Category: Occupational Licensing

City Council Not Hailing A Cab Anytime Soon

Numerous times I’ve pointed out some of City Councilman Jon Johnson’s dumber comments and ideas. However, I’m happy to say I agreed with him last week. While reading over the Times-Picayune wrap-up of the new taxi regulations, was this encouraging statement, “I don’t know how we can rationally say to someone that … (the) investment can be taken away from him or her without properly compensating that person.”

Johnson’s comment was in reaction to the terrible passage of changing the characterization of Certificates of Public Necessity and Convenience (CPNC) from property owned by driver’s or cab companies to privileges bestowed to them at the mercy of the city council.

It’s bad enough that New Orleans arbitrarily limits the number of CPNCs, but now they’ve made a cartelized system even worse for individual owner-operators and smaller cab companies. What single driver would go to the effort and expense if his livelihood could be revoked at any moment, while also prohibiting him from selling his CPNC to start another career? I highly suspect this was a move requested by companies like United Cab to give them some protection on the back end to make up for the costs they will incur to make the required upgrades. Under the guise of “consumer protection” and “tourism” the council was only too happy to oblige.

Where Are All the Microbreweries?

So, you want to start your own New Orleans microbrewery huh? Seems like a cool idea. Shockingly (to me), we don’t have many good, local beers being made in New Orleans or Louisiana in spite of a sizable vibrant, young entrepreneurial population that enjoys knocking back a couple (or few). Surely it’s not lack of innovation or desire. Maybe, just maybe, there’s a roadblock? Well, lets see.

Good tasting recipe, check. Building to brew in, check. Equipment to brew with, check. Awesome design for labels, check. Sounds like you’re on your way. Oh wait, you may want to check here first. That’s where you can read Revised Statute 26 of the state of Louisiana. And there’s more. That’s the requirements of the city of New Orleans. Allow me to save you the drudgery of sifting through the assorted fees, laws, fees, restrictions, fees, limitations, fees, etc. Ladies and gentlemen, I give to you, a step by step guide on how to legally (I’ll leave the business plan to you) start a microbrewery in New Orleans, Louisiana, U.S. and A.

First, you must be at least 18 yrs old, been a LA resident for previous 2 years, be a US and LA citizen, never been convicted of a felony (or your spouse), not owe delinquent sales taxes, submit to fingerprinting (for a fee) and a FBI background check (for a fee), and mail your state and city permit applications within 24 hours of each other.

Next, you must decide if you will be manufacturing beers over 6% alcohol content or producing more than 12,500 barrels (48,438 pints) a year. If so, stop right here. You cannot be a microbrewery or sell on site directly to customers, you must be classified solely as a manufacturer and sell directly through wholesale distributors. Below, I outline the necessary steps for manufacturers and microbreweries.

Manufacturer

  1. Pay the state $1000/year for manufacturing an alcoholic beverage over 6% alcohol content or in excess of 12,500 barrels.
  2. You may only sell your beer to a licensed wholesaler.
  3. Each year you must pay a “gallonage tax” of $10/barrel with no barrel holding more than 31 gallons (248 pints). However, for beers <6% alc. content you may receive a 2% discount on taxes due if you pay them “accurately and timely.”
  4. You must acquire a bond in the amount of $10,000 for each type of permit you hold to guarantee payment of taxes and penalties.
  5. You’re probably going to need an attorney to help you comply with all reporting requirements and to help you understand your contractual obligations in selling to wholesalers.
  6. Since you’ll be operating in New Orleans you must get a local permit and you’ll pay a non-refundable $500 application processing fee, $135 for being a beer business, and a $50 (minimum) occupational license fee.
  7. If your business happens to be in the Vieux Carre Zoning District you must pay a $50 processing fee and a $125 permit issuance fee.

So, it’s pretty straightforward what’s required for being a manufacturer. After investing in creating a product that makes people happy you lose a significant amount of control over where it can be sold. Certainly not ideal.

