City of La Palma Agenda Item No. 6

City of La Palma Agenda Item No. 6 MEETING DATE: September 2, 2014 TO: FROM: SUBMITTED BY: CITY COUNCIL Ellen Volmert, City Manager Douglas Dumhart, Community Development Director AGENDA TITLE: Request for Public Convenience and Necessity (PCN) Determination for Type-20 Beer and Wine Sales at 8471 Walker Street - Crescent Car Wash RECOMMENDATION: It is recommended that the City Council adopt a Resolution Approving Public Convenience and Necessity (PCN) Determination for Type-20 Beer and Wine Sales at 8471 Walker Street and authorize staff to submit determination to the Alcohol and Beverage Control Board. SUMMARY: This item presents the current status of Mr. Azer s (owner and operator of the Crescent Car Wash) application with the Alcohol and Beverage Control Board, and addresses his request of the City Council to revisit the findings of Public Convenience or Necessity in light of new direction provided by the State Department of Alcoholic Beverage Control (ABC) regarding interpretation of the Business and Professions Code, Division 9, Section 23000-23047 et al., which is known and cited as the "Alcoholic Beverage Control Act." BACKGROUND: In 2011, the Alcohol Beverage Control Board (hereinafter ABC ) calculated that the City of La Palma had an undue concentration of Type 20 (off-premise beer and wine) liquor licenses within its city limits. An undue concentration is an area where any of the following conditions exist: (1) The applicant premises are located in a crime reporting district that has a 20 percent greater number of reported crimes, as defined in subdivision (c), than the average number of reported crimes as determined from all crime reporting districts within the jurisdiction of the local law enforcement agency. (2) As to on-sale retail license applications, the ratio of on-sale retail licenses to population in the census tract or census division in which the applicant premises are located exceeds the ratio of on-sale retail licenses to population in the county in which the applicant premises are located. Agenda Item 6 Page 1 of 7

(3) As to off-sale retail license applications, the ratio of off-sale retail licenses to population in the census tract or census division in which the applicant premises are located exceeds the ratio of off-sale retail licenses to population in the county in which the applicant premises are located. In the case of the City of La Palma only Condition No. 3 listed above is applicable. Based upon that condition the ABC imposed a Moratorium Status on Type 20 liquor licenses in La Palma. See the public notice issued by the ABC on May 9, 2011, provided as Attachment 1 to this report. This Moratorium status means the City has an undue concentration of off-sale of beer and wine. Off-sale means packaged goods sold for consumption off the premises from which it is sold. This determination by the ABC is based upon a license to population ratio of one permit off-sale retail license for each 2,500 inhabitants. The moratorium and its impacts to potential new businesses looking at La Palma means that no new Type 20 off-sale beer and wine licenses can be permitted within La Palma for any existing or future business. The moratorium does not impact any other type of liquor license issued by the ABC. So for example, if Crescent Car Wash was to pursue a Type 21 off-premise liquor license (beer, wine, and distilled spirits), their request would not be subject to the ABC s Type 20 Moratorium and would be processed normally without need for a determination of public convenience and/or necessity. However, in the case of the Crescent Car Wash, the ABC has made an exception because the ABC Type 20 liquor license Moratorium is not absolute. ABC has a process for businesses, like the Crescent Car Wash, to obtain a Type 20 liquor license under their own moratorium. Per the ABC, a business that wishes to obtain a Type 20 liquor license in La Palma while under the 5- year moratorium can do so if it purchases and transfers a pre-existing Type 20 liquor license. The subject license must be from a location within the County of Orange and transferred to the subject property in La Palma. Ironically, a transferred Type 20 would exacerbate the undue concentration of Type 20 liquor licenses in La Palma and seems to undermine the purpose of the moratorium. To establish a Type 20 liquor license under the moratorium requires the Applicant to provide a PCN to the ABC. Pursuant to ABC s Moratorium, a transferred Type 20 liquor license cannot be completed within La Palma unless the following specific conditions, pursuant to Business and Professions Code Section 23817.7, are met for an application: (1) The applicant premises are located in a crime reporting district that is below that specified pursuant to paragraph (1) of subdivision (a) of Section 23958.4. In considering an application, the department may take into account adjacent crime reporting districts, if the applicant premises are located within 100 feet of the boundaries of any adjacent district. The department shall use an average of reported crimes in the crime reporting district in which the premises are located and reported crimes in any adjacent crime reporting district, if the total of crimes reported in the adjacent district or districts is greater than the crime reporting district in which the premises are located. (2) The applicant premises are located in an area that falls below the concentration level provided in paragraph (3) of subdivision (a) of Section 23958.4. (3) The local governing body of the area in which the applicant premises are located, or its designated subordinate officer or body, determines that public convenience or necessity would be served by the issuance. Agenda Item 6 Page 2 of 7

