Heard at Shad Fest '09

Something newsy that came out of River Horse during Shad Fest ...

Co-owner Chris Walsh says RH fired off a letter to the state legislators who represent that chunk of Hunderton County that includes Lambertville.

The thrust of the letter, sent earlier this month, was an appeal to improve the business climate for brewers. You can pretty much frame that as a comparison to what freedoms brewers in Pennsylvania enjoy vs. New Jersey, namely that they can pull pints and sell cases and kegs, essentially acting as their own distributors within their premises, while of course here in the Garden State retail sales are capped at two six-packs or two growlers per person per visit to the brewery.

It’s worth noting that while Pennsylvania breweries like Sly Fox, Stoudt’s and Victory can do that, they also put a lot of beer on the shelves in New Jersey. Sum that up as they enjoy multiple points of sale at home and successfully compete for shelf space in New Jersey with our brewers, whom the state chokes off such opportunities. So asking Trenton to level the playing field seems only fair.

None of this is new. For a long while, it’s been a sore spot for Jersey brewers, who’ve pointed to the freedoms that Garden State wineries enjoy, which sort of match what Pennsylvania brewers can do in their state. Greg Zaccardi at High Point Brewing in Butler has for some time argued this position and is in the process of putting pen to paper like River Horse has done. Meanwhile, folks at Cricket Hill haven’t been shy about discussing this topic. Just ask Rick Reed.

For River Horse’s part, it’s encouraging that the 23rd District lawmakers said they would take a look at the beer/brewer regulations. Let’s hope they agree that an update is in order, one that should be done with business growth in mind, and respond with some legislation.

Let’s not forget what our cash-strapped state can come away with here – more revenue. Is it going to be a king’s ransom? Of course not, but New Jersey’s balance sheet is drowning in red ink, and it has been of little financial help to its towns and public schools for some time, as it tries to even out expenses vs income. So the state isn’t exactly in much of a position to be turning down an income source that’s both renewable and can be grown without having to jack up tax rates (like what's been proposed for liquor and wine taxes, and income taxes on wealthy people).

And part of that potential source, like we’ve been carping for a while, is the 7-cent sales tax, something everyone pays, so it’s not a regressive tax (like property taxes); it’s something that's evenly distributed. But there’s a wider picture, a trickle-down effect here, again as we’ve been saying a lot this year: Let the brewers sell more retail, beyond the minimum. The state will collect more in sales tax; breweries will move more beer, and if they move more beer, they’ll brew more beer, and the state collects more from the $3.72-per-barrel alcoholic beverage that tax brewers pay.

No one loses here. Not even the distributors or retail outlets because the breweries must rely on them to widen their reach and develop markets. Buying beer at the brewery is a convenience for the hordes of people who enjoy brewhouse tours each year, or have developed supportive relationships with the beer-makers and like to stop by.

And not to forget brewpubs ... They, as we’re saying yet again, should enjoy the opportunity to sign on with distributors and put their beer on the store shelves, provided they want to go to the investment expense to position themselves so. Conversely, production brewers should be allowed to also obtain brewpub licenses, and seek retail consumption licenses from their host municipalities (which can be a six- or seven-figure expense).

By the by, if you support the state’s craft brewers, you don’t have to wait on their efforts to make this case. You can write your own district lawmakers and pitch the argument.

It’s all about helping to trim the state’s bottom line and make the business climate fairer for the folks who make good beer for you.

Dodging a bullet – for now

A $7 billion hole in the state budget, and some of the suggested ways to fill it for now include higher taxes on liquor and wine.

That’s what The Star-Ledger is saying today in a sourced story that headlines the solutions with another tax hike on people pulling down $250,000 a year or higher. (That was done by McGreevey about 5 or 6 years ago).

But what we care about is beer, and it looks like beer dodged a bullet for now. But bear in mind that these fixes are for the fiscal 2010 budget, which has to be in place on July 1st with spending and revenues evened out.

So, yeah, beer is safe. For now. But the Legislature won't push this through until June, so higher taxes on beer could still get tucked into that. Just have to wait and see.

And speaking of beer and tax revenue, we tried to find out just how much our microbrewers and brewpubs generate for state coffers via fees and taxes. If you recall, we filed inquiries under the state Open Public Records Act. It was a logical approach, and we asked about New Jersey wineries, too, to create a comparison.

However, we only got half an answer from the New Jersey Treasury, and that was for wineries, expressed as gallons produced for each year from 1996 to 2007, and a multiplier of 70 cents per gallon (yes, Treasury was making us do the math). So for example, in 2007 (a big year for Jersey winemakers) 204,290 gallons were made, multiplied by 70 cents per gallon (damn, that’s a steep tax, but as a finance mind we talked to over the weekend says, “Wine sells for more per bottle”). The math comes to $143,000 for '07, and that’s just a state alcoholic beverage tax tied to production. There’s still the sales taxes the wineries collect, which, alas, is a figure we don’t have.

