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Roslindale restaurant owner tried to cash in value of his liquor license and stay open, but board wouldn't let him

The Boston Licensing Board's Feb. 14 agenda had a pair of unusual items. Under number 10, Redd's in Rozzie's owner, Charlie Redd, sought permission to sell his restaurant's liquor license to bartaco, a national upscale taco chain seeking to open its first Boston outlet, in Fort Point. Under number 11, Redd sought one of the "neighborhood" liquor licenses the city had won under a state law first proposed by City Councilor Ayanna Pressley.

By itself, Redd's first request, to sell off his license, was nothing unusual - except normally license owners only do that when they're going out of business and seeking to recoup the value of their one main asset - their liquor license. Because the state legislature has limited the number of licenses Boston has, their value on the open market has skyrocketed - at one point up to nearly $400,000 apiece.

But Redd wasn't going out of business, at least not then.

He told the board he saw the value of liquor licenses like his - which was included in a roughly $339,000 deal he'd made several years earlier with his landlord and a previous owner of the space's liquor license - and wanted to recoup his cost before the value plummeted even further. Instead, he wanted to get what he still could for his license and essentially trade it in for one of the lower-cost "neighborhood" licenses - which could not be sold on the open market and had to be returned to the board if the restaurant went out of business. That happened just across the street from Redd's last December, when the board took the license another chef had won for a restaurant in the old Roslindale trolley station and gave it to a Thai place on Mission Hill after the substation proposal foundered.

The board, though, denied Redd's request for a new neighborhood license - even before getting to the question of whether it even had any of the 60 licenses left.

In a denial letter sent last month, the licensing board said his request would subvert the whole reason for the licenses Pressley had helped get for the city - which were aimed at encouraging new restaurants to open up in under-served neighborhoods, such as Roxbury, Dorchester and Mattapan, as well as "Main Street" areas such as Roslindale Square, and were not intended to let people cash in on licenses they had earlier paid for. It also cited a requirement to show a "public need" for a new license:

The Board noted that the purpose of the Neighborhood Restricted License was not to allow an existing licensee to gain a windfall by selling an unrestricted license on the open market to obtain a free, Neighborhood Restricted License. Further, the Board questioned the Applicant's ability to demonstrate a public need for the Neighborhood Restricted License ad the Premises as the Applicant was simultaneously applying to transfer the Existing License to a new location.

In his announcement today that he would be shutting Redd's next month, Redd blamed Pressley - who is seeking another 153 new liquor licenses for Boston, again mostly for outer neighborhoods - and district Councilor Tim McCarthy, whom he said supported Pressley's proposal.

This initiative is popular politics meant to drum up image for the individual city councillors' next political ambition, not change neighborhood licensing in a healthy manner. These type of drastic changes in restaurant licensing in neighboring areas have wiped out the value of licenses and I refuse to let that happen to my life savings.

Boston Magazine reports McCarthy said he considers Redd a friend and he is disappointed the restaurant is closing, but said the liquor-license issue has nothing to do with it. Pressley issued a statement that does not mention Redd's but points to her work in helping revitalize communities where start-up restaurants could not afford the costs of all the licenses snapped up by national chains downtown and along the water.

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Comments

Sounds suspect to me, Good reporting, under the ordinance, you cant have it both ways...

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upscale taco chain

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It's hard to see this as anything more than Redd crying sour grapes because the city wouldn't let him take advantage of a situation designed to help restaurant owners starting out and not existing ones. I feel for him kind of but his solution is to just close? Did he take his ball and go home as a kid too if he didn't get what he wanted?

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But on this issue, I'm 100% behind her. It is insane that someone is trying to use a program designed to help underserved neighborhoods develop to basically cash in.

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It's not insane. It's business.

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Not true. You can do business and still be moral. And doing business is not an excuse to be amoral.

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What does morality have to do with it? Because he's trying to recoup what he paid for his license? It's too bad that he's chosen to sell his license and close his business, but it has nothing to do with morality.

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The program was envisioned as a means to get more licenses to underserved areas. Stunts like this one (were it successful) if replicated would lead to more licenses in areas well served at the expense of underserved areas. For that matter, should Roslindale Square even be a part of the program. I get the idea of putting the licenses in Main Streets areas, but Roslindale Square has been a Main Streets district for 30 years. I think the time of thinking of the area as needing improvement has passed.

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Well, now his license is leaving the area, *and* it won't immediately be replaced. Is that better?

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Since he didn’t pay for it in the first place, why should have the right to sell it.