The ABC informed both the Community Development Department and Mr. Azer via email and later in a face-to-face meeting that Condition No. 3 above is outstanding and they would not process the Crescent Car Wash application any further. This development was a surprise to the City and Mr. Azer in that it was raised on November 22, 2013, by the ABC after the CUP was approved in September 2013. The ABC indicated that they had re-read the letter transmitted to them on June 10, 2013, (Attachment 2) that explained that the City Council had elected to take no action on the PCN thereby deferring the decision to the ABC to make the PCN determination pursuant to Business and Professions Code Section 23958.4(2). This section states, if the local governing body, or its designated subordinate officer or body, does not make a determination within the 90-day period, then the department may issue a license if the applicant shows the department that public convenience or necessity would be served by the issuance. In 2013, Crescent Car Wash petitioned the City for a Determination of Public Convenience and/or Necessity. Pursuant to AB 2841 a local governing authority has 90-days to make a determination. To comply with the 90-day window the PCN request was presented to the City Council for their consideration on June 4, 2013. At the conclusion of the discussion on the item the City Council s direction was to take no action on the PCN request. In taking no action on the PCN request, pursuant to Section 23958.4(2), would then defer to the ABC the authorization to make the PCN determination. On June 10, 2013, the Community Development Department transmitted a letter to the State ABC licensing representative processing Crescent Car Wash s liquor license request detailing the outcome of the June 4, 2013, City Council meeting. The ABC then told Mr. Azer that they could not process his application for transfer of his Type 20 liquor license without zoning consistency which requires a Conditional Use Permit (CUP) and his letter supporting a Public Convenience and/or Necessity. Based on that direction, Mr. Azer and staff were under the impression that the ABC was consenting to the PCN, so Crescent Car Wash s CUP was presented to the Planning Commission on September 3, 2013 and was approved with various conditions including restrictions on sale hours and security measures designed to deter theft, especially by minors. Mr. Azer submitted his CUP and letter supporting PCN. In November of 2013, upon processing Crescent Car Wash s application ABC staff read the June 10, 2013, letter whereby they were notified that the City elected not to make the PCN determination. The ABC then changed their previous instructions to the applicant and City staff and cited Business and Professions Code Section 23817.7(a)(3) as the applicable code section for the transfer of Type 20 liquor license. This section states the local governing body of the area in which the applicant premises are located, or its designated subordinate officer or body, determines that public convenience or necessity would be served by the issuance. The ABC took the position is that Section 23817.7(a)(3) is the applicable code section not 23958.4(2). Staff immediately sought clarification on the matter as this was a different direction than their email of July 18, 2012, provided as Attachment 3 to this report, which provided instruction on the liquor license transfer process identified in the Alcoholic Beverage Control Act. Specifically, staff was unclear as to the citing of 23817(a)(3) as trumping 23958.4(2) because chronologically 23957.4(2) comes after 23817(a)(3) in the Business and Professions Code. Staff and Mr. Azer s read of the Business and Professions Code as it pertains to Moratorium and PCN was that the new direction being presented by ABC is derived from reading Business and Professions Codes out of order and context. If one reads the Business and Professions Code in sequential order, the affect is opposite of the ABC s November 2013 position. When read in sequential order, for a Moratorium the PCN is required before issuance of liquor license; then, if a PCN is needed, the local jurisdiction has 90 days to make a decision before the decision rests with the ABC. Agenda Item 6 Page 3 of 7

