John Carona

Microbreweries win their distribution rights lawsuit

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A Texas law that prohibits brewers from selling territorial rights to distribute their beer is unconstitutional, a judge ruled Thursday, serving up a major victory to beer companies seeking to expand their presence in stores, bars and restaurants throughout the state.

The decision says the government has no compelling interest in prohibiting brewers from seeking cash compensation when negotiating a contract with distributors, who have almost exclusive authority to handle sales between producers and retailers.

“This law, it was written by beer distributors to enrich big beer distributors and that is not a legitimate state interest,” said Matt Miller, senior attorney and head of the Austin office of the Institute for Justice, which litigated the case on behalf of Texas craft brewers Live Oak, Revolver and Peticolas.

The law, passed three years ago, allows brewers and distributors to negotiate for things like equipment and marketing efforts, but not direct compensation. That denies brewers who have worked to build up their business the ability to “capture the value of their brand” once they are large enough to require a distributor, said Charles Vallhonrat, executive director of the Texas Craft Brewers Guild.

A cash infusion from a distribution contract also would allow smaller breweries to expand operations, hire new employees and build up marketing teams to increase sales, Vallhonrat said.

Thursday’s ruling by state District Judge Karin Crump in Austin came after both the brewers and the Texas Alcoholic Beverage Commission sought summary judgments in the lawsuit. After considering depositions from both sides, Crump declared the law violates state constitutional protection for economic liberty.

[…]

Plaintiff Chip McElroy, founder of Live Oak Brewing Co. in Austin and one of the law’s most vocal critics, called it “unjust … unconstitutional … just plain wrong.”

“It took our property and gave it to them for free,” McElroy said Thursday.

Arif Panju, another Institute for Justice attorney in the case, said the ruling applies to out-of-state breweries as well. Miller said it protects all entrepreneurs looking to build up their businesses.

Miller said the ruling will help breweries going forward but does not address those who struck distribution deals while the 2013 law was in effect.

The Texas Alcoholic Beverage Commission has 30 days to file an appeal. A spokesman said agency lawyers are in touch with the Texas Attorney General’s Office and likely will appeal.

See here and here for the background, and here for a copy of the ruling. I hope the TABC will reconsider its inclination to appeal. This law serves no one’s interests except those of the Wholesale Beer Distributors of Texas. The state should not be spending its own resources pursuing a reversal of this ruling. As noted elsewhere in this story, if the original bill that forbade the microbreweries from selling their distribution rights had been about any other commodity, it would have been laughed out of the Capitol. Surely we have better things to do than this.

Beer legislation 2.0

Mar 17th, 2015

by Charles Kuffner.

1 comment

Just because craft brewers succeeded in passing a bill allowing them to sell beer for consumption on their premises last session doesn’t mean there isn’t more that can be done to advance the cause of beer freedom.

Twinned bills introduced this week would extend direct sales for breweries. The proposals by state Sen. Kevin Eltife, R-Tyler, and state Rep. Jim Keffer, R-Eastland, would let customers buy beer that they could take away and drink later.

“This gives Texas breweries the same rights already enjoyed by wineries, distilleries and many of their out-of-state competitors,” Keffer said in a written statement distributed by the Texas Craft Brewers Guild.

Under the bill, consumers would be restricted to a single purchase of no more than the equivalent of two cases of beer each month at a brewery. Advocates say this type of “souvenir” beer, often sold following tours or special events, can be an effective marketing tool.

“This legislation is designed to finish what we started last session and bring people from around the country to this state which is rapidly becoming the epicenter of craft brewing quality,” Eltife said in the statement from the Brewers Guild.

[Rick] Donley said the Beer Alliance [of Texas] is still digesting the details of this and other legislation affecting alcohol sales in Texas, but he sounded skeptical.

The Beer Alliance and major wholesalers have contributed many hundreds of thousands of dollars to numerous political campaigns in Texas since the beginning of 2013. Major recipients include Gov. Greg Abbott and Lt. Gov. Dan Patrick, but the Beer Alliance of Texas PAC also gave a total of $5,000 to Eltife in June 2013, Texas Ethics Commission reports show.

Donley said it has been only a year and a half since the most recent law changes went into effect, and his organization would like more time to see how that plays out in the marketplace.

He also said he thinks the two-case-per-month limit is too high and he would want an annual cutoff on how much breweries could sell this way. The exemptions approved in 2013 limited breweries to selling no more than 5,000 barrels of beer on site. While the bill currently does not specify an annual limit, a spokesman in Eltife’s office said the 5,000-barrel limit would still apply to all beer sold on site, whether it was sold for on- or off-premise consumption.

Donley said the ongoing success of Texas craft brewing further suggests the industry does not need additional help.

[…]

Brock Wagner, owner and founder of Houston’s Saint Arnold Brewing Co., insisted the craft brewers are not seeking to replace traditional retailers. Rather, he said, this legislation would address the most common question from tour and special events visitors – why they are not allowed to buy beer to take home – and boost awareness of the brands.

Wagner also said lawmakers are probably more inclined to view craft brewers as important small businesses that deserve the state’s support.

See here and here for some background. As noted by the Texas Craft Brewers Guild, the bills in question are Senate Bill 1386 and House Bill 3086. I understand the Beer Alliance’s hesitation – and it should be noted that they were among the good guys in 2013 – but it’s still crazy when you think about it that brewers can’t sell a six pack or two to the people that come to visit their facilities. It would be one thing if there were a blanket prohibition on all forms of booze, but that’s not the case – Texas’ wineries and distilleries can sell bottles on site. So can microbreweries in other states. What Texas does makes no sense, and it’s all about what the big brewers and distributors want. The difference between the faith in free markets that people constantly proclaim in this state and the actual freedom of some specific markets never fails to boggle my mind.

Anyway. As those links above point out, there were other issues that the 2013 legislation did not address that remain untouched by these bills. Licensing fees remain high, and microbrewers were forced by another bill from 2013 to give away their territorial distribution rights instead of being allowed to sell them. Again – crazy, right? A lawsuit was filed last December to overturn that law. I don’t know where that stands now, but there’s apparently no legislative fix for it. So, while this has been a lot more low-key this session, there’s still a lot to be done to make the beer market in Texas what it should be.

Trying again with online voter registration

Mar 13th, 2015

by Charles Kuffner.

1 comment

My State Rep., Carol Alvarado, would like for you to be able to register to vote online.

Rep. Carol Alvarado

Can I just state the obvious? Why can’t we register to vote online?

I manage my banking online, I do my taxes online, I can even buy and sell stock online; so why can’t I register to vote online? A 2014 survey of registered voters in Texas by the Pew Charitable Trust indicated that 34 percent mistakenly believed that online voter registration was already available. Georgia, Indiana, Arizona and Louisiana are just a few examples of the 20 states that have enacted legislation to modernize the way they register voters by offering an online application to register to vote.

In the social media era, it is hard to wrap my mind around why the movement to modernize the electoral process in Texas is moving at a snail’s pace. Which is why I have filed HB 953 this session to bring Texas into the modern era by allowing voters to register online.

Currently, to register to vote, one could find the time in their day to visit certain designated government offices to fill out a paper application. One could also download an application from the website of the Secretary of State, fill it out, print it out, and send your application through the mail. This feature is a step in the right direction but it requires readily available printing and postage. In such a digital world the current process is not only outdated, but inconvenient for the voters of today.

It’s not difficult to see why we had such a dismal 24.99 percent turnout of Texas’ voting age population in the latest mid-term election.

[…]

Arizona was one of the first states to transition to online voter registration. Officials in their largest county have reported the cost of a single registration dropped from 83 cents per card to 3 cents per card.

Allow me to put these figures into a Texas perspective. According to the Texas Secretary of State, at the time of the 2014 General Election, just over 14 million Texans were registered to vote. Using the Arizona estimate of 83 cents per card and assuming each registrant used the paper method, that would amount to a total cost of $11,641,116. Using the .03 estimate, that figure would plummet to $420,763.

I may not be a certified accountant, but if I could save the taxpayers over $11 million, I would make every effort to do so and be happy to take the credit.

Here’s HB953, which you will note includes Republican Rep. Patricia Harless as a coauthor. There were two bills that attempted to do the same thing in 2013. The good news is that SB315 from 2013, for which Rep. Alvarado was a sponsor in the House, passed the Senate and made it out of the House Elections Committee, but ran out of time before it could get a vote in the lower chamber. The bad news is that four Senators who voted for it (the bill passed by a 21-10 margin) are no longer there, and two of them (Sens. John Carona and Wendy Davis) were succeeded by people who (to me at least) seem less likely to vote for something like this. I could be wrong, so don’t give up hope. Honestly, I’m not even sure what the argument against doing voter registration online is. You have to think that one of these days we’re going to be voting online, perhaps via our own handheld devices or whatever comes next to replace them. It would be strange if at that time we’re still chained to paper and snail mail or fax machines for registration purposes, wouldn’t it?

Microbreweries file lawsuit over distribution rights

Dec 12th, 2014

by Charles Kuffner.

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Interesting.

Three Texas breweries filed a lawsuit against the state on Wednesday seeking to to overturn a 2013 law they say violates the Texas Constitution by forcing them to give away their territorial distribution rights for free.

In their complaint, filed in state district court in Austin, the heads of Live Oak Brewing in Austin, Peticolas Brewing Company in Dallas and Revolver Brewing in Granbury, say that were it not for Senate Bill 639, they would be expanding. Instead, their plans to bring their beer to new markets around the state have been put on hold.

In the suit, they accuse the law of “stifling the Texas craft beer renaissance.”

[…]

There are three “tiers” in the alcoholic beverage industry: brewers who make the beer, retailers who sell it, and distributors who pick it up from the former and bring it to the latter.

Prior to 2013, craft brewers could negotiate payment from distributors for the exclusive rights to deliver their beverages in a certain area. But the law, authored by state Sen. John Carona, R-Dallas, prohibited the sale of these territorial rights.

Carona was not immediately available for comment on Wednesday. He told the Dallas Observer in 2013: “What happens when the large manufacturers decide to require payment from a distributor for the right to distribute their brand? We could be back where we started from, with those who won’t pay to play getting muscled out of the marketplace.”

Distributors are not prohibited from selling territorial rights that they have acquired to another distributor. The craft brewers’ complaint says, “A distributor is thus able to receive territorial rights for free and re-sell them for a profit.”

This strikes the brewers at Live Oak, Peticolas and Revolver as unfair — and in violation of the state’s constitution, which says that a person’s property can not be taken without consent unless it is for use by the public or an entity granted the power of eminent domain. Miller said it was likely that other craft breweries will join the lawsuit.

These territorial rights are “a valuable piece of property” that brewers should be able to sell in order to generate revenue for the growth and expansion of their companies, the lawsuit says.

You can read the lawsuit here. SB 639 generated controversy from the moment it was filed; it was clearly seen as a sop to the distributors that were trying to derail the package of craft beer bills that ultimately passed last session. It was a modified version of SB 639 that ultimately passed, but the objections to it remained. Austin brewery Jester King singled out SB 639 after the session as a remaining obstacle to the continued success of craft beer in Texas. I’ll be very interested to see who else gets involved in this litigation, and what bills get filed in the Lege this session to address those lingering concerns with SB 639.

Chron overview of the AG race

Oct 17th, 2014

by Charles Kuffner.

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Couple of interesting tidbits in here.

Sam Houston

A tea party darling with a dozen years in the state Legislature, Sen. Ken Paxton has avoided the media since admitting to a third-degree felony violation of state securities law in late April. Spokesman Anthony Holm serves as his gatekeeper – even once physically blocking a reporter from approaching the candidate – while Paxton refuses to release his public schedule or meet with newspaper editorial boards.

The McKinney Republican refused multiple interview requests for this story.

Democratic opponent Sam Houston is Paxton’s foil in almost every way. So eager to garner media attention and sow unease about his opponent’s past, the Houston lawyer holds press conferences with few or no attendees. He has never held office, though he came closer than anyone expected in a recent bid for the Texas Supreme Court, and only jumped in the attorney general’s race after finding that no other Democrat intended to enter.

The importance of the position cannot be oversold. The attorney general decides what legal battles to wage on behalf of the state, and what information should and can be released to the public by government officials and agencies. This year, Abbott steered the debate over abortion, gay marriage, voter identification and the disclosure of dangerous chemical information. His successor will help determine the future of public school funding and much more.

Paxton has said he would take up Abbott’s mantle to act as a bulwark between Texas and “federal encroachment.” Houston views the office differently. In an interview with the Chronicle, he said he disagreed with many of Abbott’s decisions, but none more than his repeated lawsuits against the federal government: “A lawsuit ought to be your very last resort, and it shouldn’t be a campaign slogan. It doesn’t do any dang good.”

Both men recognize the attorney general’s duty is to the law, but Houston said the office should be an advocate for the entire state and “not just certain interests.”

“I think there might be situations when you say, ‘the state’s acting unconstitutionally. Well, I’m going to take my role as a public official and I’m not going to defend that,'” said Houston. He called Abbott’s insistence that he can’t settle the state’s school finance lawsuit “a cop out,” and said as attorney general he would work on a settlement.

After 12 years in the Legislature, Paxton consistently is described by his Senate and former House colleagues as a soft-spoken, introspective lawmaker, a quiet ideologue. Never a bomb-thrower, he gained notoriety by remaining cordial with his colleagues while challenging moderate Republicans on policy and leadership. He is heavily endorsed by tea party groups and backed by divisive figures like conservative powerbroker Michael Quinn Sullivan, whose Empower Texans PAC helped give Paxton the financial upper hand against Houston by lending his campaign more than $1 million.

