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Economic Development on Premises Liquor License Update

Hospitality & Beverage Control Blog Post
October 24, 2011

In an effort to spur and promote commercial development, with a specific target for those that are engaged or intend to engage in the dining, entertainment and/or recreation industry, the State of Michigan modified the Michigan Liquor Control Code ("Act") in 2006. For those owners or operators of a restaurant, nightclub, hotel or recreational business that is open to the public and has adequate seating capacity or a plan to increase seating, the state has made it easier for some owners or operators to obtain a new liquor license. It does require the cooperation of both the owner and the city or township which has jurisdiction over the proposed site. The end result permits more hospitality businesses to open with the ability to obtain an on premises license, without the restrictions of the state's quota system.

By way of background, under the current licensing process in Michigan, a restaurant, hotel or other hospitality based business is limited in its ability to acquire a liquor license to provide alcohol to its patrons. An applicant would be eligible for a new issue license if its business is located in a municipality where less than all of the quota licenses (1 for every 1,500 in population, as documented by the most recent census) had been issued. For those businesses who enter into a municipality after the available licenses had been issued, the applicant is forced to purchase an existing license from a current licensee and then apply for the relocation of the license to the intended location. This process has negative implications for both the applicant and the applicable municipality: without an available license, the applicant is forced to pay a much higher cost to acquire an existing license, and the city or township, which may wish to attract new hospitality businesses to its community, together with needed jobs and the additional economic boost that would accompany such development, was left without a license to assist the business owner.

Under PA 501, a hospitality business could acquire a new license if it and the municipality meet new development guidelines. For brevity purposes, I am simply outlining the basic requirements. Essentially, a business would be eligible for a new public on premises license if it operated within either a designated “Development District” or a “City Redevelopment Project Area”. These areas or zones are specifically defined in the Act and are similar to the economic development districts that were identified in the predecessor provisions to the Code. To be eligible, the city or township must evidence that it has or shall have invested improvements in real or personal property within designated areas of the municipality in amounts of not less than $200,000 for Development Districts such as Tax Increment Finance Authorities, Corridore Improvement Authorities, Downtown Development Authorities or Principal Shopping Districts, or for Redevelopment Project Areas, , not less than $50 million over the prior 3 or 5 years for cities of a population of 50,000 or more or at least 1 million per 1,000 in population in cities less than 50,000 over the same time period.

For their part, hospitality businesses locating to these targeted areas will qualify for the new licenses if they are: engaged in dining, entertainment or recreation, are open to the public, have a seating capacity of at least 50, demonstrate their inability to purchase an available liquor license from within the applicable municipality and due to lack of availability license was available, and finally, pay a fee of $20,000 to the State of Michigan for the license. In addition, for Development District based licenses, the applicant must establish that it has invested or is committed to invest $75,000 in rehabilitation or restoration improvements to the proposed site.

The new issue licenses may not be sold by the licensee to a party that intends to relocate the license, and if the business owner ceases operations, the license shall be surrendered to the township or city and eligible for re-issue within the applicable region or zone.

The Varnum Hospitality Beverage control team is well versed on the protocol and procedure for the qualifications of a new development license. If you have or expect to make the requisite capital investments contemplated by the Act, please call Christopher P. Baker at 248/567-7425 or Mary Kay Shaver at 616/336-6755. We maintain updated lists of the communities that have applied and have received certification from the State of Michigan and the number of licenses available within the municipality.

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