Chronology of Events March 2011 ABC Establishes State wide Moratorium list for Type 20 Liquor Licenses (off-sale beer and wine only). La Palma is placed on the list. (Provided as Attachment 1) May 2011 City verifies with the ABC Santa Ana office via telephone that this means no more Type 20 Liquor Licenses to be issued in La Palma. The moratorium only applies to Type 20 and not other types of liquor licenses. May 2012 California Business Escrow began the Type 20 Liquor license transfer request for Crescent Car Wash upon payment of fees. A Type 20 license from Anaheim is sold to Mr. Azer. June 2012 ABC file #20-523325 was established for Crescent Car Wash s application Delia Garcia was assigned as ABC licensing representative. July 2012 City staff receives e-mail dated July 18 2012, from ABC citing Business and Professions Code Section 23958.4(b)(2) stating a Type 20 Liquor license maybe granted during moratorium with PCN finding (Attachment 3) August 2012 City verifies with ABC via telephone about moratorium status and is informed that In-county license transfers are an option under a moratorium March 2013 ABC provides Crescent Car Wash with direction on March 7, 2013, that a PCN and CUP from the City is necessary. The letter includes a letter of explanation attached which has B&P Code Section 23958.4 cited (Attachment 4.) This is consistent with the July 18, 2012 e-mail that staff received April 2013 Crescent Car Wash petitions the City for CUP and PCN. Staff recommends seeking PCN determination first before processing CUP. June 2013 PCN request is presented to the City Council on June 3, 2013. Upon reading the provisions of 23958.4, the City Council elects to take no action and defer the PCN determination to the ABC. June 2013 June 10, 2013, City sends letter via U.S. Mail and via e-mail that City Council took no action on PCN and deferred matter to the ABC. Attached to the letter is copy of the June 3, 2013, agenda report and power point presentation (Attachment 2.) August 2013 Crescent Car Wash told application is incomplete without CUP, so applicant applies for CUP with the City. September 2013 City processes CUP under the impression that ABC is issuing Type 20 License transfer subject to complete CUP application. Planning Commission approves conditions for CUP on September 3, 2013 (Attachment 5) November 2013 Crescent Car Wash and City are informed in an e-mail dated November 22, 2013, from the ABC that they had re-read the June 3, 2013 letter from the City and determined that Business and Professions Code Section 23817.7(a)(3) requires the CITY to make the PCN determination (Attachment 6.) January 2014 City Staff and Mr. Azer have face-to-face meeting with ABC Director for Orange County. He reaffirms the ABC s position that Section 23817.7 is applicable and dismisses previous correspondence from ABC staff directing applicant and city staff to use B&P Code Section 23958.4. September 2014 Crescent Car Wash requesting City Council re-consider PCN for his Type 20 License. Agenda Item 6 Page 4 of 7

