By Chris Lane
By Jeff Balke
By Aaron Reiss
By Angelica Leicht
By Dianna Wray
By Aaron Reiss
By Camilo Smith
By Craig Malisow
TABC officers are reviewing the questionable arrangement between the Westheimer Street Festival Corporation, which operates the event, and the Houston Museum District Business Alliance to determine if their deal violates state regulations for issuing alcohol permits. In two past festivals the corporation has used the alliance to obtain the TABC permit required for beer and wine sales to festival participants.
Festival organizer John Florez told the Houston Press that his corporation paid $1,500 per festival to the alliance for the event's alcohol permit. The alliance then uses its nonprofit status to apply for and get the temporary license from the TABC. However, the corporation handles the business involving the booze. It buys the alcoholic beverages wholesale (an estimated $50,000-plus in booze is bought and consumed at each festival) and pays the expenses -- and most important for the TABC probe, the proceeds flow to the corporation.
Lieutenant Trey Rusk of the Houston TABC office says that such an arrangement could be violating state regulations. The applicant for such a permit is supposed to be the same organization that oversees the beer and wine concessions for that event, he explains.
The nonprofit permit-holder -- not a corporation paying for use of the permit -- should be the entity getting the proceeds from the booze sales allowed by that permit, Rusk says. If the net revenues on drinks flow instead to the corporation, "that's a subterfuge, and we won't tolerate that," he says.
"I don't want anybody else working on somebody else's permit," Rusk explains. The lieutenant, while not commenting specifically on the corporation-alliance arrangement, has assigned an investigator to determine if there are violations.
Festival organizer Florez readily admits the alcohol permit arrangement to the Press. The sign-company owner has been the key festival promoter in recent years. The events, held twice yearly, have attracted up to 300,000 participants to the lower Westheimer area for two days of street-fair entertainment. Drinking has been part of the draw -- and part of the reason for increasing complaints from residents of the upscale neighborhoods adjacent to the action.
In recent hearings, speakers referred to intoxicated and unruly festival fans who urinate on lawns and disrupt the community. Florez disputed those accounts, although the city Public Works Department ended the hearings by rejecting his request for another street-closing permit. Florez has vowed to take his appeal to City Council next week, or to hold a festival without required permits.
Temporary booze concessions are limited to businesses licensed by the TABC, or to charitable groups with nonprofit status. The festival corporation tried to qualify as a nonprofit, but its application was rejected by the Internal Revenue Service. Florez says the corporation argued that it was a service organization that helped keep the community clean and contributed to charities. The IRS ruled there was not enough of an educational focus to grant nonprofit status.
Florez told the Press that in light of the IRS finding, the corporation would have to "do what crooks do and hire a lawyer to find them a way to become a nonprofit."
Florez said, "Somebody told us we could give the Houston Museum District Business Alliance 3,000 bucks to borrow their license."
The alliance says that isn't accurate. Clay Moore, an attorney and past president of the group, says the alliance did receive $1,500 from the corporation for being the named recipient of the TABC license for the festival last fall and may have had a similar agreement for the festival one year earlier.
Moore says the alliance -- Florez is a member but not a director -- presumed in the past that "the festival was a fact of life" and would continue to get city permits without challenge. By getting involved, the alliance could help ensure that there was quality entertainment and adequate security and cleanup for the area, he says.
"Do we stand aside and complain, or do we try to do something?" Moore asks. "We wanted some oversight ... since it was going to occur, to make it better."
The alliance also had wanted to host a jazz festival for the area but realized it would not have the drawing power of the street festival. So the partnership helped the group get a jazz stage at the festival.
With the disputes raging, Moore says, the alliance is reassessing its position and may not be associated with the alcohol permit, even if the TABC accepts such an arrangement. While the alliance did receive funds from other sources during the festivals, Moore says, the corporation paid it none of the beer and wine proceeds.
Florez has not opened the books of the corporation but insists that neither he nor it makes any appreciable net proceeds from the sponsorship. "Oh, my God! That's ridiculous," he said when asked about the prospects of sizable profits. He says enough is made for him and the three other corporation directors to treat themselves to dinners infrequently, and that's all.