[…]

In his early years in the Legislature, Paxton spoke up on education and transparency issues, complaining in 2005 he had been “inundated by government lobbyists” during the session. He opposed tax increases, voted against equal pay efforts and co-sponsored Texas’ 2011 voter identification bill, which a federal judge ruled unconstitutional last week. He has been a leader on anti-abortion legislation, including the state’s pre-abortion sonogram requirement. He voted for requiring drug testing for welfare recipients and was one of only four senators to vote against the 2013 state budget that funneled billions back into public school funding “because it was too big.”

[…]

Paxton consistently is popular with tea party Republicans, but not with more moderate members of his party. Sen. John Carona, R-Dallas and a Branch supporter in the runoff, has thrown his support behind him despite concerns with Paxton’s media strategy and his refusal to debate his opponent. Bob Deuell, another long-time moderate Republican senator ousted by a tea partyer this year, said he could not support Paxton: “I’m just probably not going to vote in that race.”

“He’s not going to stick his neck out on any issues,” Deuell said. “But I don’t lose any sleep about him being attorney general. The world’s not going to come to an end.”

Deuell is a moderate in the same way that I’m an anarcho-syndicalist, but never mind that for now. Most of what’s in this section isn’t new, but it’s good to have a reminder that 1) the AG office is really important, 2) Ken Paxton is fully aware that he’s in deep doo-doo, no matter how hard is poor overworked spokesperson has to issue the same stale denials, and 3) Paxton is a stone ideologue who will continue Greg Abbott’s practice of representing the interests of the Republican Party over everyone else’s, regardless of the cost, correctness, or likelihood of success. I hope Bob Deuell has a lot of company here, because we’re going to need it to get Sam Houston elected.

Speaking of, here’s the smaller section of the story about Sam Houston:

Sam Houston’s name is certainly memorable, but it is not the one he claimed at birth. He was born Samuel Jones in Colorado City in 1963. His parents divorced soon after, and his father disappeared when he was a toddler, Houston said. His mother remarried and he took on his stepfather’s notable moniker.

The grandson of farmers and ranchers, Houston grew up working in his family’s auto shop. He first left the sleepy west Texas town to attend the University of Texas at Austin, after which he proceeded to Baylor for law school. He and Paxton overlapped by one year there, but their paths never crossed.

Houston married his college sweetheart soon after the two moved to Houston in the mid-1980s. But by 1993, she had developed colon cancer and died three years later. Houston said he spiraled emotionally, culminating in a 1997 arrest for driving while intoxicated. He pleaded guilty, served six months probation.

It was meeting and marrying his second wife that likely ended the cycle, Houston said: “I had a couple of really hard years. … I can say Jantha probably pulled me out of it, to be honest with you.”

I must say, I knew none of that before reading this story. That doesn’t happen to me very often these days. It would have been interesting to have seen how some of this information might have been conveyed and received if Ken Paxton had run an actual campaign instead of hiding under a rock. Too bad for him that being out in public and actually talking about things was a risk he couldn’t bear. The Trib, which covered a lot of the same ground as the Chron but with more of a focus on Houston’s campaign and Paxton’s non-campaign, and Texas Politics have more.

The Senate is likely to get stupider again

May 20th, 2014

by Charles Kuffner.

1 comment

The cause.

Sen. Robert Duncan

The Texas Tech University System Board of Regents officially named state Sen. Robert Duncan, R-Lubbock, the sole finalist to be the system’s next chancellor in a press release issued Monday afternoon.

Duncan is expected to start in his new position on July 1. A special election will have to be held to replace him, and at least one candidate — state Rep. Charles Perry, R-Lubbock — has already announced an intention to run.

“To be able to serve the great universities in the Texas Tech University System is a tremendous honor for me and my family,” Duncan said in a statement. “I love the people of West Texas and will devote all of my energy to continue to grow the reputations for excellence of all the universities in the system.”

Mickey Long, the chairman of the Texas Tech board, expressed delight that, though the regents undertook a national search for the replacement for outgoing chancellor Kent Hance, they ended up with a new chancellor with strong personal ties to the region and to Texas Tech University.

The effect.

If current trends hold, [Duncan] may well be replaced by a tea party fire-breather for a 2015 session that will be seriously deficient in “credibility, calm, and collegiality.” Here’s another way to think about that: The Rice University political scientist Mark P. Jones created an ideological pecking order of the Texas Senate after last session. He compared votes and identified the most liberal (relatively speaking) and conservative senators.

There were 19 GOP senators last session. Of the six most moderate, only three will be left next session. It’s possible that there will be only two. Duncan is leaving, and state Sen. Tommy Williams (R-The Woodlands) already left, each to take a university job. State Sen. John Carona, the most moderate according to Jones’ standard, lost a re-election bid.

State Sen. Bob Deuell (R-Greenville) faces a surprisingly competitive primary runoff against a challenger with an extremely problematic personal history; that contest will be resolved May 27. That leaves only state Sen. Kel Seliger (R-Amarillo), who squeaked past a surprisingly competitive primary challenge of his own, and state Sen. Kevin Eltife (R-Tyler).

If he wins next week’s lieutenant governor runoff, Dan Patrick has talked about ending the senate’s two-thirds rule and stripping all committee chairmanships from Democrats, which would turn the chamber, effectively, into his own private club. As if that weren’t enough, the bottom third of Jones’ chart—the small group of plugged-in, moderate Republicans—is fading away. In 2011, Texas Monthly wrote that “legislatures can’t function without members like Robert Duncan.” It looks like we’ll soon find out if that’s true.

You don’t have to buy Mark Jones’ ideology-identifying methodology to recognize that Sen. Duncan is in the increasingly smaller “let’s get something done” bucket on the Republican side of the Senate. We already know what we’re getting from some of the replacement Republican Senators, and the possible additions of Deuell’s completely unhinged challenger – who would be elected, it must be noted, by equally unhinged voters – and teabagger Rep. Charles Perry if he wins the future special election in SD28 – will only serve to make it worse. Duncan had long been expected to be the next head of Texas Tech and I will wish him well in his new job, but his good fortune will not be good for the rest of us.

Primary results: Legislature and Congress

Mar 5th, 2014

by Charles Kuffner.

3 comments

Rep. Lon Burnam

The big news on the Democratic side is the close loss by longtime Rep. Lon Burnam in HD90, who fell by 111 votes to Ramon Romero Jr. I know basically nothing about Rep.-elect Romero, but I do know that Rep. Burnam has been a progressive stalwart, and it is sad to see him go. His district is heavily Latino, and he defeated a Latino challenger in 2012, but fell short this year. Congratulations to Rep.-elect Romero. Also in Tarrant County, Annie’s List-backed Libby Willis will carry the Democratic banner in SD10 to try to hold the seat being vacated by Wendy Davis. Elsewhere in Democratic legislative primaries, Rep. Naomi Gonzalez, who earned a Ten Worst spot this past session for a DUI bust during the session, was running third for her seat. Cesar Blanco, a former staffer for Rep. Pete Gallego, was leading with over 40% and will face either Gonzalez or Norma Chavez, whom Gonzalez had defeated in a previous and very nasty primary. I’m rooting for Blanco in either matchup. All other Dem incumbents won, including Rep. Mary Gonzalez in HD75. Congressional incumbents Eddie Berniece Johnson and Marc Veasey cruised to re-election, while challengers Donald Brown (CD14), Frank Briscoe (CD22), and Marco Montoya (CD25) all won their nominations.

On the Republican side, the endorsements of Rafael Cruz and Sarah Palin were not enough for Katrina Pierson in CD32, as Rep. Pete Sessions waltzed to a 68% win. Rep. Ralph Hall, who was born sometime during the Cretaceous Era, will be in a runoff against John Ratcliffe in CD04. All other GOP Congressional incumbents won, and there will be runoffs in CDs 23 and 36, the latter being between Brian Babin and Ben Streusand. I pity the fool that has to follow Steve Stockman’s act.

Some trouble in the Senate, as Sen. Bob Deuell appears headed for a runoff, and Sen. John Carona appears to have lost. Sen. Donna Campbell defeats two challengers. Those latter results ensure the Senate will be even dumber next session than it was last session. Konni Burton and Marc Shelton, whom Wendy Davis defeated in 2012, are in a runoff for SD10.

Multiple Republican State Reps went down to defeat – George Lavender (HD01), Lance Gooden (HD04), Ralph Sheffield (HD55), Diane Patrick (HD94), Linda Harper-Brown (HD105), and Bennett Ratliff (HD115). As I said last night, overall a fairly tough night for Texas Parent PAC. Rep. Stefani Carter (HD102), who briefly abandoned her seat for an ill-fated run for Railroad Commissioner, trailed Linda Koop heading into a runoff.

I’ll have more thoughts on some of these races later. I’d say the “establishment” Republican effort to push back on the Empower Texas/teabagger contingent is at best a work in progress. May open an opportunity or two for Dems – I’d say HD115 is now on their list in a way that it wouldn’t have been against Rep. Ratliff – but barring anything strange we should expect more of the same from the Lege in 2015.

A preview of the next beer battle

Jul 12th, 2013

by Charles Kuffner.

Comments are off for this post

Texas microbreweries are now officially selling their wares on premise. Woo hoo!

In business for nearly 19 years, Saint Arnold Brewing Co. sold its first cold one directly to a customer [in June], thanks to a new law liberalizing the way beer is bought and sold in Texas.

The buyer, 22-year-old Dale Edwards, made his $8 purchase to the click and whir of cameras and a round of cheers from the afternoon tour group, then sipped a heavy stout that marked a turning point for Saint Arnold and the state’s fast-growing craft-brewing industry.

[…]

Customers must drink the beer there, however, as some of the competing interests successfully resisted efforts to allow people to take home packaged beer.

Just hours after the ink dried on Perry’s signature, Houston’s Buffalo Bayou Brewing sold its first beers during its Saturday tour. Owner Rassul Zarinfar said he sold $18 worth of beer in addition to the samples that are included in the admission price.

Saint Arnold also plans to continue including samples in its tour prices but in addition will offer select special-release beers for sale.

CultureMap rounds up what the other craft brewers in town plan to do with their new freedom. It’s been such a long time coming that it’s almost hard to believe. Saint Arnold is at the forefront here, and I really look forward to how they and their colleagues innovate now that they have this capability. But while we celebrate this achievement and all the good it will bring, it’s important to remember that there’s a lot more that could have, and still should, be done. The Jester King brewery lays it out.

While the new laws represent major progress for Texas beer, there are some realities that we are not pleased with. There still exist exorbitant licensing fees in Texas that keep beer from small, artisan brewers out of our state. We still will not be seeing beer from Cantillon or Fantome on Texas store shelves anytime soon. We feel strongly that in order for Texas to become a truly world-class beer state, it must eliminate the massive licensing fees that keep out beer from small, artisan producers. We have written extensively on this topic before, which you can read here.

We are also not pleased with the passage of SB 639, which makes it expressly illegal for breweries to sell the right to distribute their products to wholesalers, while making it expressly legal for wholesalers to sell those same rights to one another. This law is tantamount to legalized theft, and we will join future efforts to see it overturned. For our complete commentary on SB 639, please follow this link.

Again, we are thrilled for Texas law to have changed. We were skeptical whether it would ever happen after repeated defeats in the legislature. First and foremost, we want to thank beer drinkers across the state who voiced support for the bills and gave their time and/or money to our cause. We would also like to thank Open the Taps, The Texas Craft Brewers Guild, Brock Wagner of Saint Arnold Brewing Co., Scott Meztger of Freetail Brewing Co., The Beer Alliance of Texas, and journalists who helped shed light on the injustices inherent in Texas beer law. There is still much work to be done in making Texas a better place for beer and beer drinkers, but these changes represent a dramatic, positive step forward.

See here and here for my blogging on SB639, which helped to land Sen. John Carona on the Ten Worst Legislators list for this session. You should also follow the Jester King link to learn more about what still needs to be done. Here’s an excerpt:

Imagine a local event, right here in Austin, where you could sample hand-crafted beers from both the world’s most highly regarded artisan brewers, and talented newcomers whose names you probably never even heard before. OK, now stop imagining and instead start planning your trip to wherever next year’s festival is going to be held, because without some serious changes to Texas law, there is absolutely no chance that it will ever come here.

In order for an event like this to take place in Texas, every individual, participating brewer, including foreign brewers, would need to pay up to $6,128 in licensing fees, fill out extensive paperwork (available only in English) and submit each of their beers that they planned to pour for label approval, along with either samples or a certified laboratory analysis, even if they had no intention of doing any future business in the State. Of the 70+ artisan producers in attendance, you could easily count on one hand the number whose products are currently available in Texas, and unless the law changes, we aren’t likely to see that number increase all that significantly anytime soon.

There’s been a good deal of focus placed on the need to change the laws prohibiting Texas production brewers from selling their products to the general public on site and preventing Texas brewpubs from distributing theirs off site, and we absolutely, wholeheartedly support the collective efforts that are being made to eliminate these restrictions. At the same time, however, we also feel that in order for Texas to develop a truly world-class artisan beer scene, in addition to supporting its local brewers and easing the path to market for small in-state start-ups, it also needs to remove the economic and regulatory barriers that seem virtually designed to deny its citizens access to world-class artisan products that happen to be made outside its borders.

