Bill would give cities power to set liquor-license quotas

A Bozeman legislator is proposing a relatively simple fix for what he says is one problem caused by Montana’s complicated system of quotas on liquor licenses.

House Bill 412, introduced on Tuesday by Republican Rep. Bruce Grubbs, would allow municipalities, by a vote of their city or town councils, to set their own quotas.

Under the existing system, established in 1947, the state set population-based quotas on the number of liquor licenses available in each city or town, with adjustments made over time as populations grew or declined.

All-beverage liquor licenses allow the holder to offer electronic gambling, as do some beer-and-wine licenses, and the state periodically doles out new licenses for the relatively paltry sum of $20,000, awarded by lottery. But to meet the demand, license holders are free to sell their licenses on the open market, for prices that have exceeded $1 million in recent years.

Grubbs’ bill seeks to expand the number of licenses while protecting the value of existing ones. To do that, licenses created under HB412 would not have any gambling privileges attached and they could not be transferred out of the city or town in which they were issued.

Grubbs said he introduced the bill because the quota system has made it difficult for Belgrade restaurants to hang onto their licenses, or for new restaurants to open up there.

That is because the state quota system applies to cities and towns and to all areas within a five-mile radius of city limits. Urban growth has put Belgrade within Bozeman’s quota area, and licenses that were once bought or leased relatively cheaply in Belgrade are now being sold in Bozeman, where they command much higher prices.

On Sunday, the Bozeman Chronicle told of one Belgrade restaurant, the Desert Rose, that recently lost the liquor license it was leasing because the license owner decided to sell it. Restaurant owner Cindy Brown said the license owner offered to sell it to her for $350,000, which was far outside her price range.

Since losing the license, she said, her revenues have been cut in half.

“It’s not just our problem,” said John Youngberg, a former president of the Belgrade chamber and a longtime member of the group. He said similar scenarios are playing out in East Helena, Columbia Falls and in the Kalispell area.

Grubbs said the concerns in Kalispell were what motivated Rep. Frank Garner, R-Kalispell, to co-sponsor the bill. Both lawmakers want to make it easier to attract and retain new eateries.

“It could be an economic driver, as far as attracting new restaurants,” Grubbs said.

That’s also why Paul Cartwright, a former city commissioner in Helena, is supporting the bill.

“As a city commissioner, you want a vibrant town,” Cartwright said, “which means places to meet, which means local cafes and restaurants.” But if local people can’t afford a liquor license, or even a beer-and-wine license, that kind of vibrancy is hard to build.

He said Laurel might soon find itself dealing with what Belgrade is going through now, if urban growth brings it within five miles of Billings city limits.

Nicole Cromwell, zoning coordinator for the city-county Planning and Community Services Department in Billings, said the city limits of Laurel and Billings are just six miles apart now, thanks most recently to an annexation by Laurel of a subdivision east of town, off Seitz Ronan Road.

Cromwell said a variety of factors makes it unlikely that Billings will expand for many years much farther west than ZooMontana, now the closest city land to Laurel, but there’s no telling what new annexations Laurel might have in mind.

And it’s not just small towns that are affected by the quota system, Cartwright said. In bigger cities like Billings, restaurants are often replaced by casinos when restaurants sell their liquor licenses, because only casinos can afford them.

John Iverson, a lobbyist for the Montana Tavern Association, took issue with the bill, and with its premise. He said Belgrade is “not under-served,” that are “lots of places to get a drink.”

“I don’t think the data supports that,” he said of the chamber’s concern that the town is losing licenses. “It’s more of a perception.”

He said another false assumption lies behind the claim that existing license holders wouldn’t see a drop in the value of their licenses because the new licenses wouldn’t have gambling attached.

“That would assume that gaming is the only driver of the license value,” he said, when in fact many casinos derive more income from alcohol sales.

He also said that Belgrade might get more than it bargains for if Grubbs’ bill were to pass. The Chamber of Commerce is assuming that newly created licenses will be acquired by restaurants, he said, but what if they are snapped up by bars whose only goal is to sell as much alcohol as possible?

“I wonder what Mothers Against Drunk Drivers would think about more people drinking alcohol away from home?” Iverson said.

“I find that a little disingenuous,” Youngberg said. “Now they MTA is talking about how they’re concerned that there might be more bars than restaurants?”

Maybe it should be concerned about people in Belgrade having to drive to Bozeman to find a restaurant that serves alcohol, he said.

As for the chamber’s claim that Belgrade is under-served, Youngberg did his own research and found that Belgrade, with a population of 7,389, has six active full-liquor licenses. Columbia Falls, population 4,796, has nine such licenses, and Miles City, population 8,400, has 19. Livingston, population 7,044, has 20 active full-liquor licenses, he added, and Whitefish, population 6,600, has 18.

Ten years ago, the MTA did support the doubling of statewide restaurant beer and wine licenses, often referred to as cabaret licenses, Youngberg acknowledged, but those are also subject to quotas—leading to relatively high open-market prices—and many restaurant owners feel they need full-liquor licenses to compete successfully.

Iverson, meanwhile, also rapped the Belgrade chamber for not working with the MTA to craft a better piece of legislation, calling HB 412 “an ill-conceived bill that is not a good idea.”

Youngberg said he did speak with Iverson at the Capitol before the session began and the bill was still being drafted. He said Iverson suggested an even simpler solution—crafting a bill that would draw a line between the quota area of Bozeman and that of Belgrade.

But Iverson said he would need to talk to the MTA board, Youngberg said, and that was the last communication he had from him.

“We’re hoping this works,” Youngberg said of HB 412, “but we’d be willing to back off and just draw a line.”

Cartwright said giving cities and towns the power to set their own quotas makes sense because their elected officials know the needs of their communities. Some towns that have unissued licenses could even decide they have enough outlets and lower their quotas, he said.

In an op-ed that appeared in the Helena Independent Record this weekend, Cartwright said there is another reason to allow cities to set their own quotas: “They reap the benefits and suffer the downsides of bars and restaurants. Why not let them determine how many licenses is the right number?”

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