Business

Idaho liquor laws drive Bardenay expansion to Colorado

Bardenay bartender Craig West pours a cosmopolitan during lunchtime at the restaurant in Downtown Boise.
Bardenay bartender Craig West pours a cosmopolitan during lunchtime at the restaurant in Downtown Boise. kgreen@idahostatesman.com

Kevin Settles could buy a liquor license for a fourth Idaho location for Bardenay, his combination distillery and restaurant.

Settles paid between $75,000 and $175,000 each to buy licenses on the private market for his restaurants in Downtown Boise, Eagle and Coeur d’Alene. He knows how to play and win Idaho’s liquor-license game. With his track record, banks will line up to lend him money if he needs it to open a restaurant in either of his target markets, Twin Falls or Sun Valley.

But Settles said he plans to leave the state for his fourth Bardenay. He has chosen Colorado, preferably Denver or Fort Collins, where a successful license application will cost less than $1,000.

“When you’re adding up all the costs, you can do a lot of restaurant build-out for $175,000, the trading range for a license in Boise right now,” he said.

The high cost of licenses hinders job growth, argues Settles, whose Colorado plans were first reported by the Idaho Business Review. Depending on the city, people who want to open bars without buying licenses on the private market can wait more than a decade for a new, inexpensive state license under Idaho’s restrictive quotas.

Asked whether Settles is right, the head of the state Commerce Department, which promotes economic development, sidestepped the question. Megan Ronk referred the Statesman to the Idaho State Police, whose Alcohol Beverage Control unit issues licenses and enforces state alcohol laws. Russell Wheatley, who runs ABC, said the bureau enforces laws and strives to keep licenses in use. The bureau’s directive isn’t to drive economic development, he said.

Holders of the licenses do not want the state to undermine their value by easing rationing. So the Legislature has done only minor tinkering with liquor law — and not much of that — with no prospects for significant reform soon.

HOW THINGS GOT THIS WAY

Here’s how this system came about.

Idaho voters in 1890 ratified the state Constitution, which stated, in part, “The first concern of all good government is the virtue and sobriety of the people, and the purity of the home. This legislature should further all wise and well directed efforts for the promotion of temperance and morality.”

In 1947, the Legislature passed a law giving each municipality one liquor license (beer and wine licenses are separate) per 1,500 residents.

Once that allotment is used, someone seeking a license can get on a list to wait for a new license to be issued when a city’s population increases by 1,500 people. New licenses also become available if a bar has its license revoked, if a license holder dies and does not bequeath it, or if a holder simply forgets to renew a license. It costs $375 per year just to be on the waiting list.

The waiting list for a license in Boise is an estimated 20 years. But in Nampa, 16 of the city’s 59 are available, according to Alcohol Beverage Control Bureau.

When a license becomes available, the top person on the list is notified. That person has 270 days to find an establishment to use it. Applicants who do not establish a viable business in time forfeit their spot on the waiting list.

Then the holder must “perfect” the license by putting it into use immediately at an establishment for at least eight hours a day, six days a week, serving at least one drink per day.

Holding a license costs $750 a year. Once a license is perfected, the licensee can lease it for as much as $1,500 per month, or $18,000 a year. To discourage speculation, a license cannot be sold for two years.

People who cannot wait can buy a license on the unregulated secondary market from an existing holder. That price can be many times what a holder could obtain by leasing out the license. The state keeps 10 percent.

In 2012, an Idaho Falls businessman sold a license for $175,000. That license had been bought two years before for $125,000 and was leased at $1,300 a month for much of the time in between.

BOISE’S LONG WAIT LIST

Construction worker Jim Spittle’s name recently rose to the top of the Boise waiting list. He applied in 2001. He said he has signed a lease for a space to open a bar called Betty’s Liquor Bar on State Street near 38th Street.

Spittle said the window to start the bar is short. He envisions a small, 30-seat bar where locals can bike or walk with their dogs and plop down for a drink and conversation.

