MI: How Many Liquor Licenses Do And Should Exist? It’s A Riddle, Wrapped In A Mystery, Inside An Enigma

The Ticker
By Craig Manning
October 27, 2021

How many liquor licenses is too many? It’s a question Traverse City residents have been asking for years, as the number of active licenses in the city has skyrocketed. According to the Healthier Drinking Culture study recently completed by the Downtown Development Authority (DDA), the City of Traverse City, and the Traverse City Police Department (TCPD), there are 119 active liquor license locations within city limits – up more than 50 percent from 2014’s count of 79. How many more licenses are available, and what would happen if the city stopped granting them?

Statewide, liquor licenses are regulated by the Michigan Liquor Control Commission (MLCC). The regulatory system is confusing, in part because there are so many types of licenses a business can have.

Michigan has five basic types of on-premise retail liquor licenses. The most common is the Class C license, standard at most restaurants and bars and allows for the on-premise sale and consumption of beer, wine, and spirits. Other types include Tavern licenses, which only allow the sale of wine or beer; Club licenses, which are meant for private clubs; and A-Hotel or B-Hotel licenses.

The state imposes quotas on the issuance of most of these licenses, aimed at preventing localities from becoming too saturated with alcohol-serving establishments. Each unit of government in Michigan is allocated one Class C Liquor License for every 1,500 persons living there. The same rule applies to A-Hotel, B-Hotel, and Tavern licenses.

Sometimes the quotas are straightforward. Records for East Bay Charter Township show the township has an allotment of seven liquor licenses for on-premise retail sale and consumption; all of them have been issued and are currently active. In Garfield Township, meanwhile, Township Supervisor Chuck Korn notes that there are 22 active Class C licenses, and says U.S. Census data triggers quota changes every 10 years. In 2012, population growth meant Garfield received three new Class C licenses; five applicants applied and competed for them.

Other times, complicating factors can affect how many licenses are available and who is eligible to receive them. For example, there’s an entire tier of licenses devoted to suppliers or manufacturers — a category that includes micro brewers, distillers, wineries, and more. These types of businesses often hold both a manufacturing license and a tasting room license, which allows them to serve the beverages they produce for on-premise consumption. Manufacturing and tasting room licenses aren’t subject to the same quotas as the retail tier.

There are other wrinkles, too. Sometimes an establishment can purchase a liquor license from another city or township and transfer it into a new community. This past summer, Bahia — the new Spanish tapas restaurant in downtown TC — purchased a Class C license from the old Hooters in East Bay Township. The transfer had to be approved by the MLCC and the Traverse City Commission, but was allowed to move forward despite a maxed-out Class C quota in the city.

Another complicating factor began in 2006, when the MLCC started offering “redevelopment liquor licenses,” which enabled communities that had already met their quotas to keep issuing more licenses.

Redevelopment licenses can’t be sold or transferred if a restaurant or bar closes, but instead revert to the state. They also impose extra restrictions, such as requiring alcohol sales to cease at midnight. The City of Traverse City currently has 19 redevelopment licenses, at establishments like 7 Monks and Mama Lu’s. In order to receive a redevelopment license, a business must be located in a redevelopment district, must attempt to secure an existing on-premise quota license, and most prove that is has invested “not less than $75,000 to rehabilitate the building over the past five years” — among other requirements.

Because redevelopment licenses exist separately from population-based quotas, the question of how many liquor licenses are available Traverse City is a tough one. City Clerk Benjamin Marentette tells The Ticker he’s not even sure what the Traverse City’s Class C quota is at this point — just that the city has been “well in excess of it for some time” due to license transfers and other instances of the MLCC making exceptions.

When the city adopted its redevelopment license program in 2008, the MLCC made a whopping 265 redevelopment licenses available to the community. As a result, there are theoretically more than 200 liquor licenses still available in Traverse City’s redevelopment district, which spans downtown and The Village at Grand Traverse Commons.

So far, Marentette believes redevelopment licenses have helped drive economic growth in Traverse City. Prior to 2008, he recalls it being “really difficult to get a license,” with new establishments having to pay handsomely to obtain existing licenses – Class C, especially. “In Traverse City markets, [a Class C liquor license] is usually worth well north of $80,000,” he notes. The redevelopment program not only provided a lower barrier to entry for businesses looking to secure licenses – $20,000 for a non-transferrable license — but also helped modernize both downtown and the Commons.

“If you look at the state law, the real purpose [behind redevelopment licenses] is to take these otherwise obsolete and underutilized properties, and turn them around so that they’re productive business places,” Marentette says.

Benefits aside, there could be changes in store for how the city handles liquor license approvals. One action item in the recent Healthier Drinking Culture strategic plan calls for “[updating] ordinances and the local liquor license permit process to create objective and clear criteria for the desired number, type, and location of liquor licenses, including at the neighborhood and corridor level.” The goal is to have a new policy in place by December 2022. Marentette – along with City Planning Director Shawn Winter and the TCPD — will be responsible for reshaping the policy.

“We’re going to spend some time with facilitated discussions with stakeholder groups to talk about what factors should be considered in terms of granting liquor licenses,” Marentette says. “Should it be addressed through licensing? Through zoning? A hybrid of the two? Or something very different? And what are we trying to encourage, what are we trying to avoid? We’ll be having those types of discussions, and that’s going to really help us form a more strategic, high-level perspective on how to allocate these liquor licenses, rather than on a more case-by-case basis.”

Carolyn Weeks, a local entrepreneur and restaurateur, hopes the new policy is nuanced and thoughtful, rather than simply shutting the door on new licenses — something multiple current city commissioners have proposed in the past. Weeks owns two Traverse City restaurants: Park Street Café and The Tasting Room by Legacy Distillers. The latter, which is situated on the ground floor of the new Breakwater building, opened in July for food service. Due to a variety of factors, the restaurant is still awaiting its small distiller liquor license. The experience has allowed Weeks to see how crucial a liquor license is for a certain type of downtown Traverse City establishment.

“Fifty percent of the people who come into our restaurant leave because we don’t have alcohol,” Weeks says. “Some days it’s closer to 75 percent. It takes a lot to gain traction [without alcohol], especially as a restaurant for the evening. Park Street Café is a breakfast and lunch grab-and-go place, so alcohol isn’t necessary. But if you’re going to have a sit-down environment, well, we’re a tourist town, and the tourists tend to want to drink. And honestly, most locals do, too.”