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The board should allow Redd’s to sell his license and pick up the freebie. They’re right when they say it goes against the principle of creating new opportunities in outer neighborhoods, but the alternative is that Redd’s is forced to subsidize his competition by draining his investment.

The big problem is exactly the same as with taxi medallions. An artificial market was created by artificial scarcity of a piece of paper, or tin, and buyers were allowed to bid any price for these licenses.

There’s nothing wrong with setting a limit on taxis or liquor-serving establishments. But people shouldn’t be allowed to profit by buying and selling their licenses on the open market. A license should have a fairly low set price and, like the new neighborhood licenses, go back to the government if the owner disposes of the business.

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his request would subvert the whole reason for the licenses Pressley had helped get for the city - which were aimed at encouraging new restaurants to open up in under-served neighborhoods

IMAGE(https://odysseyonline-img.rbl.ms/simage/https%3A%2F%2Faz616578.vo.msecnd.net%2Ffiles%2F2016%2F05%2F20%2F635993689613695234798865864_26-backward%2520gun.jpg/2000%2C2000/jBsrs41e9%2BRWZ0B%2F/img.jpg)

Instead of encouraging new restaurants to open up in under-served neighborhoods, we've got encouraging old restaurants to close in under-served neighborhoods.

Pressley for the win?

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Would be a better graphic.

He was planning to sell his license and close, anyway, chump.

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The seaport will get a national upscale taco place! Redd's is exactly the kind of place that these low-cost licenses would go to if it were just starting off. Instead, they'll likely force him out of business one way or another. Can you really blame the guy wanting to try not to lose everything because the city is more concerned with proposing things that sound "right" rather than doing what's "right". I'll be sure to stop in and let them know how much I'll miss them. That place is one of my favorites in the whole city. Their Sunday brunch is so wonderful.

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Then the city would basically have to do the same for the other thousand or so restaurants with licenses out there. That is an impossibility when the state only doles out a handful of new licenses to the city. People who are saying this do not understand how this system works and how much the state limits the city. The city literally does not have anywhere close to the number of necessary licenses to hand out 'freebies' as you say. It cannot be done.

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But here's the thing - none of the new licenses are going to neighborhoods like, say, Fort Point, so any new upscale taco places that are opening now or in the next decade are eligible for them - so they still have to buy on the open market. Any new places that open in the square, or mattapan, or other outer neighborhoods, can turn around and sell their neighborhood license, so those aren't entering the secondary market. So it really doesn't affect Redd's 'investment', because he would still have the option of selling his 400k license to the newest Legal Sea Foods: South Station outlet or whatever in ten years.

It DOES affect the secondary market in the specific neighborhoods that are being granted these neighborhood licenses, so I guess if Redd was determined to only sell to another restaurant in Rozzie, then yes, his investment would be decimated, but that obviously isn't his concern.

It's kind of the opposite, actually, since what he wanted to do was take a neighborhood license (which are still limited!) from some other potential restaurant in the square while selling his open license up in the waterfront. If the entire program's purpose is to encourage additional licenses in the outer neighborhoods, opening a new restaurant in Fort Point goes against that.

Dude's just mad he couldn't cash out AND keep slinging inconsistent brunch

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If the process were fair, he should sell his liquor license, close Redds, and then request a free neighborhood license to open Redds2.

And Fort Point definitely needs an upscale taco joint where you can get margaritas.

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What are the costs of the new licenses. Are they really free?

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If everyone does that, then the market is flooded with "old" licenses and he won't get anything for it anyways (because nobody will buy them at the high price knowing that waiting for the new licenses will be a savings for them too).

In other words, if there are more licenses coming they either need to be metered in such a way that old license holders slowly lose value and anyone wanting a license badly enough will still pay *some* inflated amount over the new baseline that will be reached or it's tough titties for old holders and they paid solely to have a license at the time when it was more a rarity.

Or we could just have a bunch of bars open in people's homes where they don't need a license to serve liquor because they're individual-owned and people use a "drink-sharing" app to discover them and the app company disavows any responsibility for the ensuing insanity they create.

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People who want to open restaurants in high cost touristy areas will still buy at the old prices because they aren't eligible for the new licenses. There is a semi-metering going on, by virtue of the licenses only being available in less popular neighborhoods, while demand and prices stay high in the waterfront, downtown, back bay, etc

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Coding BOOZR right now. I’m gonna be rich.

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I thought it's Uber for liquor....

"Luber".

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You swipe right on that one and get your oil changed?

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But there is a dipstick involved...