As referenced in the timeline above, all parties met at ABC in Santa Ana in January of 2014 to discuss the Crescent Car Wash application. There was no change in position from the ABC on their new interpretation. The ABC is standing by its position of the order with which the Business and Professions Code is read and interpreted resulting in returning the PCN determination responsibility back to the City. La Palma s Historical Practice and Policy La Palma s land use practice towards liquor licenses has been to approve via CUP with conditions if the liquor license would not result in an undue concentration within a given Census Tract. If a liquor license were to exceed the number of liquor license for a given census tract, thus requiring a PCN, City Staff would inform potential applicants they would not support their application for alcohol sales. If the City were to support such an application resulting in or intensifying an un-due concentration, then there would be a CUP action and a PCN action by the City Council in the historical records. One instance where the Applicant made application knowing their request would result in undue concentration, and not be supported by staff, was in January of 2005 at 7921 Valley View Street. The request was for a Type 21 Liquor license (beer + wine + distilled spirits) under CUP 333. Staff s conclusion was to deny, which was supported by the Planning Commission adopting a Resolution of Denial for CUP 333. Because the ABC had deemed the application to contribute to an un-due concentration, the staff report discussed how it may result in an increase in crime, loitering, and public drunkenness, which were some potential problems associated with undue concentration, that could create negative impacts to neighborhoods. Given the City s land use practice was to deny all liquor license requests that would result in undue concentrations of liquor license the fact that the ABC has imposed a Moratorium for the Type-20 s was a surprise. It was a surprise because there should not be any un-due concentration levels of any liquor license if the City had historically denied all requests that would result in un-due concentrations. The question is therefore, how did La Palma become over concentrated? Upon extensive research into the City s historical files one document was found that sheds light upon what had occurred in the past. Contrary to the City policy, Type 20 Liquor licenses were approved in the past that resulted in un-due concentration levels in a census tract. The example that staff found was for the Chevron fueling station and convenience store located at 5502 Orangethorpe Avenue on the south east corner of Walker Street and Orangethorpe Avenue. The City approved CUP 288 in 1996 as a part of the remodel and expansion which included a request for beer and wine sales under a Type 20 liquor license. The staff report made no mention of the un-due concentration of Type 20 liquor license within the underlying Census Tract or of a PCN finding. However, in the file there was a copy of a PCN letter (Attachment 7) sent to the ABC by staff to satisfy the public convenience and necessity finding requirement. Aside from the staff PCN letter, research has found no official record of any City Council ever approving a PCN request in support of over concentration levels of any type of liquor licenses. The finding for a PCN is an either or, in that the City Council could approve it out of a convenience finding or approve it out of a necessity finding. The Business and Professions Code is silent on just exactly where the bar is for either finding which in staff s analysis appears to have been set very low so that local leaders could decide what is best for their communities. Agenda Item 6 Page 5 of 7

Crescent Car Wash could make a case that its convenience store out of public convenience would like to sell beer and wine to their patrons. The ability of its patrons to be able to purchase beer and wine at the store of the Crescent Car Wash would be the same as patronizing any of the other La Palma service stations in town, such as, La Palma Express, Chevron, or ARCO AM/PM. However, it stands to reason that it is already convenient for an adult over 21 years of age to purchase beer or wine within the City s 1.8 square mile limits. Transferring another Incounty beer and wine license into La Palma, while under the ABC s moratorium, is the exception to the moratorium. Staff notes that the ABC considers the city of La Palma as having an undue concentration of Type 20 liquor licenses that is, more Type 20 liquor licenses per capita in La Palma. The subject property is located within Census Tract No. 1101.02, which currently has one existing Type 20 off-sale liquor license. For an undue concentration to exist within this Census Tract No 1101.02 there must be four (4) Type 20 off-sale liquor licenses. Crescent Car Wash could make a case that it is a Necessity for its operations to sell beer and wine to remain competitive and profitable. However, it would stand to reason that there is no necessity in the community that beer and wine sales occur, let alone immediately adjacent to the local High School. If however, such sales are truly required for the business to remain competitive and profitable, a denial of a PCN finding could result in the owner reapplying to do the same sales, with the addition of distilled spirits, and require no such PCN finding by the City since there is no over concentration of the Type 21 licenses within the City. A Type 21 License would require an amendment to the Car Wash s CUP to allow sale of distilled spirits in addition to beer and wine. Staff has indicated to Mr. Azer staff could not support Type 21 License for Crescent Car Wash. Denial of the request would be consistent with past practice regarding over concentration. However, staff recommends that the City Council approve the PCN request in order to support the viability of the business and avoid a petition for an additional Type 21 license at this location. This would be considered an exception to past land use practice and not a move away from it. A Resolution approving the PCN request for Crescent Car Wash is provided as Attachment 8 to this staff report. ALTERNATIVES: 1. Adopt a Resolution making findings and approving the PCN determination for Type 20 liquor license for Crescent Car Wash. 2. Adopt a modified Resolution denying the PCN determination for Type 20 liquor license for Crescent Car Wash. 3. Take no action on PCN request (which is tantamount to a denial without official record.) FISCAL IMPACT: While there is no immediate financial impact to denying the PCN determination; the City could lose potential retail sales tax revenue from Crescent Car Wash s operation if there are no beer and wine sales in their convenience store. Agenda Item 6 Page 6 of 7

