John B. Strong has been in New Mexico since 1997. He is an art gallery owner in Santa Fe since 2000. Mr. Strong is a co-founder or board member at several different companies, mostly in technology, healthcare, and financial services. Mr. Strong describes himself as being “obsessed with entrepreneurship and small businesses.”
Walt Rubel is the Editorial Page editor of the Las Cruces Sun-News in Las Cruces, New Mexico. He has been with the Las Cruces Sun News since 2002 after having worked for eight newspapers in the states of Colorado, Wyoming, California and Kansas. During his many years with the Las Cruces Sun-News, his primary duties have been editing the opinion page and writing editorial opinions.
Following is a guest column by John B. Strong, an editorial by Walt Rebel published in the Las Cruces Sun News and further Commentary and Analysis. All 3 commentaries read together present a serious conversation about liquor license reform in New Mexico.
JOHN B. STRONG COMMENTARY
Many people don’t quite understand how outdated and unfair our liquor licensing laws are here in New Mexico. Decades ago the legislature created a system of a set and limited number of licenses to be able to serve or sell liquor by the drink. This is not the same as wine and beer licenses. There are currently 1,411 licenses in the state for this purpose, and they trade as a commodity and can be bought and sold to the highest bidder.
The state derives no economic benefit from the purchase, sale , or leasing of these licenses at all. They simply allow the owner to then go to the State Alcohol and Gaming Commission and apply for a license that allows them to sell alcohol.
Since there are a limited quantity of these licenses there has been a constant upward push in the price to acquire them. About 10 years ago these licenses cracked the $200,000 mark. Recently the last two licenses sold were reported by the state to be $500,000 and $590,000. Originally most if not all of these licenses were owned by local small businesses scattered across the state, but over the years the increased prices began to tempt small family owned businesses to simply sell them as they became worth much more than the actual business they were attached to.
Therein begins the problem. Many of these licenses began to migrate away from small locally owned businesses to large out of state corporations. Companies like Marriott and Hilton Hotels, Cheesecake Factory, Applebee’s, and other large chains. Then groups formed here to acquire licenses and lease them out rather sell them, both in anticipation of ever-increasing values for them as well as increasing lease payments.
If you are unsure of what effect this might have consider this, in a couple of years these licenses will likely crack $1 Million dollars! At that point (if we aren’t there already) you will never again see a small family owned Mexican restaurant that can sell a Margarita, or a local Steakhouse that can sell a martini, or an ethnic restaurant that can sell beverages native to the food they prepare. Consider the International District, which is home to many great ethnic food establishments, and they are under constant pressure to compete with large chains that have this unfair advantage over them.
Replicate that scenario across the city as well as the state and you start to see the problem. Keep in mind as well that we have an interest in our small businesses, because when the large chains sell that $10 Martini, their profits go straight to a corporate bank account in New York, Chicago, or LA. When our small businesses are able to make that sale, those profits percolate through the community many times over, and that is a BIG deal.
I don’t think anyone believes that when this system was set up that it would get to this point, and periodically over the years there have been conversations about reform, but nothing ever happens. Partly because there is a lot of money at stake for the folks who own these licenses (we think about half of them are owned by out of state corporations that probably pay little attention to their value) and it’s complicated to try and change it. I am told that we have around 34 different licenses for beer, wine, and alcohol, and that is far too many.
So now that we are in this mess, what do we do about it? I have a couple of suggestions:
The legislature could simply create a class of liquor license combined with wine and beer specifically for venues of less than 75 seats that would be affordable, say $500 per year.
This would take some of the pressure off the upward increase in the large venue licenses but they would still maintain a high value, while giving small venues a chance to compete.
We could levy a tax on liquor beer and wine, and bond against that revenue stream to begin buying in and cancelling the licenses. It’s doable.
The bottom line here is that this issue has a very outsized economic impact on both our cities, particularly Albuquerque, and our state. I tell anyone who will listen that this is not a liquor issue, it is an economic development issue.
Keep in mind as well, that now that we are enjoying some real success in attracting large investments from companies like Netflix, and NBC Universal, the employees they bring here will begin to demand the neighborhoods, music venues, and social spaces that they are used to in cities like San Francisco, Los Angeles, Seattle and Austin. They contain neighborhoods filled with small music venues, speakeasies, coffee shops, and bistros. We won’t have any real hope of creating these neighborhoods without reforming this issue.
