WILLCOX — A bill addressing Arizona’s wineries could create new possibilities for the Willcox economy.
HB 2876 bill passed out of the House Commerce Committee with a unanimous vote last Tuesday. HB 2876 reduces regulation on Arizona wineries, allowing the farming operations to expand without limits on production.
There are roughly 30 states with a producer, distributor and retailer distribution system. The farm winery license allows small wineries to avoid the system through self distribution. However, self distribution limits Arizona wineries to under a 20,000-gallon capacity. HB 2876 would drastically increase that cap.
“As a representative of rural Arizona, I have a deep understanding of what wineries have done work to help establish and grow a sustainable agriculture industry in Willcox, Cochise County, and the state as a whole. An approximated $3.6 million tax revenue stream to local and state revenues underlines its importance to the overall economy. Hindering these local and family-owned businesses from expanding is hindering growth in rural Arizona — not a win-win for the State. We need to give small businesses the ability to expand, create local jobs, and grow rural economies,” said Rep. Becky Nutt, R-Clifton.
When the Arizona Range News reached out to Rep. Gail Griffin, R-Hereford, she said she was supportive of of the bill.
“A great business economic boom for our rural Arizona is our wineries, and I totally support it,” Griffin said. “I haven’t heard anybody in opposition as of yet. But I look forward to working in support of our wineries that we have in rural Arizona,” Griffin said.
When the Arizona Range News approached Rod Keeling of Keeling-Schaefer Vineyards, Keeling said he was hopeful but not confident in the ability of the bill to pass. According to Keeling, Arizona winemakers have received continuous opposition when it comes to relaxing restraints on Arizona wine production.
“It’s been a long battle but a group of our Arizona winemakers got tired of wasting time and they’ve got a sponsor to submit the bill,” Keeling said. “I’m not sure if it’s going to be passed. It’s going to be tough. We’re up against the big liquor distributors. They’re going to be opposed to it and they’re going to spend hundreds of thousands of dollars to beat it.
“We’ve been in a fight with those guys before way back. If we get it passed it probably won’t be a bad idea. But it’s the stuff that we haven’t been able to get. We’ve been working around the fringes of this for the past five or six years. They’ve just been really hard on us. There’s been a lot of opposition in the liquor industry to the growth of vineyards and the wine business. Primarily from the distributor side.”
Keeling told the Range News that if the bill does get passed, it would mean healthy outcomes for Cochise and Graham counties.
“It would have a huge impact economically (if passed). It would change Willcox as a visitation area. It would bleed over to all the towns in Graham County because they have great locations for wine growing,” Keeling said. “I could go on and on, but the bottom line is it could transform Southeastern Arizona and bring so much money in. It would create so many jobs and this is the first step. We’ve got to get rid of that capacity limit.”
However, in contrast, Mark Beres, president and CEO of Flying Leap Vineyards, said he was opposed to the bill.
“This bill is bad for Arizona’s farm wineries because it changes the state’s farm winery business model in a way that will invite legal challenges from across the country by large, out-of-state alcohol producers that the farm winery industry cannot win,” Beres said.
“The Arizona farm winery business model does not exist to carve out lucrative statutory gems to allow successful, matured Arizona farm wineries to grow into larger-scale commercial wine producers who, unshackled by the restraints that govern the rest of the American wine industry can then shield themselves from the burdens of the three-tier system to in-effect ‘masquerade’ in the market as small farm wineries while being nothing of the sort. When changing the farm winery business model one must ask themselves, ‘does this change better-incubate small wineries? and, does it incentivize investment in Arizona agriculture and wine production from the fruits of these investments?’ And, ultimately one must ask if the changes being presented make for good public policy.
“The very premise of HB 2876 — that Arizona’s farm wineries are disadvantaged by the current statutory system regulating them — is as preposterous as it is factually-false,” he continued. “There already exists in Arizona a clear, unambiguous statutory path to growing out of the small farm winery business model. The system is designed to allow for this — the small farm winery’s lucrative relief from three-tier regulation ends when the small farm winery is not longer ‘small,’ as defined by its production.The current status-quo provides many lucrative benefits to small farm wineries, and most-importantly provides an incentive for Arizonans to invest their capital in planting grape vineyards and developing wine production and retail operations. Farms pay large taxes, hire lots of people and put investment capital in Arizona’s poorest counties.
“If production caps are eliminated — as is being requested by some of the state’s farm winery owners, then the Constitution’s commerce clause and a bulwark of courts decisions require that they be eliminated for out-of-state wineries too. Elimination of the production cap itself would harm Arizona farm wineries because it would allow any out-of-state winery (regardless of size) with nothing more than a federal winery permit to obtain an Arizona Series 2W Out-of-State Farm Winery license and masquerade as a small farm winery in our market. Such measures would make it difficult (if not impossible) for small wineries to compete, which would stifle investment in Arizona viticulture thus diminishing the legislative purpose of Arizona’s farm winery statutes. It’s bad public policy.”