Liquor Licenses and Economic Development, Part 2

liquor license and economic development_Part2Earlier this week, in reviewing the idea that liquor licenses automatically spur economic development, we reviewed some of the issues surrounding the special liquor licenses granted in Pennsylvania outside its quota system for economic development. Similar provisions are in place in Michigan.

Redevelopment Liquor Licenses

In 2006, in an effort to generate and promote commercial development, Michigan adopted Public Act 501 in which on-premises licenses can be issued in addition to those within the quota system: “In order to allow cities to enhance the quality of life for their residents and visitors to their communities, the commission may issue public on-premises licenses in addition to those quota licenses allowed in cities under section 531(1).”

There are development guidelines that must be met including location (areas defined in the Act similar to economic development districts), size (seating capacity of 25 or greater), operating hours (open at least 10 hours per day, 5 days a week) and investment (applicant must commit to investing $75,000 in restoration or rehabilitation of the proposed site and pay a $20,000 fee to the State of Michigan), according to Michigan Economic Development Corporation’s “Redevelopment Liquor Licenses” fact sheet.

Additionally, the applicant must prove an inability to obtain a traditional liquor license due to a lack of availability within the quota system. As with the provision in Pennsylvania, this part of the requirement is open to interpretation. It’s possible that the inability to obtain a license within the quota system is an inability to afford its cost. Costs driven by supply and demand are an integral part of any quota system and clearly benefit existing establishments as a real and tangible asset.

The only benefit to existing establishments is the restriction on redevelopment liquor license transfer: “The commission shall not transfer a license issued under this section to another location. If the licensee goes out of business, the licensee shall surrender the license to the commission. The governing body of the local governmental unit may approve another applicant within a city redevelopment project area to replace a licensee who has surrendered the license issued under this section provided the new applicant’s business meets the requirements of this section….”

While the idea of issuing specialized, above-quota liquor licenses in the name of economic development seems reasonable on the surface, digging a little deeper brings up many more questions and counter arguments, the most important of which may be the impact to those restaurateurs who have purchased liquor licenses within the quota system.

Economic development liquor licenses may quickly create an un-level playing field, undermining existing establishments, which in turn undermines the very economic development they are designed to generate.