BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

 

In the matter of the amendment of ARM 42.12.501 through 42.12.505 pertaining to competitive bidding processes for retail all-alcoholic beverage licenses

) ) ) )

NOTICE OF PUBLIC HEARING ON PROPOSED AMENDMENT

 

TO: All Concerned Persons

 

1. On December 4, 2019, at 11:00 a.m., the Department of Revenue will hold a public hearing in the Third Floor Reception Area Conference Room of the Sam W. Mitchell Building, located at 125 North Roberts, Helena, Montana, to consider the proposed amendment of the above-stated rules. The conference room is most readily accessed by entering through the east doors of the building.

 

2. The Department of Revenue will make reasonable accommodations for persons with disabilities who wish to participate in this public hearing or need an alternative accessible format of this notice. If you require an accommodation, please advise the department of the nature of the accommodation needed, no later than 5 p.m. on November 15, 2019. Please contact Todd Olson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-7905; fax (406) 444-3696; or [email protected].

 

3. The rules as proposed to be amended provide as follows, new matter underlined, deleted matter interlined:

 

42.12.501 DEFINITIONS The following definitions apply to this subchapter:

(1) through (3) remain the same.

(4) "Irrevocable letter of credit (ILOC)" means a letter of credit between a financial institution and a bidder, in accordance with Title 30, chapter 5, MCA, in which the issuing financial institution guarantees the:

(a) the bidder's ability to pay the payment of a stated bid amount;

(b) the ILOC will be irrevocable for a minimum of one year from the date of the competitive bidding closing if the bidder's bid is the highest bid submitted for the available license; financial institution will not withdraw the credit or cancel the letter if the bidder's bid results in being the highest bid submitted for the available license;

(c) the department is named as beneficiary of the ILOC financial institution will not modify or revoke the credit without the department's consent if the bidder's bid results in being the highest bid submitted for the available license; and

(d) the financial institution will not modify the ILOC without the department's consent if the bidder's bid is the highest bid submitted for the available license. department as the beneficiary; and

(e) financial institution's commitment to honor the line of credit for a minimum of one year from the date of the competitive bidding closing if the bidder's bid results in being the highest bid submitted for the available license.

(5) "Minimum bid amount" means the lowest acceptable bid amount. The minimum bid amount shall be set by the department at 75 percent of the market value of licenses of the same type and privileges that have sold within the quota area or similar quota area.

(6) remains the same. 

 

AUTH: 16-1-303, 16-4-105, 16-4-201, 16-4-204, 16-4-420, MCA

IMP: 16-4-105, 16-4-201, 16-4-204, 16-4-420, 16-4-430, MCA

 

            REASONABLE NECESSITY: The department has determined that it is necessary to propose amendments to the definition of "Irrevocable Letter of Credit (ILOC)" contained in ARM 42.12.501(4) in order to implement portions of 16-4-430, MCA (2019), regarding the competitive bidding process for alcoholic beverage licenses. The department proposes its ILOC amendments to align with the requirements of 16-4-430, MCA, while adopting many statutory ILOC standards found in Title 30, chapter 5, MCA, which are required of Montana-regulated financial institutions. The department's acceptance and recognition of industry-standard ILOC terms is consistent with past department efforts to recognize customary banking industry practices in liquor licensing matters, such as security interests and cross-collateralization involving alcoholic beverage licenses.

            The department also proposes to amend the definition in (5) to clarify it is the department's responsibility to set the minimum bid amount for licenses offered through the competitive bidding process.

            The department proposes amending the rule's implementing citations to include 16-4-430, MCA, for the rule to comply with 2-4-305(3), MCA.

 

42.12.502 PUBLISHING OF ALCOHOLIC BEVERAGE LICENSE AVAILABILITY (1) through (4) remain the same.

 

AUTH:  16-1-303, 16-4-105, 16-4-201, 16-4-204, 16-4-420, MCA

IMP:  16-4-105, 16-4-201, 16-4-204, 16-4-420, 16-4-430, MCA

 

REASONABLE NECESSITY: The department proposes amending the implementing citations for the rule to include 16-4-430, MCA, for the rule to comply with 2-4-305(3), MCA.

