City on a Hill: Libation regulation

November 18, 2010

When the Georgetown freshmen who are just getting comfortable at off-campus house parties start to explore D.C.’s nightlife scene, they will find subpar bars and exorbitant prices throughout the city. This is largely due to the fact that Georgetown and most of its surrounding neighborhoods have placed strict limits on the number of liquor licenses available for bars and restaurants. The idea is to protect against the type of mass drunkeness and excessive unruliness that dominate Adams Morgan on weekend nights, but the caps send license prices to astonishing levels. An April Washington Post op-ed by local blogger Topher Mathews said that the going rate for a license in Georgetown is about $70,000, a steep investment for any would-be entrepreneur.

As a result, in Georgetown you mostly find wild bars like Third Edition or Rhino, which pack in as many people into as they can to make the most money per square foot of space. On the opposite side of the spectrum, you can sit down for dinner and a very expensive beer or glass of wine—that is, if you’re comfortable parting with $30 or $40.  Those are both profitable business models, but it makes it very difficult to find a place to sit down with friends in an interesting social setting and enjoy a reasonably priced drink.

Mathews suggested one good solution to the ban. Currently, owners can hold onto liquor licenses indefinitely, waiting for their value to appreciate, as long as they pay a small yearly renewal fee. A use-it-or-lose-it policy could prevent owners from keeping an idle license for more than six months and make the market more fluid, giving smaller establishments a better chance of opening and operating successfully.

But, in addition to the problem of license hoarding, all liquor license regulation occurs at the local Advisory Neighborhood Councils.  The commissioners who make up these councils are ultimately responsive to their constituents–who are generally not the businessmen and women who run the restaurants and bars in their jurisdiction. Georgetown’s ANC representatives have a well-deserved reputation for using every means to protect residents from unwanted noise or hassle, making it difficult for new bars and restaurants to obtain licenses.

Liquor licenses recently became big news in the gentrifying neighborhood of Bloomingdale. The popular hangout and coffee shop Big Bear Café was looking to expand and serve alcohol, but ran into opposition from the ANC and local residents who feared that granting a liquor license to a first non-liquor store establishment would lead to a stream of new bars and restaurants.

“One small entity begets another small entity begets another small entity,” a particularly animated resident told Washington City Paper. “And then we end up with the same issues that make you a U Street or an Adams Morgan.”

Big Bear Cafe ultimately got its liquor license, with the strict condition that it could not operate past 11 p.m. on weekdays and 12 a.m. on weekends.  However, the coffee shop’s saga reveals the underlying problem with allowing ANCs to regulate liquor licenses.  The commissioners with the power over these decisions represent extremely small jurisdictions, and have a strong incentive to prevent the growth of nightlife options.  And thanks to the rancorous Big Bar Café fight, you probably won’t see many entrepreneurs in Bloomingdale looking to open up bars or restaurants in the foreseeable future.

However, with some structural changes, D.C. could see a more rational and effective approach to alcohol regulation. Gradually shifting regulatory powers away from the ANCs toward the more liberal Alcoholic Beverage Regulation Administration and ensuring a more fluid market for liquor licenses would be a step in the right direction. And with better choices and lower prices, everybody wins.


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