It was on Wednesday, January 13,Governor Michelle Lujan Grisham outlined her legislative priorities that she wants the legislature to consider and enact during the 2021 New Mexico Legislative. Included as a priority is liquor license reform efforts. Lujan Grisham wants to provide a provision that would allow alcohol home delivery and loosen up the state’s tightly controlled monopoly on liquor licenses. A bill has now been introduced by New Mexico State Representative Dayan Hochman-Vigil, a Democrat from Albuquerque that would make significant changes to New Mexico’s liquor laws.
HOUSE BILL 8
All bars in New Mexico have been closed since March under the Governor’s pandemic health care orders resulting in severe economic consequences. House Bill 8 introduced by Hochman-Vigil would allow what many consider would be a dramatic change in New Mexico’s liquor licensing laws. The legislation would allow restaurants, grocery stores, liquor stores, craft distillers, small brewers and bars to offer “home delivery” of bottled alcoholic spirits. Under the legislation, restaurant deliveries would be limited to beer and wine sales that would require a minimum food purchase of $25.00. All the other liquor sales businesses would not have a food sale restriction or a purchase quantity requirement.
HB 8 would create a new type of license that would allow restaurants to serve hard liquor, and not just wine and beer, without the purchase of an expensive dispenser license. If House Bill 8 were to pass, bars owners would be allowed to take alcohol delivery orders without opening their establishment. The argument made it would provide a stream of revenue for the struggling industry during the pandemic. The new license would allow restaurants to pay a yearly fee of $3,000 to the state to sell liquor.
JOHN STRONG GUEST COLUMN
Reforming our outdated and unfair (and possibly illegal) system of licensing liquor by the drink has been one of the hot button issues of mine for a very long time. I have written about this, lobbied for it, and spoken about it to everyone who will listen for years. Now that it finally appears that there is a real interest in reform, I wanted to revisit some of my own recommendations.
The Dayan Hochman-Vigil bill is simply going nowhere. The idea that simply allowing a restaurant to buy a license for $3000 per year instead of owning a current license that is purchased or leased makes those licenses worthless immediately. That’s about as unfair as you can get to those businesses who purchased them in the last few years. Rep. Hochman-Vigil says that businesses will replace their existing license with a new one with a yearly renewal fee, and will be able to sell their existing license to recover their investment. The problem here is who exactly will buy one of these licenses for $350,000 or so when they can simply obtain one from the state for a yearly fee? The licenses under this scenario are worthless, which makes a few other problems, namely that many owners have spent very large amounts of money on them, and many of these businesses have actually financed them at local banks. So now not only are you telling the license owners their asset is worthless, but you are telling the lenders their collateral is also worthless. That’s not a very good start. Let’s be clear. The current system is the product of inaction by our elected officials for decades. It is not the fault of the license holders at all. It’s s our states obligation to deal with this in a fair and moral manner.
HOSPITALITY INDUSTRY NEEDS LIQUOR REFORM
The hospitality industry in New Mexico is a pretty important constituency for elected officials. The pandemic has suddenly focused them on just how important that constituency is. It is not just business owners that are held back here, but also servers, bartenders, caterers and even the busboys, whom would earn more money and tips if this law were changed. You have a chance here to promote real infill and neighborhood development that is greatly needed as well. So now that the consensus is finally to do something, what are the best paths to move forward?
We must compensate the current owners of these licenses to at least some degree. Anything that does not do that will be doomed to fail, but there are a couple of approaches that will work.
Let’s consider where the problem really lies. Package store licenses are not the biggest threat to competition and economic development. Most of these are owned by big box retailers such as Walgreens, CVS, Costco, Total Wine and Allups parent company own about 120 of them. What we really want to do is to level the playing field for small by the drink dispensers such as restaurants, lounges and clubs. The goal is an environment where any qualified licensee can obtain one for even the smallest business.
This will likely result in hundreds of new businesses, lots of neighborhood redevelopment, and the creation of entertainment areas that can rival cities such as Austin, Denver, Scottsdale, Tulsa, and Oklahoma City. These are cities we are directly competing with to attract young people, and the companies they work for. Now that we are attracting investments from companies like Netflix and NBC Universal, we must make an environment that their employees want to live in.
It is a fact that redevelopment and gentrification of blighted neighborhoods through entertainment focused businesses is a great way to crowd out crime. The implications here are large particularly for Downtown Albuquerque, which should be the heartbeat of our state, but instead is a blighted area of boarded up businesses and buildings that are in disrepair.
Keep in mind that with reform, and the addition of hundreds of new bars, restaurants, lounges, comedy clubs, speakeasies, and small music venues, we can begin to reclaim some of the entertainment dollars that are lost to casinos. This is no small matter, as a large percentage of entertainment dollars are spent at the casinos that ring Albuquerque and Santa Fe, and these tax dollars are critical to paying for city services.
TWO POTENTIAL PATHS TO REFORM
There are two pretty straightforward paths to accomplish meaningful liquor reform licensing: .
1. Convert all 1, 411 licenses to package store licenses. You would essentially double the number of them, that would decrease the value of them, but likely they would still be worth $200,000 or so, and each owner could sell or lease theirs to a Walgreens or some other retailer. Couple this with a smaller payment from the state or tax credit and you’re done. Then go to a system where by the drink dispensers can pay a yearly fee for their license and there is no limit in the number. I personally feel that $3,000 per year is too much, and most of our neighbors are at around $1,000 per year.
2. Buy back all licenses and cancel them, and then go to a system of yearly license fees of about $1, 000. If you levy a supplemental tax for the sale of liquor, such as 4% in restaurants and 2% on bottles, you can bond against that tax revenue to buy back all licenses and just cancel them. The bond would likely pay off in 4 to 5 years. This would Also put much needed capital in the pockets of existing businesses that are leasing these licenses for thousands of dollars per month, or have bought them with their own money.
Texas has a supplemental tax of 6.7% on Liquor by the drink. Most states levy some form of tax. It’s hard to argue about this, as the state is not paying for it, even though they caused the problem, the public is paying for this reform, and all indications are they are wildly in favor of doing so.
There is one final thought worth considering. Get rid of miniature sales or restrict their sales even further. Miniature sales are a large source of down and out calls, a public nuisance, and a big source of driving while intoxicated. Anyone can sit in front of a convenience store and watch folks go inside, buy 2 or 3 of them for .59 cents and dump them in a big gulp on the way out while tossing the plastic bottles on the roadway. Municipalities hate them, but when some have tried to restrict or ban them they are threatened with lawsuits. This needs to come from the legislature itself. One example of a solution? In Oklahoma it is illegal to sell hard liquor in the same place that sells fountain drinks or ice. It a solution that needs to be thought about.
Meaningful liquor reform is long overdue. This issue needs the full attention of the legislature this year while there is serious interest. There must be a vigorous debate and then a consensus on how to move forward. Legislators should expect to be held accountable to the public if they do nothing. The pandemic has focused these issues squarely front and center, and if we do nothing now, it will never happen.
A link to related blog article is here: