Drinking it All In
Barely two weeks into 2024, New Jersey’s liquor-licensing laws got their first significant overhaul since Prohibition ended when Gov. Phil Murphy signed S-4265/A-5912 into law Jan. 16. With the flourish of a pen, new legislation revised, among other things, some nearly century-old guidelines mandating a distribution of liquor licenses based on metrics that reform advocates say have become everything from outdated to restrictive.
“For the first time in nearly a century, New Jersey has shown the fortitude to tackle an age-old problem that has stifled economic growth and hampered the dreams of countless small business owners,” the governor said during the mid-January signing. “We knew this wasn’t going to be an easy lift—nothing that has been entrenched for nearly a century ever is.”
Despite Prohibition being struck down in 1933, The Garden State has held tight to liquor-license laws considered among the nation’s most restrictive. Those laws are additionally guided by a 1947 law most recently amended in the late ’60s, wherein it’s laid out that municipalities can issue one consumption license for every 3,000 residents and one retail license for every 7,500 residents.
Given that any changes in towns’ liquor licenses have been hinged upon the once-a-decade U.S. Census indicating a significant spike in population, the few available consequently soared in value.
“We’re talking upwards of half a million to $1 million for a liquor license. That’s not sustainable, and it’s not equitable,” says Courtenay Mercer, PP, AICP, the executive director for Downtown New Jersey, which oversees the NJ Liquor License Reform Alliance. As a collective of organizations, municipalities, public officials and businesses, the alliance was formed around members’ shared mindset that New Jersey’s “quite antiquated laws” present a concerning economic-development issue, as Mercer adds that “it’s really hard for a small business, for that first-time restaurant or entrepreneur to get into the game.”
Reforming how the state controls its liquor licenses is just one change contained with the bill. It also permanently relaxed a number of recent restrictions placed on breweries, distilleries, cideries and meaderies, now allowing them to offer snacks and non-alcoholic beverages, collaborate with outside vendors, and host unlimited onsite events and up to 25 off-site special events per year. The bill also goes after inactive and pocket licenses—licenses associated with a specific location but not in use and purchased licenses not yet designated for a specific location, respectively—that the bill’s supporters cite as the primary reason licenses have become such a precious commodity.
The New Jersey Restaurant and Hospitality Association (NJRHA) brings together and advocates for a wide range of members hailing from the industry like restaurants, hotels, casinos, brewers, venues and more. With its diverse membership, President and CEO Dana Lancellotti notes that the association “represents all stakeholders in this issue, which means we have had a critical responsibility in guiding and articulating the facts and potential consequences of changes in the NJ liquor license system.”
That obligation had the NJRHA championing the needs of a richly varied member base through the likes of helping members meet directly with legislators, testify in state House committees, and engage in numerous meetings, in addition to hosting a Town Hall with legislators, a stakeholder panel discussion and an attendance of more than 100.
“The food and beverage landscape in NJ is robust, diverse and ever-evolving,” Lancellotti continues. “We were diligent in our communication and proactive conversations, examining a variety of perspectives from license holders and non-license holders across the state. Ultimately, we shared this feedback directly with our legislators and the governor’s office throughout the past two years.”
NJRHA representatives were among the many voices contributing to and guiding the conversation as the proposed legislation made its way to becoming a law that, as the association and many others discovered, benefited some members and left others feeling defeated.
The Celebrants
Gov. Murphy immediately lauded the bill’s passage as a win for reforming what he had previously called “antiquated and confusing” parameters in his Jan. 10, 2023, State of the State address.
“Together with our partners in the legislature, we are laying new ground rules to help our breweries and distilleries flourish, at the same time creating new opportunities for smaller and more diverse mom-and-pop establishments to set up shop or expand in New Jersey and help transform our downtowns,” he said following the reform’s passage.
The governor wasn’t the only one who felt that way, of course, as loosened brewery restrictions and an increase in available liquor licenses had their supporters.
“From the beginning, and consistently throughout, we advocated to first get the 1,400 inactive liquor licenses back into the market and sold at fair market value and to allow transfer of licenses under certain parameters. The legislation that was recently signed into law accomplished all of this,” Lancelotti says, “With that, we believe this legislation is a positive and productive update to the current law, protecting the value of the licenses held currently, while also promoting opportunity for re-activated licenses to promote growth in areas that were deficient in liquor license accessibility.”
The Brewers Association (BA), a national organization supporting small and independent craft brewers across the country, had been “heavily involved with New Jersey’s brewers and breweries throughout this process,” offering resources and talking points throughout what Sam DeWitt went on to describe as “a terrific partnership that ultimately delivered the needed changes,” particularly in terms of aligning aging legislation with a modern economic composition.