The cost of staff time to prepare and process a determination of Public Convenience or Necessity is not currently offset by the Applicant because there is not an established filing fee on the Adopted User Fee Schedule for a PCN. NOTIFICATION: None. APPROVED: Department Director Administrative Services City Manager Director Attachments: 1. ABC Moratorium 2. City Letter Dated June 10, 2013 3. ABC E-Mail Dated July 18, 2012 4. ABC Letter Dated March 7, 2013 5. Conditions of Approval CUP 246 6. ABC E-Mail Dated November 22, 2013 7. PCN Dated September 16, 1996 8. Resolution Approving PCN Request Agenda Item 6 Page 7 of 7

RESOLUTION NO. 2014- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALMA FINDING AND DETERMINING THAT THE PUBLIC CONVENIENCE OR NECESSITY WOULD BE SERVED BY THE ISSUANCE OF AN OFF-SALE BEER AND WINE (TYPE-20 ALCOHOLIC BEVERAGE CONTROL LICENSE) FOR THE PREMISES LOCATED AT 8471 WALKER STREET, LA PALMA CALIFORNIA (CRESCENT CAR WASH) (APN 262-201-04) WHEREAS, pursuant to applicable provisions of the Business and Professions Code of the State of California, the Department of Alcoholic Beverage Control (hereinafter the ABC ) is charged with the responsibility of reviewing applications and issuance of licenses ( license ) for the sale and/or manufacture of alcoholic beverages in the State of California; and WHEREAS, On January 1, 1998, Section 23817.5 of the Business and Professions Code was amended to permanently establish a moratorium on the issuance of off-sale beer and wine licenses (Type 20) in cities and counties where the ratio on Type 20 licenses exceeds one for each 2,500 inhabitants; and, WHEREAS, The ABC issued a notice of Moratorium on May 9, 2011, for cities and counties that meet the overconcentration ratio criteria, and said list identified the City of La Palma as a Type 20 Moratorium City; and, WHEREAS, Henry Azer of Crescent Car Wash ( Applicant ) located at 8471 Walker Street has petitioned the ABC for Off-Sale Beer and Wine (Type 20) License to augment their primary operations as a Car Wash, Mobile Fueling Station, and Convenience Store; and, WHEREAS, Section 23958 of the Business and Professions Code provides that the ABC shall deny an application for a license if issuance of that license would tend to create a law enforcement problem, or if issuance would result in or add to an undue concentration of licenses, except as provided in Section 23958.4 of said Business and Professions Code; and WHEREAS, Section 23958.4 of the Business and Professions Code provides that, notwithstanding the limitations of Section 23958, the ABC shall issue a license if the applicant shows that public convenience or necessity would be served by the issuance of such license; and WHEREAS, pursuant to Section 23958.4 of the Business and Professions Code, the local governing body in this case, the City Council, has the discretion to determine when public convenience or necessity would be served by allowing an alcohol license in Page 1 of 4