 

42.12.503 RETAIL ALCOHOLIC BEVERAGE LICENSE COMPETITIVE BID FORMS (1) Competitive bid forms pursuant to ARM 42.12.502 must be submitted electronically on a form provided by to the department.

(2) remains the same.

(3) The department shall notify the highest bidder, in writing, if any deficiencies exist on the highest bidder's bid form. The highest bidder shall have the opportunity to correct any deficiencies by submitting a revised bid form within five business days of being notified.

(3) (4) A bidder will be disqualified from the competitive bidding process if:

(a) and (b) remain the same.

(c) the competitive bid form is not signed;

(d) remains the same but is renumbered (c).

(e) the competitive bid form is incomplete;

(f) through (h) remain the same but are renumbered (d) through (f).

(i) (g)  the irrevocable letter of credit is not equal to or greater than the bidder's bid amount; or

(j) (h)  the irrevocable letter of credit fails to specify the license type and/or quota area; or .

(k) the department determines, for any other reason, the information provided is inaccurate or incomplete.

 

AUTH: 16-1-303, 16-4-105, 16-4-201, 16-4-204, 16-4-420, MCA

IMP: 16-4-105, 16-4-201, 16-4-204, 16-4-401, 16-4-420, 16-4-430, MCA

 

            REASONABLE NECESSITY: The department proposes to amend ARM 42.12.503 which is necessary to implement provisions contained in 16-4-430, MCA (2019). Section 16-4-430, MCA, allows a bidder in a competitive bidding process for an alcoholic beverage license to correct any deficiencies on their bid form within five business days of being notified by the department. The department proposes to include language in (3) that specifies the five-business day time frame begins when the applicant is notified in writing by the department. Sending a written notification is necessary to inform the applicant of when the deficiency correction period starts.

            The department proposes to remove from (4) the three referenced circumstances which previously disqualified the bidder from the competitive bidding process. Under current law, the electronic bid form cannot be submitted without all information included, so those three circumstances are obsolete and unnecessary to keep in the list.

            Based on the existence of the department's electronic bid form, through which all competitive bids are currently submitted to the department, the department finds it necessary to propose the removal of references in (1) to the rule that contained form publication language and clarify that no physical bid form is used to enter the competitive bid process.

            Lastly, the department proposes amending the implementing citations to include 16-4-430, MCA, for the rule to comply with 2-4-305(3), MCA.

 

42.12.504 DETERMINATION OF SUCCESSFUL RETAIL ALCOHOLIC BEVERAGE LICENSE COMPETITIVE BIDDER AND SUBMISSION OF COMPLETED APPLICATION (1) remains the same.

(2) Regardless of the timing of bids, in In the event a bidder places multiple bids, the department shall accept the highest bid placed by the bidder.

(3) remains the same.

(4) The department shall notify the highest bidder in writing.

(5) and (6) remain the same.

(7) The information provided by the applicant on the application for licensure must match the information provided on the competitive bid form. Failure to provide identical information will result in disqualification and denial of the application will be denied.

(8) and (9) remain the same.

(10) The licensee must commence business within one year of receiving the department's notification in (4) unless the department grants an extension.

(11) The licensee is subject to forfeiture of the license at the department's discretion if the licensee:

(a) transfers the license to another person unless the transfer is due to the death of the licensee;

(b) does not use the license within one year of receiving the license unless the department grants an extension;

(c) places the license on nonuse within 5 years of receiving the license; or

(d) proposes to use the license in a location which has had the same license type within the previous 12 months.

(12) (10)  If the application for licensure is withdrawn, not approved or the license is forfeited pursuant to 16-4-430(7) , MCA, or if the department denies the application for licensure, the next highest bidder will be notified in writing. The next highest bidder will have two weeks to submit an irrevocable letter of credit for their bid amount if the original letter of credit was cancelled. The next highest bidder shall comply with the requirements of (5) through (9) and 16-4-430(4), MCA.