And if we want to keep attracting more of these companies to invest and bring their employees here, we will need to give them reasons to say YES to living here. So let’s once again start that conversation about reform, but this time lets actually do something about it.
JOHN B. STRONG
WALT RUBEL, LAS CRUCES SUN NEWS , NOVEMBER 28, 2018
“When I moved to New Mexico in 2002, I was told the reason there was a set number of liquor licenses in the state was to control drunken driving and the other problems associated with alcohol abuse.
Which seemed like a strange way to approach what was a real problem, given New Mexico’s lax DUI laws at the time. Penalties topped out at the fourth conviction, meaning there was no difference between the fourth and the 40th. Unless somebody was hurt or killed in a crash, drunken drivers could expect a wrist slap.
The conventional thinking at that time was if we punished them, even by just taking away their driver’s license, it would only end up hurting their families.
Former Gov. Bill Richardson, working with Republicans like former Sen. Kent Cravens, ended that old way of thinking and dramatically reduced drunken-driving deaths in the state through a combination of tougher laws and more aggressive enforcement.
And yet the limit on liquor licenses remains.
It is now clear that the issue is not DUI or alcohol abuse, but rather protecting the investments of a small number of powerful business owners.
Last week the City Council voted 4-3 to support legislation that would crack the door open ever so slightly by allowing more restaurants to sell alcohol. But only alcohol produced by New Mexico distilleries. And, only for restaurants located within economic development districts.
While there were some public safety arguments raised during the City Council debate on the issue, the primary argument against the proposal came from those who own one or more of the prized liquor licenses, and who believe the government has an obligation to safeguard their business investments.
One business owner said he was counting on the fortunes to be made selling his licenses to finance his retirement. Another conceded that we have a broken system, but then argued that nothing could be done to fix it because it would hurt existing licenses holders.
Because of the artificial scarcity of liquor licenses created by the state government, those selling existing licenses can get up to $1 million for them. The average price is $300,000, according to the city, more than 10 times as much as in neighboring states. Obviously, that serves as an enormous detriment to new restaurants moving into New Mexico. Not to mention reducing the options for diners in the state.
Current license holders may be right when they say ending the restriction would mean more competition for their businesses and would lower the value of their licenses. But, when did it become government’s job to protect businesses from competition?
The government’s job is to promote the common good and work toward increasing the number of businesses that operate in the state. Maintaining a set number of liquor licenses to discourage out-of-state investment in order to protect a small number of current business owners does the exact opposite.
There are many valid reasons for a state to set laws regulating the sale and consumption of alcohol, most involving public safety. Protecting the business interests of those who have invested in licenses at artificially inflated prices is not among them.”
DINELLI COMMENTARY AND ANALYSIS
New Mexico has an extensive history of attempting to restrict liquor licenses and at the same time dealing with some of the highest rates of drunken driving (DWI) in the country. The state’s liquor licensing laws impairs economic development with no real evidence that fewer licenses reduce DWI rates and increase public safety in any meaningful way.
Out of state “chain stores and restaurants”, which are now proliferating Albuquerque and squeezing out locally owned businesses, can afford whatever it takes to buy a liquor license. Smaller, locally owned restaurants cannot compete nor afford to pay hundreds of thousands for a liquor license. Any average New Mexican who wants to open a new bar or restaurant with a full liquor license cannot do so because the cost of a liquor license is so prohibitive as a result of the cap placed on the number of licenses that can be issued based on population numbers.
Albuquerque has repeatedly tried for the last 50 years to revitalize the Downtown area. Revitalization of any downtown area always includes entertainment venues, new restaurants and bars. However locally own businesses simply cannot afford the investment in a liquor license. Laws preventing alcohol sales within 300 feet of a church or school, and preventing sales before noon on Sundays make any city in the state less attractive to businesses, while serving no real public safety function. Sunday liquor sales at one time were prohibited all day with one argument made because it is considered a day of worship for attending church and not for drinking. The 300-foot restriction is somewhat of a farce and should be eliminated.
If New Mexico Governor Michelle Lujan Grisham and the New Mexico Legislature truly want to encourage economic development and help locally owned businesses, liquor license reform must be included in equation.