Ditto for beer. Here’s why ...

• The Division of Taxation has informed this office that they do not differentiate New Jersey microbreweries and brewery/distributors from out-of-state breweries. Therefore, we have no records responsive to your request.

What the state is saying is, they don’t break down entities and revenues paid per entity for their internal reporting, meaning distributor Hunterdon Brewing – and all they beer they sell – gets lumped in with say, River Horse brewery for all the beer they make in Lambertville, which gets lumped in with the next brewer (say Cricket Hill), which gets lumped in with the next wholesaler, and so forth. (The alcoholic beverage tax for beer, according to Treasury, is 12 cents a gallon, or $3.72 a barrel – the 31-gallon unit breweries usually deal in).

Treasury didn’t say they couldn’t tease out the state’s craft brewers and brewpubs to provide a figure. They can and would for a processing fee – and here’s where things stall – of about $3,000, paid by the filer of the OPRA request (to wit, us). And that sum is just a guess on Treasury’s part. And here’s why: No one has ever asked for the information, so all of the computer scripts to capture the data would have to be written and run by the folks working at Treasury, in addition to doing their normal data processing jobs.

So (in Soup Nazi voice), no beer figures for us! However, Treasury did say about 20 million gallons of beer were produced or transacted wholesale in New Jersey in 2007, generating over $2.3 million in alcoholic beverage tax revenue alone. (Most of that figure, undoubtedly, comes via Budweiser in Newark). Again, this doesn’t include sales taxes on beer sold by packaged goods stores, or the mere two sixpacks or growlers breweries can sell per person per visit.

But all is not completely lost. According to figures that Jersey breweries reported to the Brewers Association, the Colorado-based national trade organization for craft brewing, Garden State microbrewers produced 26,376 barrels for 2007. That comes to just over $98,000 in alcoholic beverage tax revenue for the state.

A few caveats, though. Not all craft or pub brewers in the state belong to the Brewers Association (just like not all cranberry producers think the Ocean Spray cooperative is a swinging deal; the brewers have their reasons). Also, the figures from the Brewers Association exclude Pizzeria Uno (as do not publish), because they’re a restaurant corporation that gets kind of batty even if you just want to take a picture of inside their lone US brewpub (in Edison). Additionally, the figures include estimates from the smallest of the small brewers, i.e. companies that produce their beer under contract with other brewers, such as Boak Beverage in Pompton Lakes (20 barrels, by the way, was their estimate).

So, getting the figure from the New Jersey Treasury folks would have been far better, as far as firm, audited numbers go.

Nonetheless, beer means revenue for cash-strapped New Jersey. Of course it’s not going to wash away the red ink and make it so state employees aren’t going to get robbed of 12 days’ pay (furloughs). But Trenton should look at the long-range picture and support the industry, help grow it.

And that, as we’ve been arguing this year, means updating the stifling regulations for brewers, and, like the bullet dodged right now, hopefully skip raising the existing beer taxes.

More on beer & taxes & cash-strapped states

At the risk of sounding like Chicken Little, here's more talk on the topic of state governments in serious financial holes and looking at whose pockets they can raid without voter backlash ...

Pennsylvania beer writer Lew Bryson noticed in the Philadelphia Inquirer recently a letter to the editor urging the Keystone State to "substantially" boost taxes on beer, wine and liquor to help keep Pa.'s fiscal house in order.

The letter writer hails from a Philly 'burb, and we're going to assume that the individual is one of the everyday people, not someone with a temperance league calling behind his urging a bump in the sin tax in the name of salvation. (Worth noting: Goodman Lew didn't take the suggestion lying down and fired off a rebuttal to the Inky's opinion page.)

Anyway, here's where things lean toward scary: Joe Street-level urges his lawmakers to ramp up beer taxes, 'cause that product and its relatives deserve it. Lawmakers, with less than seaworthy vessels in choppy financial straits, may be inclined to listen to such mumbo-jumbo because it's not about the sales tax, nor income tax.

More scary: New Jersey's in stormy seas, and its vessel has a $2.8 billion gash in it right now, and that's just the current budget we're sailing under, never mind the one that has to be christened July 1 with an even keel.

Cap'n Corzine says we're taking on water and we're hard-pressed to find a port in this perfect storm, which includes an election year for the Garden State. Sales tax and income tax are historically hands-off territory anyway (barring that one sales tax hike Corzine bet his political career on in 2006), and they'll be doubly so in 2009. Though we haven't seen a beer tax hike pitched for the Garden State yet, that's no reason to think it's not on the table.

