Wrangling over liquor licenses - Albuquerque Journal

Wrangling over liquor licenses

The bar area at Standard Diner. (Jim Thompson/Albuquerque Journal)
The bar area at Standard Diner. (Jim Thompson/Albuquerque Journal)
Matt DiGregory, owner of the Range Cafe chain and Standard Diner, says the state's "quota" liquor licensing system makes it prohibitively costly for small independent restaurants to buy in. (Jim Thompson/Journal)
Matt DiGregory, owner of the Range Cafe chain and Standard Diner, says the state’s “quota” liquor licensing system makes it prohibitively costly for small independent restaurants to buy in. (Jim Thompson/Albuquerque Journal)

Matt DiGregory’s customers – particularly those visiting from out of town – are often confounded by the fact they cannot order a cocktail with their dinner at some of his restaurants.

DiGregory is, too.

The man behind the Range Cafe chain and Standard Diner says New Mexico’s liquor license system makes it prohibitively expensive for independent restaurateurs to buy in. New Mexico’s “quota” setup limits full liquor licenses by population and there are just 1,411 of those quota licenses active today for businesses selling hard liquor by the drink, in packages or both. That includes restaurants serving spirits, bars, nightclubs, and convenience, liquor and grocery stores. The state hasn’t issued a new dispenser license since 1982, according to the Alcohol and Gaming Division.

Obtaining one today usually means buying one from an existing holder, and the price tag is high.

Twelve dispenser licences – which allow the user to sell alcohol for on-premise consumption and by the package – were sold between January and mid-August, according to the most recent transaction data available on the Alcohol & Gaming Division’s website. For the 11 that cite a purchase price, the average was $381,000.

Slate Street Cafe owner Myra Ghattas said she cannot afford the expense, putting her Downtown Albuquerque restaurant at a competitive disadvantage with big chains that can. She said she has lost business – particularly among customers scheduling parties – because she does not serve cocktails, only beer and wine under a limited license the state offers restaurants for $1,050 annually.

Ghattas said New Mexico’s laws are ripe for re-evaluation and that the state is not competitive with its neighbors.

Texas, for example, charges a restaurant or bar $6,602 for a “mixed beverage” permit that allows for the sale of hard alcohol. That covers the first two-year period and it gets cheaper after subsequent renewals, according to a spokesman for the state’s Alcohol Beverage Commission.

The owners of M'Tucci's Italian lease the liquor license for their restaurant and will do the same for the upcoming M'Tucci's Moderno in Rio Rancho. (Marla Brose/Journal)
The owners of M’Tucci’s Italian lease the liquor license for their restaurant and will do the same for the upcoming M’Tucci’s Moderno in Rio Rancho. (Marla Brose/Albuquerque Journal)

Arizona has quota limits on some licenses – like those for liquor stores and bars – but no limits on how many it issues to restaurants and hotels. There are 3,668 active restaurant liquor licenses, which cost $2,000 for a full year and $500 to renew, according to the Arizona Department of Liquor website.

“I think that we would have more and better independent (restaurant) options if the liquor license challenge would be resolved,” Ghattas said. “I think people sometimes go out of business because they can’t make ends meet. I don’t know that the liquor license is the answer, but it could be. It could be one of the answers.”

Resistance to reform

Those who have invested in liquor licenses often bristle at proposals that might create more of them.

“If you own a home and you live in a neighborhood, and someone says you own your home, but we’re going to build houses all around you and they’re going to be free. What’s that going to do to your house (value)?” said Santa Fe’s Maurice Bonal, who describes himself as the “historian” among the state’s license holders and is the fourth generation of his family in the business.

Bonal, who declined to say how many licenses he owns or to whom he leases them, says many owners have used their licenses as collateral for bank loans.

DiGregory said he understands the urge to protect what are extremely expensive assets – he actually has liquor licenses at the Bernalillo Range and Standard Diner, with plans for a third at the next Range Cafe. Standard Diner was just a break-even operation until he bought a license for it a year ago; now he said it turns a small profit.

But even as someone deeply invested, he said change is necessary because the status quo is limiting growth.

