City of Lincoln to vote on liquor license reform tonight

 

[January 16, 2019] 

On the January 7th voting agenda for the Lincoln City Council tonight, changes to the current liquor license rules will be one of the action items aldermen will be asked to consider.

Among the changes will be the request to combine the Class B and C license into one rule to become Class B. From there all the subsequent licenses will be re-named making Class D the new Class C and so on until all the licenses are again in alphabetical order.

Aldermen will be asked to pass a new license that eliminates the cap on the number of licenses that can be issued in the new Class B, opening the door for unlimited applications for businesses that serve liquor in a bar or restaurant setting.

Conversations about these changes came before the council at the December 26th Committee of the Whole. At that meeting, Steve Parrott introduced the topic and offered up the recommendations of the Liquor Committee that met on December 19th.

Up to this time, Parrott had been very concerned about issuing unlimited licenses because of the potential for additional video gambling machines within the city. This is still a concern for Parrott as well as others on the council.

Aldermen have learned that the only control they have on the machines is through the issuance of the liquor license. The video gambling application process begins with the city approving a liquor license application. The business must then apply to the state for a liquor license. Once both of those licenses have been issued, then the business must apply to the state for a gaming license.

Parrot said after meeting the committee is recommending that the city move forward with combining the B and C license, and removing the cap on the number of licenses issued. Where video gambling is part of the business, the business will be required to show proof that at least 30 percent of the gross receipts for the year will come from revenue other than gambling. This is a change from 50 to 60 percent of the revenues coming from other sources.

Parrott said that the city will strengthen its monitoring of the 30 percent requirement, asking for sales receipts and tax records from all licensed businesses at the annual renewal time in May of each year. The city will also impose a $500 fine on any business that does not meet the 70 percent minimum. If the business violates the 70 percent rule three years consecutively, the license will be revoked.

When the discussion about changing the liquor license began last fall, City Administrator Beth Kavelman said that the city’s liquor commission had struggled to keep track of compliance with the liquor rules because grandfathering was an issue. Those who had video games “for recreational purposes only” prior to the state's pay-out laws being passed did not have to adhere to the new revenue rules implemented by the city.

Another issue for the commission on monitoring came from the point in time when a license was issued. It was very complicated, Kavelman said, for example if a license was issued in September of 2016 it would not have a year’s worth of records at renewal time in 2017. Because of this, the business would not have to prove compliance until May of 2018.

In summary, because of these issues the proof that current businesses were in compliance with the rules was practically non-existent.

At the December 26th meeting Parrott said there would be no more grandfathering, so every business in the city with video gambling would have to comply with the revenue rules. He said this would help with the monitoring.

City Attorney John Hoblit said that since coming on board with the city he has searched through the city codes looking for anything that referred to grandfathering and had not found anything. He said that there was no changes that needed to be made to the written rules for the city regarding that topic.

Dayne Dalpoas asked if the committee had discussed the approval process for license applications. Parrott said they had not, but agreed that there needed to be a specific guideline put together.

The question of going with an unlimited number of licenses came up again and it was suggested that maybe the city should keep the cap. There are currently 21 licenses for the city in the B & C Classes. It was suggested that for the new Class a cap could be set at 30.

Mayor Seth Goodman, who has expressed opposition to the cap in the past said that if the city was going to set a cap, he would suggest that they make it high enough to last a while so this doesn’t come up again in the near future. He noted that the city had taken quite a bit of time reaching this decision, and that in the future he would not want to see the city lose out on business opportunities because it has to once again work through the issue of licensing.

Parrott agreed that this issue had taken a while to resolve but he called it a “perfect storm” of situations that had unfolded and made the decision more complicated.

Hoblit said that he knows other cities do put a cap on the number of licenses issued. He said they do this because they want to assure that they do not get too many liquor establishments within their community. He also noted that in going through the liquor application, the commission will have to have “just cause” for denying a license. Therefore, anyone who applies and meets the requirements of the application can get a license.

Ron Fleshman asked about the $500 fine, seeking to verify that the fine would be a flat rate for each of the three years. Parrott said the group had talked about increasing the fine in years two and three, but decided not to make it a greater hardship for the business. Hoblit, however, said that in other areas significant increases in the fines had been a good motivator for businesses to make sure they comply.

Michelle Bauer said she wouldn’t necessarily agree with increasing the fine. She said for example, if a business showed progress toward reaching the 70 percent requirement in the second year, she wouldn’t want to increase the penalty for that business.

City Clerk Peggy Bateman had also been involved with the committee that met on December 19th. She said one thing she wanted to make clear to applicants was that they would have a checklist of materials they were to provide with their application, and the applicant would be expected to have everything on the checklist the first time. She said that it was not right for the commission to have to repeatedly ask applicants to provide information. So, if all the requirements are not met they would be denied.

Hoblit also reported that the Liquor Commission will be expanded from three members to five and there will be a compensation of $25 per meeting for the members.

Hoblit was asked to have the appropriate documents drafted in time for the January 7th voting session. He said he could have those prepared, but wondered if the aldermen would want to read through the documents and discuss the final draft further before taking a vote. It was mentioned that if the aldermen are not satisfied with the draft, the action item could be tabled. Ron Keller noted that the new rules had been discussed thoroughly and he felt that the city would probably be prepared to take the vote.

The council is expected to vote on this item tonight, with the new rules taking effect immediately. As is always the case, the aldermen have the right to table any item on the agenda if they feel they are not prepared to make an informed decision.

[Nila Smith]