Wine BID Not Ready for Harvest

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By Stephen Pepe, Clos Pepe Vineyards

The SB Vintners is proposing to create the first Wine Business Improvement District (BID) in California, a 1.5% tax on “all tasting room sales.”

BIDS were created in the middle of the last century by business owners to build parking lots for their customers in cities where the local government was unable to do so. The business owners financed the cost and upkeep of the parking lots.

At the end of the last century, the hotel industry created tourism BIDS to finance advertising to attract visitors. The hotel BIDS charge a fee either as a percentage of the hotel bill or a fixed fee per guest. In our area, there are hotel BIDS in Lompoc, Buellton, Solvang, Santa Ynez and Santa Barbara. The SB Vintners argue that their Wine BID is like a hotel BID -- it is not.

In the wine industry, there are three types of customers -- the Trade (hotels, restaurants, grocery stores and wine shops) Wine Club Members and Tasting Room consumers.

Does the SB Vintners 1.5% Wine BID tax require each wine customer to pay his or her fair share? Nope. The Wine BID excludes Trade and Wine Club sales. The 1.5% Wine BID tax is only charged to tasting room consumers.

If the Wine BID were a hotel BID it would mean neither business travelers nor consumers who came in thru the hotel’s Wine Club would pay the Hotel BID Tax. The only hotel guest to pay the BID tax would be the tasting room customer.

How would the Wine Bid Tax be spent?

  • Promotion to the Trade and consumers: $3,324,832 (62%)
  • Protection - advocacy to but not lobbying elected officials: $1,217,651 (23%)
  • Community Support: $836,649 (15%)

 

How would this affect the wine industry? Very discriminatorily.

There are wineries whose revenues from the Trade sales are 40-80%, yet none of this revenue would be taxed while the Wine BID would market to the Trade.

There are wineries whose revenues from Wine Club sales are 30-80%. While the Wine BID would market to consumers, none of the Wine Club sales would be taxed.

The wineries with tasting room sales would pay the entire 1.5% tax on their tasting room sales.

Who is supporting the Wine BID?

Wineries whose revenue comes mostly from wine sales to the Trade or with robust Wine Club sales. These tend to be the large tens of thousands of cases wineries, even some of which are owned by millionaires. The Wine BID is opposed by largely the mom and pop wineries with a tasting room and 10,000 case production or less. They are the ones who must tax their tasting room customers 1.5% to pay for the big wineries’ marketing to the Trade and Wine Club members.

It is refreshing that even some large wineries owned by millionaires recognize the discriminatory effect of the Wine BID and oppose it for that reason.


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9 Comments

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tercero wines Aug 22, 2020 01:05 PM
Wine BID Not Ready for Harvest

I am under the impression that this simply needs to be approved by the businesses affected, not by the taxpayers at all. Please show me where local BIDS, including those that fund Visit Santa Barbara, are approved by taxpayers. Thank you.

a-1598147016 Aug 22, 2020 06:43 PM
Wine BID Not Ready for Harvest

Tercero can you not keep your positions consistent? You said TOT (BIDS for hotels) was not voter approved. It is. You seem to think that this is the model. Are you willing to abide by that precedent? I think not, you are simply trying to grab some money for your own purposes out of other peoples purses. If you want to play, pay up.

a-1598114491 Aug 22, 2020 09:41 AM
Wine BID Not Ready for Harvest

Tercero: Transient Occupancy Taxes (TOT) require a public vote for the tax and for any increase. Are you agreeable to that process for this tax?

tercero wines Aug 21, 2020 07:29 PM
Wine BID Not Ready for Harvest

I do not believe that the citizens of cities approve BIDS for hotels, do they? Please correct me if I'm wrong . . .

a-1598053886 Aug 21, 2020 04:51 PM
Wine BID Not Ready for Harvest

Tercero: Balderdash. Wine tasting will not be pushed up by some fraction of a dollar. This is just too awkward. And I never said it would not affect locals as well. It was your defense of the charge as being on on "visitors to our area" as though that excused it that I noted. But this is a tax for private purposes and it should be allowed only if the citizens of the community OK it by public vote as they have to do with a sales tax for example.

tercero wines Aug 21, 2020 12:37 PM
Wine BID Not Ready for Harvest

I can with a straight face that the majority of the funds raised will be from those visiting our area - which is certainly one of the goals of the Vintner's Association as a whole. Will locals be affected as well - yep, they will and I'm hopeful that they understand the goal here is not to line any pockets but instead to protect and promote our local wine industry, an industry that contributes hundreds of millions of dollars each year to our local economy.