an area where there is an over concentration of licenses or where there is high crime; and WHEREAS, Under state law Section 23790 of the Business and Professions Code, the ABC may not issue a liquor license if it violates an existing local zoning ordinance; and, WHEREAS, The subject site has a Land Use designation and is zoned Planned Neighborhood Development ( PND ) which encourages retail sales and allows the sales of alcoholic beverages subject to a Conditional Use Permit (CUP); and, WHEREAS, the subject business is located in Census Tract 1101.2 with population such that the ABC may permit up to three (3) off-sale licenses before an undue concentration would exist, and there is currently only one (1) liquor license in Census Tract 1101.2; and, WHEREAS, the request for Determination of Public Convenience or Necessity, hereinafter ( project ) is exempt from California Environmental Quality Act (CEQA) review under 15061(b)(3) of the CEQA Guidelines because a Determination of Public Convenience or Necessity will not with reasonable certainty have any possible effect on the environment; and, WHEREAS, the City of La Palma has prepared a Letter of Public Convenience or Necessity provided as EXHIBIT A attached hereto. NOW, THEREFORE, the City Council of the City of La Palma resolves as follows: SECTION 1. The foregoing Recitals are incorporated herein and made a part hereof. SECTION 2. That the public convenience or necessity would be served by the proposed sale of beer and wine for off-premises consumption in conjunction with the operation of a Car Wash, Fueling Station and Convenience Store. SECTION 3. The City Council does hereby find and determine that adoption of this Resolution is conditionally predicated upon compliance with each and all of the conditions set forth in the Amendment to Conditional Use Permit No. 246. Should any such conditions, or any part thereof, be declared invalid or unenforceable by the final judgment of any court of competent jurisdiction, then this Resolution, and any approvals herein contained, shall be deemed null and void. SECTION 4. Pursuant to 15061(b)(3) of the CEQA Guidelines, an activity is covered by the general rule that CEQA only applies to projects that have the potential for causing a significant effect on the environment. Where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA review. Making a Page 2 of 4

Determination of Public Convenience or Necessity will not bring about any physical change to the environment. Therefore, in light of the whole record, it can be seen with certainty that the project has no potential to cause a significant effect on the environment. As such, the City finds that the project is exempt from the provisions of CEQA pursuant to CEQA Guidelines Section 15061(b)(3) ("general rule exemption"). SECTION 5. The request for Public Convenience or Necessity Determination is hereby approved for Crescent Car Wash at 8471 Walker Street. SECTION 7. The City Manager and her authorized designees are authorized to transmit Exhibit A to the ABC and take any other necessary actions, sign any other documents or instruments, as may be necessary, to implement, and affect this Resolution on behalf of the City. PASSED, APPROVED, AND ADOPTED this 2nd day of September 2014. ATTEST: Steve Shanahan, Mayor Laurie A. Murray, CMC City Clerk Page 3 of 4

STATE OF CALIFORNIA ) COUNTY OF ORANGE ) SS CITY OF LA PALMA ) I, LAURIE A. MURRAY, City Clerk of the City of La Palma, HEREBY DO CERTIFY that the foregoing resolution was adopted at a regular meeting of the City Council of the City of La Palma, held on the 2nd day of September, 2014. AYES: NOES: Laurie A. Murray, CMC, City Clerk Page 4 of 4

September, 2014 Delia M. Garcia Department of Alcoholic Beverage Control Licensing Representative II 605 W Santa Ana Blvd, Bldg 28, Suite 369 Santa Ana, CA 92701 Re: Type 20 Liquor License at 8471 Walker Street, La Palma, CA 90623 Dear Mrs. Garcia: On September 2, 2014, the City Council of the City of La Palma adopted Resolution No. CC 2014- determining that the issuance of a Type 20 liquor license (off-sale of beer and wide) will serve public convenience at the subject location. A copy of said Resolution is enclosed herein for your records. It has been determined that a public convenience would be provided in that the sales of prepackaged alcohol for off-site consumption will be an ancillary use to the car wash, fueling, food, and convenience store aspects at the subject business. Additionally, the historic crime data, provided by the La Palma Police Department, indicates that the Type 20 application is not located in an excess crime-reporting district as defined by Business and Professions Code Section 23958.4. Furthermore, the subject property is located within Census Tract No. 1101.02, which currently has one existing Type 20 off-sale liquor license. For an undue concentration to exist within this Census Tract No 1101.02 alone, there must be a total of four (4) Type 20 off-sale liquor licenses. Lastly, the Applicant, Henry Azer of Crescent Car Wash, has secured an Amendment to Conditional Use Permit (CUP) 246 with the City of La Palma for the addition of beer and wine sales to his convenience store. With such additional measures in place, the proposed use shall not be a detriment to the surrounding neighborhood and public. Respectfully submitted, Douglas D. Dumhart Community Development Director Enclosure: Resolution No. CC 2014-