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Your last paragraph describes the new show from Mike Schur - creator of Parks and Rec and the Good Place FYI.

https://www.avclub.com/tv-delight-natalie-morales-to-star-in-michael-sch...

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You have to break a few eggs. Charlie Redd is one of the eggs Pressley and McCarthy had to break for their new plan.

Everybody who claims he's trying to make a fortune by selling his liquor license is talking nonsense. He put a fortune into the liquor license in 2011, he's just getting it back before Pressley and McCarthy make it evaporate.

Why should they be able to wave a magic wand and make 350K of someone else's money disappear? He should just let that happen?

I'm sure Pressley and McCarthy are great people and all, but if someone tried to make all their home equity disappear they wouldn't let it go without a squawk.

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stocks, boats, real estate, gold, Beanie Babies.....the "market" can fall out from under them, at any time. Due to regulations, business conditions, or people just losing interest. This situation is no different. You over paid for a licence. OK, well, you still HAVE the licence right? You can still be a legal drug dealer in Roslindale, where there are so few legal drug dealers right? OK then, keep your business open and continue making money. Not seeing the problem here.
Either the business was NOT doing good and the licence was the safety net Redd is rushing to hold onto, or he's sick of working for a living and wants to walk away with what he started with.
Someone with a successful, thriving business would NOT be doing this. Can you imagine Davios, or something of the same ilk that has been around for decades, doing this? Of course not. I look forward to seeing who moves in at Redd's with their shiny new FREE licence.

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I've written this before here but the city should not allow private sales of liquor licenses at all. Existing licenses should have a requirement to be turned back into the city upon restaurant closure, new ones should awarded for a nominal amount of money and based on the merits of the application. For those legacy ones where people paid top dollar there should be a timetable set up with a reducing buyback payment schedule based on the fact that they are earning money with the license on liquor sales in each of the years they continue to possess it.

To make up arbitrary numbers let's say that it starts with the buyback price being $280k and it is reduced every year by $20k until it reaches the level that the new licenses are being granted for.

I visit friends in Philly and DC and it kills me that there are all kinds of interesting small neighborhood restaurants there while places like that would have a much harder time opening here (though a little easier now with the 'hood licenses).

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After the buyback, would your policy allow the restauranteur to acquire a new, nominally-priced license?

Your suggestion sounds better than the current situation, in which Boston essentially wants to confiscate fifty thousand dollars from Charlie Redd for each year he’s run a restaurant here.

It’s a heck of a way to punish a guy for opening a restaurant in Boston. I hope Somerville treats him better.

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You can't sell your driver's license. You can't sell your business license.

Anyone who participated in the buying and selling of liquor licenses should have at least insured themselves against the possibility that it might actually be treated like, you know, a LICENSE and not a commodity.

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They would only be able to get the money if they were closing the restaurant. I want to see a more vibrant local restaurant scene in the city and those people have a legitimate gripe that a rule change like I'm proposing is stripping their asset of value. I see my proposal as a way to balance the benefits of the regulatory change with some controls for the now depreciating asset to mitigate harm to the current owner. If your restaurant is still plugging along in 10-20 years then it's a safe bet that you've been able to recoup the cost of that license by then. Consumers win and license owners are given a bit of a safety net.

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What Redds paid for was the ability to have a rare license for the entire period of time from when he bought it to the time when the licenses are plentiful.

If every other restaurant closed tomorrow and all their licenses went back to the city because nobody wanted to open a restaurant, then Redds' license would be worth the paper it's printed on...who's responsible for its devaluation then?

Yes, it's a state/city-created rarity and yes, the state/city is going to affect his monopoly on selling liquor. This is was one of the risks that was understood and should have been taken into account when the license was purchased secondhand in the first place.

Imagine you buy a Picasso for millions of dollars because it came from a period when people didn't realize Picasso had painted...so it's super rare. Then, a warehouse is found and it's full of Picassos from that time period. Every house has one like a Velvet Elvis. Your Picasso is worthless. Them's the breaks.

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Them's the breaks.

Here's the problem with your reasoning: Restaurants borrow against the value of these licenses to grow their business. If we make the value of the licenses suddenly more volatile, we vastly increase the interest rates charged to the restaurant for this borrowing. If the goal here is to help grow Boston's restaurant scene, randomly devaluing these licenses will achieve the opposite goal. It sucks that we've created this system where legitimate business owners have to shell out hundreds of thousands of dollars just to do business in our state, but since we have, it's in our own best interest to make their financial lives more predictable.

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Restaurants borrow against the value of these licenses to grow their business.