 

AUTH: 16-1-303, 16-4-105, 16-4-201, 16-4-204, 16-4-420, MCA

IMP: 16-4-105, 16-4-201, 16-4-204, 16-4-420, 16-4-430, MCA

 

            REASONABLE NECESSITY: The department proposes to amend the catchphrase of the rule to reflect the rule's updated content in conformity with ARM 1.2.214.

            Section (2) is proposed to remove language that the department believes is unnecessary. The department believes the amended section sufficiently describes how the department will select bids submitted by the same bidder.

            Section (4) is proposed to provide clarification on how the department will notify the highest bidder.  The department proposes the amendment to reflect the preferred means of how the department notifies the highest bidder. When written notifications are used, quality assurance of department processes is heightened, and document retention policies are integrated.

            Section (7) is proposed to remove an inaccurate, procedural reference to an application's disqualification when the information on the application does not match the information on the competitive bid form. In these instances, the application is denied, it is not disqualified; and it is necessary for the rule to contain technically correct terminology.

Sections (10) and (11) are proposed for removal because the licensee's requirement to operate within one year of receiving the license, and the reasons the license is subject to forfeiture, are now provided in 16-4-430, MCA, and are unnecessary to include in rule.

Proposed renumbered (10) would remove rule text and add statutory authority for circumstances when an application is not issued. The department believes the amendments are necessary for consistency between statute and the procedural aspects of the rule section.  

 

42.12.505 DETERMINATION OF BOUNDARIES FOR THE LOCATION OF PREMISES (1) and (2) remain the same.

(3) Except as provided in 16-4-105, 16-4-201, and 16-4-420, MCA, Uunder no circumstance may a license, restricted by the quota limitations in 16-4-105, 16-4-201, or 16-4-420, MCA, be located farther than:

(a) and (b) remain the same.

 

AUTH: 16-1-303, 16-4-105, 16-4-201, 16-4-420, MCA

IMP: 16-4-105, 16-4-201, 16-4-420, 16-4-430, MCA

 

REASONABLE NECESSITY:  The department has determined that it is necessary to propose amendments to ARM 42.12.505 in order to implement portions of 16-4-430, MCA (2019). Section 16-4-430, MCA, now specifies how certain incorporated cities' boundary lines shall be determined and to which quota area the affected licenses would belong. The department proposes to include an exception in (3) to reflect these statutory allowances.

 

            4. Concerned persons may submit their data, views, or arguments, either orally or in writing, at the hearing. Written data, views, or arguments may also be submitted to: Todd Olson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-7905; fax (406) 444-3696; or e-mail [email protected] and must be received no later than 5:00 p.m., December 13, 2019.

 

5. Todd Olson, Department of Revenue, Director's Office, has been designated to preside over and conduct the hearing.

 

6. The Department of Revenue maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request, which includes the name and e-mail or mailing address of the person to receive notices and specifies that the person wishes to receive notice regarding particular subject matter or matters. Notices will be sent by e-mail unless a mailing preference is noted in the request. A written request may be mailed or delivered to the person in number 4 above or faxed to the office at (406) 444-3696, or may be made by completing a request form at any rules hearing held by the Department of Revenue.

 

7. An electronic copy of this notice is available on the department's web site at www.mtrevenue.gov, or through the Secretary of State's web site at sosmt.gov/ARM/register.

 

8. The bill sponsor contact requirements of 2-4-302, MCA, apply and have been fulfilled. The primary bill sponsor was contacted by mail and email on May 23, 2019, and on October 24, 2019.

 

9. With regard to the requirements of 2-4-111, MCA, the department has determined that the amendment of the above-referenced rules will not significantly and directly impact small businesses.

 

 

/s/ Todd Olson                                              /s/ Gene Walborn                                        

Todd Olson                                                   Gene Walborn

Rule Reviewer                                              Director of Revenue

 

Certified to the Secretary of State October 29, 2019.