They have a chart of per-unit costs for breweries of various size to illustrate their point. It’s clear that everyone who was involved in getting the good bills passed recognizes the need for more work, and I expect they’ll be back in 2015 to push for more. That fight will be more difficult – as far as the public is concerned, the problem has been solved, and as SB639 represented a last stand by the Wholesale Beer Distributors of Texas you can be sure they’ll lobby like crazy to protect it – but it needs to be fought. Again, this is about making the beer market in Texas more closely resemble an actual free market. You’d think the way so many politicians in this state croon about the virtues of the free market that this would be a no-brainer, but then we’re really much more about being pro-business than pro-market. The two are very much not the same, as the long slog to get any freedom for craft brewers attests. The fight picks up where it left off in another 18 months.

What we missed by not getting a payday lending bill

Jun 16th, 2013

by Charles Kuffner.

2 comments

Better Texas Blog reminds us of what could have been

SB 1247, the omnibus reform bill filed by Sen. John Carona … included the ability to repay standards, loan limits, and refinance limitations, among numerous other provisions. According to the Office of Consumer Credit Commissioner (OCCC), the refinance limitations alone in SB 1247 would have produced annual savings more than $130 million for more than 300,000 Texas consumers.

Unlike other consumer loan products offered in Texas, the Finance Code contains no payday loan regulation relating to loan fees or effective annual interest rates, loan amounts, maximum number of refinances per loan, loan terms[i], ability to repay or underwriting and type of product. At least for payday loans, the absence of any statewide regulation or consumer protection makes Texas an outlier compared to nearly every state that permits or authorizes payday lending. Only five other states do not cap the amount of fees payday lenders can charge (Delaware, Idaho, Nevada, Ohio and South Dakota).[ii] Even among these states however, Delaware and Nevada have limits on loan terms and all five states limit loan amounts. [iii]

A recent analysis of payday lending conducted by the Consumer Financial Protection Bureau (CFPB), which covers a majority of the U.S. storefront payday loan transactions over a 12-month period, found that 68 percent of payday loan consumers had annual incomes at or below $30,000, and 43 percent had annual incomes at or below $20,000. The median annual income of payday loan consumers was about $22,500; for borrowers making under $20,000, the most common income sources were “public assistance/benefits” and “retirement”.

The CFPB analysis also found that the average payday loan amount nationwide was $392 in 2012. Nationwide data on payday lending appear to be much better than comparable data from unregulated Texas payday lenders, which reveal that Texas borrowers pay much higher fees and loan amounts. Based on 2012 data from OCCC, the average single payment payday loan in Texas was $472.

SB 1247 also included limits on refinances for each loan product, generating a pathway out of debt for consumers who get into trouble with payday or auto title loans. For 2012, single payment payday loans alone comprised about 75 percent of all payday loans, while single payment auto title loans accounted for 83% of all auto title loans.[iv] The original loan amounts of single payment payday loans surpassed $1 billion, while loan refinancing nearly hit $2.1 billion. Over 70 percent of single payment payday loan consumers that refinanced their loan did so multiple times. As shown by the CFPB report, repeat borrowing and renewals represent the lion’s share of all loan volume. On-time repayment is the exception, with three refinances for every loan paid in full on the original due date.

The good news and the bad news is that city ordinances are still in effect. It’s good news because we almost got an bill that did little more than nullify the city ordinances, and it’s bad because city ordinances only cover a portion of the state. Given what Mayor Parker has said, we will likely be able to add Houston to the list of cities that offer this protection. But until we have a real statewide law, it only means so much.

Patrick involved in another Senate squabble

Jun 11th, 2013

by Charles Kuffner.

2 comments

Must be something in the water.

In this corner...

A powerful Republican urged the Senate last week to strip a plum committee chairmanship from a GOP colleague who voted against the state budget, six senators said Friday.

Chief Senate budget writer Sen. Tommy Williams polled colleagues on whether they would support removing Sen. Dan Patrick as head of the Education Committee, though Williams appears to have since suspended the effort, the lawmakers said.

It’s unclear if Williams has permanently abandoned his push and if Lt. Gov. David Dewhurst condoned it, said the senators, both Republicans and Democrats.

Through a spokesman, Dewhurst, a Republican, denied late Friday that he instigated or supported the proposed ouster of Patrick.

“The lieutenant governor’s not involved in this, and he didn’t encourage it,” said Travis Considine, Dewhurst’s communications director.

Patrick said Dewhurst must have blessed Williams’ actions, at least implicitly.

“I’m much more worried about the people being unhappy with the votes I cast than a lieutenant governor,” Patrick said.

He and Dewhurst, both Houston Republicans, may collide in the party’s primary for lieutenant governor next year – after a political alliance that took just 10 months to unravel.

[…]

…And in this corner

Williams, R-The Woodlands, has had icy relations with Patrick since the former radio talk-show host arrived in the Senate in 2007.

This year, Patrick sat on Williams’ Finance Committee. After voting for the budget at the committee and during its first trip through the full Senate, Patrick was among four conservative Republicans who opposed the final product of a House-Senate conference committee on May 25.

“They lost me on a couple of issues,” he explained.

Patrick cited a loss of funding for some of his favored education items and what he said was too profligate an approach with rainy-day dollars and with spending generally, especially when highway funding wasn’t boosted much.

Williams championed more spending on roads, only to be thwarted by conservative Republicans who wouldn’t support increasing vehicle registration fees. He was highly upset with Patrick’s vote, one senator said, adding that Williams met individually May 26 with all four senators who voted against the budget, to convey his displeasure.

See here for more on this latest outbreak of Republican-on-Republican violence. You may recall that just last year, Patrick had a high profile slap fight with Sen. John Carona. Looks like he gets to cross another name off his Christmas card list

Taking back the Texas Senate

Jun 10th, 2013

by Charles Kuffner.

4 comments

Colin Strother says the Democrats should not overlook opportunities to make gains in the upper chamber of the Legislature.

The conventional wisdom is that Democrats need a miracle to pick up any single seat, much less turn the chamber Blue. The numbers show this reaction is based more on assumptions rather than any empirical evidence.

Here are some districts that should be immediate targets:

Low-Hanging Fruit

SD9 Kelly Hancock (R) Non-White VAP*= 47% (272,400) 2012 Total Vote=233,577

SD16 John Carona (R) Non-White VAP= 47% (288,695) 2012 Total Vote=181,746

SD17 Joan Huffman (R) Non-White VAP=47.5% (287,575) 2012 Total Vote=238,707

*voting age population

First of all, I am well aware that a sole reliance on non-White voters would mean we need astronomical turnout (except in SD 16 where a mere 35% turnout of non-white voters bests Carona). Non-White voters are a piece of the puzzle–not the panacea some think it is. I am also aware that Romney rolled in these districts, as he did in 20 of the 31 districts.

It is also important to note that the 3 districts hold meaningful populations in counties that are nearly 100% Blue from top to bottom (Dallas & Harris), so we are not exactly talking about a handful of voters scattered across a 37-county district like District 31. We are talking about large concentrations of non-white voters in large, urban counties where active GOTV programs are already in place.

For the sake of comparison, SD 10′s non-white VAP is 47.3%, the 2012 total vote was 287,759, Romney won it in the mid-50s, it has numerous down ballot Democratic officeholders, and it holds a meaningful population in an urban county where active an active GOTV program is already in place. Basically, it looks identical to 9, 16, & 17 on paper. The only difference? We made SD 10 a priority, got a good candidate, dedicated the resources, and made it happen.

These 3 districts have good bones, a good bench, and access to existing infrastructure. For a party that desperately needs to grow its market share, these look like a good place to start. (I can assure you that when the Republicans swiped SD 3 in 1994 and SD 5 in a 1997 special, their numbers didn’t look this good.) With a dash of candidate recruitment, a splash of smart staffers, and a chunk of cash, Texas Democrats can be knocking on the door of a 16-15 minority status…not in 10 cycles, but in 2-3.

I looked at the Senate district numbers back in February, and while I agree with Colin about which ones are the most targetable, I’m less sanguine about our chances in the near term. As a reminder, you can find the 2008 results by district here, and the 2012 results here. The basics are as follows:


Dist  McCain    Obama  McCain%  Obama%
======================================
09   145,020  103,614    57.8%   41.3%
10   158,677  143,651    52.1%   47.1%
16   161,779  129,105    55.0%   43.9%
17   174,371  124,939    57.8%   41.4%

Dist  Romney    Obama  Romney%  Obama%
======================================
09   142,499   94,117    59.3%   39.2%
10   155,936  132,707    53.3%   45.4%
16   159,759  116,603    57.0%   41.6%
17   178,241  117,562    59.4%   39.2%

I think you can only call SDs 9 and 17 “low hanging fruit” in the sense that there is no fruit besides those districts and SD16. Romney not only did better than McCain in all three districts – and in SD10, home of Democratic Sen. Wendy Davis, whom I include for perspective – he also had a wider margin in SDs 9 and 17 than he did statewide. Other than the fact that every other district is worse, one normally wouldn’t look at these and see much in the way of opportunity.

That said, Colin is right that we’re not going to get anywhere if we sit around waiting for easy races, and whether we run a decent statewide slate this year or not, we need to aim at some targets bigger than State Reps. If nothing else, the VAP numbers suggest there’s material here for Battleground Texas to work with. There is a huge benefit for each additional Senator – among other things, without Sen. Davis, we wouldn’t have been able to block all those awful abortion bills this session – and the Senate is a great proving ground for future statewide campaigns. Even as longshots, there’s enough value in a Senate seat to support any good candidate.

It may be instructive to review Sen. Davis’ two wins to see what we can learn from them for future campaigns. A lot of stars came into alignment in 2008. It all began with Wendy Davis, who was an excellent candidate and who has proven to be an outstanding Senator, but equally important is the fact that she was available and ready to take on the race in the first place. She was a term-limited Forth Worth City Council member, so had no incumbency to lose by filing for another office. That’s an important consideration when you remember that the bulk of our up and coming stars are State Reps, who would be giving up their seats to challenge a Senator in a regular election. She went up against an ethically-challenged incumbent, which is always a bonus. The seat was clearly winnable and was seen as such, which surely helped Davis with fundraising and campaign energy. And of course, 2008 was a pretty good year for Democrats – no doubt, Davis was helped by the Obama surge.

As an incumbent herself in 2012, Sen. Davis needed less help, but she still got a gift in the form of her opponent, then-Rep. Mark Shelton, who was one of only a handful of House members to vote against a bill by Davis to provide state grant money to local law enforcement agencies to help clear rape kit backlogs. It was such a bad vote that even Sen. John Cornyn, who was sponsoring similar legislation in Washington, couldn’t defend it. Votes like that are an oppo researcher’s dream, and making it in the same cycle that gave us the likes of Todd Akin and Richard Mourdock was icing on the cake. We know Sen. Davis drew crossover support in her successful re-election bid. I don’t have polling data handy, but I’d bet good money a significant chunk of that crossover support came from female voters.

So what lessons can we take from this? Well, first and foremost, the best candidate is no help if he or she is unavailable or unwilling to make the race. We all agree that the future of the Texas Democratic Party is largely in the House, but we can’t expect tomorrow’s stars to risk that status on races where they’d be big underdogs. That means we need to be thinking outside the box for potential Senate candidates, and as a corollary to that it means getting involved in city, county, and school board races, where new talent can be incubated and other offices can at least some of the time be explored because there’s no filing conflict.

Two, it means seek out candidates that can best exploit the weaknesses of the incumbents. In the case of SD09, Sen. Kelly Hancock is a slash-and-burn teabagger, and I’m sure his House record will show plenty of anti-education votes, and surely more than a few anti-women votes. A female candidate with an education background, perhaps a school board member, would be high on my list. Sen. Joan Huffman is coming off a session where she carried a lot of water for the prosecution lobby, and got was responsible for an emotional outburst by the brother of Tim Cole, the man who died in prison after being convicted of a crime for which he was later exonerated. Here, a person of color with a background in criminal justice reform and/or innocence advocacy would be ideal. Do such people exist? Very likely. Is anyone talking to them about their future in politics? Very likely not.

And three, keep focus on the stuff we’re already working on, or at least that we say we’re working on. Register those unregistered folks, and engage them in a manner that will get them to the polls. Remind our Presidential year voters that we need them in other years, too. Figure out why Texas Democrats aren’t doing as well with female voters – specifically, Anglo female voters – as Democrats elsewhere. I’m thinking Wendy Davis and her campaign team might have some insights of value there. As Colin says, this isn’t rocket science. I’ve given Battleground Texas plenty of goals already, but taking back at least one Senate seat this decade needs to be on that list. The targets may not be easy, but they are there. We just have to make sure we take our best shots at them.

Craft beer bills pass the House

May 18th, 2013

by Charles Kuffner.

1 comment

Hallelujah!

A raft of bills that would dramatically alter the way beer is sold and consumed in Texas sailed through tentative approval from the House on Friday after a lengthy and disputatious process between brewers and beer distributors. If finally approved next week, the legislation will go straight to the governor’s desk without another stop.

The bills represent the largest overhaul of the industry in Texas since the Legislature legalized brewpubs in 1993. Under the new regulatory scheme, brewpubs and craft brewers would be allowed more flexibility to sell their products — privileges beermakers have sought for more than a decade.

The package includes Senate Bills 515, 516, 517, and 518, by state Sen. Kevin Eltife, R-Tyler, which decrease restrictions on craft brewers and brewpubs.

Under the new rules, the cap on brewpub production would be doubled, from 5,000 barrels a year to 10,000. Brewpubs would also be allowed to sell their beer to distributors, in addition to selling limited amounts of their own beer directly to retailers.

