The unfixable liquor license system

To call New Mexico’s liquor license law a mess would be an understatement. The law is blatantly unfair in how it allocates access to liquor licenses, and it is not helpful either to the state or to New Mexico citizens.

But it’s almost impossible to correct. Legislators keep trying.

There are a fixed number of liquor licenses in the state – exactly 1,411, according to Senator Ron Griggs (R-Alamogordo), who’s been working on the issue for years. Unless the law is changed, no more licenses will be issued, perhaps ever. The number is based on a quota system: one license for every 2000 persons. Under the quota system, there are already too many licenses.

The quota applies only to the most comprehensive type of license, a dispenser’s license.

A liquor license is originally issued to a business by the state. But licenses have acquired commercial value and been sold for hundreds of thousands of dollars. Businesses have made huge investments to buy licenses, which are so valuable banks have accepted them as collateral on loans.

This is the result of a process that got out of hand decades ago.

New Mexico should never have allowed liquor licenses to be sold and acquire commercial value. If we could start over from scratch, the law should have said that a liquor license belongs to the original applicant, and if the applicant surrenders that license, it would disappear, just like your driver’s license.

But the quota system prevented the issuance of new licenses. Prior to a major change in the law in the 1980s, licenses could not be sold across county lines. So you can imagine how a local neighborhood bar with an old license might be under pressure from a new hotel or supermarket to sell the license for a handsome profit.

The quota system was intended to prevent having too many alcohol dispensers, as a deterrent against excessive drinking. As our DWI problem attests, clearly that hasn’t worked. It just forced determined drinkers to drive further.

Naturally, market pressure increased to allow licenses to be sold across county lines, from small counties to the wealthier growing counties. The poor city dwellers had been suffering from too much sobriety.

The 1980s legislation legalized sales of dispenser’s licenses across county lines. It also created new restrictions about which rights could be transferred.

An original dispenser’s license allows both package sales and sales by the drink. But if the owner sells the license to a business in another city or county, the new owner may lose the right to sell package liquor.

Because the state could not fix this system, and we were stuck with this limited number of licenses, the legislature created restaurant licenses allowing the sale of beer and wine, restricted to restaurants that serve food, and the newest licenses for breweries and wineries that produce their own product.

These categories create mind-boggling compliance issues.

For example, to keep its restaurant license, a restaurant has to document that 60 percent of last year’s sales were for food. A division of the Regulation and Licensing Department, recently renamed the Alcoholic Beverage Control Division, is supposed to keep tabs on this.

All this complication is the result of two opposing forces. On one side, consumers want to have a drink and many businesses would like to sell and serve those drinks. On the other side, existing license holders sank their money into a license that was supposed to assure profit by limiting the competition.

Griggs has submitted bill after bill trying to tinker with technical details to expand the number of licenses. He says there’s a simple but monumentally unacceptable solution: the legislature could abolish the quota system. It is unacceptable because it’s outrageously unfair to existing license holders. Griggs will not propose it and probably neither will anybody else.

Triple Spaced Again, © New Mexico News Services 2019


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