Decades of limited alcohol licenses make them premium products
Since the turn of the 20th century, the number of liquor licenses in New Mexico has been largely limited. As a result, these licenses are now worth around half a million dollars. Over the past few years, state lawmakers have tried various ways to reconfigure the state’s liquor laws that would make them less costly for potential new liquor licensees while not devaluing current licenses.
This year there are a handful of bills aimed at creating a new type of liquor license for restaurants to add spirits to their menus, instead of adding more liquor licenses to the mix. The general idea is that restaurants could get a license to sell mixed drinks as long as a certain percentage of the sales are food, just like a beer and wine license. But even the idea of increasing the number of restaurants that can serve alcohol beyond beer and wine is of concern to some liquor licensees. Many of these licensees spoke out against these proposals in recent committee hearings. Their concern is that just like printing more money, the value of their licenses will decrease. Many licensees have told lawmakers that their licenses are of such value that they are used as collateral for business loans.
Mike Cheney, owner of the Win Place and Show Bar and Package Liquor Store in Ruidoso, told the Senate Tax, Business and Transportation Committee last week that he bought his liquor license for $ 600,000. Cheney spoke against SB 6, a bipartisan bill sponsored by Sen. Ron Griggs, R-Alamogordo and Senate Majority Leader Peter Wirth, D-Santa Fe. The bill seeks to allow the delivery of alcohol, but would also create a new alcohol license class similar to the existing beer and wine license.
Cheney told the Senate committee that his current business loan requires him to maintain a three-to-one debt ratio and that if the value of his liquor license drops, he could lose that loan.
“If you take away the value of my liquor license, my debt-to-value ratio will jump to seven and a half and my loan will be classified and possibly in default,” Cheney said.
Almost everyone who spoke against the bill during the public comment period of the committee hearing argued that the value of current licenses will decline, creating a domino effect.
“Our concern with the bill is that it is likely that the value of the licenses will drop significantly, which will impact the value of our collateral,” Anderson said.
But the high value of alcohol licenses is mainly the result of a limited number of licenses available. The hundreds of thousands of dollars spent to obtain a license do not go to the state, but rather to the former licensee. While the value of a license can be worth several hundred thousand dollars, the license fees paid to the state are closer to a few thousand dollars.
Andrew Vallejos, director of the state’s Alcoholic Beverage Control Division, said last month NM Policy Report that the intention to limit licensing was never intended to create any value for state authorization to sell packaged or distributed beverages.
“I don’t think the Liquor Control Act was ever designed for a resale market,” Vallejos said. “It just wasn’t.”
Since last March, when housekeeper Michelle Lujan Grisham first issued emergency public health orders, many restaurants have struggled to maintain profits. Allowing packaged alcohol deliveries would likely increase those profits. But Vallejos said allowing restaurants to add spirits to their menus would also increase revenue, meaning savvy employees could see more money in their pockets as well.
“Restaurants operate with notoriously narrow margins,” Vallejos said. “The margins improve when you start selling spirits, so it’s good for the business owner. But it’s also good for knowledgeable staff who have also suffered from the pandemic.
During the House committee hearing last week, New Mexico Economic Development Secretary Alicia Keyes reiterated the impact on the state’s economy the additional licenses would have.
“This will bring more revenue to a low-margin, difficult business,” Keyes said. “And that will also mean a lot more jobs.”
Representative Larry Scott, R-Hobbs, is the sponsor of HB 164, which would take what he called a more nuanced approach to allowing more licenses to be issued while also not shooting current licensees. Scott’s Bill suggests an annual tendering process that slowly increases the number of liquor licenses. The House committee took no action on either of the bills introduced last week, but heard nearly two hours of public comment from most of the small business owners who opposed to changes.
Scott spoke about the complex nature of liquor licensing in New Mexico which seems to create an unfair balance no matter what.
“There are forces on one side of this issue that demand additional access to alcohol retail services and for economic development purposes,” Scott said. “And [there are] forces on the other side of the problem that have significant asset value established with existing licenses. ”
Since last week there is now another proposal to amend the alcohol law.
Rep. Antonio “Moe” Maestas, D-Albuquerque, deposed HB 255 Last week. The bill, which also has Republican co-sponsors, would create a new class of liquor licenses like other proposals, but would also offer a tax deduction to businesses that already have a liquor license.