The bills adjust breweries’ right to circumvent beer distributors and sell beer directly to retailers. Larger breweries than before would now be allowed to self distribute, but the limit on how much they are allowed to self distribute has been lowered.

Also, breweries would now be able to sell beer for on-site consumption — a major victory for Frank Mancuso, the Central Texas sales representative for the Saint Arnold Brewing Company of Houston, the oldest craft brewer in the state. Mancuso came to the House Gallery with a large number of other Texas brewers, who broke into applause when the last of the bills finally passed.

“We’ve been working on this for eight sessions now,” he said. “Selling beer at our location is something we’ve wanted to do for a long while.”

I only remember this going on in the last four sessions, but regardless, it’s been a long and arduous road to this point. I’m going to crack open a Saint Arnold’s to celebrate. Major kudos to everyone involved – I’m especially proud to say that my State Rep through 2012, Jessica Farrar, was an early and ardent leader in this fight. Here’s a little beer music to commemorate the moment. Please note that it contains some naughty language, so exercise care while watching:

We do love beer. Thanks to these bills, it’s easier to love.

Payday lending prospects look grim in the House

May 2nd, 2013

by Charles Kuffner.

1 comment

From the Observer:

Late into the night on Monday, the payday loan industry strutted its stuff before a very friendly House committee. The hearing came just a week after the Senate passed a surprisingly tough bill that the industry insists would shut down most of Texas’ 3,400 payday and auto-title storefronts. Even though the legislation aired last night is a faint shadow of the Senate bill, it got a rough treatment from six of the seven committee members.

Only the chairman and author of the bill, Rep. Mike Villarreal (D-San Antonio) evidenced any interest in cracking down on the industry.

“I think the tone of the committee was that clearly there was no support for what Villarreal put out there, at least right now,” said Ann Baddour of Texas Appleseed.

What happens next is anyone’s guess but it is possible that payday reform is dead for the session.

[…]

Villarreal’s bill is considered by consumer groups to be a minimalist reform effort. The Senate version would close a loophole that allows payday and title lenders to get around Texas’ anti-usury laws and charge unlimited rates. Instead it would impose a strict 36 percent APR cap on loans, effectively scuttling the business model in Texas. The Villarreal proposal, which focuses on limiting the number of “rollovers” and imposes modest limits on the size of loans based on borrower income, has only received tepid support from consumer groups.

The wording here is a little confusing. Rep. Villarreal has his own bill, HB2706, which was heard in committee on April 22 and which is pending in committee. I believe this bill is similar to the pre-amendment version of Sen. Carona bill, which is SB1247. That now-tougher bill, which passed the Senate last week, is what Rep. Villarreal brought up in committee this Monday. Rep. Villarreal is the chair of the Investments & Financial Services committee, but only one other member of the committee is a Democrat, and two of the Republicans are quoted in the story giving rhetorical foot massages to the payday lenders and the curious notion that their lightly regulated existence is necessary for truth, justice, and the American way. As the man said, you don’t need to be a weatherman to know which way the wind blows.

What happens next is impossible to predict but billions in revenues hang in the balance.

Daniel Freehan, the CEO of Cash America International, acknowledged as much on a conference call with analysts last week.

“Dozens of different scenarios could unfold at this point that run the gamut of this bill never getting out of the House committee, to a bill that passes the House in identical form of Senate Bill 1247. In between these two extremes are multiple permutations that could develop, and it’s impossible to predict how this may unfold with any reasonable degree of confidence.”

A worst-case scenario from the point of view of the reformers is legislation that would strike down city ordinances but not add any new statewide regulations. One such pre-emption only bill, House Bill 2953 by Rep. Ryan Guillen (D-Rio Grande City), is already headed to the House floor.

Last night, Rob Norcross of the Consumer Services Alliance of Texas, a group that represents 80 percent of all the payday and title storefronts in Texas, tried to play down the pre-emption issue, saying that he believed the industry would prevail in its court. But there’s no doubt that ordinances passed in Austin, Dallas, San Antonio, El Paso and Denton are cutting into profits. In January, Mark Kuchenrithe, the CFO of Austin-based EZCorp, told analysts that the company’s “profitability… was negatively impacted by over $1 million” during the last quarter of 2012 “as a result of ordinances enacted in Dallas and Austin.”

Here’s HB2953. Far better that nothing passes than this does. I’m okay with rolling the dice in the courts if it comes down to it. BOR has more.

UPDATE: The Trib adds on.

Improved payday lending bill passes the Senate

Apr 26th, 2013

by Charles Kuffner.

6 comments

Good news, if it goes anywhere.

The Texas Senate approved a bill to regulate short-term lenders on Monday night, a milestone some thought the chamber wouldn’t reach after a personal and divisive floor fight on Thursday.

But with the measure’s author, state Sen. John Carona, R-Dallas, calling the highly-altered bill an “ugly baby,” it remains to be seen whether the measure is viable enough to get through the House.

The bill passed with versions of the six amendments Carona brought with him to the floor last week – but seven other amendments got tacked onto the bill, including one from state Sen. Wendy Davis, D-Fort Worth, which would bring payday lenders back under the control of existing small-loan regulations.

That provision is similar to one in a bill state Rep. Tom Craddick, R-Midland, introduced, which was lauded by consumer advocates but has long been seen as politically troublesome.

Another potential poison pill comes in the form of an amendment from state Sen. John Whitmire, D-Houston, which prevents state regulation of payday lenders from preempting local regulations. Previously, the bill established a statewide minimum level of regulation and preempted local ordinances regulating short-term lenders.

The statewide regulations and preemption were welcomed by payday lenders, who were willing to negotiate certain reforms in return for the expectation that they would be operating under uniform rules. With that provision gone, it remains to be seen whether the two sides can come together to reach an agreement. Carona acknowledged as much on the Senate floor.

“This has the effect, I think,” he told Whitmire, “of perhaps not leaving us any hope of passage.”

Whitmire, for his part, seemed to doubt that the amendments would survive the House, leaving it with no hope of passage later when it returns to the Senate.

“What are the odds,” he asked, that “the House returns your bill with these amendments? This ain’t my first rodeo.”

See here, here, and here for some background. The Observer calls the bill “surprisingly tough”, and it’s certainly a pleasant surprise. The Chron adds a few more details.

Another amendment, by Sen. Rodney Ellis, D-Houston, capped annual percentage rates at 36 percent for all borrowers – the amount lenders are allowed to charge military families.

The bill prohibits lenders from extending more than one payday or auto title loan to the same borrower at one time, limits the number of times the loan could be refinanced, and mandates that lenders must permit partial payments so that borrowers can reduce the size of their loans.

Pointing out the industry’s strength, Sen. Wendy Davis, D-Fort Worth, said that there are more payday lending storefronts in Texas than Whataburger and McDonald locations. “We’ve heard many, many stories about lives that have been ruined as a consequence of this state’s failure to appropriately regulate this industry so that consumers are treated fairly,” she said.

I have to say, after all the twists and turns this bill took, I did not expect this result. Kudos to Sens. Whitmire, Ellis, and Davis for strengthening the bill, and to Sen. Carona for not standing in the way. Maybe this means the bill now has no chance of passing the House, but maybe the House will take a cue from the Senate’s insistence on passing meaningful reform. I choose to be hopeful, as foolish as that often is with the Legislature. EoW has more.

That’ll just about do it for gambling this session

Apr 23rd, 2013

by Charles Kuffner.

Comments are off for this post

Sen. Carona calls the chances “slim”, but it sounds like slim just left town to me.

[Sen. John] Carona, chairman of the Senate’s Business and Commerce Committee, said last week he expected to vote his sweeping gambling bill out of his committee Tuesday. But the morning committee hearing came and went, and Carona declined to bring the bill up for a vote.

Carona’s fellow senators told him they didn’t want to take a vote on the controversial topic if it doesn’t have much of a chance, especially in the Texas House, Carona said.

State Rep. John Kuempel, R-Seguin, agreed that there is not much of an appetite for gambling in the House this year.

“I don’t think it has a great chance over here,” said Kuempel, who supports expanded gambling to bring additional revenue to Texas. “It’s challenged in the 83rd legislative session in the Texas House.”

[…]

Even if his legislation fails this session, Carona said a lot has been accomplished in the past several weeks. Notably, two often clashing pro-gambling interests — those seeking slot machines at racetracks and those advocating casinos — have worked well together on a broad gambling bill.

“Time is always your enemy in a legislative session,” Carona said, adding that he is not ready to pronounce gambling dead just yet.

Sure sounds dead to me, but as always, you never know. There will almost certainly be a special session to deal with school finance next year, however, and barring anything unexpected from the Supreme Court the Lege will need to find more revenue for the schools, so expect the subject to be on the front burner. Having the cover of a court order sufficed to get the business margins tax created, and it could well do the same for some kind of gambling measure. If nothing else, we’re going to have to pay for Rick Perry’s irresponsible tax cuts somehow. So don’t bury expanded gambling too deeply just yet.

Division over the payday loan bill

Apr 19th, 2013

by Charles Kuffner.

1 comment

Quite a heated little fight in the Senate yesterday.

An ugly scene erupted in the Texas Senate today, with Sen. John Carona (R-Dallas) suggesting that some of his Republican colleagues were “shills” for the payday loan industry and worrying that the GOP would be seen as “the party that is backed and bankrolled by payday lenders.”

After intense negotiations this week, Carona told lawmakers he had struck a deal to pass legislation to reform payday and auto-title lending in Texas. Most of the consumer groups, the cities, Senate Democrats and even the payday loan industry were on board with the “hard-fought compromise,” he said.

“There have been great concessions on both sides,” Carona said. “We can leave this chamber at the end of May and honestly say we made a significant incremental step forward on protecting consumers.”

However, as Carona moved toward a suspension of the rule to bring the bill up for debate, which requires two-thirds of the Senate, he complained that payday-loan lobbyists were calling senators on the Senate floor and asking them to change their votes. He even hinted that two GOP senators were acting as agents for the industry.

“If we don’t do it this time, you won’t be able to regulate this industry two years from now,” he said. “This industry will be so much wealthier, so much more politically powerful that you won’t be able to say no and you won’t be able to draw the line. I know the lobbyists are just in a frenzy right now to try to stir up some action on the floor and get one or two of my colleagues who seem to be working the floor to change their vote.”

Sen. Carona wound up pulling the bill down. The Trib adds some details.

Carona, who said the bill had been “negotiated literally through the night,” brought with him to the floor six amendments that were intended to address the concerns of some consumer advocates who said the bill didn’t go far enough in limiting the abilities of short-term lenders.

Ultimately, the bill was pulled before debate on the amendments began, but Carona said they mostly contained ways to strengthen consumer protections, including limiting the types of loans that short-term lenders could offer, mandating that lenders accept partial payments, and limiting the maximum duration of multiple-payment loans — a major sticking point for consumer advocates.

“There are only two or three amendments that the industry really finds objectionable,” he said, “and in that case, all we’re asking the chamber to do is do what’s right for consumers.”

Early in the debate, state Sen. Kirk Watson, D-Austin, said many senators’ support for the measure would depend on the inclusion of those six amendments in the final bill.

“I think that there will be an effort to stop 16 people from voting for any conference committee report that strips those out,” he said, referring to the version of the bill that could emerge from a future House vote.

But some senators, who had previously expressed their intent to vote for the bill that emerged from committee, balked at the proposed changes. In an argument about process that turned personal, critics of the bill took issue with the way Carona brought his amendments to the floor.

Leading the criticism was state Sen. Troy Fraser, R-Horseshoe Bay, who charged that Carona hadn’t given the chamber enough time to review the proposed changes. While calling payday lending reform a “difficult issue,” he asked Carona if he had sent the amendments around 24 hours in advance. Carona’s reply was sharp.

“No, sir,” he said. “And, frankly, I haven’t seen you do that with your bills.”

[…]

Fraser was joined in his criticism by Sen. John Whitmire, D-Houston, who also argued that the legislative process should be slowed down to give senators time to consider prospective amendments, adding that he had concerns about Houston’s ability to regulate payday lending under the bill.

“What’s the rush?” Whitmire asked Carona.

Because “the industry has hired damn near every lobbyist in town to kill this bill,” Carona replied.

When Carona replied that he had been in constant contact with the city of Houston to determine its position on the bill, Whitmire erupted, telling Carona that he would represent his own constituents. He again criticized Corona for rushing the process.

“When you were negotiating this most recent agreement, I was chairing [Senate] Criminal Justice for four hours,” Whitmire said. “I think this has gotten totally out of control.”

The bill in question is SB 1247. Before this kerfuffle, the main divisions had been among consumer advocates.

Some progressive groups, including the Center for Public Policy Priorities and Texas Impact, have thrown their support behind the bill, arguing that it’s better than the status quo.

“For us, doing nothing is not an option this time around,” said Don Baylor, senior policy analyst at the Center for Public Policy Priorities. He points to estimates that limiting the number of times borrowers can “roll over” loans would save consumers at least $132 million.

“You get to a point where you ask yourself the question, Is there any more money [for consumers] left on the table? The folks that have decided to support it have decided there isn’t any more money on the table.”

Bee Moorhead, director of interfaith group Texas Impact, said that it’s important that legislators show the increasingly aggressive and powerful industry who’s boss.

“The thing that’s hard is that first step,” Moorhead said, “saying the state gets to decide under what terms you do business.”

Opposing the bill, however, are most Senate Democrats, the Texas Catholic Conference, Baptist organizations, Texas Appleseed and AARP.

