Compromise Law is Not a Win for Liquor License Reform
NJ liquor license “reform” bill addresses the arcane restrictions on NJ’s craft producers, but still leaves our small-business, restaurateurs thirsting for more.
January 16, 2024 – In what has been a years-long struggle for liquor license reform, Senators Gopal (D11), Sarlo (D36), and Singleton (D7) introduced what was touted as a compromise “deal” between the legislature and Governor’s office. The bill was approved in both the Senate and Assembly, and then signed by Governor Murphy on January 16, 2024 .
We thank and appreciate the NJ Legislature and Governor’s Office for coming to a compromise that addresses the craft industry restrictions; and supported the passage of this bill solely for the benefit to NJ’s craft producers. But when it comes to plenary license reform, we expect the results will be marginal at best in opening licenses to new entrepreneurs and the bill does nothing to address the affordability issue that makes NJ’s current system so inequitable and puts us at a competitive disadvantage to our neighboring states.
We hope the adoption isn’t checked off as a victory that closes the discussion on liquor license reform for another 10 to 20 years. During the next legislative cycle and the final years of Governor Murphy’s administration, Downtown New Jersey and the NJ Liquor License Reform Alliance will keep pushing for more progressive reform to address our equity and access concerns for small and minority-owned businesses. We hope the legislature will consider a special license for downtowns and diverse entrepreneurs, and/or reconsider a beer and wine table service-only permit. We think there could also be interesting opportunities to link small business eateries with NJ’s burgeoning craft production industry in a way that is a win-win for both. We look forward to pushing the needle a bit further in the next legislative session.
In the meantime, we’d like to keep you informed about what New Jersey P.L.2023, c.290 entails and Downtown New Jersey’s concerns and reactions. Here’s a breakdown of the legislation:
- Lifts restrictions on craft producers (limited brewery license, cidery and meadery license, and craft distillery license holders) that previously prohibited them from cooperating with food vendors, selling non-alcoholic beverages, and severely limited and regulated both on- and off-premises events.
Downtown New Jersey is ecstatic about the provisions of the bill lifting the excessive restrictions on brewers and distillers that were severely limiting the expansion of the craft industry in our state. Craft producers are destinations in many of our downtowns, complimenting and bolstering all the great businesses and activities happening in these communities.
- Creates a process by which a municipality can issue an RFP to purchase an inactive plenary liquor license from a contiguous municipality for use in a “redevelopment, improvement, or revitalization area”, defined as an urban enterprise zone, special improvement district, pedestrian mall, area in need of redevelopment/rehabilitation, or any improvement which is 100 percent new construction. The bill sets the transferred license price based on prevailing plenary consumption license sales in the area. It limits a municipality to receive one license per year, and no more than two over five years. The sending municipality must agree to the transfer by resolution.
First, we see transfers happening on a very limited basis, because 1) transfers can only occur between contiguous municipalities, 2) the sending municipality has to agree to release a coveted license, and 3) the receiving municipality has to raise the capital to make the purchase without triggering the tax increase cap. Second, on affordability, the law dictates that the licenses be sold at the prevailing rate for license sales in the area – leaving no opportunity for price reductions in high demand/high price markets. NJ’s diverse small-business owners make up the lion’s share of new restaurants, yet the liquor licenses aren’t following those trends. Those with access to capital will continue to be the winners in the liquor license race, while our mom and pop, black and brown, and immigrant entrepreneurs without backing will continue to lose in the hottest NJ markets.
- Allows municipalities to issue up to two special consumption licenses within shopping malls of at least 750,000 gross square feet, and four special consumption licenses within shopping malls of at least 1,500,000 gross square feet. Previous iterations of this special license set a relatively low price. An early version of the bill set the special license price based on prevailing plenary consumption license sales in the area; however, the final version changed the pricing to “the fee for the initial issuance of the license shall be at least $250,000 “. It no longer required the license be sold at the average sale prices for the area, language that was retained in the transfer provisions for downtowns and redevelopment areas.
While we understand the notion behind the special mall license to help struggling commercial assets, given the limited applicability of the transfer program, this provision clearly demonstrates that higher value is placed on supporting the primarily corporate owners of these assets and the corporate/chain leaseholders of the restaurant spaces over our downtown small businesses. While municipalities will have to jump through hoops to access a restricted number of licenses for their downtowns, this bill establishes a simple process to create two to six brand-new licenses that will primarily serve corporate interests. Moreover, the update setting a price floor for this license at $250,000 makes this provision more egregious, potentially giving corporate interests access to a discount license compared to a regular plenary license in many high demand communities.
We would have appreciated a similar special license for downtowns that would support small businesses. Imagine if NJ had a social equity provision for liquor license access and pricing like we have for the cannabis industry – now that would be progressive and meaningful reform.
- Updates and strengthens enforcement of the “use it or lose it” provisions for inactive licenses to force the sale/transfer. It also adds a provision that a municipality can issue and offer for public sale, a new plenary license to replace those inactive licenses that lapse.
We are happy with the updates of the “use it or lose it” provisions for inactive licenses, which hopefully foretell actual enforcement that has been lacking for so long. The new law sends lapsed licenses back to the municipality to be auctioned. In the past, towns rarely enforced the time limits on any “grandfathered” inactive licenses that exceeded the population cap, because they would lose them altogether. The new provision will help the municipalities that have speculators sitting on licenses.
- Creates a farm-brewery license that allows farms to produce malt alcoholic beverages (made substantially produced from hops or other ingredients grown or cultivated on that tract of land) for sale off-premises.
We support expansion of craft production in all forms.
Again, Downtown New Jersey does not consider the book closed on liquor license reform with the passage of this bill. We will continue to engage our constituents and the NJ Liquor License Reform Alliance to push for more progressive reform that supports small business and helps sustain and revitalize our downtowns.
