DAN'S PAPERS, January 9, 2009 Page 22 www.danshamptons.com
Over The Barrel... with Lenn Thompson
Will Governor Paterson Hurt the NY Wine Industry? Unless you’ve been living under a rock, you know that New York’s budget is a mess, and Governor Paterson is trying to balance that budget – and there are a few items in his proposed 2009-2010 budget that will directly affect the New York wine industry. Briefly, two things that Paterson is proposing are an increase in the per-gallon excise tax that wineries have to pay for their wine – from nearly 19 cents to 51 cents, a pretty hefty hike. The Governor’s plan also calls for elimination of state funding for the New York Wine and Grape Foundation (NYWGF), the largest and perhaps most important wine-related association in the state. The NYWGF gets $1 million from the executive budget and $1.8 million from the Legislature. It matches the executive grant with private fund raising, for a total budget of $3.8. It’s important to remember that this is only a proposed budget. Nothing has been finalized and it’s unlikely that the budget will pass as it is written today. That said, what might happen if it does? I emailed with Jim Trezise, the president of the NYWGF, last week to learn more about what he thinks the impact might be. Apparently, they’ll be able to support and fund any ongoing projects through the end of their current fiscal year, March
31, but that beyond that date, they’ll have to cut “everything” including roughly $1 million of research by Cornell and the Cooperative Extension each year, the wine trail and regional branding programs, the New York City initiatives, the public television series, and “everything else.” Saying it even more bluntly, he told me “Our programs are based on the availability of matching funds from the State, plus in some years additional funding for more programs, so the end of state funding would mean the end of the programs.” I’m not an economist, but it’s hard to understand how these cuts make any sense for the state. An independently run study in 2005 showed that the New York wine industry generated $3.4 billion for the state’s economy. Given that, and the proposed increase in the excise tax, the less than $3 million the NYWGF usually gets doesn’t seem like much. As they say, you need to spend money to make money, and that seems like a pretty good investment to me. It’s an especially good investment when you consider that wine is one of the only agricultural industries in the state still growing. In that sense, it just seems silly. But, as I talked with many local winery owners and winemakers, I heard mixed reactions.
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About the proposed increase in excise tax, Richard Olsen-Harbich, winemaker at Raphael in Peconic told me “Our (at Raphael) excise taxes are not very large to begin with. Increases in excise taxes usually hurt the very large producers the most due to the volumes involved. One thing it would do in the long run is reduce our ability to fund research and development for the local industry.” No one else really mentioned the excise tax as an issue. On the topic of the NYWGF, opinions differed significantly. Steve Bate, director of the Long Island Wine Council, thinks that the NYWGF is vitally important to the Long Island wine industry, saying in an email that “The Long Island wine region benefits in at least two ways: marketing support and research. Every year we receive matching grants which we are able to leverage for specific regional programs. While there may be grumbling sometimes about the amount and the requirements, the fact is in 2008 we accessed $97,000 in grants from the NYW&GF which was matched to provide some $180,000 in total project funding. These resources enabled us to hold the Art of Balance Symposium in August, produce our promotional materials, conduct some cooperative ad campaigns, etc. Simply put, if the funding were to be cut, the region would have to try to find resources from another source, or more likely in the current environment, curtail many marketing activities.” Others aren’t as convinced of the value the NYWGF offers the Long Island wine community. Theresa Dilworth, owner of Comtesse Therese said simply “The NYWGF has almost no impact on Long Island.” Taking a step back without going off topic, Charles Massoud, co-owner of Paumanok Vineyards said “The coming year is going to be challenging no matter what business we are talking about. And if the industry should experience any difficulty will it blame it on such a possible fate for these organizations or will we blame it on the economy?” Massoud thinks that, “For many wineries that have distanced themselves as to their sales and marketing, the effects may not be noticed. There are probably some wineries that used such organizations as a crutch, and therefore they may now have an opportunity to stand up and move forward. Perhaps we should go it alone for a while to discover what importance these organizations may really have.” I think that he’s right with his assessment of the situation. I think this might be a wake-up call, both for the foundation and for its member wineries. The NYWGF is far from perfect and there’s been a dire lack of innovation in its programs – at least in the marketing and promotions arena. This is an opportunity for the NYWGF (as well as member wineries) to re-think how they operate. To survive in this tight economy, you simply can’t rely on the same old programs. Innovation and the leveraging of new technology is a must. This might force everyone in the industry to improve how they promote and market themselves. In that sense, a little short-term pain might lead to better days in the long run.