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No license for proposed South End steakhouse

The Boston Licensing Board yesterday deferred action on the proposed Boston Chops on Washington Street because it has no liquor licenses left to hand out.

At a hearing on Wednesday, the attorney for the latest venture by the group responsible for Deuxave in the Back Bay and dbar in Dorchester, said they would likely have to just keep hoping a license frees up, because expensive renovations and soundproofing needed for the space where Banq and Ginger Park failed means they could not also afford the $300,000 or so it would take to buy a liquor license on the open market.

State law limits the number of liquor licenses available in Boston.

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Comments

Why does a liquor license in Boston cost a 1/3 of a million dollars?

Who in their right mind thinks this is good for customers or business in the city?

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This is simple supply/demand. Resource scarcity -> price increase. If the law was changed to allow for more [liquor/food/hackney/etc] licenses, then the market price for them would come down.

The state legislature likes to keep a tight hand on the flow of business creation in Boston. I suspect that a lot of non-Boston legislators feel they are protecting the interests of their local business constituencies by handicapping the "tiger in the room".

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The difference is that in other places, it's a certain number per 10,000 residents. Only in Boston does the legislature arbitrarily set a number. Goes back to the anti-Irish days of the 19th and early 20th centuries, which is also why the Boston Licensing Board is appointed by the governor, and which leads to things such as Dianne Wilkerson stuffing cash into her bra (in exchange for getting more liquor licenses for Boston, one of which was for the guy who turned out to be wired for the feds).

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It's also bigoted in origin. And will this somehow convince the Puritans to end their liquor licensing madness? Of course not.

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OK, stupid question.
Let's say I have a liquor license, and I want to close my business. Is that liquor license mine to sell?

That makes no sense to me. I would think it would be handled like a mooring in a harbor. Once you give up the mooring, it's not yours to sell. You hand it (the rights to the mooring, not the mooring itself) back to the town that manages it and they assign the mooring to the next guy. You don't own the mooring.

I would think that one does not "own" the liquor license.

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If you couldn't sell the liquor license, then people would probably do shell games where they actually sold the entire business, which then changed its name and location and gave back all of the physical assets to the previous owner or something. The liquor license is probably one of the most valuable assets of a restaurant in this city, so people will figure out some way to buy and sell them.

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There are some licenses that have to be given back to the licensing board when you go out of business (for example, in certain "blighted" areas or if the owner agrees to a license restriction). Most, however, can be resold on the open market and, in fact, that's often the main asset sold off in bankruptcy.

Legally, the licensing board has to approve the transfer of a license. If it's in the same location, that's generally fairly pro forma. If the license is going to be moved into another location, though, you'll have to go before whatever the local neighborhood group is first (such as, say, the Neighborhood Association of the Back Bay, which says the Back Bay has just the right number of licenses already, thank you very much, and so will fight tooth and nail against any new licenses - this was an issue when Deuxave proposed opening up before the Louis restaurant had moved out). But aside from the Back Bay and, increasingly, the North End, most neighborhoods are not really so finicky and the board will usually grant the transfers (true, the Allston Civic Association narrowly voted to oppose the transfer of a liquor license from some closed place in Roxbury to a Lower Allston pizza place, but the board approved it anyway).

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I want photographic proof.

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I'm not of the impression that Ferrer plays for the other team. Besides, you'll have to compete against me for her.

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Fact is alcohol outlet density is correlated with vary crimes. Like DUI's, assaults, etc. It is good public policy to limit & control the number of licenses. You need to factor in the social costs too. Police, medical, loss, noise, etc.

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Jesus, isn't this what zoning is for?

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Correlation does not equal causation. I'm sure income, education level, and population density correlate with those same endpoints as well. What are the social costs of a high end steakhouse (besides $40 for a prime steak)?

The $300k isn't dictated by the city/state. It's the free market price of buying a transfer.

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Re: your last statement - just by establishing licensing programs in the first place, government enforced scarcity precludes the possibility of a truly 'free' market.

I'm not saying that a completely unregulated number of restaraunts would produce better long term cultural/economic outcomes - I'm just pointing out that the government does not need to explicitly set prices in order to strongly influence market value for licenses.

The trick is finding the sweet spot so we don't get business environments that are either boom-bust-free-for-all or choked-in-the-cradle. There seems to be a pretty wide consensus that Boston's license supplies (food/hack/etc) are constrained to an extent that depresses new enterprise activity in the city. There's less consensus as to whether the degree to which this happens is a good or bad thing, and if bad, what should be done to address it.

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Since you believe that, then you'll be displeased to note that limiting liquor licenses actually produces higher densities of alcohol serving businesses.

That's because as the cost of acquiring a license rises, it becomes more and more imperative to locate your business in a place where it will attract a lot of customers to pay for it.

