The two-year effort by the Santa Barbara Vintners Association to form a Wine Business Improvement District, funded by a 1% sales assessment on all Direct-to-Consumer sales in the county, was officially dropped on Oct. 29.
The BID was advertised by the association as a way to provide funding for Santa Barbara County wine, winery and vineyard promotions. All DTC sales that incur state sales tax, including wine, tasting fees, merchandise, food, events and wine clubs would have had a 1% tax on them.
The concept met opposition from more than 85 local wineries and tasting rooms. Forty-five of those were in Lompoc alone, and the Lompoc City Council unanimously rejected the BID, voting 5-0 during its meeting on Oct. 20.
However, what ultimately pulled the plug from the BID was a letter from the Howard Jarvis Taxpayers Association.
The letter informed the Vintners Association of their two concerns with the idea: that it is a sales tax and it is unconstitutional.
The letter, obtained by the News-Press, states that the BID violates Proposition 26, specifically citing that there is no way to be sure that every winery is seeing increased sales worth the same or more than their payments or that increased sales are attributable to the charges, and that benefits are not direct to the payer.
“The new system the Vintners Association seeks is obviously a sales tax collection system,” the letter read. “It wishes the county government had a sales tax collection system it could use, recognizes that none exists because sales tax collection is a state function, and then asks the county to intrude into state territory to create a new county-run system to collect its proposed Wine BID sales tax.”
Sent on Sept. 30, the letter pointed out that the BID would require two-thirds voter approval, not just majority winery approval under Proposition 26
“Because the judiciary interprets the Constitution, there is no guarantee that the Legislature’s interpretation will stand up in court,” the letter stated. “Such a case would be one of first impression.”
Alison Laslett, CEO and board member of the Santa Barbara Vintners Association, told the News-Press the letter “ultimately made the decision” to drop the efforts for the BID.
“We were not in a position to survive a lawsuit if it were to come to that,” she said. “I think that we did a really good and comprehensive job in developing the BID and the structure of it, listening to the vintners according to what they wanted or asked us to accommodate and we were making progress.
“But at the end of the day, with potential legal action coming, that was not going to be something we could sustain.”
The letter from the Howard Jarvis Taxpayers Association was reviewed by legal counsel and BID expert consultants, and according to Ms. Laslett, they calculated a 90% chance of a lawsuit being filed.
In a statement on the HJTA letter, the Vintners Association stood by their legal basis supporting the BID.
“Notwithstanding the weak legal arguments in the letter, the Association was advised that these letters typically result in a lawsuit being filed on the grounds cited in the letter,” the statement read.
“We’re not going to pursue a mandatory approach at this point,” Ms. Laslett continued. “We’ll continue to do the work that we have always done and we’ll keep the organization a voluntary organization.”
She added that she’s now interested in moving on from this issue and that “while people disagreed with the BID as a funding source, they don’t disagree that the industry needs to work together and then they’ll be more effective.”
Doug Margerum, the owner of Margerum Wine Company, was one of the supporters of the BID, and told the News-Press, “It became quite obvious when they filed a lawsuit that we were going to create a horrible dynamic within the Vintners Association.
“It didn’t work because there was very, very vocal opposition to it, and you have to find out from them what the real opposition was,” Mr. Margerum said. “I think some of it is just no tax is a good tax, ever.”
He added that he thought the actual plan was “terrific,” and not an unusual plan, either.
“With the vocal people against the BID, I admire their passion, but I said (in an email), ‘I will join your group if you tell me what your plan is to promote Santa Barbara County wine,’ and I sent it to all the leadership of the group, all friends of mine…. No response,” Mr. Margerum said.
David deLaski, owner of Solminer Wine Company, was one of the leading opposing voices and helped write a letter that was sent to around 300 wineries on behalf of a coalition of wineries opposing the BID when the idea was announced.
In addition, he asked for a raise of hands of those who wouldn’t agree to the BID, and heard back from 85 wineries in opposition to the 1% sales tax, and “that in itself showed that there just wasn’t quite a consensus here,” he said.
“It became necessary to ask for a raise of hands to see who was going to actually say, ‘Yes, we actually oppose this because it’s not fair,’” Mr. deLaski told the News-Press.
He also said that he believes no one threatened a lawsuit.
“There’s a difference between a threat and threaten. I know of no one who threatened a lawsuit,” Mr. deLaski continued. “The county never received and approved a master plan for the BID, so there was no way to even file a lawsuit. It never materialized.
“It was a fairly boilerplate response by Jarvis that they send to potential BIDs that are trying to assess tax-like fees.”
In the end, Mr. deLaski said that he and his coalition are happy to support a fair and equitable way to promote Santa Barbara County, including options like a grape tax.
“There were just so many issues… that we had to really bring to the surface and show the leadership of the association that, look, these are real problems that can’t be ignored, and if you actually managed to get the county to approve this, it would continue to be problematic,” he said. “I think they finally listened.”