Interview with Adam Harris

Adam Harris

We have some news that affects how things are going to work between Pennsylvania's brewers and the government, as represented by the PLCB and the Legislature. The Brewers of Pennsylvania (BOP), the state’s official brewers guild, has hired Adam Harris, former chair of Pennsylvania’s House Liquor Control Committee, as the organization’s new Deputy Director.
The BOP said, in a release put out on February 6, “The newly created position (shades of Joe Da CEO Conti!) will further bolster the BOP’s advocacy efforts and its quest for a more fair playing field within Pennsylvania’s antiquated three-tier system (manufacturer, wholesaler, retailer). In conjunction with Dan LaBert, BOP’s Executive Director, the BOP’s Legislative Committee, and Board of Directors, Harris will assist in outreach efforts to BOP members, potential members, elected officials, and other beer-interest entities to strengthen and expand Pennsylvania’s thriving craft beer industry. According to the Brewers Association, Pennsylvania craft beer ranks second nationwide in economic impact ($5,788,000) and first in barrels of craft beer produced per year (3,724,010).” (Thank you very much, Dick Yuengling and Jim Koch!)

Harris was hired to lobby the government, although as a recently retired House member, he won't be able to directly talk to House members until December of 2019 because of lobbying restrictions. Beer is his direct focus, of course, but as the former chair of the HLCC he's pretty damned familiar with what was going on with Pennsylvania's booze law changes.

So I asked the BOP if they could set me up with Adam for an interview. I'd met him at a Commonwealth Foundation event five years or so ago, and we had quite an affable conversation.

(One note: I tried my best to keep up with the conversation as I typed, but let's just say that everything I 'quote' Adam Harris as saying is actually a paraphrasing. I've also moved pieces around to make more sense of the flow as we went back to clarify things; there was no intent to change meaning. I tried to stay as true as possible to what we both said, but if there are any problems, I invite Harris or the BOP to send me an email and I'll be happy to discuss it.)

What are your top legislative priorities to create opportunity for Pennsylvania breweries?

The issue that's most time-sensitive is the taproom tax. We pushed it back once already. That would be a killer. The brewers were told in 2015 that the taprooms would be tax-free. So they jumped in. It would be a step backwards to tax that now. The governor wants a legislative fix. Our legislative side is talking to members.

Could you explain what we're talking about in a bit more detail? And I'll note that the tax has been delayed until June 1.

In 2015, the PLCB said, look, if you have a G license, a manufacturer license, you can have a tasting room. Now, a tavern is paying the sales tax on beer, but they're paying it at the wholesale level. They pay 6% on the wholesale price of the keg when they buy it. They want the brewers to pay the 6% sales tax by the drink. That's 4-5 times as much in sales tax. We'd love to keep the tax-exempt status, but we surely don't want to be paying more. Our attorneys are talking to the Department of Revenue, and they're getting that.

How did it happen? Who made the decision, and how did the tax get put in place?

It's hard to track down where this began, or who made the policy decision. There has been no legislation. Ironically, Department of Revenue came out with a statement that the taproom sales would be tax-free, and now they are changing that to a 6% per drink tax. On a premium pint, in Philly when it's already got a per-drink tax, that's a significant increase, and it trickles down to employees: fewer pints sold, fewer people employed. If it goes ahead, brewers are going to pass the tax on directly, and itemize it on the receipt so people know why they're paying more.

As I said, I can't lobby the House members for twelve months, so I'm talking to Senators, and to brewers to make sure they understand the issue, making sure they interact with their legislators. We meet with everyone we can in the Governor's office, and Revenue, and they've been receptive to the idea. The governor's office indicated he'd like a legislative fix to take the gray area out of it.

The thing is, if we run it as a tax code bill, that usually doesn't get passed until June 30. We're hoping we can get it done earlier. If you wanted to change the tax structure, you do it in a tax code bill, but if we're not changing taxes in the budget, there may not even be a tax code bill. But we do a budget every year, and it has to balance.

Why does it seem that it's always everything that needs to get done gets jammed into the last half of June?!

(Laughs) It does appear that June's when it all takes place. It all gets done in one month, and it's a hot month.

Drinking the good stuff. 

What's the Beer Equity program?