But I would suggest that your so-called "fact" is obviously not true. Take a look at that Bostonography map to see where the liquor licenses are. It's pretty neat. There are large concentrations in downtown Boston, the Back Bay, Harvard Square, Davis, Allston and Coolidge Corner. None of these areas is high crime. So much for your "correlation" which frankly smells like the anti-Irish bigotry that Adam mentioned earlier.

The current system lends itself to bribery and corruption, because it is such a huge distortion of the market. If we instead chose to properly tax and assess fees on establishments serving alcohol, then we could pay for the necessary social services without creating this mess.

And guess what? Massachusetts isn't the world (newsflash, I know). Even in this country, there are many states without such restrictive licensing laws. And believe it or not, they are not dystopian hellscapes either.

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Cambridge currently has the highest alcohol outlet density with 1 liquor license per every 700 residents compared to Boston and other nearby cities at about 1 to every 950 residents. The reason for this is that Cambridge successfully petitioned for an escape to the ABCC's control of their limit. Cambridge now sets its own limit.

So, are DUIs, assaults, and social costs higher in Cambridge than Boston? There's your grand hypothesis put into action right across the river.

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they still held a hearing on the steak house's request for one anyway.

Seems to me to be a silly waste of everybody's time and the taxpayer's money.

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Now there's a job-killing regulation to hate.

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That, and the completely asinine taxi medallion system (I believe those are up to $500k per cab here... good luck getting that funding outside of an already established incumbent taxi company)

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There is no excuse for this. Why would they want to kill a new business? I talked to City Councilor Matt O'Malley about the issue when he was campaigning and he said he had never heard from anyone who had a problem with it, ever.

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He should stop by Cristelle's on Washington Street and ask them about the time they tried to get a beer and wine license (they eventually did). Or for that matter, the Upper Crust on Centre Street.

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I should add that this discussion with O'Malley occurred before he had ever actually served on the city council. He was running for office but had yet to hold any position that I know of--but it still surprised me that during his campaign not a single person had ever raised this issue. I wonder what his response would be today? Seriously, it would be a make or break for my vote for any candidate--a litmus test to see what they were made of. For the status quo? A player. Against it in this instance? Someone who might actually mean business. I bet most of them would say it is no kind of issue and brush you off though.

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It's not like this is really going to come up a lot - I'm thinking the good people of West Roxbury and Jamaica Plain are not actively fretting about how to attract more restaurants with liquor licenses.

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Ahem, yes, he probably doesn't have to worry about too much, which is why Boson Proper needs its own City Councilor, someone who both lives and works in the neighborhoods. Mike Ross is the closest thing we have but he lives in Mission Hill.

John Connolly is the only city councilor I know who has ever taken a real interest in Boston - Center.

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Boston should simply collect fees for every liquor license or taxi medallion issued. The free market would take care of itself. This type of legislation is anti-competitive. In this case, government needs to stay out of the way.

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This is the kind of thing that turns people into Republicans.

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Because anyone with half a brain would realize that when Mitt was in charge it's not like he did anything about this either.

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right, because that's where you turn if you want drug regulation relaxed.....

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If I paid $300K for a liquor license transfer or $100K for a taxi medallion, and then deregulation caused the market price and thus the value of my investment to suddenly plummet, I'd feel ill-used. Who compensates these buyers?

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Besides those people are paying the current holder to agree to transfer it to them instead of keeping it for themselves or returning it to the city's currently empty pool for the next place on some waiting list. If you didn't want to pay $300,000 for your liquor license, you didn't have to. You just had to wait until the city was given a license that it could give to you.

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it's a free market all along. But suddenly changing the rules from a regulated market to an unregulated one is not the same as taking one's chances on an investment in a free market that has always been a free market.

There's a question of fairness there in the face of changing government regulations that you're ignoring. You can bet the folks who currently have a stake in this aren't going to sit back and swallow this "Screw you, that's your tough luck" notion without some kind of fight.

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I think that the relevant legal term is "Illegal Takings" -- businesses would sue the government for taking away the value of the medallion/license which they had purchased.

Not an expert, but I seem to remember hearing that other cities found ways around this, which involved gradually transitioning from "fixed-number" to "shall-issue" over more than 10 years, along with a gradually phased-out tax deduction for the owners of the original licenses. As only a few new licenses are granted each year, the value of the existing ones gradually decreases, offset to some degree by the tax deductions.

I believe that you're correct that the courts do not generally allow an overnight change in regulation that would rob this much value from existing property owners. That's why other states and cities have had to figure out transitions that could survive the legal challenge.

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Past performance is no guarantee of future performance.

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For political reasons, to assuage the complaints of folks like you, we phase it in over 10 years.

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