Monday, August 25, 2014

Rant: More Liquor Licenses Coming

Last week, it was reported that Chef Mario Batali spent $410,000 to purchase a liquor license for Babbo, his new Boston restaurant. Maybe he should have waited a little bit longer and bought one of the new liquor licenses that will soon be available. He could have saved at least a few hundred thousand dollars.

As there is a cap on the number of liquor licenses in Boston, if a restaurant wants to purchase a license, they must find someone willing to sell one, and the prices can easily run $200K-$400K, if not higher. This makes it difficult for some restaurant owners who cannot afford to pay so much for a license. As such, there have been some efforts to fix this situation.

Last year, Boston Councilor Ayanna Pressley, after working on the issue for a year or so, filed a home rule petition to life the cap on liquor licenses in Boston. Since at least 2009, Governor Deval Patrick has been advocating for lifting the cap on liquor licenses in Massachusetts and proposed it once again in this year's Economic Development Bill. Both of these proposals though had a problem, a failure to adequately protect or compensate existing liquor license holders.

The current system, which has been in place since a time after the repeal of Prohibition, has made liquor licenses valuable assets. Some restaurants use their licenses as collateral with their banks. If this asset suddenly dropped drastically in value, it could cause severe economic problems for a number of restaurants. We should not potentially hurt over 1000 businesses if there is a way to remedy the situation without harming them. That would set a terrible precedent and be indicative of a lack of empathy. Fortunately, there is a solution that should satisfy all parties, and harm none.    

Back in July 2013, I ranted in Eliminating The Liquor License Cap? and offered my own solution, raising the limit on liquor licenses as set forth in the current paragraph 7 of the existing law, like "main street districts, urban renewal areas, empowerment zones or municipal harbor plan areas." Interestingly, this is essentially the solution that recently passed in the new Economic Development Bill. After much debate and compromise, the new law has authorized the creation of 75 new liquor licenses in Boston. Although Governor Patrick wanted to lift the liquor licenses cap across the state, the new law deals only with Boston.

These new licenses will be spread out over the next three years, with 25 available each year, starting September 1. See? Chef Batali didn't really have to wait too long for the new licenses to be available. Each year, 5 of those new licenses will be available to anyone, all across the city. For example, if you wanted to open a new restaurant in the North End, you could potentially apply for one of those 5 licenses. The other 20 licenses each year will be restricted to areas such as Dorchester, Mattapan and Roxbury, as well as "main street districts, urban renewal areas, empowerment zones or municipal harbor plan areas." It is this aspect of the new law which is similar to my original proposal. Those licenses must remain in those areas and cannot be sold outside of those neighborhoods.

The next few months will be fascinating to see who purchases these new liquor licenses. Hopefully, the extra 20 licenses will help invigorate those neighborhoods, allowing small business owners to afford liquor licenses for their restaurants, whether existing or new.

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