Reminder: The fiscal 2010 budget proposal goes public March 10th.

Summary: One of the engines that has conked out on the $$ New Jersey is the sales tax. Collection has sunk like a lead weight, our ship, like others, has been battered on the rocks of this recession (and ours was listing to begin with).

To repeat past posts: Think not of raising beer taxes, like Oregon has pitched and that fellow in Pa. who seems to think it's a capital idea. Instead, overhaul the regulations for brewers, meaning get behind them and help grow the industry, instead of standing in the way. Allow brewpubs to diversify their brewing, grant production brewers the same freedoms as wineries to sell retail. In short, raise revenue by having more brewers selling more beer, not by burdening the few, and ultimately us, the consumer, with higher prices.

Change comes to DC? Let's hope NJ, too

Just how much is New Jersey’s micro brewing industry worth to state coffers, in terms of tax revenues and fees (including corporate and sales tax revenues)?

That’s what we’re trying to find out.

The kind folks at the New Jersey Department of Treasury (under their Open Public Records Act obligations) notified us today that they’re inclined to take another three days to process our request for the financial tallies regarding our state’s small-batch brewers, and Garden State wineries, for which we also sought the same information.

No problem, Treasury; we’re patient. And thanks for the heads-up email, even if it was obligatory.

For the record, we’re not expecting a dramatic figure from our request regarding microbrewers. And we’re curious about the wineries, since they are under less stringent regulations pertaining to direct sales to the public.

Therein lies the heart of our OPRA requests: compare the two industries. Vintners are likely generating more sales tax revenues à la direct sales to the public than microbreweries because they can sell unfettered. By law, our microbrewers can sell only two six-packs or two growlers per person per visit to the brewery.

More on that in a minute. It’s important right now to highlight the significance of the 7 cents on the dollar sales tax, especially in our state which has gaping holes in the current budget and for years now has been resorting to gimmicks to plug annual deficits to fulfill the state constitutional requirement of having a balance between incoming revenues and spending at the start of the fiscal year.

Sales tax – which, unlike income tax, everyone pays – is a big chunk of the state budget, and it’s been tanking for months now. Retail sales are down, and the folks running the show in Trenton aren’t smiling. How bad’s the frown? Well, for the first six months of the current budget year – the fiscal calendar runs July 1-June 30 – sales tax collection is off target by nearly $250 million. In that period, sales tax collection was $4.13 billion; big number, huh? See how important sales tax is?

So back to microbrewers and the strong arm of the law. Two sixes or two growlers, no more. Alas, the state is cheating itself out of sales tax revenue. How sad. Does this mean craft beer is the salvation of the state’s crippled finances (which were troubled even before credit default swaps and subprime loans and all those other finance terms that became the iceberg the SS National Economy rammed)? Of course not. Craft brewing is a niche industry, but New Jersey needs its small businesses as much as it needs its big ones. Because revenue is revenue, and selling beer generates it. So what not capitalize on it?

Having a comparison of revenues generated by Garden State wineries and the microbrewers could illustrate revenue potential if the Trenton would only take the yoke off brewers. Some of the state’s production brewers these days are rallying to that point, getting restless under the rules they've had to play by for better than a decade. And honestly, they should be allowed to sell unfettered like the wineries.

And a note to critics of this idea: Don’t confuse allowing this freedom as competition with liquor stores situated along main highways and near shopping centers, which provide enjoy far greater access to the buying public than breweries located in industrial parks etc. and tend to draw beer enthusiasts and beer travelers with their tours and open houses. To be sure, selling a couple of cases to the beer tourist serves to augment business for the brewers, not form a backbone. So if Joe Craft Sixpack on a brewery tour wants to say "I'll take all you got in cold case" and pony up for it, how is that a problem? He's buying at an added 7 cents on the dollar, which the state gets.

One other thing: This business of bottling up the brewpubs, limiting them to on-site sales only is another ill-conceived yoke on a free brewing market. Regulations requiring you be either brewpub or production brewery, both not both, are simply beyond shortsighted. And quite frankly, brewers in neighboring states enjoy that freedom and are putting packaged beer on Jersey shelves. No one’s talking about protectionism, but geez, just level the playing field and let the Jersey brewpubs have a shot at additional revenue streams. And ditto for production brewers, should they wanted to diversify their approach, let 'em open a bar under their banner if they're willing to pay the extortionate price for a consumption license (that's another topic for another time).

