Montana’s alcohol license system has winners, losers

Last month, several individuals and businesses in the Gallatin Valley won the lottery.

Out of more than 600 applicants in Bozeman and Belgrade, four names were chosen by the Montana Department of Revenue as the winners of the state’s annual liquor lottery.

The lottery is part of Montana’s population-based alcohol license quota system, which permits only a certain number of selected establishments to sell beer, wine and liquor. Passed in the 1930s after the repeal of Prohibition, the quota laws were put in place to control the sale and distribution of alcohol across the state.

Each year, the department’s Liquor Control Division announces the number of available licenses. The number of various licenses, which include one for beer and wine restaurant sales, as well as the coveted all-alcoholic beverage sales license, are based on yearly U.S. Census Bureau statistics. Livingston, for example, has a quota of seven all-beverage and 11 restaurant beer and wine licenses.

This year, the agency selected 17 lottery winners from a pool of 1,000 applicants across the state. And while officials maintain the process is working as intended, many are critical of the system, which they say is antiquated, unfairly burdens smaller establishments and has created a market for licenses that prices out some communities.

Five years ago, Cindy Brown, owner of the Desert Rose in Belgrade, came to an agreement with a local property owner that would allow the restaurant to use his license. The mutual understanding worked fine for years, Brown said, until recently, when the owner decided to sell the license. The holder offered Brown and her husband Scott, who opened the restaurant seven years ago, the chance to buy the license for $350,000, far above the couple’s price range.

“That’s a crazy amount of money. It was disheartening,” Brown said. “(This year) has been our best year ever in business, and to have our license pulled out from underneath us was very hard.”

Saturday marked the restaurant’s last wet day, after which it will replace its taps with kombucha and homemade soda. But it will be nearly impossible to supplant the revenue lost from beer and wine sales, which often accounts for a quarter of Desert Rose’s transactions on a weekend night, the owner said.

“It significantly impacts our business. People come for the food, but there are some people who won’t come because there’s no alcohol,” she said.

Brown added that the lottery system, which allows individuals to apply for licenses they can eventually sell — often for hundreds of thousands of dollars — is unfair to smaller restaurants. Both of the companies listed as winners for the Bozeman and Belgrade licenses were formed a month before the September lottery.

Department of Revenue officials acknowledged the inflated market for licenses, but added that the state has regulations in place to oversee, vet and approve each sale or transfer.

“If I wanted to go to Bozeman and start a restaurant and want to have drinks, I better have a lot of money,” said Liquor Licensing Bureau Chief Denise Brunett. “It’s hard for (owners) to get in when the licenses have the prices mentioned.”

Due to a clause in the quota law, cities and towns within a certain distance of one another are grouped together, meaning areas such as Whitefish and Columbia Falls or Bozeman and Belgrade are considered a single entity in regards to the number of licenses they receive. And according to Belgrade Chamber of Commerce Executive Director Debra Youngberg, this creates a system where a majority of the licenses are funneling out of smaller communities into more affluent ones.

“It’s a big concern of ours,” she said. “The license is worth more money in Bozeman, so people are taking their licenses to Bozeman instead of leaving them here. To me that seems unfair, that someone can get a license who doesn’t have any plans to open an establishment and then put it out to the highest bidder.”

Several restaurants in Belgrade have lost their licenses to Bozeman in the last few years, Brown added.

“It’s really hurting Belgrade, that’s my big thing,” she said. “If you’re trying to grow Belgrade, you want to keep people here and spend money here.”

“We just want to protect our community and offer good restaurants; it just makes it a better place to live,” added Youngberg. “(The current system) deters restaurants from opening here in Belgrade. It’s hard enough to compete with Bozeman, and not being able to get a license makes it even worse.”

But state officials said that the state’s license laws have plenty of proponents, including the Montana Tavern Association.

“We’re not trying to limit anybody from having a license,” said MTA President Jim Johnson. “When you limit something it becomes more valuable. That’s the reason that the licenses are so expensive, and some people don’t like that fact, but it’s one of the costs the bars understand they have to go into business. It’s absolutely not that we are trying to stifle competition, we’re trying to keep the playing field level so that the competition is fair.”

Youngberg has floated a change to local legislators that would separate Bozeman and Belgrade for the purposes of the quota system, but said she’s not holding her breath.

“It’s not that there’s an animosity between us and Bozeman, but it doesn’t seem fair that we aren’t our own district,” she said. “It needs to be changed.”

“In my ideal world, if you have an establishment and want to sell beer and wine, you should be able to buy a license at a reasonable price,” Brown added.

The Desert Rose owner said that despite her frustration, the situation has brought out a few unexpected silver linings.

“The great thing that’s come out of this is the community showing of support,” she said, adding that many regulars of the restaurant have come to her asking how they can help. “We’re a family business; we’ve done this off the hard labor of ourselves and our staff and this is one more hurdle that we have to face.”

From Bozeman Daily Chronicle