You have the manufacturer – the brewers – and the wholesalers, who have franchise rights to the brands once they contract to sell them. Those rights, that contract, runs in perpetuity. That's a PLCB ruling, from about a decade ago. There are very few opportunities to get out of those. Usually it's a great relationship, but a few aren't, and those people literally cannot get out those relationships. They can be traded to another wholesaler, or go to court, which isn't easy. We're trying to find a better way to open these contracts. We want legislators to know this is an issue for us. The wholesalers are great for us, and get the beer out where we couldn't. But the few exceptions, that makes it harder for a brewer to think about signing that contract. It causes a great deal of stress and anxiety. 'We're making great beer, getting great reviews.' But they don't know what to do. If the contract was just ten years, and had to be renewed, that would be better.

We got the end of the case law, and the regulatory workaround that allowed grocery stores to sell beer by installing a 30-seat “cafe” and buying a tavern license. Are there numbers on how much those two measures actually benefited PA brewers: sales increases, numbers of outlets?

Let me check on that. It was a huge win, no doubt, to see them spring up all over the state, give consumers that option.

On the flipside, there are problems with the grocery store beer sales situation. Taking limited restaurant licenses to use for grocery stores makes those licenses more expensive and scarce for on-premise businesses. The system is inherently unfair to smaller grocery stores. It does little to bring beer sales to convenience stores, a major sales outlet in other states. What we clearly need in PA is a grocery store license. Why can't that happen here?

It's becoming the game only the big guys can play. The rep in Carbon County has way too many R licenses and they're worth nothing, while in Chester County, how can a young couple start a small restaurant when the license costs $500K? Any time you talk about new licenses or transferring, you get into a fight that stalls out. We talked about transitioning D licenses, but there was considerable pushback. There are some distributors who are still doing really well, if they're willing to push the envelope. The landscape has changed.

You want to do what's right for the consumer, but this is people's livelihood. That sixpack sale, for instance, is how the tavern-owner pays their mortgage. My comeback was video gaming terminals for the taverns. We'd be down a whole new rabbit hole with that.

Why is the legislature so reluctant to take substantive action on creating a more open retail situation that would directly benefit both Pennsylvania brewers and Pennsylvania consumers? This is not the first time the PLCB has taken independent and somewhat arbitrary action that effectively rewrites the Liquor Code; they made a case a 12-pack, for instance, and then the legislature did away with the limits altogether. The Board has often shown no reluctance to defy the stated desires of both the legislature and governor. Is there any interest in the legislature to limit this power?

They are a bit of their own little fiefdom.

But the only negative feedback we had from brewers on the case law changes was, 'Hey, you just gave us 12-packs, and we re-did the package lines, now a few months later you give us singles. Could you stop giving it to us piecemeal?'

It really is strange. The ultimate backstop is that anything the legislature passes and gets signed is then the law. It might seem like they [the PLCB] spring surprises, but they're open about process. I don't think they anger people enough that we'd limit what they do. [Adam interjected at this point that PLCB member Mike Newsome has gone over to the Governor's office, so it's a 2-member board right now.] We could always call over to them and get things done. It never got personal or unpleasant. [He should know, but I'll note here that at PLCB hearings I was watching it most definitely got unpleasant on occasion.]

As the former chair of the House Liquor Control Committee, can you give me some insight on why it always seems that the interests of the FOURTH tier, the actual consumers, come last in considerations of alcohol legislature?

Say we wanted to get something done for the consumer. We'd pull the committee in, and we'd want to change things, and...personal relationships with voters and businesses in legislative districts stalemate things. The consumer is finally getting a few wins, but slow and steady wins the race in Pennsylvania. We'd do a big omnibus bill, and you'd get a lot of things. Some of it you liked, some you didn't. We've gotten away from that. The consumer's more engaged. They get more and they want more. I will say that I don't think there's that many anti-alcohol advocates in the general populace or the legislature as there were even ten years ago. For some of them it's a revenue issue, but with Uber and Lyft, there's no reason anyone would have to drive drunk.

Look, we're playing catch-up for sure. Got to get our guild solidified, talking to their legislators. I grew up in small-town Pennsylvania, in Juniata County, and all we knew was Yuengling. But there's no animosity among the brewers, there's cooperation. More than I saw in the legislature.

And that's that. Thanks, Adam Harris.