If Nevada is going to turn around its economy, it’s going to need more people like George and Katalin Rácz. The pair of Romanian immigrants moved to the Las Vegas Valley after they identified a resource Southern Nevada had in abundance. Not solar energy or wind power, but people who like to drink.
George Rácz and his wife moved from New York City, where they wed. Both of them hail from Transylvania, a region of Romania.
“Looking on the map, we saw that Nevada had no distilleries,” he said. “Starting about five years ago, one or two new distilleries began popping up in every state. Nevada is one of the last one’s without one.”
What if some of those people wanted to drink something made locally? We’re talking about serious drinking here, not beer or wine. The Ráczs have a space in Henderson that they would like to transform into an artisan distillery, where they will make small batches of whiskey, vodka and gin from grains grown in Nevada and California.
George Rácz is a bear of a man with a pronounced accent and dancing blue eyes. He launched his business, the Las Vegas Distillery, in early 2009, after a career as a filmmaker that culminated with a short film at the Tribeca Film Festival.
The couple plans to distill seven-grain vodka and special desert whiskeys made from grains grown in Winnemuca. They’ll also offer a brandy-like beverage from Hungary — where they lived for a time — called Palinka, which George’s grandfather used to make at home in Transylvania, in a small pot still he called “the copper angel.” They’ve got the space, several pot stills on the way from Europe and even a local source of soft winter wheat — no small feat for a state in which both arable land and water are pretty scarce.
As it turns out, you can find wheat, barley and hops in Nevada. What the state doesn’t have is an official license for distillers. So before the outfit ever ferments its first batch of mash, the Ráczs will need to bottle a solution to the legal problem. The Ráczs don’t want to get in to the moonshine business; they want to operate a legal distillery.
Nevada’s lack of legal distilleries might strike an outsider as strange. After all, isn’t this the state that elevated alcohol consumption to a 24-hour tourist attraction? Where grocery stores sell hard liquor alongside baby food and fresh produce?
Las Vegas wouldn’t be Las Vegas with a last call. But the anything-goes attitude we extend to drinkers just doesn’t apply to people who actually want to make some booze. George Rácz didn’t know that when he picked Nevada as the place to start his distillery. The market they thought was wide open was actually closed tight. Laws that have been in place since Prohibition have been slow to change in the Silver State, where opponents ride in on a cavalry of refrigerated trucks. The antiquated laws have enriched a handful of disgustingly lucrative alcohol distributors — companies such as Southern Wine & Spirits, Wirtz Beverages and Nevada Beverage Company, which control the flow of liquor into the state.
The tap they control is more like a fire hose. In the first seven months of this year, the state imported more than 50 million gallons of beer, wine and liquor, according to the Nevada Department of Taxation. State laws don’t allow retailers, such as liquor stores, restaurants or bars to deal directly with alcohol suppliers. So every bottle of California wine, Milwaukee beer or Russian vodka must be laundered through a wholesaler or distributor.
It’s good business, if you can get it. And history shows that those who get it want to keep it. The liquor distributors lobbied against an effort in 1999 to change a state law that made it a felony to bring more than a gallon of wine into the state for personal consumption.
“So if you brought back a case or two of wine from California, you were committing a felony,” said state Sen. Mike Schneider, who introduced legislation to change the law. “The perception was the distributors wouldn’t make any money. So you could go to a china shop, buy some dishes, or you bring as many dresses or Levis into the state as you want, and no one says anything. You can even buy prescription drugs. But God forbid you bring some wine back.”
Some people suspect the distribution lobby was behind the state’s winery law, which essentially relegated the industry to the same status as brothels. Neither one can move to a county with more than 100,000 residents. The original law regulating micro-breweries was equally arcane, Schneider said. It restricted them to historic or redevelopment areas.
The problem with micro-breweries and wineries, in the eyes of Nevada law, is their ability to sell on site. Wineries and breweries make a lot of their money off sales to visitors. But liquor suppliers in this state are not supposed to sell directly to anyone other than a distributor, who can then turn around and sell to a retailer.