They say that Carona’s approach falls short of meaningful reform and sanctions harmful new loan products.

“Our opposition is that this bill doesn’t do what it purports to do,” said Ann Baddour, with Austin-based group Texas Appleseed.

The pre-emption of local ordinances is the sticking point for many, myself included. It should be noted that there is a decent argument for proceeding anyway, as articulated in the Chron.

The bill has split the community of nonprofits that lobby legislation affecting the poor. Favoring it are the Center for Public Policy Priorities, Goodwill Industries and Texas Impact, whose leaders believe it provides a pragmatic system of statewide regulation.

While it pre-empts the stronger city ordinances, they believe lenders simply are directing borrowers to suburban locations outside the reach of city enforcement.

The industry has launched legal challenges to those ordinances that probably will be resolved by the conservative Texas Supreme Court, said Scott McCown, executive director of the public policy center. “Do we really think that if the ordinances are challenged, the Texas Supreme Court is going to say they are valid and enforceable?” he asked.

McCown also said most cities do not have the “economic wherewithal” to enforce the ordinances. While he would like the bill to be stronger, McCown said, “our assessment is that this was the best we could do.”

[…]

Carona’s bill would limit the number of times lenders could “roll over” a loan and charge new fees. That provision would save Texas consumers at least $132 million a year, according to an analysis by the Texas Consumer Credit Commission.

[Rob] Norcross said [the payday lending group Consumer Service Alliance of Texas] agreed to it in response to the plethora of city ordinances and the burden that dealing with so many different laws creates for business. “If anybody thinks anybody (in the industry) is happy, they are wrong,” he said. “This is a high price to pay.”

I’m a half-a-loaf guy and I get where McCown and Moorhead are coming from. I’m still reluctant to support this thing, though perhaps I’d feel better once I knew what the amendments that never got to be debated are about. The Observer indicated that Carona may bring the bill back on Monday, though the Trib suggested it could be longer than that. I don’t know what to think at this point, other than to marvel once again at how sleazy the payday lending industry is. Trail Blazers has more.

More on the potential Coushatta casino

Apr 11th, 2013

by Charles Kuffner.

Comments are off for this post

The Houston Press cover story from last week is about the Alabama-Coushatta tribe’s efforts to get a casino again. It covers a lot of the same ground as that Chron story I blogged about on Sunday, but it also reminds us of a very sordid aspect of the original casino and why it was closed.

A federal court had ruled that the Alabama-Coushatta had violated the terms of their recognition, which, as argued by then-Texas Attorney General John Cornyn, stated that all gaming prohibited by the state of Texas was “hereby prohibited on the reservation and on lands of the tribe.” The challenge came with the full-throated support of Texas’s evangelical population, spurred on by a now-notorious lobbyist named Jack Abramoff. (Ironically, the Alabama-Coushatta remain a heavily Christian community and even forbade alcohol at their former entertainment center.)

“We already knew that when we opened, we were going to be in litigation,” Williams continues. “We were prepared for that.” The Louisiana-Coushatta, a related tribe just one state over, had been concerned about consumers opting for their Texas cousins and ended up enlisting the aid of Abramoff, the fedora-topped lobbyist later sentenced to nearly six years for conspiracy and tax evasion in 2006.

While secretly disparaging the Native Americans as “stupid mofos,” “monkeys” and “fucking troglodytes,” Abramoff used Christian connections in Texas to mobilize anti-casino forces. Through shell corporations and blatant corruption — Abramoff and his partner are believed to have received a total of $85 million from their Indian clients — the lobbyist managed to muster enough opposition to shutter the casinos of both the Alabama-Coushatta and El Paso’s Tigua tribe in 2002. Less than a year in, the Alabama-Coushatta’s best modern opportunity for self-sustenance collapsed.

With equal parts gall and venality, Abramoff then approached the Alabama-Coushatta with an offer to restore their casino but was found out before he could swindle more Native-American money.

“It was devastating,” Williams says, his voice moving slowly through the subsequent drop-off. “Everyone could see what was possible — at the time, when we were open, we were one of the highest-paying employers here in the surrounding area.”

A visitor asks Williams about Abramoff, but the chairman claims the name provokes no reaction on the reservation. Nobody brings him up. No one thinks about him. But it’s Abramoff’s work — his choice to blinker both Texas legislators and tribes — that ended the only casino the Alabama-Coushatta have ever known. It was Abramoff’s slimeball politics that forced the Alabama-Coushatta to revert once more to smoke shops and land cultivation as their sole, and depreciating, sources of income. It was Abramoff’s grease-stained fingerprints, his choice to skim the profits and to try to lobby both for and against the tribe’s casino, that directed Williams and his people back onto Washington’s dole.

That was more than a decade ago. In the interim, the tribe, which sued Abramoff and settled out of court in 2007, has sunk nearly $3 million into attempting to change the federal language prohibiting its casino.

See here, here, and here for more on that story. One person that was prominently involved in screwing the Alabama-Coushatte tribe but who wasn’t mentioned in the Press piece is longtime religious right mouthpiece Ralph Reed. Reed has maintained a fairly low profile in recent years, but lowlifes like him never truly go away. It’s important to remember just how awful a person he and his cronies are and were. Be that as it may, between the Congressional action and the better-than-I’d-have-thought prospects in the Lege, this could finally be the year the Alabama-Coushatta get the opportunity that had been denied them. I remain ambivalent about gambling, but I do wish them the best of luck.

Senate to consider expanded gambling

Apr 10th, 2013

by Charles Kuffner.

1 comment

I didn’t really take it seriously when I heard that Sen. John Carona had filed his own gambling expansion legislation, but it seems it’s got some traction.

Sen. John Carona

A proposal from Dallas Republican Sen. John Carona would establish a commission that licenses 21 casinos throughout the state, including three mega-resorts in Bexar, Dallas and Tarrant counties and two smaller locations at Retama Park in San Antonio and Sam Houston Race Park in Houston.

Carona, chairman of the Senate Business and Commerce committee, told reporters Monday the proposal would keep the estimated $3 billion Texans are spending at casinos in bordering states inside state coffers while creating more than 75,000 jobs. The committee, which will consider the measure Wednesday, is likely to pass the proposal on to the full Senate, he said.

“No one can really determine yet what chance of ultimate passage it has this session,” Carona said in an interview in his Capitol office, noting his vote tally indicates both chambers are a few votes shy of approval. “It is a difficult bill because of the presumed political consequences of it, but the polls show there is overwhelming public support.”

House Appropriations Committee Chairman Jim Pitts, R-Waxahachie, who has supported similar measures in the past, said the chances of gambling passing the Legislature this session are “slim-to-none.”

However, Pitts said the final decision on the state’s school finance trial could provide a boost for gambling in Texas. If the current ruling – that the state’s public education funding is inadequate and unconstitutional – stands, lawmakers will be searching for a new source of revenue that does not create a new tax, he said.

[…]

Under Carona’s proposal, three casinos would be licensed in coastal counties, 12 would be reserved for racetracks and three would be designated for federally recognized Native American tribes.

The majority of revenue generated – 85 percent – would be dedicated to the Property Tax Relief Fund, which supports local programs, such as public education and emergency services. Remaining revenue would belong to city and county governments and fund programs to counter gambling problems. The constitutional amendment must gain two-thirds support of the House and Senate before moving on to voters in a statewide referendum.

Sen. Carona’s measure is SJR 64. If you’ll pardon the expression, the smart money is on nothing happening, as has always been the case before. The Trib goes into some more detail.

[Carona has] been working on casino legislation for the last few sessions, but his plan this year is much more comprehensive. In the past, gaming bills have either had the support of casinos or race tracks. But not both.

That split support had doomed the efforts. This time, Carona said, both groups are on board.

“Let me make clear that this legislation has very broad support,” he said. “While not all stakeholder concerns are resolved in this bill, we have come a long way. And it is my hope that we’ll continue to work together to bring forward a bill that is best for Texas.”

The senator said his legislation is still fluid — many changes could be made. So for now, there’s no price tag on how much money casino gambling would generate. But billions are expected from the three giant destination resort casinos and 18 other facilities that would be authorized under his resolution.

[…]

But hey, if you want to pass something in the Legislature, you need to do one of two things: Show what problem the legislation would fix or, as casino supporters did this week, show an enemy that would be defeated by this bill. And according to casino supporters, we have met the enemy — and it is Oklahoma.

“In particular, we’re hemorrhaging money to Oklahoma,” said John Montford of Let Texans Decide. “Not only do they recruit our best high school football players. They also snooker us each day by building their gaming empire on the backs of Texans.”

Texas Association of Business President Bill Hammond was even less diplomatic when explaining what he sees as the benefits of casinos in Texas.

“Texans will no longer have to travel to third-world countries in order to game,” Hammond joked. “It’s unfair and unconscionable that we are making these people travel to these third-world counties that surround Texas.”

The state’s hatred of Oklahoma aside, there are still several roadblocks to casinos in Texas. Carona’s resolution needs a two-thirds vote in the House and Senate before it heads to the ballot as a constitutional amendment this November.

And on the Senate side, Jane Nelson, R-Flower Mound, has a history of threatening a filibuster over gaming legislation. As debates have neared in the past, she has even put tennis shoes on her desk on the Senate floor to let people know she’s ready to go if needed.

And, of course, if a resolution passes the House and Senate, then there’s the final statewide vote — a vote that will certainly include groups opposing casinos on moral grounds along with some backed by those neighboring states’ casinos that don’t want to lose business.

The 100-vote threshhold in the House is pretty daunting. Speaker Joe Straus will not be an ally, since he stays away from gambling bills to avoid talk about conflicts of interest, and there’s likely to be enough social conservative opposition to make it at best a close call. Still, even getting a bill out of committee in the Senate is farther than the gambling expansion forces have gone in the past. If Carona’s bill can actually make it to the floor in both chambers, who knows? Stranger things have happened.

Somewhat improved payday lending bill passes Senate committee

Apr 4th, 2013

by Charles Kuffner.

4 comments

I still don’t think it’s good enough.

Breathing new life into a proposal that was doomed by the opposition of consumer groups only last week, a Texas Senate committee approved strengthened legislation Tuesday that imposes restrictions on the payday loan industry that could save desperate Texas consumers some $220 million a year.

Sen. John Carona, R-Dallas, said his proposal would end the cycle of debt that entraps thousands of Texans each year by curtailing the kinds of credit products offered, limiting loan amounts based on a borrower’s income and capping the number of times a loan can be refinanced.

Acknowledging that some consumer groups still opposed the bill as insufficiently restrictive, Carona cautioned that a politically powerful industry would kill legislation that reached too far. “In the eyes of none of you is this a perfect bill,” he said at a Senate Business and Commerce Committee hearing Tuesday. “But this is the only version that will pass this session. I am convinced the industry has given as far as it intends to go.”

Carona noted that according to the state’s consumer credit commissioner, the bill’s provisions would limit extensions of loans, saving Texas borrowers as much as $221 million a year. “If that’s not progress, then I am not sure what progress is,” he said.

Only last week the proposal appeared dead when every consumer group involved in negotiations testified against it. On Tuesday, however, representatives of Texas Impact, the Center for Public Policy Priorities and Goodwill Industries gave their blessings. “This will meaningfully benefit more than 300,000 borrowers and will save real money,” said Bee Moorhead of Texas Impact.

See here and here for the background. The bill in question is SB1247. Rep. Mike Villarreal says he is now prepared to move forward with his companion bill after Sen. Carona’s modifications. Others, such as the AARP, Texas Appleseed, and Sen. Letitia Van de Putte, who cast the sole No vote in committee, remain opposed. The modified bill still preempts local ordinances, which to me is a deal-breaker. I believe cities should not be prevented from addressing whatever shortcomings they see in the statewide regulations on these parasites. Until that provision is taken out, I can’t support this bill.

Payday lending legislation may go nowhere

Apr 1st, 2013

by Charles Kuffner.

Comments are off for this post

I can’t say I’m surprised, since Sen. John Carona’s most recent version of a payday reform bill was not met well by advocates for consumers and the poor.

Among other things, Carona’s proposal would limit the maximum size of loans to a percentage of the borrower’s monthly income and cap the number of times a borrower could roll over outstanding loans.  

The initial version of the bill elicited measured praise from consumer groups. But that support has eroded amid concerns that the bill’s consumer protections have been watered down and that key provisions have been replaced by language favored by industry trade groups.

“It’s been pretty touch-and-go for the past couple of weeks,” said Don Baylor, a senior policy analyst at the Center for Public Policy Priorities, an Austin-based liberal think tank, who is involved in negotiations to reinstate consumer protections in the measure.

“The last version that was in the committee has caused a lot of the consumer groups to pull back,” Baylor said. “A lot of the industry actually testified in support of the bill.”

[…]

During the current legislative session, lawmakers proposed additional regulations. Former House speaker, state Rep. Tom Craddick, R-Midland, filed a measure that would extend already existing rules for small loans to the auto title and payday lending business.

Most of payday lending bills, so far, have been left pending in committee, but SB 1247 has received the lion’s share of attention from both reformers and the industry.  

Last week, a new version of the bill appeared that consumer advocates argue weakened many of the consumer protections.

In the original bill, a payday loan taken on within five days of a previous loan was considered refinancing – a rule intended to prevent borrowers from rolling over their loans ad infinitum, paying more fees and interest.

Consumer activists wanted a period of seven days, but the revised bill would reduce the required gap to two days.

In the original bill, the size of some payday loans was capped at 15 percent of monthly income for those making less than $28,000 a year, and 20 percent for those making more. In the new version of the bill, those limits are set at 30 percent and 40 percent, respectively. 