Who told them that was a good idea? Is it a recourse or no-recourse loan? Maybe the lender is the one stuck in the cold (fat chance). The housing market tanked in 2008 and a lot of home equity loans went underwater and banks foreclosed on a lot of property. Them's the breaks.

You're right that the city/state has an interest in not killing the restaurant scene by sending a bunch of owners into foreclosure on their licenses. I can't imagine a bank wanting to collect a license that they know is worthless in the end though. However it's also not true that adding more licenses is necessarily going to reduce the revenue that these guys have to pay off the loan payments for whatever they were lended against their collateral (the license) even though the collateral is now worthless. That sounds like an issue the lenders will have to take up with the lendees where they can agree that payments are being made and it doesn't matter that the collateral is no longer worth what was lended against in the first place.

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The housing market tanked in 2008 and a lot of home equity loans went underwater and banks foreclosed on a lot of property. Them's the breaks.

Yes, but the thing about homes is that their value tends to recover if you wait long enough. If they didn't, it would be almost impossible to get a loan in order to buy one. Maybe you want to make it impossible to borrow against the value of the license? That would almost certainly accelerate the devaluing of the license, however it would also further limit access to the restaurant business to only those with a lot of cash (so very rich people and restaurant groups, basically).

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Charlie Redd can wait 10 years, the neighborhood licenses will be given out, and then sell and recoup his costs then, is what you are saying.

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You oppose building new homes in your area because it will "steal money" from you?

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I'm putting in a pitch for Redd's on the Quincy Shore.

Somerville's got enough good eats. I doubt Redd's could come close to offering what it currently does in that market. It's never super packed, but more because they have plenty of space than not enough customers. I've been a Redd's fan for the past 4 years.

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The finacing structure of the establishments would collapse , a liquor license is used as collaterall .

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A buyback program would be *nice* but completely unnecessary.

The license was worth what it was because the city/state wasn't giving them out fast enough for the number of places that want one. But that worth wasn't realized by the city/state. It was realized by the previous owner...and somewhere back up that chain of owners is someone who got a license from the city for cheap because they were lucky or fast or simply old and benefitted from the artificial rarity created. But Redds could have gotten a cheap one too from the city...it just didn't have any to give him because people kept reselling them at a much higher value.

The point is that the city never realized the money from the new value...so if it's going to pay restaurants for their loss, then it's out of kindness and not some remuneration to the people stuck without a chair when the music stops...who still got to make money the entire time the music was playing.

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These liquor licenses are just as bad as taxi medallions.

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didn't the new owners do that?

https://www.universalhub.com/2015/license-swap-lead-new-restaurant-seapo...

Does this mean that the Aloft didn't pay?

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It does look a little hinky, but I see three main differences in that case: 1) the license for Gerard's was originally beer+wine only and they wanted to "upgrade" to full liquor, 2) the people doing the transfer were new owners, not established owners who just wanted to raise some extra cash, 3) they weren't selling the city-wide license, they were transferring it to another location they owned.

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The glaring difference is that the people that bought Gerard's are much richer than Redd. The board could have declined the transfer or allowed the license to "upgrade" without allowing another license sent to the Seaport.

The forgotten side effect of selling licenses means that they concentrate where businesses are the most profitable. I am sure there are people living in the seaport that would like to see a grocery, a dry cleaner or a hardware store instead of another restaurant/bar.

He definitely is responsible for the the risk that he took when he bought his license in 2011. It was possible to foresee the instability in the market at that point. Apparently, he failed to make the right political friends. There are ways to compromise. He could have downgraded to beer and wine.

But i would disagree that his complaint is completely unfounded. I think that allowing existing owners to sell their licenses and get a limited licenses is reasonable. difficult to arrange but reasonable. It seems he may have just expected them to create or assign him one when he requested it.

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Gerard's went through an ownership change, with the old ownership selling the license to someone on the waterfront rather than to the new ownership. Also, old Gerard's only had a beer and wine license, while the new ownership requested (and received?) a full liquor license.

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...

lawyer for Russell DeMariano and Edward Brooks, who would operate both establishments, said the Aloft restaurant would cater to hotel guests. DeMarino and Brooks, both Dorchester natives, said they want to upgrade Gerard's for the new century. They are seeking one of the new neighborhood-specific licenses approved by the state legislature, which means they could not resell it.

The new owners are both someones: they swapped out the old b&w license for Gerard’s to their other joint and then got a new local only full license for Gerard’s. Not entirely similar to the case in which the board refused Redd, but similar enough in some regards to raise questions.

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I think that would have been completely fair.