Microbrewery

  1. Acquire Retailers, Class A permit for $120 that allows you to sell on site but not at wholesale.
  2. Acquire Microbrewer permit for $1000 that allows you to brew and sell no more than 12,500 barrels a year of not more than 6% alcohol content beer.
  3. Since you can sell at retail you must pay a “fee” of $100 for every $100,000 in gross sales.
  4. Each year you must pay a “gallonage tax” of $10/barrel manufactured with no barrel holding more than 31 gallons (248 pints). However, you may receive a 2% discount on taxes due if you pay them “accurately and timely.”
  5. You’re probably going to need an attorney to help you comply with all reporting requirements and to help you stay within the law as a retailer.
  6. You must acquire a bond in the amount of $10,000 for each type (2) of permit you hold to guarantee payment of taxes and penalties.
  7. Since you’ll be operating in New Orleans you must get a local permit to manufacture and you’ll pay a non-refundable $500 application processing fee, $135 for being a beer business, and a $50 (minimum) occupational license fee.
  8. If your business happens to be in the Vieux Carre Zoning District you must pay a $50 processing fee and a $125 permit issuance fee.

In other words, for the desire to have a local business that allows you to interact more personally with your customers and allow them to better sample your product before buying it in stores or at a bar you must limit the upside of your business and variety of your products.

No wonder we don’t see more microbreweries in Louisiana, much less New Orleans. Yes, I’m sure there are other factors as well, such as the inability (I think, but I’m no farmer) to grow hops locally, but do we really need all these restrictions and fees? At a minimum the 12,500 barrel production limit should be increased significantly. Why is 6% alcohol content the dividing line? And why can wine producers sell directly to their customers when beer manufacturers can’t? Also, I think ultimately we need to seriously reconsider the 3 tier distribution system. After researching this article, I’m amazed how cheap drinks are in this city once you take into account the 3 parties who get paid by it’s sale.

Why do we need a middle-man? Especially when a situation can arise where you, as a manufacturer, choose to change wholesalers but by law must wait 24 MONTHS until your new wholesaler can sell to the bars/retailers your previous wholesaler sold to! Why shouldn’t you be able to sell your beer directly to a bar or liquor store who wants to carry your product? Crazy, right? Seems to me that alcohol distributors had a heavy hand in getting this 3 tier system placed into law just to force suppliers to use them. One thing is for certain though, these laws need serious reform. Here’s looking at you, 2012 legislative session.

Cartels Gone Wild – State Government Edition

Cutting hair. Selling tulips. Designing that living room makeover. These all seem to be pretty straightforward, above the cuff professions right? Most people would assume that if they saw an opportunity to make some money in the above fields then they should be able to simply acquire the necessary expertise, supplies, space and customers and open up shop. They would be wrong. In Louisiana and many other states, there exists a nasty little thing called “occupational licensing.” At least 69 professions in Louisiana alone require you to get a permission slip from the state before you can start working. Other professions also require federal licenses or some combination of federal + state. In an environment of high unemployment with people clamoring to “get back to work” you’d think that governments would be looking to scale back some of the barriers to entry in even the most basic of industries. Again, you would be wrong.

The stated reasoning behind occupational licenses is always presented as a method of protecting the public. Because clearly, a licensed barber will never give you a bad haircut, a licensed florist will always sell you beautifully long lasting flowers, and without your interior designer being licensed you can’t possibly find someone to design your home in an aesthetically pleasing manner. The reality is at best these are revenue generating annoyances and at worst they are anti-competitive measures backed by the industries themselves to limit new competition (essentially cartel behavior).

Aren’t tried and true methods like referrals, portfolios and testimonials enough to help find reputable people to do these jobs? Modernize the situation and you have Yelp!, Angie’s List, and Consumer Reports to not only find good people but make sure other people know about them if they’re bad. What happened to the state government expecting the consumer to take a little responsibility in doing their homework about a company or proprietor instead of telling us who’s approved? Also, just because you’ve hired someone who’s licensed is still no guarantee they’re any good at what they do. There’s a reason people pay extra to not go to Super Cuts. I am certainly not the first person to bring up these unnecessary government intrusions into working people and entrepreneurs lives. However, I intend to do something about it. I will keep you informed as to my research and efforts to scale back these impediments to the citizens of Louisiana who simply want to support themselves.

*Disclosure. I am FINRA Series 7 and 66 licensed as well as hold Louisiana Life, Health, and Variable Annuity insurance licenses.