Open Tap On New Liquor Licenses

March 19, 2007
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Grand Rapids city commissioners will soon review a recommended policy from the Downtown Development Authority prescribing rules for businesses within DDA boundaries to purchase a new, cheaper class of on-premise liquor license. The state legislature more than a year ago passed legislation specifically aimed at growing urban entertainment districts that would allow businesses within downtown districts procurement of licenses, the number of which is unlimited and unhampered by the current state quota system. The state licensing system deliberately limits the availability of liquor licenses, naturally inflating the price of the purchase.

The suggested new city rules by which downtown restaurants and entertainment venues would be reviewed for such liquor licenses is good news for small businesses, the vast majority of which are locally owned. Liquor licenses now cost $75,000 to $100,000, a substantial increase from even 10 years ago when Sierra Room owners paid $80,000, which was considered at the time to be exorbitant. The new licenses are $20,000, but the business applicant must show proof that it cannot afford an escrowed or quota license.

New, small restaurant or entertainment businesses have in the past waited for liquor licenses to become available, and then competed for them, further driving up cost. A restaurant in the new JW Marriott hotel can more easily cover such a cost given the price of a dinner entrée, especially when compared to locally owned Big O’ Café’s Cuban sandwiches and pizza menu items.

It is as much a matter of leveling the playing field for small business owners fully invested in the downtown, but often in the shadow of big business and franchise operations. Under proposed city rules, the applicant also must have expended at least $75,000 in rehabilitation or restoration of the building housing the business, or be a tenant in a space in such a building, further enhancing the city’s ongoing urban revitalization.

The DDA has recommended that the city give first priority for the new licenses to existing restaurants, second priority to new restaurants, and third to “restaurant, recreation or entertainment businesses.” We have no quarrel with the first of those priorities, but suggest that the second and third be combined. It is a better mix; the competitive environment among restaurants within the specific area of downtown is not improved in preference of a new restaurant over a new entertainment complex.

“Cool” creative cities are built and become magnets based on a community’s foundation of different cool, creative, local businesses drawing customers. We see no reason for the city to dawdle with its agreement.    

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