LAS CRUCES - Legislators working to increase the number of restaurants in New Mexico that can serve alcohol are trying to find a “soft landing” for bar and liquor store owners who have invested their life savings to purchase liquor licenses. That’s proving to be hard to do.
Liquor-license holders from throughout the state told members of the House Commerce and Economic Development Committee on Friday, Feb.5, that legislation to allow restaurants to buy restricted liquor licenses at a much lower cost would devalue their licenses. Many said they had used their licenses as collateral on loans for the business, and would go into default if the value of the licenses were decreased.
“I believe in the free market, I just want to compete on a level playing field,” said Mike Cheney, who owns a bar and package liquor store in Ruidoso. “Allowing people to get in at a much lower cost than what I got in for just doesn’t seem equitable.”
Cheney said if the value of his license is cut in half, he would be in danger of defaulting on his loan. John Anderson, of the New Mexico Bankers Association, confirmed that many bar and liquor store owners have used the value of their licenses as collateral, and would be in danger of losing their businesses if that value were reduced.
“It’s likely the license will substantially decline in value, which will impact the value of our collateral,” Anderson said. “We may be forced to write the loan off, and could take it to foreclosure, which is the last thing we want to do. We have no interest in holding a liquor license.”
New Mexico is a quota state, with a set number of liquor licenses available. That has created an artificial scarcity that has made the licenses incredibly valuable. Some have sold for more than $1 million.
Rep. Moe Maestas, D-Albuquerque, who is both a cosponsor of one of the liquor reform bills under consideration, and the committee chair, said legislators are trying to address problems in New Mexico’s liquor-licensing laws that are decades in the making. He said a state Supreme Court ruling in the 1980s found that liquor licenses are not the same as property, and are not subject to all of the same rules.
“We want to buy them back, but it’s unconstitutional. It’s not a property right, and if we devalue them it’s not a taking,” he said. “So how do we make people whole? How do we give them a soft landing? There will be a landing. There will be a devaluation.”
The two bills under consideration Friday, House bills 8 and 164, were rolled into a new bill, HB 255. It will be debated Wednesday in the same committee.
The bill would create a new liquor license for restaurants that sell beer and wine within a local option district. The new Type B license would allow for the sale of hard liquor along with meals. License fees would be $1,050 for the type A beer and wine license and $3,000 for type B licenses allowing for mixed drinks.
A second provision in the bill would allow for alcohol delivery along with food orders, either by the restaurant or by an independent delivery service. Several restaurant owners said they supported the delivery provision, but not the $3,000 licenses.
Mark Rose, of the New Mexico Package Liquor Association, said the bill has a domino effect. The low-cost licenses will harm restaurants and bars. In an attempt to placate them, the bill allows for delivery, which will harm liquor stores.
“The dominos stop at that point, and there is nothing to reimburse them,” Rose said.
Oscar Andrade, owner of Pic Quick stores in Las Cruces, said that instead of helping local small business owners, the new licenses would all be snapped up by national chains.
Marci Dickerson, owner of the Game I and II sports bars in Las Cruces, said she has three liquor licenses, plus one she leases from the state for her catering service at the New Mexico Farm and Ranch Museum. She proposed that instead of creating a new class of licenses, the state should create something like a stock split, where current license holders would be able to split their licenses in thirds and sell off the other two.
Bill cosponsor Rep. Doreen Gallegos, D-Las Cruces, stressed that legislators are listening to the concerns and proposals, and have not made any final decisions yet. She said she asked opponents of the bill to give their testimony so committee members could hear from all perspectives.
“This bill is still in the process, and boy did we hear a lot of different ideas today, and that was good,” Gallegos said. “But we don’t have a lot of time. New Mexicans need a path forward.”
Sen. Ron Griggs, R-Alamogordo, is cosponsor of a duplicate bill in the Senate, SB 6. It is further along in the process, having cleared its first committee.