Idaho Puzzler: Liberating Liquor Licenses Without Bankrupting Pubs*

cocktail.jpgThis story is happening in Idaho, but it could apply to any jurisdiction where government licenses to do a certain kind of business are made scarce by an artificial limit. According to Rick Carpenter of Idaho Business Review’s Biz Blog, Gov. Butch Otter wants to reform his state’s Alcohol Beverage Control and how it allocates liquor licenses.

Liquor consumers might like where this is going, but the consequences of any major change would be huge for pubkeepers in the spud state:

There is currently a 20-year waiting list with more than 300 people/vendors wanting to purchase a license. The ABC has been granted unprecedented power in determining how to enforce policies, based more on the enforcer’s suspicion of applicants than consistent policy.

In a meeting at the Boise Metro Chamber’s State & Federal Committee on Friday, a panel of guests discussed the issues with the committee. Currently, there are about 800 licenses in the state. Unless you want to wait the 20 years, you have to pay an unrealistically high price to get one from a license owner, not the state. Kevin Settles, owner of Bardenay, said he paid more than $300,000 for three licenses. And if you want one in Ketchum, you can pay more than $400,000 for one license. The state charges less than $1,000 for a license, but gets 10 percent of the sale of the license from one owner to the next.

Governor Otter wants to put some common sense into the process and make more licenses available. The problem is, many of the license owners are treating the licenses as assets. And there are stories floating around of people getting loans based on those assets, something Brian Ballard, of Hawley Troxell Ennis and Hawley, told the Chamber committee is illegal.

So, governor. Who you going to send to tell Mr. Settles that the state is going to sell his competitor something for $1,000 that you paid $300,000 for? Wyatt, one of Biz Blog’s commenters delves into the issue:

This is one of those odd situations where correcting poor policy further harms those who were initially harmed by the policy. Current license holders had to shell out absurd amounts of money to start their business. And now that the poor policy is being corrected, their balance sheets take the hit, giving them weakened leverage with lenders and leaving them paying loans on a dead asset. Not only this, but existing license holders will now see a barrier to entry removed from their competition. They will be financially handicapped by their initial investment in their license while their young competition can flourish at lower cash flow levels in the increasingly competitive environment. We may see some well-liked watering holes go under from this correction.

That being said, correcting the poor policy is the right move to make.

Now that Gov. Otter has climbed onto this limb, what does he do next?

* CORRECTED to reflect Rick Carpenter posted the item on IBR Biz Blog.

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One Comment on “Idaho Puzzler: Liberating Liquor Licenses Without Bankrupting Pubs*”

  1. sistBoonInadiawhibia Says:

    weqtpjkskietkzjvwell, hi admin adn people nice forum indeed. how’s life? hope it’s introduce branch 😉

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