Liquor License Economics: Quotas, Barriers to Entry, & Information

If you’re new to Minot’s liquor license discussion, what’s happening in this post is an introduction to a few economic principles that illustrate why Minot’s laws governing liquor licenses are broken. Earlier this month, City Council attempted to redefine what it means to be a ‘supper club’ (a type liquor license). In the process, they made our city’s laws more burdensome and didn’t fix the issue at hand.

In the video below, City of Minot City Clerk and Human Resource Director Lisa Jundt explains the details of Minot’s laws. We add annotations on some basic economic principles, specifically quotas, barriers to entry, and information as she explains.

The captions sometimes move pretty fast. Pause as necessary to stay caught up. And if you want to read the actual laws, here they are.

Editorial Commentary

You get the idea. In Minot, our laws make it virtually impossible to start a new bar or liquor store business. The reason the supper club law was so important; it creates a legal way for restaurants to serve liquor without having to purchase an extremely scarce and hugely expensive privately held liquor license.

On Quotas:

Why in the world do we need a population-based quota? Minot is not Las Vegas; we don’t have a never ending supply of tourists to keep an unlimited number of bars afloat. The free market would determine how many bars Minot needs more efficiently than a quota, and it would reward new, innovative entrepreneurs as well.

But even if we feel a need to maintain a quota system, why in the world do we have to wait until 2020 to add a new license? We currently have an estimated 55,000 residents. If we used a sane system for issuing licenses based on population, we would be able to issue eight new liquor licenses.

And if our problem is too many bars and the behavior they introduce into the community, fine, let’s have a discussion about that. But why would off-sale liquor stores be lumped into the same quota system? If you can think of a good reason, please share it.

On Our Barrier to Entry

So as it stands today, the only way you can open a business that sells liquor in Minot is with a supper club license. Our laws simply do not allow a new business owner the chance to compete.

On Our Hypocrisy of Economic Development

You know about the MAGIC Fund right? It’s the program where we use taxpayer dollars to create jobs and attract new businesses. So on the one hand we use taxes to stimulate growth. On the other hand, we use liquor license laws to restrict business and stifle growth. Am I the only one sees a bit of hypocrisy in this?

On Information

Finally, say an investor did want to go the traditional route and purchase an existing liquor license, wouldn’t it make sense that we be able to share with that person what it’s going to cost them to set-up shop? If the cost of a retail liquor license was public information or if there were a set price, at least people would know how much they have to invest, right? Can you imagine how an investor might prefer to know how much it will cost to open a business?

Most places make that information available, but not in Minot.

And the Solution Is…

It’s simple. Throw out our existing liquor licensing system and start from scratch. We don’t need quotas; we do need a business friendly regulatory structure that makes investing in Minot easy and worthwhile. Other vibrant cities have done it; we can too!

 

Josh Wolsky

Editor and Publisher of TheMinotVoice, Developer of the #ForMinot Network,  Co-Host of #GoodTalk Minot, Advocate and Friend of the Souris River, Former City Alderman, and clearly -- all things #MakeMinot. Go ahead, don't wait for permission!

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