He took a chance to open a place in Rozzie Sq - a place that was/is considered "under-served." He had no choice other than to buy the liquor license at the price he did when he opened the place.

The cost wasn't his fault...it's the fault of the state with their draconian laws which drove up the prices in Boston as well as politicians of the past not doing much about that situation. And lets be honest - no restaurant can survive w/out a liquor license. Seven Star is unfortunately a great example of what these laws do/did to small businesses.

We love it when restaurants come into our neighborhoods and do well. We praise how great they are for the community. So you can't punish him now for "cashing in" when his and other small restaurants $400k license is about to devalue to nothing. We would do the exact same thing.

I am all for more licenses in the city and I think it should be controlled by the city - not the state. But it's ridiculous to peg someone as Snidely Whiplash when they used to be thought of as a great asset to the community. The city is basically telling small restaurant owners that their biggest asset is about to be worth poop and that they didn't figure out an equitable solution for them.

I believe 753 received one of those special licenses...so they already have a leg up on people like Redd b/c they don't have to try and recoup all that money. So if more businesses open with those licenses (which is great) Redd's and restaurants like them won't be able to compete and most likely go out of business anyway or move to other cities where they don't have to deal with it.

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would cast him as a villain, or fault him for doing what he is doing. But smearing the councilors on his way out is just petty and class-less. Like, sorry you have to close your money-printing facility guy, but lets not point fingers and throw a tantrum on the way out.

Why don't businesses, entrepreneurs, and civic leaders file suit against the state to strike that unfair law from the books OH RIGHT because everyone involved is profiting from the system in place.

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Not quite sure where you get off calling it a "money-printing facility." Restaurants are a notoriously narrow-margin business. As for whether or not he profits from it, I suspect he'd much prefer to not have had to pay for the liquor license in the first place, but once he's got it, it's understandable why he wouldn't want it to lose half its value.

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I would say this was an entirely predictable consequence of poorly designed legislation. Any economist could have told them that this is what would happen. It's unfortunate for the owner of Redd's that he decided to make his intentions known to the licensing board ahead of time. He should have just sold it claimed he was going out of business, and then reappeared under a new name a few months later to claim one of the free "neighborhood-only" licenses.

Also, it's not a "windfall" when someone pays $400k for something and then turns around and sells it a few years later for $339k. That's called a "loss."

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IMO the "right" way for the city (or state) to retire this stupid system would be to commit to a certain agreed upon and published level of annual depreciation, say 5%, and then make available--at auction--whatever was the right number of units required every year to achieve that rate of depreciation. This would continue until the price was at a level where it just covered its own administrative cost, at which point an unlimited number of licenses would be made available at that price. Perhaps you could even use some of the proceeds from the sales of the licenses to reimburse existing license holders for the lost value of their licenses.

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I would say this was an entirely predictable consequence of poorly designed legislation.

This is true and our state legislators deserve scorn and blame for allowing this to continue. Mr. Redd is completely off base blaming city councilors, though, who are trying to correct a system that they did not even create.

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Not entirely. Their method of correction needlessly harms current license holders but undermining the value of an asset they were forced to acquire as a condition of doing business.

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Holders of the existing licenses have spent a good amount of time and money lobbying those same legislators to keep the current system in place, as to continue benefiting from the monopoly. Same as how the few major players who were hoarding taxi medallions to grossly profit off of, to the detriment of the drivers, riders, and city, continued to use their illbegotten gains to pressure lawmakers to keep the system in place.

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Why is the cost of a license so prohibitive and so expensive in the first place? Does a restaurant/bar not need insurance for liability and property already? Can someone explain this to me...

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Make that artificial supply and demand.

Th numb of licenses in Boston is set by the state legislature. Guess what? Thy like lording it over Boston and so the number of available licenses is less than the demand. With the boom downtown and along the water, there are any number of large national chains willing to pay big bucks for licenses. Price goes way, way up.

The 75 new licenses Pressley got back in 2014 (60 for outer neighborhoods and 15 for anywhere) eased the price pressure somewhat. The even larger number she's trying for now (plus bonus "umbrella" licenses for big new complexes, such as the South Bay add-on) would probably do even more.

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Poor Charlie
Woe is me
Woe is me
Has a 7 day license BUT is closed Sunday nights and Monday.
Poor guy
Blames everybody but himself.
A real freaking asshole.

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I'm so bummed to see yet ANOTHER restaurant in this location/space close. Why can't anything that goes into that place seem to stay open for more than only a couple of years? While the service/staff at Redds is (I HATE to say this), really awful, the food is delicious. Another place to get good food gone from Rozzie again....

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