Utah House Passes Law to Allow More Restaurant Liquor Licenses; Awaiting Senate Approval

April 07, 2011

For almost a quarter of a century, the Utah Department of Alcoholic Beverage Control has distributed alcohol permits to bar and restaurant owners based on a formulaic population quota system rooted in state law. But this system of liquor license rationing has proven a major headache for enterprising Utah restaurant moguls looking to take advantage of one of the fastest growing markets for eateries in the nation.

Census reports show slower than expected population growth in Utah (so the number of issued liquor licenses actually exceeds the amount technically allowed under state law), but demand for licenses remains at precipitous levels. Some restaurants are even being forced to close their doors while they wait in line for their chance at the trickle of alcohol permits in circulation.

Fortunately, the state legislature has taken notice; a bill aimed at making more liquor licenses available for restaurants is currently working its way through the Utah Senate, and House members have already passed a similar measure.

How the New Bill Will Provide Relief for Restaurants under Utah's Alcohol Permitting System

Under the current Utah quota system, a new permit to serve alcohol is released every quarter if the state population is estimated to have increased by 7,850 or more (additional licenses are issued if the population is deemed to have grown by bigger leaps).

But today, however, there are far fewer actual Utah residents than calculated by estimates (the state is home to around 75,000 fewer people than expected). As a result, because of the license quota requirements, there remains a period where no new permits can be issued until the real population total can catch up to the inaccurate estimate--thus leaving restaurateurs waiting.

The quota law, while fairly rigid in the creation of new licenses, does allow existing alcohol permits to circulate; if a restaurant or tavern closes, their license becomes available.

Specifics of the Bill

With a few tweaks to how on-hand liquor licenses are designated, legislators are attempting to seize hold of this window in the law. A new bill recently passed in the Utah House of Representatives would convert unutilized beer-only bar licenses (of which there is a surplus) into restaurant licenses. The House bill would allow 41 unused beer tavern licenses to be distributed for use in restaurants, with 20 licenses being designated for restaurants serving only beer or wine and 21 set aside for establishments serving a full range of libations.

Awaiting Senate Approval

This measure passed in the House with overwhelming support of a 67-3 vote. But, in its journey to become law, the House bill must next muster approval in the Senate.

But, some Utah senators have their own vision of how to relieve the liquor license crunch, and a separate, albeit similar, bill has been introduced in the Senate. Like the House bill, the Senate version would convert a number of beer-only tavern licenses into restaurant liquor permits; the Senate bill proposes additional restaurant liquor licenses numbering 25 for beer and wine and 15 for any kind of alcohol. The sponsor of the bill, Senator John Valentine, claims that if passed into law, the measures would actually decrease liquor intake, ensuring liquor is consumed with food by only granting new licenses to restaurants (to qualify as a restaurant, Utah law stipulates that at least 70 percent of sales revenue must come from food, which is usually not a high hurdle, as alcohol for a typical restaurants makes up about 10 percent of purchases).

The Senate bill (containing a few more minor tweaks to other liquor laws) recently passed the Senate Business and Labor Committee with unanimous support. Its next stop? The Senate floor.

Time to Reconsider the Quota System?

Whether the House bill or its Senate counterpart eventually comes to fruition, everyone involved expects the 40 or so new liquor licenses to be snatched up immediately. In a time of economic stagnation across the county, barriers to new businesses, like Utah's liquor license quota system, are coming under mounting scrutiny.

A recent poll of Utah residents found that a majority support increasing the number of alcohol permits, and even Representative Gage Froerer (who sponsored the House bill) called his proposal to release 41 new restaurant licenses a measure that would only provide temporary relief for the unremitting demand for new liquor licenses. Froerer, along with others, would like to explore alternatives to the quota law, and in the process provide the opportunity for new restaurants to stimulate economic growth, creating jobs and generating much-needed sales-tax dollars.

In time, Froerer and his colleagues may be able to garner the political capital necessary to challenge Utah's liquor license quotas on a broader scale.

Article provided by Cleveland Law Firm
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