I do believe most wineries will increase their tasting fees to cover this cost - if your tasting fee is currently $15, that means the new fee would be approximately $15.25.

And this has nothing to do with 'propaganda' or 'lobbying' whatsoever. This has to do with creating a professional trade organization that will now be equipped to assist our wine industry, and the area, with increased marketing, education and government relations in order to allow our industry to better survive and thrive in a very competitive marketplace.

Cheers.

a-1598024007 Aug 21, 2020 08:33 AM
Wine BID Not Ready for Harvest

Tercero: How can you with straight face say that because the money comes from "tourists" and not locals people shouldn't object to such a scheme? First, no one is taking money directly from the visitor and putting it directly into this fund. The money will be collected by the business, sent to its accounting system, removed from that system and sent to the BID. No one seriously thinks that the tasting rooms will raise the tasting fee by 1.5% to cover this. Second, the huge fund proposed is a corrupting influence itself. It will perpetuate the continuation of this propaganda and lobbying scheme forever. The people hired to implement it will always do something to keep it going, leading to abuse for sure. Third, the equity of this is being ignored by you on the basis that money paid by visitors will allow "the industry" to lobby. Why not have "the industry" fund its own lobbying work? Something for nothing? That is corrupting.

tercero wines Aug 21, 2020 07:09 AM
Wine BID Not Ready for Harvest

Stephen certainly presents a compelling case as to why some may not support this type of program, but his analysis is not entirely correct.

First off, there are plenty of wineries like my own which fit into the category of those that sell directly through my tasting room and not through other channels. I an not a 'mega winery' that seeks to gain at the expense of others whatsoever. I am a small single person operation who understands the value of marketing and advocacy, and know firsthand the 'disadvantage' our industry has versus other wine industries around the state.

The money raised will not come from our own pockets but will instead come from visitors to our area - exactly as the hotel BIDs work. This money will allow the local wine industry to better advocate for ourselves with local governments, allow our organization to add much needed staff in order to meet much greater need than ever before, and allow us to educate consumers near and far about the magnificent products that we produce. And these monies will benefit all wineries in our area, regardless of size. And the advocacy part - let's just say that our local government does not take the wine industry into account oftentimes when making decisions like with short term rentals, and does not take into account how much revenue our industry adds to the local economy, directly and indirectly.

It aims at 'raising the tide' for all wineries in our area, and that is a wonderful thing. Since no money will come out of the pockets of any winery, the only 'cost' is the additional charges customers visiting tasting rooms will have to pay. And to put things in perspective, the fee on a $40 bottle of wine will be an additional 60 cents.

Stephen, who currently does not produce or sell wines in our area, is concerned that the money will not be well spent and that not all voices in the wine business in our area are being heard or will be accounted for when the money is spent, but this is as far from the truth as possible. He and all others have been invited to get involved and take a more active role in the SBC Vintner's Association, but he and others have made the decision that it is better to 'agitate' then to roll up their sleeves and work to make our area a more harmonious one.

RHS Aug 20, 2020 09:41 AM
Wine BID Not Ready for Harvest

I agree with this analysis. The idea that customers should be taxed to advocate for the businesses is a bizarre one. Any business that wants to advocate for itself or publicize itself is free to do so. They could, for example, take a 1.5% share of their revenue and dedicate it to such use. But it seems wrong that that decision would now be enforced by local ordinance. In addition it is particularly offensive that a huge share of the money would be used to lobby for laws and policies that might be inconsistent with the desires of growers or wholesale sales producers and others that are not "tasting rooms" (i.e., bars). For example proposed restrictions on the over consumption of "tastings" to make the highways safer could be supported by those who want their wine workers to travel safely and those who want to use the roads to ship product, etc., while they would be opposed by the tasting rooms. In general this sort of merger of private enterprise and public agency is not a good model.

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