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Game Changer for Oregon Wineries

State adopts uniform rules for events, but only the largest can have restaurants

by Peter Mitham
King Estate Winery
King Estate Winery in Eugene operates a restaurant and supported separate regulations for larger wineries.
Salem, Ore.— Running battles about events allowed at Oregon wineries may continue despite new state legislation. Supporters say that House Bill 3280 marks the biggest overhaul of event rules in more than 20 years, permitting wineries on properties zoned EFU (exclusive farm use) to operate tasting rooms, host marketing events and host at least 25 event days per year. (Wineries on non-EFU properties face other zoning considerations.)

The legislation, passed June 27 (enactment is pending), allows events including weddings and other celebrations, outdoor concerts and other manner of facility rentals. For more than 25 event days annually, wineries must obtain a permit from their local county. Retail sales of non-wine items may account for no more than 25% of on-premises revenues.

“Counties cannot come in and say you can’t have a tasting room, they can’t come in and say you can’t do marketing events, and they can’t come in and say you can’t do 25 days of events,” explained Sam Tannahill, co-owner of 135,000-case A to Z Wineworks in Dundee, Ore., and chair of the Oregon Wine Growers Association, a proponent of the bill. “Every winery across the state gets those rights.”

The legislation also creates a new classification for large wineries. Those with 130 acres, which typically produce 150,000 gallons (about 63,000 cases) of wine per year, may have a restaurant on EFU land, subject to the same limitations on events. According to WinesVinesDATA, only 10 of Oregon’s 521 licensed producers meet the size requirement, while bill proponents claim the provision affects less than half that number.

“These wineries can have a permitted restaurant. However, if that restaurant’s open more than 25 days out of the year, it has to go get a permit from the county to operate,” Tannahill explained.

The legislation was passed after several instances of wineries and counties in the state going head to head over what was permitted on farmland. Since the existing rules were adopted in 1989, the state’s wine industry has grown and changed. When the current rules were crafted, wineries were typically far removed from urban areas; weddings and concerts were not as common winery marketing events as they are today.

Tannahill told Wines & Vines the new legislation, the culmination of a two-year process including town hall meetings with stakeholders across the state in 2010, is supported by 70% to 80% of the industry. “It worked for most of the stakeholders,” he said. “We came up with a set of concepts that not only dealt with events, it also dealt with what a winery could be within the EFU.”

A two-tier system

One of the main critiques of the legislation is its potential creation of two tiers of wineries. Creating a classification for large wineries allowed to have restaurants isn’t the only way the legislation does this, argued Duane Bowman of 300-case Cricket Hill Vineyard & Winery in Jacksonville.

The requirement that wineries have at least 15 acres of contiguous vineyard ties events to estate wineries. While Bowman believes those who framed the legislation did the best they could, he harbors concerns that the new legislation may have an unintended consequence, blocking new entrants to the industry.

Wineries that blend fruit from an estate vineyard smaller than 15 acres, supplemented with fruit from contract growers, don’t have the same freedom as larger producers to host events and build their brands.

“A vintner can’t start a winery, buy his grapes, begin building his winery brand then add in his acreages—even though eventually he might be able to plant 150 acres because he’s got enough land,” Bowman said. “That’s the approach to getting into the business by this legislation.”

Bowman’s math indicates that a 15-acre vineyard in Southern Oregon, where vineyards average 2.5 acres, would cost about $220,000. That cash is tied up for three to five years before the vines establish themselves and production can begin. “That pretty much prohibits anyone who is a normally wealthy human from getting into the business,” he said.

Tannahill acknowledged that not everyone in the industry is happy with the legislation, but like Bowman he feels the best possible job was done to update the 1989 legislation.

One over-arching concern was to reflect the industry’s evolution across the state and to respect the leeway counties might want for permitting based on local considerations.

“We wanted wineries to have certain rights, and to clarify those privileges, but we also wanted to leave the counties with discretion as well, because each county is different,” Tannahill said. “Different counties and different regions have different maturation levels of their rural business, and different urban/rural interface. So counties have to play a role in what wineries can and cannot do.”

Given that the new provisions for small and mid-size wineries expire Jan. 1, 2014, future legislative sessions will surely revisit the issue. Bowman welcomes the prospect. Tannahill expects future discussions to further clarify what wineries can do, but also anticipates better-defined rules regarding food service.

The evolving state of th e law speaks to what Tannahill believes should have happened all along. “It’s a really delicate balance, and it takes a long time to find that,” he said. “I think in the future, the industry needs to make small steps on a continual basis as opposed to large leaps every 20 years.”

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