George Rácz would like a license to permit him to sell what he distills by tasting and by the bottle to the people who visit his distillery. He has created three proposals for the Legislature’s approval. As is the custom with this type of regulation, he also sent it to the distributors so they could weigh in. He wants the state to create a regular distillery license, an artisan license and an educational license. The regular license would apply to larger operations, and applicants for the artisan license would have to get at least half of their raw materials from Nevada suppliers. The education license would allow Rácz, and anyone else who comes after, to teach people in his own facility how to distill their own spirits. Until the state creates a license for legal distilleries, he must operate under a letter of compliance, which may or may not satisfy federal regulators.
The educational license would be similar to one held by Grape Expectations, a wine making school in Henderson that opened in 2007 after years of muddling through its own bureaucratic nightmare. Like Rácz, Grape Expectations founder Charlie Peters had to lobby for special legislation that would allow him to open his school in Henderson. One of the stipulations is that he doesn’t produce any wine for sale. Instead, groups of students invest in a barrel or half-barrel of wine, which they create themselves, from selecting the grapes, crushing, fermenting and bottling.
The distributors did not object to Peters’ proposal, which didn’t directly compete with their business. Rácz, who envisions his distillery as a small, family-run operation, is hoping for the same consideration. He hasn’t heard anything from the wholesalers or distributors, who declined comment for this article.
Kris Berglund, a chemistry professor at Michigan State University and an expert on artisan distilling, said micro-distillers in his state successfully argued to the legislature that it was missing out on an economic development opportunity by clinging to its antiquated laws. If in-state distillers could capture even a small part of the billion-dollar liquor trade, then the legislature could create lots of jobs. Small distillers in Michigan didn’t have to contend with distributors, as the state controls the alcohol trade.
That’s the ironic thing about liquor laws: It’s usually easier to change them in states with government control. Nevada doesn’t have that.
“Distilling is one of the most regulated industries in the United States,” Berglund said. “There is a high level of excise tax collected as opposed to wine or beer, and the government wants to make sure it gets its share.”
The regulatory situation creates its share of Catch-22s, Berglund said. A distiller must have a plant before he can apply for a federal license. That creates a huge risk for investors before the first drop is ever poured.
Unlike wine makers or micro-brewers, artisan distillers can’t work on recipes at home. Uncle Sam still tends to frown on bathtub stills.
Before the Las Vegas Distillery ever pours its first drink, its owners must obtain licenses from the local, state and federal governments. The federal process has been the easiest to navigate, Rácz said. The federal agencies have been licensing artisan distilleries for a decade now, and have streamlined the process. Yet, it still took three weeks to fill out the paperwork.
But that’s nothing compared to the hoops he had to jump through on the local level. George Rácz originally approached Clark County with his distillery proposal. After studying the issue, the county told him his plant would have to adhere to the same zoning requirements as a rocket fuel factory. Rácz, who wanted to have his distillery near a high-traffic area, decided to take his proposal to the zoning boards in Las Vegas, North Las Vegas and Henderson. The company obtained a temporary permit to open in Henderson, where the distillery is under construction.
Rácz expects a response to his federal permit application during the next three months. The final local permit will be granted after an inspection of his plant by code enforcement and the fire marshal. The state permit is trickier because it doesn’t exist. Rácz must hope the legislature finds time to consider and ratify his proposals during a hectic 2011 session consumed with budget cuts and tax proposals — and that the distributors step out of the way.
The whole process will take more than perseverance; it will take faith. Mysticism is woven into the art of distilling. When Rácz talks about the process of making whiskey, he refers to “the Angel’s share.”
“It’s really very beautiful,” he said. “All the alcohol that evaporates is the Angel’s share.”
It’s a testament to his equanimity that he can wax poetic after all the obstacles he’s faced. When it comes to distilling liquor, even the heavens have to take their cut.