Baylor said the new monthly limits simply explicitly allow current practices.  

“It’s kind of akin to putting a 75 mile-per-hour speed limit on a residential road,” he said. “You can say it’s a limit, but it’s not going to make anybody safer.”

Complicating matters, the new state regulations would trump city ordinances that regulate short-term lending. Since 2011, several Texas cities, including Austin, Dallas, San Antonio and El Paso, have passed regulations that are more restrictive than the current version of SB 1247. If the bill passes, restrictions on payday lending would be relaxed in such areas.

As I said before, no bill is preferable to a bad bill, and any bill that undoes the ordinances some cities have adopted to regulate payday lenders is unacceptable. If waiting till next session to try again is the best option, then that’s what we should do.

Craft beer bills pass out of the Senate

Mar 28th, 2013

by Charles Kuffner.

3 comments

A good day indeed.

The Texas Senate voted Monday to give craft brewers and brewpubs new opportunities to sell their beer.

“To see that happen was amazing,” said Scott Metzger, a San Antonio brewpub owner who worked with other brewers, legislators and wholesalers in negotiating a compromise.

Brock Wagner, owner of Houston’s Saint Arnold Brewing, called it a critical step toward passage of the state’s most significant beer-related legislation in 20 years.

“We still have a path to follow,” he said.

Metzger watched via his office computer at Freetail Brewing as the Senate voted 31-0 to approve two bills promoted by the Texas Craft Brewers Guild. An economic impact study Metzger prepared for the guild predicts the measures will spark even stronger growth for the state’s burgeoning craft beer industry.

[…]

Rick Donley, president of the Beer Alliance of Texas distributors group, which supported SB 515 and 518 from the beginning, called it “a good day for the craft-brewing industry,” including manufacturers and wholesalers.

As Metzger noted, SBs 516 and 517 were not taken up because the Senate can only vote on so many bills on a single day at this point in the session. They were subsequently passed unanimously on Wednesday. SB639, the Carona bill, was also approved after some modifications were made that settled most of the objections to it. All bills now await hearings in the House, and signs look good for passage. Put some beer in the fridge in anticipation of it finally happening.

It’s good to be a payday lender

Mar 25th, 2013

by Charles Kuffner.

4 comments

Bleah.

Earlier this legislative session, a chief of staff for a senator noted that the $4 billion Texas payday and auto-title loan industry would soon grow powerful and lucrative enough that the Texas Legislature would be unable to take it on. That time may have already come.

At a legislative hearing this morning, state Sen. John Carona, the Dallas Republican who’s leading the payday “reform” effort in the Senate, basically said the industry had bought off lawmakers. Carona was defending the latest version of his payday loan legislation, which most advocates derided as unacceptably weak. Senate Bill 1247 would scuttle the efforts of most of Texas’ big cities—Austin, San Antonio, Dallas and El Paso—to rein in payday loan excesses and codify the industry’s loan products in statute.

“You have to get the most you can get with the political support that you have,” Carona said. “This industry is in business and this industry has amassed enormous political support at the Capitol.”

He urged opponents to consider that the votes were lacking in both the House and the Senate to pass anything more.

Yesterday, campaign finance watchdog Texans for Public Justice released a report that “loan sharks” had poured almost $4 million into Texas politicians during the past two election cycles.

Carona blamed the industry’s stroke for the hobbled proposal he laid out in committee this morning. In almost every respect it’s weaker than the filed bill.

[…]

“None of this will meaningfully change the market,” said Ann Baddour of Texas Appleseed.

The latest version would also allow a one-year, multi-payment auto-title loan that would cost a borrower $5,000 to pay back a $1,000 product. The previous version had capped the length of such a loan at 270 days.

“They’ve basically created new uncapped loan products,” Baddour said.

Bishop Joseph Vazquez said the legislation “offers a few positive measures while it ultimately endorses predatory lending practices.”

“Current industry practice, which would be given state sanction, only rewards borrower failure with lender profit.”

Perhaps most galling to reform advocates is that the legislation would wipe out existing city ordinances, which almost uniformly provide stricter lending regulations. While Carona lamented that legislators had been persuaded by lucre to abandon whatever conscience they might have, a city councilman from San Antonio made a salient observation.

“While they’ve amassed a significant amount of political capital here, outside of Austin there is not anywhere a component of constituents that are on their side.”

The San Antonio City Council member in question is Diego Bernal, who pushed the San Antonio effort to curb payday lending excesses and who made his feelings about the industry quite clear. Any legislation that rolls back the local efforts to regulate payday lending is not only unacceptable, it’s unconscionable. Any legislator that votes in favor of such a bill should be ashamed of themselves. Thankfully, this weakened bill may get killed in the House.

But the compromise reached with industry groups may have cost Carona his House sponsor. Rep. Mike Villarreal, D-San Antonio, said he does not believe “the version presented in the Senate committee today provides adequate protection for consumers.”

He left open the possibility that further negotiations would produce a stronger version. “I know Chairman Carona would like to strengthen the bill,” Villarreal said. “I’m hopeful we can pass a balanced bill. But I’d rather pass no bill than legitimize usury.”

Amen to that.

Why do we give tax breaks to country clubs?

Mar 24th, 2013

by Charles Kuffner.

4 comments

As you know, I’ve talked before about sunsetting tax expenditures. Sens. John Carona and Rodney Ellis have filed a bill to require a periodic review of the many exemptions, exceptions, and other special cases in the tax code, with the aim of requiring legislative approval to renew or extend them. This is a good idea for many reasons, and State Impact Texas highlights one of those reasons.

Whaddya mean we have to pay our fair share?

One break Sen. Ellis says could be targeted right now is one used by country clubs. Ellis will be the first to tell you what a lovely time one can have on the links of the exclusive River Oaks Country Club in Houston.

“I have a lot of good friends who are members there, have had the benefit of being able to play once or twice, would like to get invited again, may not get invited the day you run this story,” Ellis told StateImpact.

Two decades ago as a newly-elected legislator, Ellis saw a news article about how some local country clubs took advantage of a big break and avoided paying millions in property tax. Known as the Greenbelt Act, it gives enormous property tax discounts to owners of tracts of green space that is used only for recreation.

[…]

Ellis’s staff found that in the 10 most-populated counties in Texas, a total of 36 clubs took advantage of the break (some counties had no clubs that used it including those in Dallas, Fort Bend, Travis and Bexar counties).

Harris County had by far the most clubs utlilizing the break with 22 of 26 private clubs saving millions in taxes. Ellis’s office found that the River Oaks Country Club had the biggest savings, about $2 million a year from getting its golf course’s market value of about $80 million marked down to only $4.2 million. A call to the club did not result in obtaining a comment.

OK, I’m open to suggestion here. What’s a good public policy rationale for giving this tax break to the River Oaks Country Club? Are we afraid they might lay off a groundskeeper or something if they paid taxes based on the actual appraised value of their property? Make your case in the comments, I’d love to hear it.

Gambling interests narrow their focus

Mar 23rd, 2013

by Charles Kuffner.

1 comment

This is usually how it goes.

Let Texans Decide, a pro-gambling organization that is fronted by former state Sen. John Montford, was aligned at the beginning of the 2013 legislative session with big casino interests in a call for full-scale casino gambling in Texas, whether at horse and dog tracks or at yet-to-be-built destination resort casinos.

But as the session progressed, the chances of passing a measure for casino gambling appeared to grow slimmer. And now, Montford’s group, which advocated legislation in 2011 to permit slot machines at tracks, has returned to its old way of thinking.

“This was the position we originally took,” Montford said. “I do believe that this is a reasonable approach.”

The goal has always been the same: to get a gambling-related bill through the Legislature and have the matter put in front of the voters of Texas, the former senator said.

[…]

While it is always difficult to gain approval for gambling legislation from the Texas Legislature, some factors at play now could help, Montford said.

For one, there is growing support among Republicans in the House for slot machines at racetracks, he said. Recently, John Kuempel of Seguin and Rep. Ralph Sheffield of Temple signed on to a slot bill by Rep. Richard Raymond, D-Laredo. Montford said he was encouraged that more members are willing to allow constituents to vote on a gambling initiative.

Montford is also happy that a slots-at-tracks measure by Sen. Juan “Chuy” Hinojosa, D-McAllen, has been assigned to the Senate Finance Committee, where more senators could hear the testimony.

See here and here to compare what’s being said now to what was said before. I have my doubts that this was a consensus decision, since the casino interests and the horse racing interests have generally not been on the same page in the past, but whatever. I’ll believe there’s movement when something gets passed out of committee. As it happens, while there are three pieces of legislation relating to expanded gambling – the latest, SJR64 by Sen. John Carona, was filed this week – none have yet been scheduled for committee hearings.

The other players in the game, notably the big Las Vegas casino companies, might be quiet now, but that doesn’t mean they have lost hope in the long run.

Some gambling proponents could see an opportunity if there is a special legislative session, as expected, focusing on financing public schools.

If lawmakers are scrambling in a special session for new money to comply with an expected court order to put more money into education, then casinos are “more optimistic for serious consideration,” said John Pitts, a lobbyist for several large casino interests.

Maybe. A scenario where more revenue is required and there’s no two ways around it is probably a prerequisite for any expansion of gambling to happen. I still think it’s highly unlikely, but I suppose anything is possible. I wouldn’t bet on it, though. The equally pessimistic Burka has more.

Craft beer legislation advances

Mar 15th, 2013

by Charles Kuffner.

1 comment

Moving forward.

Legislation authorizing the most significant changes in 20 years to the way beer is bought and sold in Texas passed a key Senate committee Tuesday with broad support.

Under terms of the bills, Houston’s Saint Arnold and other Texas craft breweries could sell a limited amount of beer on site and brewpubs like San Antonio’s Freetail Brewing could package some of their product for sale in stores, bars and restaurants.

The breweries, meanwhile, would be prohibited from accepting cash payments for the rights to distribute their beer in specific geographic regions, but they would be allowed to continue to share marketing and some other costs with their distributors.

“It’s an exciting day,” said Scott Metzger, the owner of Freetail Brewing, who has been negotiating on behalf of the Texas Craft Brewers Guild. “ … We have a path ahead of us.”

Final terms of the bills – four of which were developed after yearlong negotiations between brewers, lawmakers and distributor and consumer groups – were hammered out under a tight deadline set last week by the chairman of the Senate Committee on Business & Commerce, who introduced a competing bill and ordered the two sides to reach a compromise.

The committee approved all five amended bills unanimously Tuesday and sent them to the local calendar committee for expedited scheduling before the full Senate. Metzger said a signed agreement among stakeholders with an interest in the bills should expedite companion bills in the House.

Metzger and Brock Wagner of the Saint Arnold brewery both expressed positive thoughts on this, while spokespeople for the Beer Alliance of Texas and the Wholesale Beer Distributors of Texas, who had played the role of villain prior to this, both basically said everyone got some of what they wanted and no one got everything. In its summary of the legislation, Open The Taps says that “at least a few craft brewers are not pleased with the limitation on selling their brand territorial distribution rights”, which is an aspect of the Carona bill that had been criticized by everyone except the Wholesale Beer Distributors. My feelings on this are in line with Open the Taps, which writes in its analysis of the bills:

This is by no means a perfect package of regulatory changes, but again it is a good step. Things happen incrementally in legislative bodies, and we will be back next session if necessary to continue the fight to OPEN THE TAPS in Texas.

We still have a few points on our wish list to accomplish, and we are looking for ways to implement those points, but this may be the most we can get at this time and we will consider it more progress than has been made since 1993 when brew pubs were first allowed in Texas, post-prohibition.

See also Scott Metzger’s analysis of the bills and the process that led to the package that emerged from committee. This is tangible progress and a big deal in its own right, but hardly the end of the line. Now let’s get this across the finish line, and we can see where to go next from there. Good job, y’all.

More on sunsetting tax expenditures

Mar 10th, 2013

by Charles Kuffner.

3 comments

I say again, this is a good idea that really needs to happen.

Sen. John Carona

The Texas tax code is rich with tax breaks. There are tax breaks for industries relocating to the state and for anyone with an Internet connection. Tax exemptions for groceries and bottled water. Tax holidays for back-to-school supplies. Tax exemptions for golf courses at private country clubs.

It adds up to at least $38 billion a year for the state’s major taxes and school property taxes, the comptroller estimates — hardly pocket change in a state that is expected to collect $80 billion in tax revenue in 2012-13. But no one claims to know for sure how much the state is forgoing because, by law, smaller taxes — those that raise $2.2 billion or less — are excluded from a biennial report by the state comptroller.

Sen. Rodney Ellis

“We have so many exceptions to the tax code, none of us really know how many we have, what they cost, if they make sense or they don’t,” said state Sen. Rodney Ellis, D-Houston.

To get a handle on all those tax breaks, Ellis, along with Dallas Republican state Sen. John Carona, has filed legislation to create a “sunset” process that would eliminate any tax break that isn’t renewed by the Legislature.

“I truly believe every conservative in this Capitol ought to be supportive of analyzing those special government giveaways on a regular basis,” Carona said. “And that’s all this bill seeks to accomplish.”

Just as the state now reviews every agency and its programs on a 12-year cycle, Ellis and Carona want every state and local “tax preference” reviewed on a six-year cycle. The comptroller would set the schedule, the Legislative Budget Board would present the facts, and the Legislature would be forced to reaffirm the tax break or it would die.

