Governor Patrick proposes eliminating liquor license cap

[keithn.livejournal.com]

In what could end up being great news for Somerville, Governor Patrick has proposed eliminating the liquor license cap for towns and cities across the state. This would eliminate what has (ostensibly) been a major hurdle preventing new restaurants from opening in Somerville.

More details: http://www.masslive.com/politics/index.ssf/2014/05/gov_deval_patrick_proposes_to.html

From the article:

"That giant sigh of relief you probably heard was Mayor Joe Curtatone,” joked Gardner Mayor Mark Hawke, referring to the Somerville mayor who was not in attendance.

Curtatone appeared with Boston Mayor Thomas Menino and Salem Mayor Kim Driscoll at a legislative hearing in August to testify in favor of legislation to eliminate the cap, arguing that restaurant owners find it difficult to locate in Somerville because of a lack of available licenses.

I'm not sure what resistance there will be to this, but current restaurant owners will have something to lose, as their liquor licenses (which are transferable) will no longer have any value.

Comments

[puffy-wuffy.livejournal.com]

Is it true that the proposal also would make current licenses no-value (non-transferable), or are you referring to the fact that current owners could be forced out by competition?

A liquor licenses racket with more available licenses will create more competition and (key to the reason why the City is pursuing this) more revenue. Plus, most cities forced under the cap tend to go over their quota. For every extra license they have to appeal to the State due to a law written 100 years ago (except for certain lucky exempt cities), and its extra man-hours on all sides to do this.

As far as I can tell, and I could be wrong, the removal of the cap would put the City of Somerville in charge of liquor licensing. Therefore, if the law goes into effect as is, the City will decide the new limits of the liquor licenses racket.

[somerfriend.livejournal.com]

The current owners will face more competition, and their licenses are now not worth anything. They paid tons for those licenses under the current unfair system of government artificial restriction. That is not a reason to perpetuate the current system, but I do feel sorry for them. Unwinding any government interference in a marketplace is messy.

[puffy-wuffy.livejournal.com]

Agreed. I feel that we're taking a potentially positive step if and only if residents and owners get to weigh in on what the new policies should be, but the State has definitely taken its pound of flesh out of current owners and, well, it doesn't seem like there is anything in the works to compensate current owners. It seems like the State is just calling it a sunk cost. The new City-run liquor licensing racket could be even worse than the old one . . . or it could take into account in some concrete way, the efforts of current owners.

[keithn.livejournal.com]

The license point is exactly the point I was making. Licenses can currently be sold, and if the city has no more licenses to give, the only way to get a license is to buy it from an existing restaurant. I don't know how much they go for but I would imagine it is substantial. The value of that license is part of the total value of your business.

Once the city has an unlimited supply of licenses, new restaurants can just obtain licenses for a relatively small fee from the city. So the licenses existing restaurants have become effectively worthless and that business loses value and the owner loses wealth. If the owner bought the license directly from the city, then they lose on paper only what they gained on paper, but if they bought it from another licensee they will take an actual loss on the money they spent on the license. This kind of thing often leads to resistance from those who stand to lose, often in a backhanded way.

That said, I'm not sure how many cities in the state are bumped up against the cap like we are, so resistance may not be widespread. It seems to be a problem in at least Somerville, Salem, and Haverhill.

[clevernonsense.livejournal.com]

presumably, many cities will continue to limit the number of licenses, they just won't have to deal with any state restrictions.

[keithn.livejournal.com]

A self imposed cap is effectively no cap at all. The city will have the full ability to make exceptions to their own rules and license whoever they want. It might add another piece of paper or meeting to the process for the exemption, but adding red tape is all it would be doing.

As an example of what I'm talking about, the Somerville licensing commission opposed Beer Works because the city had decided that the remaining licenses were only for areas in need of economic development, which isn't Davis Square. When a Korean restaurant applied for a license in a location directly across the street from the proposed Beer Works, suddenly the "economic development" restriction no longer applied.

[clevernonsense.livejournal.com]

not at all, actually. Somerville is an exception--leafy suburbs are almost all well under their state quotas

[keithn.livejournal.com]

I'm not sure what you are getting at. They are well under the state quotas, but it isn't because of self imposed limit that they are strictly enforcing. They just haven't had to use all their licenses.

[clevernonsense.livejournal.com]

and I don't see why Somerville and other highly developed citiescan't sell liquor licenses for $100k (which I'm sure is the more likely result). Waltham asked the state for additional licenses so they could lease them (rather than sell them outright). I can't remember the secant amount they wanted to lease them for, but it was a relatively hefty sum.

[keithn.livejournal.com]

I would imagine charging six figures for a license would effectively prevent small mom and pop restaurants from opening. Only established restaurants (read: chains) would be able to afford the license. That seems to be the opposite of what this city wants.

[tiggrstaar.livejournal.com]

I think eliminating the cap really will really have a positive affect for smaller restaurants and more specialized bars as it really reduces the start-up costs. I think this is the best reason to eliminate the cap. I don't think we'll overwhelmed with new bars since there already seems to be plenty/enough but some more interesting and unique places would definitely be welcome.