Wednesday, November 25, 2009

On Liquor License Rebates, Protectionism

There he goes again. Greg Helding is initiating another plan to discourage business start ups. Previous efforts have targeted convenience stores, landlords, and short term loan businesses. This one targets restaurants and taverns seeking a Class B liquor license. The JT has the story here.

According to the JT article, some time ago the state passed a law limiting the number of liquor licenses that could be issued in a given community. The law also allowed cities to exceed the limit by selling reserve licenses for $10,000. In 1998 under former Mayor Jim Smith the city started to issue rebates of $9,500 to help businesses that were restricted by state law. Greg Helding wants to end the rebates.

"To me, it doesn't make sense to (offer the rebate), because the whole point was to limit the number of licenses available and make the existing licenses a little bit more valuable" Greg Helding said. Helding added that the license quota exists to limit liquor licenses and reduce its negative impact on a community. Also it would be an additional revenue source for the city.

Heldings measure appears to meet with the approval of the liquor union, ie tavern owners, who enthusiastically support efforts to limit competition for themselves. Multiple tavern owner Joey LeGath doubtfully would support measures limiting his number of taverns, but he doesn't mind sticking would-be competitors with a $10,000 disadvantage. And if he or others in the tavern union are concerned about the "negative impact" that their businesses have on the community, there is nothing preventing them from closing their bars.

Just the other day I complemented Greg Helding for being a stand-up guy who often takes the time to articulate his positions on the various Racine blogs. So I hope he answers the following questions. Why should the government be in the business of making "existing licenses a little bit more valuable?" Is the additional value derived exclusively via a state induced reduction in competition? If so, why should government reward current license holders while punishing prospective license holders? Does the $10,000 in any way have a mitigating effect on the "negative effect" of Class B license establishments? And finally, do you really think that restaurants negatively impact our community?

And for readers, this issue is up for discussion on December 7th, 5 pm, City Hall, Room 205 if you want to add your two cents.

25 comments:

Anonymous said...

I think the whole issue of limiting the number of licenses (most types of licenses) is questionable. Thus the rebate should be $9,999.

Greg Helding said...

Q: Why should the government be in the business of making "existing licenses a little bit more valuable?"
A: The government is in the business of regulating alcohol sales. My experience dealing with alcohol licensing has taught me that one of the worst things for an area is a license holder who is not doing well financially. I have seen this lead to numerous problems, including closing hour violations, capacity problems, underage sales, the tendency to look the other way when other substances are sold or consumed in their bar, and an unwillingness to deal with problems because they would rather have problems and extra sales than no problems and reduced sales. All of these things lead to quality of life issues for the people in the vicinity of the establishment. Limiting the number of licenses can help the existing establishments to do well without resorting to the things that cause the most trouble for the rest of the community. Increasing the value also means it is more likely a potential new owner would seek to buy and turn around an existing establishment. We have seen this, too. Someone will buy a place, spruce it up, turn things around, do well, and be a better neighbor than the previous owner. Creating the reserve pool and making them more expensive increases the likelihood of that happening.
Q: Is the additional value derived exclusively via a state induced reduction in competition?
A: If I understand you correctly, I think the answer is yes. The state law sets the initial fee at “no less” than $10,000. It does not allow us to charge the fee; it says we must. Previous leaders decided to provide a rebate to get around this requirement. I think they were wrong and believe we should correct this.
Q: If so, why should government reward current license holders while punishing prospective license holders?
A: The government has an interest in regulating alcohol. Part of the regulation is to limit the amount sold. This will naturally reward existing purveyors at the expense of prospective license holders. There really is no way around this other than not regulating alcohol – which would not be in the best interest of the community.
Q: Does the $10,000 in any way have a mitigating effect on the "negative effect" of Class B license establishments?
A: If the $10k price tag keeps the overall number of establishments from growing, yes. It also brings in revenue to balance out the money we spend policing in and around these establishments.
Q: And finally, do you really think that restaurants negatively impact our community?
A: Generally speaking, no I do not. I also do not get to make the distinction between those and bars. They both get the same license. There was some talk at the state level of providing quota exemptions for full service restaurants. The law allows this now for restaurants with a seating capacity of over 300. I would support lowering that number to perhaps 100. This would provide for actual restaurants and not places that are primarily taverns, but happen to serve food.

BradK said...

Greg,

You said...

"The government has an interest in regulating alcohol. Part of the regulation is to limit the amount sold."

For clarification, the Gov. isn't really regulating "the amount sold" as much as "the number of places that can sell it".

The number of licensed bars / taverns / etc doesn't affect the demand for alcohol. Only how far the demand-er is required to drive to get it!

Or... am I missing something here...?

Denis Navratil said...

Greg, thanks for your answers. If I understand your thinking correctly, you think the government should assist license holders because otherwise they would be more inclined to commit crimes and or cause a "quality of life" deterioration. This sounds very much like liberal social theory (ie poverty causes crime) and is a common argument for bigger government. I am not sure I agree as I am inclined to believe the opposite, that people inclined towards criminal activity tend to cause their own poverty. Anyway, just for the sake of the discussion, let us assume that financially struggling license holders are more likely to cause problems and that government should step in to help them. Have you stopped to consider the fate of financially struggling would-be restaurant/tavern owners who were denied an opportunity or in effect fined $10,000 for opening a business. Wouldn't you be harming them harm them financially, and wouldn't they also be more inclined to cause problems/commit crimes or otherwise harm the community? Or to put it more bluntly, are you pushing some innocent citizens toward a life of crime by denying them an opportunity to work? It seems to me that perhaps you have only looked at one side of the coin here. A far better approach in my view would be to discard the liberal social theory that leads to unequal treatment by government (subsidies, protectionism etc...) and instead take a hard and consistent line towards liquor license scofflaws. Crack down on the lawbreakers, fine them, and take away licenses from repeat offenders. The newly available licenses could then be granted to prospective entrepreneurs who haven't broken the law.

Anonymous said...

I am thankful Greg and other politicians are busy looking after the well being of our communities and neighbors.

Anonymous said...

This motivates me to speak my mind more and work to remove those who wish to micro manage The City of Racine.

Wade said...
This comment has been removed by the author.
Denis Navratil said...

Wade, are you the Wade I think you are, serving overseas? When are you coming home?

Anonymous said...

Yes anon 9:43, Wade is very non-anonymous. I looked him up in the phonebook and there he was - "Wade".

Wade said...
This comment has been removed by the author.
Anonymous said...

"I also did not declare my no found mind speaking abilities like the other Anon did."

English please -

Wade said...
This comment has been removed by the author.
Anonymous said...

Hey Wade, YOU'RE the one who showed up to make fun of anon 9:43 and that person did nothing to warrant it. Perhaps you shouldn't post on blogs on the days that you are breaking in a new butt plug. In addition, it is not the fault of anon 9:43 - or me - that your subscription to "Frat Boy Drag Queens" ran out last month. Try paying your bills.

Denis Navratil said...

Doea anyone have anything o say about the subject at hand?

Betsy W. said...

Nice thread. One of the quicker trips into the toliet. And you wonder why elected officials won't comment?

Wade said...
This comment has been removed by the author.
Anonymous said...

Wade - I don't like people picking on other people, however, what I said to you and to everyone who reads this blog was wrong and I am very sorry. Peace to you as well.

Anonymous said...

Betsy W - that was a trophy-size rationalization of the reason for no politicos engaging in a dialogue here. I have been reading this blog for quite some time and yesterday's "conversation" was unusual.

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Anonymous said...

Hey, back off people. We can only HOPE that Helding will run for mayor again. They person we have now is............unreachable?

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