Alcohol fee affects mayor’s interests

Mayor Gavin Newsom opposes a fee on alcohol proposed by Supervisor John Avalos, a stance that might slightly benefit two companies the entrepreneurial mayor has an interest in.

Newsom is president of Airelle Wines Inc. and a partner in Villa Encinal Partners LP, the companies behind PlumpJack and Cade wineries in Napa Valley. He has invested more than $1 million in each enterprise and receives at least $200,000 in income combined from the wineries each year, according to his latest financial filings.

Newsom takes no part in the operations of those businesses.

The fee would require alcohol wholesalers such as Newsom’s companies to pay about a nickel for each ounce of pure alcohol sold in The City. The money would then go to pay for treatment of San Francisco’s chronic drunks, an estimated $15 million.

Opponents say that while the fee would be imposed on alcohol wholesalers, the costs will then be passed on to restaurants, bars, hotels and, ultimately, to consumers.

Newsom opened his first business, PlumpJack wine shop, on Fillmore Street in 1992 with backing from family friend and billionaire Gordon Getty. He often recounts how a spat over a mop-sink permit led to his involvement in politics. In 2007, Newsom admitted his own addiction to alcohol.

Before Newsom was sworn in as mayor in 2004, he divested his interest in a network of San Francisco businesses that included the wine shop and Balboa Cafe. Newsom is now a “passive investor” in the PlumpJack empire, mayoral spokesman Tony Winnicker said.

And while Newsom does benefit economically from wine sold in San Francisco, those sales are “negligible,” Winnicker said. About 98 percent of PlumpJack and Cade sales are outside San Francisco.

“There is absolutely no conflict in letter or in spirit,” Winnicker said. “If anything, his experience in the industry gives him a clear understanding of just how harmful this fee would be to our local economy, tourism and employment.”

For Avalos, the opposition has come as a surprise. The supervisor expected support based on the mayor’s own passage of a cigarette fee, which provides money for cleaning up cigarette butts.

“I wonder if his own interests are coloring his acceptance of this legislation,” Avalos said. “I’m hoping that he’ll consider the fee on its merits.”

Ethics laws allow for conflicts of interest

California Fair Political Practices Commission regulations allow an elected official to make a policy decision on a law that directly benefits that official economically as long as it also affects a large number of businesses, according to John St. Croix, director of the San Francisco Ethics Department.

An elected official’s benefit would be outweighed by the industry if at least 2,000 businesses were affected, according to the law.

“It’s an obvious answer that the quantity is there,” St. Croix said. “The [alcohol fee] legislation would not just affect distributors, but bars, restaurants and hotels as well.”

Ethics laws favor mayors when it comes to conflicts of interest, as happened with Dianne Feinstein in 1986. A nonprofit housing association sued then-Mayor Feinstein after she vetoed a rent control ordinance claiming that her ownership of several rental properties was a conflict of interest.

An appeals court ruled in favor of Feinstein, saying that the “personal interest of the only officer empowered to make a decision does not disqualify the officer.”

Newsom’s portfolio

$1 million (at least) Invested in Villa Encinal Partners LP

$100,000 (at least) Annual income from Villa Encinal Partners LP

$1 million (at least) Invested in Airelle Wines Inc.

$100,000 (at least) Annual income from Airelle Wines Inc.

98 Percentage of PlumpJack and Cade wines sold outside SF

2,000 Minimum number of businesses affected to avoid conflict of interest

356.8 million Alcoholic drinks consumed in SF

0.6 Ounces of pure ethanol in one drink

5.7 Cents per ounce of ethanol required by alcohol fee

Sources: Statements of economic interest, California Fair Political Practices Commission, San Francisco city controller

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