Rant: Eliminating The Liquor License Cap?

Let us hurt 1000 existing businesses so we can help new businesses get established.

Is that a fair trade-off? Is there an alternative which can help promote new businesses without hurting existing ones? Though several news articles have praised this potential new law, they have largely ignored the negative impact it will have on existing businesses. The proponent of this new law also seems to be avoiding discussing this negative effect.

Recently, Boston Councilor Ayanna Pressley, after working on the issue for a year or so, filed a home rule petition which will basically remove the numeric cap on liquor licenses in Boston, allowing the licensing board to determine who can get a new liquor license. Though the petition is not posted on the Councilor's website, her office sent me a copy. In short, the petition seeks to amend Massachusetts General Laws, Chapter 138, Section 17 by striking out the sixth and seventh paragraphs in their entirety, and replacing them with some different language.

Curiously, Councilor Pressley's website says very little about the petition beyond an initial press release and a few links to news articles about the petition. I would expect to find much more supporting information about the petition on her site, such as the results of studies or a list of everyone who supports the petition. Why fail to post supporting information on your website? How can anyone make an informed decision about the petition if they can't find sufficient information on the website of the person proposing this petition?

There are approximately 1,030 liquor licenses (675 full licenses and 355 beer/wine) in Boston. Because it is nearly impossible to obtain a new liquor license, new businesses must usually purchase a liquor license from another business, and the cost for a full license can reach over $400,000. Essentially, an existing liquor license has become a financial asset of the business and it has significant value. If you possessed such a significant asset, would you support a law which drastically devalued that asset? Seems doubtful.

Councilor Pressley is concerned because many liquor licenses have been sold to downtown restaurants, in neighborhoods like the Seaport and North End. That means that some of the more outlying neighborhoods have fewer liquor licenses. Good restaurants can help elevate a community so the inability to obtain liquor licenses, which greatly help profitability, can hurt neighborhoods. The lack of licenses can also mean that some businesses will choose to locate in places like Cambridge and Somerville, where it may be easier, and less expensive, to get a liquor license. I agree that this is a valid problem which needs to be addressed. However, I don't think Pressley's petition is the best way to fix this matter.

People must also understand that Pressley's petition still has a long way to go before it might even become law. First, it must be signed by Mayor Tom Menino, who has not yet taken a public position on this matter. Second, if the mayor signs off, then the petition must be approved by the state legislature. I have not yet seen any public positions that anyone in the legislature will support this petition. What is the chance that this petition will overcome those hurdles?

Councilor Pressley's website does not provide a list of any people and organizations which support the petition. I have contacted her office to gather such a list but I have not yet received any response. I have also tried to determine the position of any of the local restaurant associations on this petition, but none have responded either. Does this petition have any significant support?

I have heard from a few individual restaurants about the potential effect of this petition, and how it would devalue their existing liquor licenses. With such licenses being able to be sold for $200-$400K, that forms a significant asset for their businesses. If there is no longer a cap on liquor licenses, then the value of those existing licenses drastically drops. They might be worth maybe 10% of their current value. The petition does nothing to address that problem, or compensate existing liquor license holders for that financial loss.

Under the new law, these businesses would still be able to sell their liquor licenses, but who would buy them when new licenses were now available? And if someone would buy them, they would be willing to pay only a tiny fraction of their prior value. With over 1000 existing liquor licenses, that is a lot of businesses that would lose a significant asset due to this law. They are very unlikely to support Pressley's petition and I am sure many of those businesses would actively oppose the petition.

Most of the recent news articles about this petition have been very supportive of the petition, and I see how allowing more liquor licenses could help small business owners start new restaurants, which could help to revitalize certain neighborhoods. However, helping those businesses should not come at the cost of significantly hurting other existing businesses. Businesses with existing liquor licenses don't want to stifle competition, but they also don't want to lose their financial assets. That is a very reasonable position.

Though I approve of the basic concept, of helping certain neighborhoods obtain liquor licenses, I think it could be accomplished another way beside simply lifting the cap on all liquor licenses in Boston. Instead, you could simply raise the limits on some liquor licenses, especially those set forth in the current paragraph 7, like "main street districts, urban renewal areas, empowerment zones or municipal harbor plan areas."

The current law already sets aside a small number of liquor licenses for such areas. If that limit was raised, there would not be a need to eliminate the main cap of liquor licenses. It would make liquor licenses available in the areas of concern. In addition, it would largely protect the value of liquor licenses belonging to existing businesses. I think that small change would be far more likely to gain general support than Pressley's petition.

What do you think?