“I have more than a million dollars wrapped up in liquor licenses – enough to open up one or two more stores, and employ more people and put quite a bit more gross receipts taxes back into the state of New Mexico,” he said.

Jeff Spiegel, a longtime New York restaurateur who now co-owns the M’tucci’s family of eateries in Albuquerque, said he used to pay $1,700 a year in New York to serve beer, wine and spirits at his eateries. He leases liquor licenses for M’tucci’s Italian and will do the same for the upcoming M’tucci’s Moderno in Rio Rancho. He said he would support changing the system, noting that he likes the way New York did things.

“The reality is that, if you’re going to buy them, (liquor licenses) cost as much or more than the restaurant you want them for,” he said of New Mexico. “So it really means that, as a small businessman with limited resources, you’re unable to add this potentially incredibly valuable element to your business and therefore it means that only those who have the capital are able to do so.”

Gaining momentum

The Liquor Control Act’s last major overhaul happened in 1981, but reform is not a new idea. Cries for change arise regularly, said the head of the New Mexico Restaurant Association. But CEO Carol Wight, who has been in the job for 14 years, said the push seems to have gained momentum.

The New Mexico Legislature’s Economic and Rural Development Committee discussed it at its September meeting, hearing a presentation from Alcohol & Gaming Division Director Mary Kay Root and comments from various sides, including those who said the cost of licenses has hurt growth in smaller communities. Michael Bunt of the Greater Artesia Economic Development Corp. spoke about a planned retail development that “cratered” because the anchor restaurant tenant could not negotiate down the price of a liquor license, according to the meeting minutes.

Wight said the Legislature’s interest prompted a new restaurant association task force to discuss possible changes. She said she wants the association to be part of any discussion, but is not actively campaigning for reform. While some members want an overhaul, others have already spent big money on licenses and are fiercely protective of their assets.

“I understand that completely,” she said. “They put the money up for these licenses and they’re worth something on their balance sheet, and that’s part of something we have to solve for. How do we make them whole in this whole plan if something can be done?”

New Mexico Sen. Ron Griggs, R-Alamogordo, has considered the issue for years. The former mayor of Alamogordo, Griggs says many licenses that originated in small New Mexico communities have been transferred to places like Albuquerque – where they might have higher earning potential – and rarely make their way back. Under the quota system, Albuquerque should have 273 licenses; it has 372, according to numbers on the New Mexico Alcohol & Gaming Division’s website.

Last year, Griggs had a proposal to allow those who hold the most comprehensive dispenser licenses to lease the half (package or by-the-drink) they might not be using, but it never was introduced. He said he might introduce another bill in 2017, perhaps based on the same idea, but that he hasn’t made any decisions. He continues to meet with interested parties to see if there is a solution that would mostly satisfy people on all sides of what is often a thorny issue.

‘Outdated, outmoded’

Ruben Baca, executive director of the New Mexico Petroleum Marketers Association, represents an estimated 400 convenience stores. He said allowing owners to lease the unused half of their license sounds relatively palatable, but he cautioned that such an expansion would likely garner opposition from anti-drunk-driving groups. (The New Mexico Mothers Against Drunk Driving office did not respond to a Journal email on the matter.) However, Baca said he would object to any proposal that might, for example, create a new class of liquor licenses for restaurants because that would be unfair.

“We paid for our licenses. We don’t like going out and paying $350,000, $400,000 for a license – we don’t like to do that, either, but that’s the way the rules are right now, so we live by them,” he said.

Former Albuquerque Mayor Jim Baca oversaw a major overhaul of the Liquor Control Act during his 1979-81 tenure as state liquor director. Baca said treating the licenses like private property is one of the system’s biggest flaws, as is what he calls an “outdated and outmoded” quota system. The law limits licenses to one per 2,000 people.

“Why is that even valid anymore?” he said. “If you want economic development … you should not have a quota system. You should give licenses out to responsible people who will use them properly.”

New Mexico Alcohol and Gaming Director Root was not available for an interview last week, according to a spokesman. In an emailed response to a question about whether there is talk within the office about expanding the program, Deputy Director Debra Lopez said, “We’re committed to a balanced and responsible approach to protecting public health and safety while doing our part to help the private sector grow.”

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