseholder Committee Recommended Action: Council Action: BACKGROUND: Half Brothers Brewing Company, which currently holds a Class 3 (On- & Off-Sale Beer & Wine) Alcoholic Beverage License has submitted a request for City Council to consider creating a Brewer taproom license for use in the City of Grand Forks. If the request is granted, Half Brothers Brewing Company would be interested in changing their class of license from the currently held Class 3 to the new license class. ANALYSIS AND FINDINGS OF FACT: City of Grand Forks offers various classes of alcoholic beverage license. Currently there is not a license specifically for a brewer taproom. Half Brothers Brewing Company currently holds a Class 3 Alcoholic Beverage License, which would normally allow for the sale and service of any type of beer and wine, both on-sale and off-sale. The State License held by Half Brothers Brewing Company restricts the on-sale and offsale and service of alcohol products to only beer produced by the licenseholder. It does not allow for the sale or service of any wine or any beer products not produced by the licenseholder. Half Brothers Brewing Company is requesting that the City Council consider adding a class of license which would mirror the State license to better reflect the operation of their business. Fargo and Bismarck both offer a brewer taproom license. An ordinance change would be required to create a new class of license, along with passage of a resolution to set the appropriate license fees. SUPPORT MATERIALS: Letter from Half Brothers Brewing Company

HALF BROTHERS BREWING COMPANY 17 NORTH THIRD STREET GRAND FORKS, ND 58203 701.757.0805 TO THE CITY OF GRAND FORKS, I am writing you today to discuss the City of Grand Forks Alcohol Beverage License: Class 3, in which my company, Half Brothers Brewing Company, currently uses and is up for renewal. My concerns with this city license is that it doesn t define our business. Our business, according to the State of North Dakota, is to operate a production brewery with a Taproom on-site that can offer samples, pints and off-sale of Malted Beverages manufactured onsite. The Class 3 license, offered by the City of Grand Forks, is the only License currently available to my business. So, I am suggesting that the City of Grand Forks creates a license available to Breweries that would fit the business model and be in line with the state, as many other cities in North Dakota have done. We are currently using and paying for a license that far exceeds what we are allowed to do. As stated in the North Dakota Century Code, we are restricted to the sale of Malt Beverages produced on site only. This means no Wine or Alcohol sales. 5-01-21. Brewer taproom license. 1. The tax commissioner may issue multiple brewer taproom licenses to the owner or operator of a brewery producing no more than twenty-five thousand barrels of malt beverages annually. A brewer with multiple taproom licenses must produce malt beverages at each location and the total amount of malt beverages produced at all locations combined may not exceed twenty-five thousand barrels of malt beverages annually. Each brewer taproom license may be issued and renewed for an annual fee of five hundred dollars, which is in lieu of all other state license fees required by this title. All provisions of this chapter which apply to a retail license must apply to a license issued under this section unless the provision is explicitly inconsistent with this section. 2. A brewer holding a brewer taproom license may: 1. Manufacture on the licensed premises, store, transport, sell, and export no more than twenty-five thousand barrels of malt beverages annually. 2. Sell malt beverages manufactured on the licensed premises for consumption on the premises of the brewery or a restaurant owned by the licensee and located on property contiguous to the brewery. 3. Sell beer manufactured on the licensed premises for off premises consumption in brewery-sealed containers of not less than twelve ounces [.36 liters] and not more than 5.16 gallons [19.53 liters]. 4. Sell and deliver beer produced by the brewery to licensed beer wholesalers. 5. Dispense free samples of beer offered for sale. Complimentary samples of beer may not be in an amount exceeding sixteen ounces [.47 liter] per patron. 6. Sell and deliver beer produced by the brewery to licensed retailers within the state, but only if: 1. (1) The brewer uses the brewer's own equipment, trucks, and employees to deliver the beer; 2. (2) Individual deliveries, other than draft beer, are limited to the case equivalent

of eight barrels per day to each licensed retailer; 3. (3) The total amount of beer sold or delivered directly to all retailers does not exceed ten thousand barrels per year; and 4. (4) A common carrier is not used to ship or deliver the brewery's product to the public or to licensed retailers. All other sales and deliveries of beer to licensed retailers in this state may be made only through a wholesaler licensed in this state. The addition of a new License would align our current business model and license with the state Century Code as well as help promote more breweries opening in Grand Forks. I have researched what other cities in the state offer for brewery licenses and what I found is that they all follow the century code guidelines. Fargo: Class "Y" - A Class "Y" license is a brewer taproom license. A brewer taproom licensee may manufacture on the licensed premises, store, transport, sell and export a total number of barrels of malt beverages annually not to exceed the amount allowed by the North Dakota Century Code 5-01-21, and must comply with all other provisions of N.D.C.C. 5-01-21. A brewer taproom licensee may sell malt beverages manufactured on the licensed premises directly to consumers for consumption on or off the premises subject to the limitations set forth hereinafter. Licenses granted under this subsection entitle the brewer taproom licensee to sell malt beverages manufactured on the premises for off-premises consumption in brewery-sealed containers holding at least 12 ounces and not more than 5.16 gallons (19.53 liters) in contents. Complimentary samples of malt beverages may be served on the premises in amounts not exceeding 16 ounces (.47 liters) per patron. All sales and delivery of malt beverages to licensed retailers within the state must be made in accordance with 5-03-07, N.D.C.C. and N.D.C.C. 5-01-21(2) (f). Additional sales may be made through a wholesaler licensed in this state. Malt beverages manufactured on the licensed premises and sold by a brewer taproom licensee directly to the consumer for consumption on or off the premises are subject to the taxes imposed pursuant to 5-03-07, N.D.C.C., in addition to any other taxes imposed on brewers and retailers. A brewer taproom licensee is also subject to the following restrictions and conditions: 1. The initial fee for a "Y" license as well as the annual renewal fee shall be as set forth in city ordinance. 2. The initial issuance of a "Y" license shall consider all of the factors set forth in section 25-1508. 3. All restrictions on sale, service or dispensing of alcoholic beverages as contained in section 25-1509 shall be applicable to a brewer taproom licensee. 4. A Class "Y" licensee shall obtain any brewery license required by the state of North Dakota. 5. Special events for which a permit has been obtained from the state tax commissioner allowing the brewer taproom licensee to give free samples of its beer and to sell its beer by the glass or in enclosed containers at off-premises events are, as a result of such permit, authorized within the city, so long as notice of the special event to which the permit is issued is given to the City Auditor and Chief of Police no less than seven (7) days before the event is to occur. 6. Multiple brewer taproom licenses may be issued to the owner or operator of a brewery producing no more than twenty-five thousand barrels of malt beverages annually. Class "Y" licensees with multiple taprooms must produce malt beverages at each location and the total amount of malt

