Liquor Licenses: A Budding Catalyst for Inner City Revitalization

(picture of Payne Avenue, Saint Paul, MN, source)

The use of liquor licenses as an economic development tool is a comparatively recent consideration among practitioners and policymakers, driven by an increased focus on equitable economic growth and growing recognition of antiquated public policies that underlie licenses’ distribution in many cities.

In roughly half of US states, liquor license distribution is controlled or capped at the state-level. This is true in New Jersey and Massachusetts – where the issue of liquor license distribution has come into sharp focus over the past few years. In both states, specific policies limit the number of liquor licenses available in each community, which, in turn, creates a market for liquor licenses, which can be cost prohibitive for many restaurateurs– particularly those who run independent establishments. In New Jersey, liquor licenses routinely trade hands for $250,000 to $500,000.

Lacking a liquor license can make it more challenging for restaurants to succeed: liquor sales typically account for anywhere between 20 and 30 percent of an average restaurant’s sales. Our friend and former colleague Steven Pedigo recently touched upon the issue in an article for the Huffington Post. He reflected on his adopted hometown of South Orange, NJ, which, despite having a high median household income, has struggled to attract people to its downtown, due, in part, to the paucity of restaurants with liquor licenses.

This dearth of liquor licenses affects lower income communities in New Jersey as well. “When it comes to urban redevelopment, access to a liquor license can really be the difference between failure and success,” says New Jersey Senator Ray Lesniak, who has advocated for liquor license reform.

Assemblyman John Burzichelli echoed that sentiment. “In this particular area, I know firsthand restaurant entrepreneurs that have had a harder time succeeding and some that have failed because they did not have that revenue stream that the sale of alcoholic beverages provides to a restaurant owner,” Burzichelli said. Last year, Burzichelli introduced legislation that would overhaul New Jersey’s liquor license policy. The proposal would allow unlimited distribution of liquor licenses sold at a reduced rate depending on the size of the eatery.

George Jacobs, president of Clifton, NJ-based Jacob Enterprises, explains how restaurants and real estate development are increasingly becoming intertwined. “Restaurants have been functioning as really the anchor of a lot of different projects recently,” Jacobs said. “And many of them, because of the antiquated nature of our liquor laws, are missing out on a very significant opportunity for sales. The way [Burzichelli] has designed the bill, we think…the impact on the downtown redevelopment scene will be extraordinary.”

A Tufts University study analyzed liquor license distribution across the city of Boston. It found that current distribution of liquor licenses is limiting inclusive economic development. The results are startling. For instance, research found that Boston’s liquor licenses are predominately concentrated in white and wealthy census tracts. Over half of all licenses are aggregated in the city’s wealthiest quartile of census tracts, and the quartile with the largest percentages of white residents contains 40 percent of all licenses. Not surprising, then, is that inner city neighborhoods like Mattapan, Roxbury, Dorchester and Mission Hill have a disproportionately low concentration of liquor licenses.

Over the past several years, Boston City Councilor Ayanna Pressley, and a coalition of community-based organizations and organizers, have led the campaign for more equitably allocated liquor licenses within the city. This has included designating new place-based, lower-priced liquor licenses that are restricted to specific neighborhoods in Boston. Finding a balance between supporting inclusive economic growth, while not unnecessarily impacting existing license holders, is a delicate exercise, but one in which the City of Boston seems fully committed.

If efforts are successful in Boston, the impact will be felt in places like Egelston Square, where most of the local businesses are service-oriented. The district is lined with barber shops, auto repair shops, nail salons and other local businesses. Dining options are limited. There are a few Dominican restaurants and a late-night Chinese restaurant. Restaurants do roughly 40 percent of their sales by delivery. The lack of destination dining – and by extension, retail – has made revitalization efforts even more challenging in Egelston Square. The emergence of a few new restaurants could be the catalyst the area needs, and liquor licenses could help do that. There are approximately six or seven establishments there today, but only one or two have liquor licenses – an incredibly low figure when “compared to Allston, which has seven in one block,” as Luis Cotton, the Main Street director points out.

Case and point: Payne Avenue in Saint Paul, Minnesota has revitalized largely due to the success of a few restaurants. Restaurateur Leonard Anderson paved the way. He and his business partners moved to Payne Avenue because they found space they could afford. Today, the 1-mile stretch between Maryland Avenue and Phalen Boulevard features a critical mass of trendy restaurants and food enterprises. Anderson’s Tounge in Cheek is just one of several popular eateries. Ward 6 is a popular gastropub. Caydence Records and Coffee lures a more hipster crowd. And Brunson’s Pub is the local neighborhood hangout.

New investment along Payne Avenue, and the subsequent influx of diners, has brought a new energy to the long-blighted thoroughfare.

“In the beginning, people said we were borderline delusional,” said Anderson. “But it’s worked out. We’re benefitting from what’s a kind of rebirth of neighborhood restaurants. Instead of driving downtown, people are sticking closer to home and giving back to their communities.”

That is why liquor licenses are more important than many realize. By making liquor licenses easier and more affordable to obtain, cities and states can help increase the chances that a restaurant will succeed. When a restaurant succeeds, it sends a signal to other entrepreneurs that there is enough foot traffic or demand to locate their businesses there. Collectively, these restaurants, retailers and related businesses can help revitalize the surrounding area.