“At the highest level, the benefit is keeping with the times: When these laws were put in place decades ago, the concept of craft brewing didn’t really exist, certainly not in the way it does now. There are more than 9,500 small and independent craft brewers in the U.S. currently, and it is a model that has been proven successful in communities and neighborhoods across the country,” says DeWitt, BA’s state government affairs director. “What’s more, neighboring states New York and Pennsylvania have thriving brewing businesses, and stifling that growth with outdated liquor laws was putting New Jersey at a competitive disadvantage. Modernizing the laws to reflect those realities isn’t just a desire for our members, it’s an existential necessity.”
The new law also loosened newer restrictions placed upon the comparatively newer operational models that breweries have been embracing, offering a range of entertainment, special-event spaces and dining options that restaurants and bars felt were eating into their businesses.
“We’re ecstatic with the loosening restriction on breweries,” says Mercer. “We’re absolutely happy that that happened. We have a lot of breweries and distilleries in our downtowns and they’re helping to carry those downtowns—and I don’t think the restauranteurs in those areas are finding them as competition, since people will either order in from those restaurants and go to the breweries and have a beer, or get a beer then go to a restaurant. It’s kind of like it’s more complementary.”
She also notes that the alliance considers improvements to the “Use It or Lose It provision” dictating grandfathered licenses’ permanence the most significantly positive outcome from January’s reform.
When the last round of licensing changes came about more than half a century ago, “whatever the difference was between how many licenses you could have per 3,000 residents and what you already had were grandfathered in.” As Mercer goes on to explain: “If you had a grandfathered license and somebody’s not using it and the municipality denied allowing them to renew the inactive license, it goes away completely. They lost that license—so if they had five grandfathered licenses, they only have four left. Now, the new provision actually says that if a municipality does not renew it for it being inactive, they then basically get it back and can sell a new license.”
The Wary
When this new legislation began gaining both traction and attention early last year, reactions were already mixed. Mercer says that the NJ Liquor License Reform Alliance was originally on board with the legislative revamp’s earlier iteration but, aside from the victory for smaller craft operations and the emerging industries they represent, was ultimately less than thrilled with S-4265.
Much of that comes from numbers that the alliance finds suspect.
“We were quite frustrated,” Mercer admits. “We had testified several times about the inactive licenses. That number of inactive licenses is exaggerated, they include licenses that are in limbo. So maybe a restaurant closed but somebody else has bought that restaurant and that license, and they just haven’t opened yet—those licenses are on the list of 1,500, 1,600 inactive licenses they’re quoting.”
The alliance also takes issue with a provision establishing a new class of retail consumption liquor licenses with the potential to create nearly 100 new licenses throughout the state, allowing municipalities to issue up to two new licenses for smaller malls’ food and beverage establishments, and up to four new licenses for malls with a minimum of 1.5 million square feet. Supporters say the move is intended to help the struggling brick-and-mortar retail centers, but Mercer argues that those licenses “didn’t have to go at the going rate of the last three license sales” and do nothing to contribute to the overall landscape of a town’s identity that help distinguish it as a destination—despite Gov. Murphy’s quoted intent to “help transform our downtowns.”
“The kicker insult for us was the mall licenses—so you’re doing nothing for downtown and you’ve basically just handed out licenses by setting the floor lower,” she adds. “It does virtually nothing for downtown. That was our frustration. We actually asked the governor to veto the mall part: We’re not tacitly opposed to the mall part, but now it’s like it’s over. There’s no negotiation. You’ve given it to the malls, so who’s going to come back and talk about downtowns?”
And she certainly appreciates the frustration that those who’ve shelled out top-dollar for a liquor license are feeling in the wake of law reform.
“We understand the argument that somebody’s paid $1 million for a license and if you expand licenses, then that takes away from the value for that person,” she notes.
The Future
While estimations and predicted outcomes can sometimes look to previous examples for guidance, there’s not much national precedence to refer to in regard to the landscape New Jersey’s currently navigating. There are, however, some educated guesses from an economic perspective that point to a promising path ahead that allows for both harmonious coexistence of today’s businesses and the innovation inviting new enterprises to thrive.
“Any opportunity for a business to become a part of the community it serves is valuable and important,” says DeWitt. “That’s true whether it’s an exceptional brewery or an exceptional restaurant or something exceptional that hasn’t been dreamed up yet. Driving economic development is important to give life and opportunity to other new and interesting businesses.”
For Mercer and the organizations she works with, they still plan to promote alternatives like the beer-and-wine-only license that other states have or creating a license to only sell Jersey Fresh wine, beer and distilled spirits—anything to promote the region’s potential as a dining destination without “taking away from the value of a liquor license.”
“Think about who has great restaurant scenes in New Jersey: Something like the New Brunswick restaurant scene is fabulous because they have a lot of extra licenses, Jersey City’s restaurant scene has boomed because they don’t have a liquor-license problem, Hoboken’s restaurant scene is great and they don’t have a liquor-license problem,” Mercer points out. “It’s like ‘If you build it, they will come.’ If you have a good restaurant district, you will build a better district by having more successful restaurants.”
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Author: Madeleine Maccar
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