State budget woes could lead to challenges in wine industry

Julie Sherwood
The New York wine industry has grown steadily since the New York Wine &?Grape Foundation was established in Penn Yan in 1985. President Jim Trezise says the foundation cannot survive if state funds are cut.

New York has some 250 wineries churning out some of the best whites in the country and making inroads in reds. Millions of tourists visit them every year.

Near the north shore of Canandaigua Lake, the New York Wine and Culinary Center holds elegant wine-tastings. U.S. Sen. Hillary Clinton visited the center when it opened in 2006.

It wasn’t always this way.

In the 1970s, the state had fewer than 20 wineries. The industry was struggling.

The state responded in 1985 by creating the New York Wine & Grape Foundation, which was originally located in Penn Yan but now makes its home at the wine and culinary center in Canandaigua. There, Jim Trezise, president of the nonprofit organization, coordinates research and marketing for the wine and grape industry.

But the foundation is now in jeopardy. Gov. David Paterson has proposed cutting all state funding as part of his plan to close the state’s $15 billion deficit by 2010.

Trezise said the foundation wouldn’t survive the governor’s proposed cut. The foundation’s $3.8 million budget depends on $2.8 million in state funds that leverage $1 million from the private sector.

Along with eliminating the foundation — which helps fund grape research at Cornell University, markets a dozen wine trails, promotes Concord grape juice and upstate wine and grape products in New York City — the governor proposes cutting marketing dollars from other organizations, including the state Apple Association and state Maple Producers.

“We had to make some difficult decisions,” said Jessica Chittenden, spokeswoman for the state Department of Agriculture and Markets.

The department worked with the governor to come up with proposals to close the budget gap. “There are cuts all over the board and because we are undergoing the worst economic crisis in our lifetime, no area escaped reduction,” she said.

Chittenden said the focus is shifting from spending state money on marketing products to promoting environmental protection and public health.

For example, the budget provides funding for farmland protection programs and incentives for businesses to preserve water quality. As for promotion, existing programs such as Grow New York and I Love New York would play a bigger role in boosting the wine and grape sector, she said.

At the same time, the governor is looking to the grape industry to raise money. He has proposed allowing grocery stores to sell wine but charging the stores a fee for the privilege of doing so. The fee would raise about $100 million in 2009-10. Paterson has also proposed nearly tripling the excise tax on wine, from 19 to 51 cents per gallon, a move that would raise about $53 million.

Many applaud New York joining most other states in allowing wine sales in grocery stores. “It is very exciting,” said Jim Bedient of Branchport, who is president of New York Wine Grape Growers, a statewide non-profit that has been lobbying for it since the 1960s.

But they don’t like the proposed increase in the excise tax, which is paid by wineries or the wholesalers representing them in the state.

“The price of wine will go up,” said Don Bombace, owner of Bombace Wine & Spirits in Farmington. The increased tax paid by wineries will just get passed down, he said, with consumers charged more as business owners try to meet expenses.

“The state is looking for all the money it can get,” Bombace said. “That will take sales away.”

Before the governor made his proposals, state Agriculture Commissioner Patrick Hooker released recommendations by the Wine Grape Task Force aimed at doubling the economic impact of the wine grape industry in five years.

According to a 2005 economic-impact study by wine economist Barbara Insel, the state’s grape and wine industry generates more than $3.4 billion annually. The state Farm Bureau says the number is closer to $6 billion. Though it’s unclear exactly how much comes from the state’s fastest-growing industry in the agriculture and tourism sector, it is significant.

Bedient, who served on the task force, said the governor’s proposals — which still have to be hashed out and either accepted, rejected or altered by the state Legislature — could influence whether the industry continues to grow at the rate he and others hope.

The recommendations focus on several key areas, he said. Those include economic development, clarifying and updating regulations for the alcohol beverage industry and wine promotion and marketing.   

Bedient said he is concerned about the effect of cuts such as eliminating the state Wine & Grape Foundation. “That is a step backwards,” said Bedient. If wine sales expand to grocery stores, that brand new market will need a strong, coordinated promotion effort that the foundation can do expertly, he said.

When the foundation was formed in the 1980s, the industry was struggling, said Bedient, who sells his wine grapes to about 15 local wineries. Some businesses were shutting down. Now the industry is the “shining star of New York,” he said.

According to the state Department of Agriculture & Markets, the number of farm wineries has grown from under 20 in the late 1970s, to nearly 250 today. There are 1,400 vineyards statewide and wine production has increased more than 50 percent in the last 20 years to nearly 200 million bottles annually. New York is now the third largest wine producing state in the country, behind California, and recently Washington. The sale of New York wines account for $420 million a year.

More than four million tourists visit New York wineries annually.

Trezise said 13 new wineries opened just this year, with 12 more close to getting their licenses.  Trezise is quick to point out he doesn’t feel targeted, as proposed cuts strike all areas of the budget, from agriculture to education. In his recent foundation newsletter, Trezise outlined the pains and gains he anticipates are coming during the current economic crisis.

“Zeroing us out seems like a logical way to save money,” he wrote. “But in the end, it may actually cost the state a lot.”