Both lawmakers expect that the Legislature would reaffirm most of the tax breaks, including the popular homestead exemption and exclusions for groceries, medical and dental services, and medicines, for example.

But a periodic exam invariably would raise questions. Should golf courses at private country clubs be appraised at less than 10 percent of the land’s market value? Should retailers be paid — some say overpaid — for remitting sales taxes on time? Is there still a need to encourage the spread of the Internet by exempting sales tax on the first $25 of your monthly bill?

Then there are the oddities of the sales tax. Soda is taxed; bottled water isn’t. The services of landscape architects aren’t taxed, but landscape services are. Food meant to be eaten at home is exempt, but not food intended for immediate consumption.

And so on and so forth. If it helps, think of these exemptions and exceptions and what have you as expenditures, because that really is what they are. Expenditures get plenty of scrutiny – too much, sometimes – unless they’re tucked into the tax code. We could have recouped about $2 billion from ending unnecessary tax expenditures back in 2011, but of course the Republicans weren’t interested in cutting that kind of spending. It would be nice if there were some more interest in it this time around. If nothing else, we’re almost certainly going to need to find some more money to comply with the latest school finance lawsuit ruling once the Supreme Court has reviewed it. This is a sensible place to start looking. See here for more.

Craft beer bills get their hearing

Mar 8th, 2013

by Charles Kuffner.

1 comment

From the Trib:

The Senate Business and Commerce Committee on Tuesday acted as legislative referee over bills that would allow craft breweries to sell on their premises and self-distribute in Texas, but critics said the legislation would hurt the state’s system of alcohol production and distribution.

“It’s two different visions of where the beer industry in Texas needs to go,” said Rick Donley, president of the Texas Beer Alliance.

State Sen. Kevin Eltife, R-Tyler, filed a package of bills in February that would make significant reforms to the Texas Alcoholic Beverage code and the state’s three-tiered system that regulates the production, distribution and retail sales of beer separately, dating to the end of Prohibition.

Eltife said the legislation also puts Texas brewers “on a level playing field with other states” in their treatment under the law. The change is strongly supported by the Texas Beer Alliance, which lobbies for major-brand beer distributors and some craft brews. Donley said the legislation supports the growth of craft breweries and addresses lawsuits surrounding the Commerce Clause.

[…]

The Texas Beer Alliance did not always champion these changes, but craft breweries have recently become the industry’s gold mine. “It is the only segment in the industry to show growth in the last four years,” Donley said.

But Eltife’s bills are being challenged by Senate Bill 639, filed by state Sen. John Carona, R-Dallas, and supported by the Wholesale Beer Distributors, which presents a host of complex changes to the code, centered on severability, reach-back pricing and distribution — problems that Carona’s staff argues go unaddressed in Eltife’s bills.

“For whatever reason, the working groups didn’t anticipate the issues that you find in 639,” said Steven Polunsky, Carona’s committee director. “If passing craft beer was easy, it would’ve been passed three sessions ago.”

With all due respect, the reason why this has been so difficult and so time-consuming is because there are entrenched interests at work. Big breweries and the big distributors have fought for the status quo because it’s a great deal for them, and they don’t want the competition. Thanks in part to a scaling back of their ask, a persistent grassroots campaign, and a welcome alignment with the Texas Beer Alliance, Sen. Eltife’s bills have a chance. Sen. Carona’s alternate bill is opposed by the craft brewers, the TBA, and as this AP story notes, the Texas Association of Business, the Texas Association of Manufacturers and Anheuser-Busch InBev as well. The Chron has more on what a pasting Sen. Carona’s bill took.

“That is very simply a government-sponsored price-fixing cartel,” Mario Loyola of the Texas Public Policy Foundation said in testimony before the Senate Business and Commerce Committee in Austin.

He cited a provision that would force manufacturers to charge one price to distributors statewide, regardless of varying market circumstances, but allow the distributors to sell to retailers at any price they wished. Supporters say this would clarify existing law and prevent dishonest dealing by brewers, but it was widely derided Tuesday

“From the consumers’ point of view, that’s the worst of all possible worlds, restricted output and higher prices at every level,” said Loyola, who has written for conservative publications and served as a state policy adviser to former Republican U.S. Sen. Kay Bailey Hutchison.

“In fact, the law, in our view, should be amended in exactly the opposite direction.”

In a crowded hearing room lined with craft brewers and other industry representatives, the lone supporter testifying for the measure, Senate Bill 639, was Randy Yarbrough of the Wholesale Beer Distributors of Texas.

State Sen. Leticia Van de Putte, D-San Antonio, politely grilled Yarbrough after noting that the wholesalers group had not raised these issues during a yearlong series of meetings that brought industry and legislative leaders together to hammer out legislation.

Another critic, Anheuser-Busch’s Dallas-based region vice president of sales Keith Diggs, pointed out that in other states where such pricing mandates have been enacted, consumer prices increased markedly. He said SB 639 ignores that “what goes on in East Texas is not the same as what goes on in Brownsville, Texas.”

Ouch. The thing is, the Wholesale Beer Distributors don’t need a bill to pass to win – they just need to play defense. Filing Carona’s SB 639 was an extra layer of defense, and perhaps a sign that this time they’re worried. But it’s still easier to kill bills than to pass them, and just because there’s been progress doesn’t mean there will be success. Keep letting your Rep and your Senator know that you support a genuinely free market for beer in Texas. Open the Taps presented written testimony for the Eltife bills and has a recap of the hearing, and the Rivard Report has more.

I knew all this beer harmony couldn’t last forever

Feb 24th, 2013

by Charles Kuffner.

4 comments

We have some legislative beer controversy on our hands.

Sen. John Carona

Texas brewers would lose a potential source of capital and some flexibility in negotiating sales under a bill before the state Senate.

The Texas Craft Brewers Guild immediately opposed the legislation, as did one of the state’s two major groups representing wholesale distributors – which called it “asinine” and “anti-competitive.”

The bill, authored by state Sen. John Carona, R-Dallas, chairman of the Senate Business and Commerce Committee, would prohibit brewery owners from selling distribution rights for their beer and it would restrict them from selling beer at different prices in different geographic areas.

Scott Metzger, owner of Freetail Brewing Co. in San Antonio, has been actively involved in talks regarding a separate package of bills designed to help the state’s growing number of independently owned craft breweries and brewpubs.

He said the major provisions of the Carona bill were not raised during pre-session negotiations among lawmakers and industry stakeholders and he said the Craft Brewers Guild opposes all of them, whether in this bill or if they should be added later to other legislation.

[…]

Under the state’s three-tier distribution system, brewers cannot sell directly to retailers or consumers but must, with a limited exception for smaller breweries, enter exclusive contracts with wholesalers to sell the beer to retailers in designated territories.

Distributors can pay breweries for those rights, although payments are not required and can take different forms.

Donley said the practice is becoming more common as the craft segment grows. These generally smaller brewers reach a point where they need an infusion to expand, he said, and selling distribution rights is a potentially large source of capital.

Denying breweries this option goes against the charge of the pre-session working groups to stimulate economic development in the craft industry, he said.

Carona’s bill would not stop distributors from selling the rights to individual brands to other distributors.

The bill in question is SB639. Donley is Rick Donley, president of the Beer Alliance of Texas, which represents Silver Eagle Distributing and other major wholesalers, who opposes it; Keith Strama of the Wholesale Beer Distributors of Texas, supports it. There’s no quote from Sen. Carona’s office, but he did send a statement to author Ronnie Crocker after publication. Among other things, we learn that Carona is no longer one of the authors of the craft beer bills that would finally loosen some of the archaic restrictions on microbreweries and brewpubs; apparently, he decided to go a different route. Scott Metzger of Freetail has an interesting perspective on this at his blog:

It has not gone without notice that the proponents of this bill don’t have an interest in restricting themselves from raising prices in different markets, or from selling brands rights, but that they are only concerned about what they have to pay. In essence, this bill is one step short of the Texas Alcoholic Beverage Code having Mandated Profits for the middle tier. This is self-serving protectionism at its most blatant.

[…]

This Legislation amounts to nothing more than a blatant money-grab by the Wholesale Beer Distributors. It distorts the free market by protecting wholesalers from paying the cost of doing business. Ironically, no one has ever forced any distributor to pay for the distribution rights of a brewer. These are voluntary private-party transactions that occur because craft beer distribution rights are actually valuable and distributors are eager to out-bid their rivals for those rights. If you don’t want to pay, then don’t.

Luckily, this proposal is likely to go nowhere at the Capitol. My contacts up there have told me the Legislature is highly unlikely to move on Legislation that most of the industry hates, benefits only certain players, and goes against free-market principles.

Lastly, I’m thankful to Chairman Carona for filing this legislation. The WBDT was trying to amend Senator Eltife’s craft beer bills with this anti-competetive, self-serving language, and were promptly told no. But I suppose everyone deserves a chance, and I’m looking forward to hearing the WBDT try to explain any shred of public interest that might exist for this money grab.

See also this post for related matters, and this post for a fuller response to Sen. Carona’s statement. Metzger makes it clear in that latter post that he is speaking on behalf of the Texas Craft Brewers Guild. If they are OK with Sen. Carona filing this bill then I don’t see any reason for me to be unhappy about it at this time.

Here come the craft beer bills

Feb 14th, 2013

by Charles Kuffner.

2 comments

From Brewed and Never Battered.

Senator Kevin Eltife (R-District 1) introduced bi-partisan legislation along with Co-Authors, Senators Brian Birdwell (R-District 22), John Carona (R-District 16), Eddie Lucio (D-District 27), Leticia Van de Putte (D-District 26), Kirk Watson (D-District 14), and John Whitmire (D-District 15) to modernize the state’s alcohol regulatory system to make more competitive Texas’s small, craft brewers.

Senate Bills 515, 516, 517 and 518 expand the rights of the state’s craft breweries and brewpubs to provide parity versus what brewers in other states are allowed to do.

From a Press Release put out by Senator Eltife’s office:

“Government shouldn’t be involved in picking winners and losers in private industry. Texans believe consumers make the best choices about products in the free market,” said Senator Eltife. “These four bills will level the playing field for the small business segment of Texas brewing industry.”

“Legislators should encourage entrepreneurial spirit by creating a climate for small business development opportunities that leads to capital investment and job creation in our state,” added Senator Eltife. “This legislation will provide the proper regulatory framework for these businesses to operate and grow.”

What the Bills Do

SB 515

Increases the production limit for a brewpub from 5,000 to 12,500 barrels annually

Authorizes a brewpub to sell their products to the wholesale tier for re-sale

Authorizes a brewpub to self-distribute up to 1,000 barrels annual to the retail tier for re-sale

SB 518

Authorizes a production brewery under 225,000 barrels of annual production to sell up to 5,000 barrels annually of beer produced by the brewery to ultimate consumers for consumption on the premise of the brewery

SB 516 & 517

Authorizes a production brewery under 125,000 barrels of annual production to self-distribute up to 40,000 barrels annual of beer, ale and malt-liquor to retailers. (Note: this right currently exists but is being adjusted. Currently, a brewery under 75,000 barrels of annual production may self-distribute up to 75,000 barrels. These bills increase the size of a brewery that may self-distribute while reducing the amount they may self-distribute. There are two bills because it affects both the “Manufacturer” license – Ch. 62 of the code – and the “Brewer” permit – Ch. 12 of the code.)

Eliminates discrimination against out-of-state suppliers.

This is great to hear. I don’t remember there being this kind of broad support for previous bills, but if this is any indication there just might be a breakthrough this year. These bills encompass most, but not quite all, of what the microbrewers and brewpubs have been pushing for. Beer, TX notes the exception:

Notably, the bill regarding on-site sales for production breweries does not include any provision for selling beer for off-premises consumption or giving packaged beer away following tours. That had been a major push during the past two legislative sessions. In 2011, a bill made it through the House and Senate committee but was never called for a floor vote because of opposition.

That opposition hasn’t gone away and the small brewers abandoned efforts to include such a provision in this year’s proposals.

That’s a bummer, but sometimes you have to take a smaller step forward before you can get where you really want to go. Here’s Open the Taps:

Open The Taps continues to work closely with the [Texas Craft Brewers] Guild to help shape and guide the legislation and we are pleased with the general direction of the debate, but we believe these bills can and should go further by allowing microbreweries to sell set quantities of beer directly to patrons for off-premise personal consumption.

We will be working with members of the Senate Business and Commerce Committee and the House Committee on Licensing and Administrative Procedures to share our position and elicit their support.

I’d rather have stronger bills, too, but better to get these bills passed and come back in two years for more than fail again and have to start all over again in two years. Passing these bills will be progress, and we need that. The key is that the usual suspects do not appear to be standing in the way this time, as the Chron story notes.

Several of the parties involved in developing the proposals say there is at least some agreement within the industry and in the state Senate.

“Conceptually, we’ve agreed,” said Rick Donley, president of the Beer Alliance of Texas, which represents Silver Eagle Distributing and other major wholesalers.

[…]

Charles Vallhonrat, executive director of the Texas Craft Brewers Guild, applauded the work of lawmakers “in bringing industry stakeholders – from small and large brewers to distributors and retailers – to the table to discuss how to make Texas a compelling place for breweries to do business.”

Scott Metzger, the Freetail owner who pushed for a brewpub bill two years ago, agreed that pre-session working groups organized by Van de Putte created “a really good, open process.”

Getting past that opposition is huge, but nothing is certain until the governor puts his signature on it. As always, now is an excellent time to contact your Senator and your Representative to let them know you support these bills, and you would like them to support these bills as well.