He said he could not have afforded to go ahead if he had to buy a license on the secondary market. “I wouldn’t be able to do a neighborhood bar,” he said. “If you spend $180,000 on a license, you need a certain number of seats to justify what you’re doing.”

Spittle said he would scrap the quota system that will reward his patience and foresight with a license worth up to $200,000. He would prefer more locally owned small bars and restaurants in the Treasure Valley rather than more large chains, such as Buffalo Wild Wings or Applebee’s, that can afford licenses on the secondary market.

“People could be a lot more creative and open more corner restaurants and bars, close to their neighborhoods, where they wouldn’t have to get in their cars,” Spittle said. “That adds vibrancy to communities.”

THE CASE FOR THE LIST

Brian Donesley, a Boise lawyer whose clients include businesses seeking to secure and season licenses, thinks scrapping the quota system would have the opposite effect.

A former Democratic state senator, Donesley has worked with Idaho liquor license laws for decades. He is a former chief of Alcohol Beverage Control.

Without quotas, he said, cities could be flooded with restaurants and bars, increasing competition to the point where only the largest operators — often big chains — would survive.

“If I can open a $5 million place, all my neighbors with their little bars will be in big trouble,” Donesley said. “This is Wal-Mart versus your neighborhood hardware store.”

I don’t want to see seven times the number of bars in Idaho by cutting loose the licenses and giving them to everybody who wants one. I don’t think that’s good for society.

Boise attorney Brian Donesley

Donesley said many out-of-state restaurant operators “don’t blink an eye because of the cost.”

“The system works,” he said.

The Post-Register in Idaho Falls contributed. Zach Kyle: 208-377-6464 , @IDS_ZachKyle

Ideas to reform licensing

Bardenay owner Kevin Settles said the state requirement that license recipients be up in running in 270 days — a 180-day period followed by a 90-day extension — is too short to secure financing, find a location and start a business, especially if permits are needed for remodeling or new construction.

He called it “a heavy lift.”

“On the flip side, you can’t invest in a space without having a license secured,” he said.

Settles testified at the Idaho Legislature in 2009 on behalf of a bill supported by Gov. Butch Otter to restructure the quota system. The bill failed.

Russell Wheatley, chief regulator as captain of the Idaho State Police’s Alcohol Beverage Control, said few stakeholders agree on whether the Legislature should make the system smoother by tweaking or gutting the quota system.

“There’s plenty of opportunities to fix problems within our codes,” Wheatley said. “But it’s complex. You have 10 different perspectives on how it should go.”

ABC litigated 17 cases against owners who weren’t using their licenses in 2014 and 2015, he said. Wheatley said the system would benefit if ABC had authority to seize unused licenses so they can be turned over to active owners.

Boise lawyer Brian Donesley, who represents license holders, said wrinkles could be easily smoothed. He supports: relieving operators by expanding their window from 270 days to 12 or 18 months; reducing waiting time by allowing applicants to sell their position on the state’s waiting list; and getting rid of the two-year seasoning period, allowing the free market to work.

Wheatley said extending the 270-day window is “certainly worthy of discussion.”

Boise’s waiting list

There are 59 applicants for liquor licenses on the Boise waiting list. Here are the first 10 in line. At least several have risen to the top of the list and have entered the 180-day window build-out period to set up their businesses.

Spot on list

Applicant

Year of application

1.

Liza Goul

2001

2.

Bobby Showers

2001

3.

Jim Spittle

2001

4.

Chadron J. Vassar

2002

5.

Don L. Wilcox

2002

6.

Kevin R. Ames LLC

2003

7.

A’A LLC

2003

8.

Howard Wasserstein

2004

9.

Jaysen Desaro

2004

10.

Hoyle Investment

2004

What neighboring states do

Like Idaho, Montana and Utah cap the number of liquor licenses they issue. Washington, Oregon and Colorado do not.

In Montana, licenses often sell for more than $1 million apiece on the secondary market.

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