The Santa Barbara Vintners is proposing to create the first Wine Business Improvement District (BID) in California, with a 1.5 percent tax on “all tasting room sales.”

Steve Pepe

Steve Pepe (Clos Pepe Vineyards photo)

BIDS were created in the middle of the last century by business owners to build parking lots for their customers in cities where local governments were unable to do so. The business owners financed the cost and upkeep of the parking lots.

At the end of the last century, the hotel industry created tourism BIDS to finance advertising to attract visitors. The hotel BIDS charge a fee either as a percentage of the hotel bill or a fixed-fee per guest. In our area, there are hotel BIDS in Buellton, Lompoc, Santa Barbara, Santa Ynez and Solvang.

The Santa Barbara Vintners argues that its Santa Barbara Wine Preserve BID is like a hotel BID. It is not.

In the wine industry, there are three types of customers: the trade itself (hotels, restaurants, grocery stores and wine shops), wine club members and tasting room consumers.

Does the Santa Barbara Vintners’ 1.5 percent Wine BID tax require each wine customer to pay his or her fair share? Nope. The Wine BID excludes trade and wine club sales. The 1.5 percent Wine BID tax is only charged to tasting room consumers.

If the Wine BID were a hotel BID it would mean neither business travelers nor consumers who came in through the hotel’s wine club would pay the Hotel BID tax. The only hotel guest to pay the BID tax would be the tasting room customer.

How would the Wine BID tax be spent?

» Promotion to the trade and consumers: $3.3 million, or 62 percent

» Protection, i.e. advocacy to but not lobbying elected officials: $1.2 million, or 23 percent

» Community support: $837,000, or 15 percent

How would this affect the wine industry? Very discriminatorily.

There are wineries whose revenues from trade sales are 40 percent to 80 percent, yet none of this revenue would be taxed while the Wine BID would market to the trade.

There are wineries whose revenues from wine club sales are 30 percent to 80 percent. While the Wine BID would market to consumers, none of the wine club sales would be taxed.

The wineries with tasting room sales would pay the entire 1.5 percent tax on their tasting room sales.

Who is supporting the Wine BID? Wineries whose revenue comes mostly from wine sales to the trade or with robust wine club sales. These tend to be the large, tens-of-thousands-of-cases wineries, even some of which are owned by millionaires.

The Wine BID is opposed by largely the mom-and pop-wineries with a tasting room and 10,000-case production or less. They are the ones that must tax their tasting room customers an additional 1.5 percent to pay for the big wineries’ marketing to trade and wine club members.

It is refreshing that even some large wineries owned by millionaires recognize the discriminatory effect of the Wine BID and oppose it for that reason.

— Steve Pepe is co-owner of Clos Pepe Vineyards, the sixth vineyard planted in what would become the Santa Rita Hills in 1994; a founding member of the Santa Rita Hills Wine Alliance; and a co-creator of the Santa Rita Hills AVA. He also is the founding chairman of the Lompoc Economic Development Committee. The opinions expressed are his own.