A Boston city councilor’s idea to inject cash into struggling restaurants in exchange for liquor licenses was met with resistance from the head of the city’s licensing board on Wednesday, who said the proposal raises profound questions about legal liability and a potential administrative quagmire.
“It could have significant unintended consequences,” said Kathleen Joyce, chairwoman of the city’s licensing board, at a virtual city council hearing on Wednesday.
But City Councilor Lydia Edwards thinks the prospect of the city buying liquor licenses from struggling establishments and leasing such licenses back to establishment operators is an idea worth exploring. She thought it could bring help to restaurants battered by the ongoing COVID-19 public health crisis.
“When we’re talking about a post-COVID world, we need to talk about how we’re keeping our mom-and-pops and our main streets thriving” said Edwards during the Wednesday hearing.
For many restaurateurs, a liquor license may be their only asset left once Boston emerges from the pandemic, said Edwards.
However, Joyce said that should the city buy licenses, Boston would have to go through the same transfer process as any other applicant, which would include approval from Joyce’s board, as well as the state’s Alcoholic Beverages Control Commission. She suggested if the city were to hold the license, it would be responsible for things like a restaurant’s payroll and taxes.
“The city, as the holder of the licensee, would still have to maintain ultimate control," she said.
There would be other questions, according to Joyce: How are the bank accounts held? How would the revenue be split? Who pays and hires and fires restaurant employees? How would the price of the licenses be set? She also suggested there would be nothing to protect the city from liability from incidents that occurred at premises where the city was holding the license.
Edwards said such a program would not constitute a silver bullet for restaurants, but could be one tool used during the city’s economic recovery. The initiative is intended to be cost-neutral for the city, she said. Edwards anticipated more and more licenses to become available as restaurants go under because of the coronavirus emergency. The city can look to buy such licenses to help establishments, or leave them for large restaurant chains, she said in a phone interview earlier this week.
“I think it’s time to be bold, be creative as possible,” she said during the interview
Liquor licenses in Boston have for years been a political battleground, with some neighborhoods largely missing out on the city’s restaurant boom. Mattapan, for instance, currently does not have a restaurant that has a liquor license, Joyce confirmed at Wednesday’s hearing.
The total number of non-restricted liquor licenses for restaurants in Boston, which includes all-alcohol as well as beer-and-wine licenses, is 1,000, and the total number of restricted licenses is 117, according to the city’s licensing board. The non-restricted licenses can be sold on the open market; they typically go for hundreds of thousands of dollars. The restricted licenses, in some instances, are tethered to specific neighborhoods, and are made available to restaurant applicants at no charge, according to Boston Mayor Martin J. Walsh’s office. Such restricted licenses were created via state legislation during the past 15 years as authorities tried to make the city’s restaurant scene more equitable by bringing establishments to areas that lacked dining-out options.
Philip Frattaroli, who owns Cunard Tavern in East Boston, which has a neighborhood-restricted, non-transferable liquor license, thought the current crisis might be a good opportunity to transform the city’s licensing system.
“The system of licensing is very expensive, it’s very expensive to open a restaurant in Boston,” he said during Wednesday’s hearing.
Gustavo Quiroga, a partner at real estate and retail consulting firm Graffito, said Edwards’s proposal could provide relief at a crucial time for restaurants.
“A buyback program would help to chart an inclusive path forward to economic recovery in Boston by finally giving the city the power to bring reform and balance to an antiquated and inequitable alcohol licensing system that has locked out whole neighborhoods,” he said.
Dining in at restaurants throughout Massachusetts has been banned since mid-March. The ban was among the slew of restrictions instituted in an attempt to mitigate the spread of the outbreak. Some in the industry have suggested that as many as 40 percent of restaurants may not reopen once the public health emergency is over.
Earlier this year, a council committee held a hearing to discuss whether to issue new liquor licenses. The council has also discussed capping third-party delivery fees for restaurants.
Restaurants are allowed to reopen in Phase 2 of the state’s reopening plan with restrictions. No date has been set for that phase, but could come as early as the second week of June.