It just makes sense to revisit and modernize New Jersey's brewery regulations, especially in the light of a state that’s broke, does little to encourage business, and worse still, creates obstacles to commerce.

It's 2009, and DC isn't the only place that needs change.

Piece of the Rock

One of the things about craft beer and New Jersey – more specifically South Jersey – is that if you want to try all of what the Garden State brews, you must travel.

What’s brewed in North Jersey – Climax, Cricket Hill and Ramstein (High Point) – isn’t widely (or readily) available to South Jersey. It’s a distributor/liquor store thing, certainly not something the breweries are doing wrong. (Yes, we know Climax self-distributes; South Jersey's a long haul from Roselle Park.)

Meanwhile, NJ’s brewpubs, stationed at all points of the compass, are locked into selling only on premise: filling pint glasses, growlers and offering kegs, unlike their counterparts in, for example, Pennsylvania, where beer makers (like Sly Fox, Stoudt's and Victory) enjoy the best of both worlds – production brewing and serving retail on premise. (Conversely, as most of us know, production brewers in Jersey can’t serve/sell you a pint on premise. More on this a bit.)

So if you want what the Garden State’s pubs brew, yes you must go to the mountain. In our case, Berkeley Heights, home of tree-lined streets and Trap Rock Restaurant & Brewery.

We hit TR last week on a return trip from a High Point open house, capitalizing on the fact it’s only about a half hour south of Butler, High Point’s home base.

Our only gripe about Trap Rock: we wish it were closer. There’s good beer all around at the pub; ditto for the food.

Ample sample
If you are doing the beer traveler thing and fear you may not get back soon, make your first round the sampler – six 5-ounce servings of three lagers, a raspberry-cherry wheat (that’s quite good, not overdone with the fruits), an IPA and an oatmeal stout. We usually pass on samplers and just order a pint from the beer board (so we can enjoy the range of that beer’s flavors, from the first sip to the bottom of the glass). But in this case we made an exception before settling into a couple of pints of TR’s William Tell, a session ale (4.7% ABV) on the hand pump; it’s hard to pass on real ale hopped with Kent Goldings. It’s hard to pass on the serene pleasures of real ale, period.

Our top picks: Raptor Trust IPA (7% ABV and brimming with hops); the Czech-German hybrid JP Pilsner (and it’s worth pointing out, as Tom E from the blog Destination Beer does, TR always has a lager on tap).

Our take-home beer: a roasty, chocolatey Capt. Carl’s Oatmeal Stout that was a silky, solid companion to some home-made pumped-up, shredded chicken nachos (plenty of jalapeños, diced tomatoes, pinto beans and chicken simmered in Sly Fox Pikeland Pils, topped with some organic pepper jack, gruyère and mahon reserva cheeses; more about our culinary prowess and beer soon).


Futurama
But there’s no sense in taking up any more space on what we had. Here’s what you can look forward to at Trap Rock. Brewer Charlie Schroeder has a smoky, caramelly Scotch ale (8% ABV) coming up toward the end of September. But don’t forget, Oktoberfest is the fast-approaching season, and TR has one (5-plus percent on the ABV, with Hallertau hops) due around the first week of September. Look for that same beer to lead a beer dinner around the end of next month; there’s another beer dinner to take place before Thanksgiving time.

Cha-cha-cha-changes
Now about those Jersey-brewing restrictions …

Charlie says Trap Rock’s beers are enjoying a good run, so much so, it’s all he can do to keep up. What does that mean for beer drinkers? Well, the up side is fresh beer’s always on tap; the down side is, it’s hard for Charlie to slip in a different style without coming at the expense of his mainstays. It also means TR’s keg availability is pretty tight right now.

But if New Jersey allowed brewpubs to also hold production licenses (or production brewers to have pubs) – bottle their beers and sell them retail – it opens the door to more styles and boosts the brand, not to mention creating another revenue stream for the brewpubs/restaurants, which have fairly high overhead and could use the financial backstop.

Charlie, who did a six-month stint at Victory Brewing in Pennsylvania, would love for Jersey’s restrictions to be relaxed, and says Trap Rock would look for the brewing space if things were changed.

The idea – one that’s not lost on others in the industry, nor beer enthusiasts – makes a world of sense. And after a decade-plus of craft brewing in New Jersey, it’s way past time to modernize the state’s brewing regulations.

What’s more, for a state that’s hopelessly in debt, can’t put together a budget without scrounging for cash and choking off money to schools and towns, and has resorted to talk about raising tolls or hocking its toll roads, you’d think that revenue-needy Trenton lawmakers would find ways to improve the business climate for those industries it collects excise and other taxes from. Like brewers.

A rising tide floats all boats. Whaddya say Jon, Dick and Joe?