NEW JERSEY — With the hospitality industry facing unprecedented hardship in the current economic environment, many restaurants are pleading for new revenue streams just to make their businesses sustainable. With municipalities across New Jersey at risk of seeing their downtowns downtrodden by the pandemic, the perennial political football of liquor license reform appears to gaining momentum.

“Our downtown was hurting prior to COVID,” said Westfield Mayor Shelley Brindle, referencing dynamic shifts in day-to-day lifestyles, such as online shopping.  “Now COVID has been kind of a dagger to the heart.”

State Senator Vin Gopal (D-Monmouth) and Assemblyman Brian Bergen (R-Morris) have recently joined the chorus of legislators like Assemblyman John J. Burzichelli (D-Gloucester) who have been calling for expansion of liquor license laws.

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On Dec. 4, Downtown New Jersey—an alliance of organizations, merchants, and public officials—hosted a Town Hall event to discuss the topic. Moderated by Tony Pizzutillo (Pizzutillo Public Affairs), Senator Gopal, Assemblyman Bergen, and Assemblyman Burzichelli were joined by Mayor Brindle and restaurateur George Constantinou (Mil Gustos Hospitality Group/Miti Miti Latin Street Food, South Orange, NJ) on a virtual platform to discuss a path to reform.

“Our liquor license rules are not working,” said Burzichelli. “They’re from a different time, they were designed to protect the public interest when shot and beer joints were on every corner.”

To stem the proliferation of bars in post-Prohibition New Jersey, laws that have come to represent the Class C liquor license were enacted, intent on capping the amount and concentration of establishments allowed to serve beverage alcohol.

“What we know today is that liquor does not work as a standalone business,” Burzichelli continued. “Food is the future for smaller retail spaces in older downtowns.”

Current bills in the State Legislature, S2964/A4925—introduced by Gopal and Bergen respectively—look to establish restricted beer, wine, and cider license while providing tax credits under corporate business tax and gross income tax for loss in value to certain alcoholic beverage licenses. Of course enduring obstacles remain, not least of which being the need to find an equitable means of compensating existing liquor license owners for their considerable investment.

“The concern from the Senate President is how do we compensate these license holders,” said Gopal, who represents constituents in Monmouth County on the Jersey Shore. “I have folks here who have paid millions of dollars for their licenses.”

Like real estate, liquor licenses appreciate based primarily on location, and their worth when transferred is assessed considering the moneymaking potential of a particular spot.

Constantinou can attest to that—as the successful owner of three full-service restaurants in Brooklyn who moved to South Orange, he sees New Jersey’s current system as a major stumbling block.

“In Park Slope I pay $4,000 every two years,” he said. “Once I heard about the liquor license laws here, I said I’m not opening anything up in New Jersey.” Eventually he did, opening Miti Miti Latin Street Food in South Orange. But he opted not to get a liquor license. “It’s cost prohibitive,” said Constantinou, citing the going rate for a license at $300,000-500,000 near him. “In the beginning, you really can’t do that.”

Nevertheless, there are those who did just that—shelling out astronomical amounts for the license to sell liquor, under the pretense that some day that license would at least hold its value, if not appreciate.

“For owners who have been working for ten, twenty years in the bar or restaurant business, this is their retirement plan,” said Assemblyman Bergen. “This has been their 401K. They’ve been operating under a certain set of rules, and I think it’s important to protect that investment portfolio. And the way that we do that is make sure that when we add things we offset what we’re taking away.”

The tax credits in the current bills are designed to do just that, softening the blow of what would essential become a depreciating liquor license, should this legislation pass.

Some have floated the idea of the State buying back all current Class C licenses, but the initial outlay has been considered, ironically, too daunting for most.

“If we bought every license in the state and put them back on the street, they become recurring revenue,” said Bergen, “and we could make that money back tenfold over time.“

While it may take desperate measures to breakthrough the walls of this legislation, desperate times call for just that.

“We’ve been doing back-flips and looking at buying properties for the sole purpose of putting a concessionaires liquor license in there as an economic development driver for our town,” said Mayor Brindle, discussing her efforts to rejuvenate Westfield’s downtown. “That’s crazy—we don’t want to be in the business of owning real estate, but our liquor license laws have forced us to make some crazy taxpayer decisions in desperation to drive economic development for our community.”

Consensus among the panel was that competition is good for business—creating a vital downtown or commercial district that attracts consumers and generates a sense of community. Constantinou has seen it in Brooklyn, and he wants to see it here, too.

“Competition increases business,” he said. “Restaurants bring more business—if you’re on your way somewhere and you see more happening restaurants, you’re going to stay in that downtown.” But he adds, “We’re in the food and beverage business, so if I can only sell 50% of my product here, it's not the best I can offer.”

Burzichelli concurred, saying, “Bourbon Street is a great example that competition encourages business.” He also recognizes the need for these venues to have the freedom to flourish. “Businesses can’t survive without every stream of revenue that could possibly be available to it. When a person sits down and orders an entrée, there’s a very good possibility there’re more profit in the martini than there is in the entrée. When you deny a business the ability to serve that piece of the puzzle, you’re denying them commerce.”

An exasperated Brindle agreed, stating, “Rising tide floats all boats has been proven over and over again, and I don’t know why that’s a conversation we need to continue to have.” Regarding Westfield’s quandary, the Mayor said, “It’s ridiculous that we have to go to those lengths because of the failure of the legislature to do their jobs. Those are the workarounds we’re so desperate to find for economic development. We are begging for you to have the courage to push this forward. With COVID, there’s never been a more appropriate time to have that happen than now.”

Bergen optimistically stated, “We’re going to get there, the question is what version, and we need to get it done as soon as possible. He added, “I don’t think this is a partisan issue, it’s a common sense issue.”

Gopal seemed to share the enthusiasm of the Assemblymen, saying, “I think we will get there. I believe the ABC knows these liquor laws are archaic, and I think there are willing parties on all sides who are trying to figure out how to get this done.”

However, the Senator stressed the importance of keeping the foot on the gas.

“Every conversation you’re having with your legislator, ask if they’re signed onto any one of the liquor license reform bill,” he said. “This has to be a prime conversation. That’s what’s going to drive this.”

Burzichelli pointed out, “No matter what we do here, the value of the existing C License will not go to zero. Collectively we’re going to have to decide what is fair. How much fairness is there for the business that has one-third-less of a chance of survival because they can’t get access to a state-issued license that is being issued based on rules going back to the 50’s?”

 

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