Sunsetting tax expenditures

Feb 4th, 2013

by Charles Kuffner.

2 comments

Sens. John Carona and Rodney Ellis have the right idea.

Sen. John Carona

Over the past 18 months, many of our constituents told us they have trouble finding a reliable, accurate and up-to-date source of information on these tax breaks, exemptions and special treatments — often called tax preferences or loopholes.

Unfortunately, so do we.

The Legislature makes extensive efforts to determine the efficacy of every state dollar spent in our public education, health and human services, and criminal justice systems. With that data, elected officials can weigh the costs and benefits of different policy options in an attempt to make the most well-informed decisions. Yet we still have an astounding deficit of knowledge when it comes to tax expenditures.

Sen. Rodney Ellis

This session, we aim to change that. We have filed Senate Bill 140 — bipartisan legislation to scrub, sunset and possibly repeal scores of preferential tax breaks in Texas law. State agencies are subject to a sunset review every 12 years to determine if their functions need to be continued or reformed. The tax code would benefit from a similar periodic review of all its tax preferences to answer a simple question — are they working?

The Texas Tax Code contains numerous tax loopholes, many of which were inserted into the code in the distant past but live on long past the time the rationale for their existence has ended. Recent press reports estimate that, at a minimum, Texas spends $19 billion annually on these incentives. Yet despite this price tag, state agencies responsible for Texas’ finances are unable to provide a comprehensive list of tax preferences, much less detailed analyses. The sad fact is that the state agencies responsible for Texas’ finances are unable to determine exactly how many of your tax dollars are spent on tax loopholes, because no one even knows how many are in the tax code, how much they cost, or if they are even working.

Our ongoing budget challenges demand that we be as prudent as possible with all of our tax dollars, yet the state lacks a basic method to review and determine the effectiveness of a host of tax preferences and incentive programs. Texas needs a consistent, thorough review process to provide the public and policymakers alike with information on tax preferences’ successes and shortcomings.

Here’s SB140, which is enabling legislation for SJR12. There was some talk about taking a closer look at tax expenditures in 2011, but it never went anywhere because spending cuts were the be-all and end-all of everyone’s existence. I’m hoping for a bit more sanity this session, but if this has to be done as a Constitutional amendment that will make it a much heavier lift. Still, this is clearly an idea whose time has come – as they note, several other states do this already – so I wish them the best of luck with it. Link via Better Texas.

On a related note, Sens. Carona and Ellis’ timing on this is propitious given the push by their colleague Dan Patrick for a brand new tax expenditure gimmick, his proposal to fund private school tuition vouchers via a business tax writeoff. Former Deputy Comptroller Billy Hamilton makes short work of that.

Setting aside the effects on public education, the tuition credit idea should be rejected as a matter of tax policy alone. Education is important, but what makes this particular program worthier of tax breaks than donations to a thousand other good causes? What makes this cause more worthwhile than donations to public schools? Why this tax break and not others? There are no good answers.

We don’t know what a Texas version of this corporate tax credit program would look like or who will benefit, but whatever shape it takes, we need to keep in mind the experience in other states. States such as Florida, Pennsylvania, and Georgia have all had problems with the programs at various times because they’re designed with little or no public accountability. Companies should be free to donate money to private nonprofits if they want, but if the donations effectively come out of the state treasury, my 30 years around government tells me someone better be following the money because scandal will happen eventually.

Hamilton sure is a busy bee these days, isn’t he? Anyone who thinks Patrick’s proposed scheme would not be leveraged by people who already do send their kids to private schools or who always were going to send their kids to private schools – something that’s already happening in Louisiana – I’ve got some beachfront property in Lubbock for you.

What does it mean to be a “craft” beer?

Jan 12th, 2013

by Charles Kuffner.

2 comments

The Chron has a Q&A with beer aficionado Jenn Litz that raises an interesting question.

Q: How are the major breweries responding to the craft beer trend?

A: Mostly through the acquisition route. They know the milliennials are drinking craft, and the margins are good with craft beer. The majority of craft beer drinkers either don’t know or don’t care if the label is owned by MillerCoors or Anheuser-Busch. A lot of these craft breweries don’t have succession plans, and they’d be open to selling to a big company.

As we know, one strategy the major breweries have adopted is to create brands that imitate craft-brewed beers. I’ll be honest, I’d have a hard time with it if my favorite craft beer were to be acquired by one of the mega-brewers. For one thing, I would not trust the big boys to maintain the quality of any craft brew they’d acquire. I mean, in any other industry, how often does a small startup retain its defining qualities when it gets bought out by a bigger competitor? Generally speaking, the idea is to “integrate” the newcomer into the brand of the buyer, which is to say make it more like what the big company does. I don’t see how that could be a good thing. Second, while I’m not a fanatic about “buy local”, all things being equal I’d rather spend my money on a company that’s based here and that invests here. Finally, to the extent that brand identity matters, I’d rather identify and be identified with something small and independent than something big and corporate. Obviously, your mileage may vary. I fully expect that there will be some consolidation in the beer industry – the big brewers can see what the trends are, and they like making money – but I can’t say I’m looking forward to it.

On a side note, Scott Metzger of Freetail Brewing is busy posting again. See his thoughts on the start of the session and of the Alcohol Working Groups hosted by Sens. John Carona and Leticia Van de Putte that have been going on for several months. He’s sounding optimistic about the way things are going for microbewers, which is good to hear. Check it out.

The payday lenders won’t go without a fight

Dec 30th, 2012

by Charles Kuffner.

Comments are off for this post

Where there’s a fight, there’s sure to be lots of money.

Payday lenders were big spenders in the most recent Texas political campaigns – contributing more than $1.6 million to state races in the 2012 election cycle and giving most generously to Republican committee members who soon will be reviewing proposed reforms for their industry.

Storefront lenders – including payday, car title and similar businesses – splurged even more heavily on 2012 campaigns than they did for 2010 state races, according to a Houston Chronicle comparison of contributions reported so far from payday players as identified by the nonprofit Austin-based watchdog group Texans for Public Justice.

And that’s likely a harbinger of a larger lobbying spree to come: The industry backed a multimillion-dollar push in the 2011 Legislature to defeat a proposed cap for payday loan rates, which most other states already control.

“Their clout comes from their ability to put some of their profits into politicians,” Texans for Public Justice Director Craig McDonald told the Chronicle. “They’re not shy about pooling money and going after reps that don’t go along with their wishes.”

Among the biggest beneficiaries of the storefront lending industry’s recent campaign contributions was Sen. John Carona, R-Dallas, who chairs the Senate Committee on Business and Commerce and collected $64,000. Carona insists he’s committed to pushing payday reforms and reining in rates in 2013.

“I can’t speak for other legislators, but contributions obviously have no effect on my position,” he said. “There WILL be legislation to break the cycle of debt and bring down the (annual percentage rates).”

The lenders also contributed $81,000 in an unsuccessful attempt to unseat Dallas Sen. Wendy Davis, a Democrat who’s a major advocate of payday loan reforms, campaign finance data shows.

There are many legislators whose pronouncements that they will not be affected by large campaign contributions from a particular special interest would be laughably ridiculous. I’m willing to give Sen. Carona the benefit of the doubt here, however, since he did do an honorable job with payday lending-related legislation in 2011. Don’t let me down, Sen. Carona.

Payday lenders’ oversized campaign investments concern advocates like Lori Henning, executive director of the Texas Association of Goodwills, part of a coalition of anti-poverty and religious organizations that support limits for lenders whose fees can trap borrowers in a debt cycle and drain resources from charities forced to fund bailouts.

“Obviously it’s a concern when anybody is giving money and hoping they can influence a vote or a decision – what’s difficult is (that) the advocacy groups can’t compete in that level. We’re nonprofits,” she said.

[…]

Advocates like Henning hope that the Legislature will limit loan fees, cap renewals and ban particularly aggressive collection practices statewide.

But lawmakers also could consider simply making all or some of a payday loan industry group’s voluntary “best practices” part of Texas law – adopting laws that require lenders to follow more specific guidelines for disclosures and loan procedures for example.

The former is what real reform looks like, and until we get it we will continue to need such reform in Texas. The latter is what “reform” looks like, and it is to be resisted as being worse than nothing because it will make people think that something has been done when in reality it’s the same as it ever was. It should be noted that Rep. Gary Elkins, himself a payday lender and the leader of the successful opposition to new regulation on the industry in 2011, opposes even these window-dressing measures. For obviously different reasons, I agree with him on that. It’s real regulation or the fight isn’t finished.

The payday lenders’ new tricks

Dec 1st, 2012

by Charles Kuffner.

2 comments

You really need to read Forrest Wilder’s story about the latest scheme by payday lenders to skirt regulation.

As serendipity would have it, I had stumbled onto the latest mutant creature in the wild and wooly world of Texas payday lending. “What you’ve come across is really important,” said Ann Baddour of Texas Appleseed, an Austin-based group that advocates for social and economic justice. “It looks like they have found a loophole within a loophole,” one that allows Cottonwood Financial (d/b/a Cash Store) to escape new, albeit meager, licensing and disclosure requirements passed by the Texas Legislature as well as more stringent rules adopted by Austin, San Antonio and Dallas.

[…]

What’s different about Cash Store’s loans versus a “regular” payday loan? Instead of signing a postdated check for the amount due, like you would in a true payday loan, the Cash Store had me sign a photocopy of a blank check. That small change apparently has magical powers. Voila! Not a deferred presentment transaction, not a payday loan, not a credit access business, and apparently not subject to Texas regulations.

Experts I consulted said the arrangement looked legal on its face, but raised troubling questions about the state’s convoluted and extraordinarily lax legal apparatus surrounding payday and title loans. (You can view my contracts here.)

“There are new products in the payday and auto-loan field that raise questions,” said state Sen. John Carona, a Dallas Republican who chairs the Senate Business and Commerce Committee. “These approaches appear to skirt local ordinances as well as state law. Carona said he would consider filing legislation to address the problem next year.

Read it and learn the details. What this ultimately boils down to is the fact that there are no limits on interest rates and fees that payday lenders can charge, which leads to effective annual percentage rates in the hundreds, even thousands. People who are forced by circumstance to take out one of these loans are often trapped, sometimes for years, paying fees without ever being able to pay off the principal. The simple solution is to do what other states have done and impose caps on interest rates and fees. If the Lege is serious about taking another crack at reform, this is what the goal needs to be.

The Lege will take another crack at payday lending

Nov 28th, 2012

by Charles Kuffner.

3 comments

I’m glad to see this, because the Lege definitely left business unfinished last time.

About 83 percent of customers in Beaumont and 75 percent in the Houston and San Antonio metro areas are locked in a loan renewal cycle, latest lender reports show.

State Sen. Leticia Van de Putte, D-San Antonio, and state Sen. John Whitmire, D-Houston, both members of a Texas Senate committee examining the problem, said data and testimonials from payday customers statewide support legislation to prevent so many Texans from being financially exploited.

“In a perfect world you wouldn’t need (payday lenders),” Whitmire said. “But I do know that people can’t make it sometimes because they have no line of credit and no credit – and they can go to these institutions, but that doesn’t mean that they have to be held up.”

[…]

The new data confirms Texans typically pay more for short-term credit than consumers in other states. A $500 loan initially costs customers about $110 in Texas compared to only $55 in Florida and $65 in Oklahoma, where the industry is better regulated, said Ann Baddour, a policy analyst for Texas Appleseed, part of a coalition of secular nonprofits and religious groups that advocate stronger rules and lower-cost credit options.

“We find it extremely troubling that Texans are paying more for these products than others in other parts of the country – there has to be a limit to the number of fees set up for the same loan,” Baddour said.

[…]

Last month, members of the Senate Business and Commerce committee led by Sen. John Carona, R-Dallas, reviewed data and heard testimony.

“Landmark legislation in the 82nd Legislature enabled us for the first time to get some hard numbers about the payday and auto title loan industry,” Carona said. “We have enough information now to come back and address the abuses in the industry.”

We know what the problem is, it’s just a matter of the Legislature exerting the will to do something about it. This isn’t about ideology – the issue unites such disparate legislators as Rep. Tom Craddick and Sen. Wendy Davis. Unfortunately, the legislation that was passed last time was a water-down compromise that really didn’t do much of anything. As it happens, the person responsible for those watered-down bills, Rep. Vicki Truitt, the chair of the House Pensions, Investments & Financial Services Committee, lost her primary race this May, so someone else will be carrying this ball in the House. I hope that’s a good sign, but the even bigger problem over there remains.

Rep. Gary Elkins, R-Houston, himself a longtime payday loan business owner, was among those who blocked the proposals. He said the cities’ regulations are unnecessary and unconstitutional and existing federal consumer and credit laws provide enough oversight.

“The Legislature clearly considered the issue … and the Legislature decided not to pass those restrictions,” he said. “Anybody can pay off their loan anytime they want so the consumers obviously have that choice. … You can stay in debt on MasterCard or Visa forever.

“Do we need a law to say every month you have to pay down your MasterCard or Visa because some city council thinks that’s what you ought to do?”

You kind of have to admire Rep. Elkins’ sheer brazenness here. He makes his living off the misery of other people, he will do whatever it takes to defend the money he makes through the immiseration of those people, and he doesn’t give a damn what you think about it. He’s a State Representative, he has lobby money and his personal relationship with other representatives in his corner, and you don’t. So there.

UPDATE: Be sure to read Forrest Wilder’s story about new frontiers in the payday lending industry. I’d ask how these guys could get any sleazier, but I fear the answer I’d get.

John Carona

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