Gov. Murphy raised the issue in his State of the State address. Two prominent lawmakers have proposed legislation
Spurred by Gov. Phil Murphy’s pledge to support reform, lawmakers are working on changing the state’s liquor licensing laws that have remained largely unchanged since the years just following Prohibition.
The current laws make obtaining a liquor license difficult and allow for a finite number of retail consumption licenses, the kind that a bar or restaurant needs to legally sell beer, wine and spirits. Each municipality can only issue one of these licenses for every 3,000 residents. The state allows for these licenses to be sold privately, so as demand for a license is high, the price is high.
According to recent estimates, the average cost of a license in New Jersey is around $350,000. However, some are sold for far more. A few years ago, for example, Cheesecake Factory paid $2.3 million for a license to sell alcohol at its Short Hills Mall restaurant.
Proponents of legislative reform point to these high costs and the limited availability of licenses as reasons change is necessary. Without the ability to earn revenue from alcohol sales — which substantially increase profit margins for restaurants — development efforts are discouraged. It also may unfairly disadvantage independent restaurateurs and mom-and-pop restaurants that cannot afford the price of a liquor license.
Sen. Troy Singleton (D-Burlington) and Sen. Paul Sarlo (D-Bergen) are sponsoring legislation to allow inactive licenses to be transferred between municipalities — something currently not allowed by law. The bill has been introduced in the Senate and referred to the Senate Law and Public Safety Committee.
What’s in the bill
A municipality would be able to acquire additional licenses in a few ways, under their bill. A municipality that has available licenses would be able to directly sell them to another municipality, the highest bidder. Additionally, a municipality that is seeking a new license, but is already at its limit, could look to acquire an inactive license from any license holder in the state. Furthermore, any holder of an inactive license could apply to the governing bodies of the issuing municipality and a municipality in the same county to sell that license in a private transaction. The bill would require any license that is inactive for two license terms to be actively used or transferred.
These licenses must be transferred as part of “an economic redevelopment plan” or on premises “located within a redevelopment, improvement, or revitalization area,” according to the bill.
Singleton told NJ Spotlight News that this bill addresses Murphy’s concerns about an antiquated system with a limited availability of licenses and respects the current holders of licenses.
“I think we have an obligation to strike a balance between expanding new opportunities for economic growth and recognizing the investment and valuation that existing holders of liquor licenses have,” Singleton said.
Legislation in recent years — and Murphy’s recent remarks — called for reforms that would add new licenses. Those opposed to these changes said adding new liquor licenses would immediately devalue the businesses of current license holders. They emphasize that this would be unfair to those who invested in purchasing a license. Singleton said his legislation instead focuses on already existing licenses. According to estimates cited by Singleton, there are between 1,000 and 1,400 inactive liquor licenses in New Jersey.
A previous attempt
In 2016, then-Assemblyman John Burzichelli (D-Gloucester) introduced legislation that would create new liquor licenses for certain restaurants and permit additional liquor licenses. To address the concerns of existing license holders, Burzichelli’s bill proposed tax credits to compensate businesses for the devaluation of their licenses.
Burzichelli, who lost his bid for reelection in the 3rd Legislative District last year, said the existing laws impose a structural restraint on trade and block opportunities for entrepreneurs.
“There’s always risks associated with being in any business,” he said in an interview with NJ Spotlight News Monday. “The fact that there’s discussion going on, if some degree of fairness and equity can be established, I think that’s the right approach…”
‘We hope that we can find a pathway forward that will be fair for everyone, and that we can find a better future for this liquor license system.’ — Dana Lancellotti, New Jersey Restaurant and Hospitality Association
Burzichelli said he feels very strongly that the next generation of licenses should be tied to food-related businesses. He said that would give people trying to start up restaurants a better shot at success. His bill included permits for restaurants based on things like seating capacity and kitchen size.
The work he and colleagues did on the issue “envisioned the municipalities would be the ones that would make decisions on how many active licenses would be in their town based on what they wanted,” Burzichelli said. “If you have potential for twelve new restaurants to come to town, you issue twelve licenses.”
Current license holders
Dana Lancellotti, the president and CEO of the New Jersey Restaurant and Hospitality Association, said that while she wants to encourage new development, simply adding new licenses would be unfair to businesses that already have licenses.
“We don’t want to forget them; we don’t want to put them in a position where they’re going to have any threat to their financial stability, while we’re trying to also bring new business to downtown,” she said. “So, we don’t want to hurt people who’ve already brought so much to our downtowns and our communities and neighborhoods. We want to find a way that this can work for everyone.”
‘I think we have an obligation to strike a balance between expanding new opportunities for economic growth and recognizing the investment and valuation that existing holders of liquor licenses have.’ — Sen. Troy Singleton
Lancellotti said that the current system is not working and changes need to be made, but that they need to be the right ones. That’s why it has been such a complex issue for so long, she said.
“This liquor license system is not ideal,” Lancellotti said. “We hope that we can find a pathway forward that will be fair for everyone, and that we can find a better future for this liquor license system.”