beverages produced at all locations combined may not exceed twenty-five thousand barrels of malt beverages annually. Annual fees shall be payable at the beginning of each license year as follows: Class AB $2,400 Class ABH $2,000 Class ABH-RZ $2,000 Class ABH-limited $700.00 Class A $1,700, except that the license fee for any lodge or club having a total membership of less than 1,000 shall be $1,200 per year. Class B $1,400 Class C $750 Class D $200 Class DD $500 Class E No annual fee shall be charged for a Class E license. Class F $1,500 Class FA $1,700 Class FA-RZ $1,700 Class FA-GOLF $1,700 Class FA-ENTERTAINMENT $1,700 Class G $400 Class H $300 Class I $1,000 Class I-ENTERTAINMENT $1,000 Class J $25 Class L $1,000 Class M $200 Class N $1,500 Class O $150 Class P $500 Class W $750 Class Y $500 Class Z $1,700 Class B-Limited $1,400 Class RZ-V $1,700 Bismarck: o. Class O. A class O license shall authorize the licensee to operate a microbrewery and to sell beer produced on the premises by the licensee on and off - sale, and to sell beer making supplies and related services, subject to the following restrictions and conditions: (1) A Class O license may be issued only to a microbrewery owner or operator who obtains a microbrew pub license pursuant to NDCC Section 5-01 - 14 or a brewer taproom license pursuant to NDCC Section 5-01 - 21 from the State Tax Commissioner allowing for the production of beer. (2) A Class O license will authorize the licensee to sell, on the microbrewery premises, beer produced by that microbrewery on the premises at on - sale or off - sale, in retail lots of not less than 5 ounces or more than 5.16

gallons, in tot al quantities not in excess of 10,000 barrels in a calendar year. A microbrewery licensed under NDCC Section 5-01 - 21 may sell beer wholesale as allowed by that section in containers of not more than 5.16 gallons. A microbrewery may utilize ingredients not produced by the microbrewery in brewing its beer. (3) A Class O licensee may sell beer produced off of the premises, on - sale only, so long as the sales of beer produced off of the premises do not exceed 20% of the licensees total beer sales. (4) A Class O licensee may be issued a special permit under Section 5-01 - 13 to sell alcoholic beverages "on - sale" at special locations as designated in the permit. (5) The Class O license shall be governed by all the provisions of this chapter generally applicable to all license classifications. (6 ) A Class O licensee who obtains a special event permit under NDCC Section 5-01 - 21(3) from the state tax commissioner may give free samples of its beer and sell its beer by the glass or in closed containers, at a designated trade show, convention, festival, or a similar event approved by the tax commissioner. All Class O license holders shall file with the application for license renewal a sworn statement executed by the licensee and a certified public accountant retained by the licensee certifying that g ross on - premises produced beer sales and off - premises produced beer sales for the previous calendar year meet the requirements of this section. The board of city commissioners may, in its discretion, require the licensee to provide such additional proof of the licensee's compliance with this section as the commission deems necessary. Annual fees for licenses issued pursuant to this chapter are as follows: Class A $3, 528.00 Class A - 2 $403.00 Class B $630.00 Class C $3,654.00 Class C - 2 $945.00 Class D $3, 906.00 Class E $756.00 Class F - 1 $3,402.00 Class F - 2 $1,449.00 Class F - 3 $819.00 Class G $693.00 Class H $680.00 Class I - 1 $3,276.00 Class I - 2 $1,386.00 Class I - 3 $756.00 Class J $63.00 Class K $630.00 Class L $334.00 Class M $630.00 Class N $756.00

Class O $756.00 Class P $630.00 Class Q $3,600.00 Class R 50.00 Thank you for considering our suggested change/addition in the City of Grand Forks alcohol licenses. If you have any questions/comments you can reach me via; phone: 701.757.0805 or by email: chad@halfbrothersbrewing.com Cheers! Chad Gunderson PRESIDENT - CEO HEAD OF BREWING OPERATIONS HALF BROTHERS BREWING COMPANY 17 NORTH THIRD STREET GRAND FORKS ND 58203 BREWERY: 701.757.0805 CELLULAR: 218.791.1047