Councillors mull plan to have city buy back liquor licenses and lease them to proprietors

City leaders discussed the idea of purchasing liquor licenses back from restaurateurs during a lengthy council hearing online last week.

Councillor Lydia Edwards, who proposed the buyback plan, said it could help small businesses during and after the pandemic and allow the city to reset its antiquated licensing system. 

She outlined her idea as a “leasing” effort. 

“The goal here is to save our small businesses that won’t be able to bounce back the same way bigger companies will. We need to talk about keeping our mom and pops and main streets thriving,” she said, “and the only asset they will have left is the liquor license.”

Edwards added: “This is a question for the City of Boston: What do we do when there are liquor licenses available for purchase? Do we sit back and watch while the Cheesecake Factory or Bertucci’s or the casino is able to buy them up and then expect our small mom and pops to survive? Or are we going to also compete in the market?”

Her concept, she said, would have the city purchase any licenses for sale, and then lease them back to the restaurants. “If the restaurants don’t come back, then the city has the licenses,” she added. “And ultimately, as a city, we have been trying to take more control of our liquor licenses to begin with. I think this is an opportunity in this post-COVID moment.” 

Kathleen Joyce, chairwoman of the city’s Licensing Board, in responding to Edwards’s proposal, said, “The idea you’ve put forward today is well-intentioned. However, putting the cost of what that would be aside, it could have significant unintended consequences, including impacting how the city can support and assist our small businesses holding a liquor license. It would create a significant legal liability for the city, and an administrative burden to the city’s officials due to legal requirements.”

She continued: “While there’s nothing in the law that prohibits the city from holding a liquor license, it would have to go through the same transfer process as any other applicant, including full disclosures, a public hearing, and approval by the board.” 

Edwards’s colleagues were largely on board with her idea. At-Large Councillor Julia Mejia and District Councillors Kenzie Bok and Liz Breadon said they see it as a chance to make changes to the city’s licensing system while also providing pandemic relief. 

“This is an opportunity to act in an equitable manner,” said Mejia. 

For her part, At-Large Councillor Annissa Essabi George said that “this is work that just generally remains undone. I appreciate the impact that this pandemic has had on businesses, and we need to make sure these businesses have a voice in any decisions we make.”  

At-Large Councillor Michael Flaherty noted that the council has long been considering issues with the city’s licensing process.

“This is an idea that came forward a few years back when a lot of restaurant and bar owners were concerned that the market would be flooded. So, I think this is an interesting issue,” he said. “We’re going to need to strike a balance and determine how many of these businesses are able to stay open post-COVID. We’ll need to watch to make sure any decision we’re making doesn’t thwart the whole industry.” 

Kaitlin Passafaro, director of policy in the Mayor’s Office of Economic Development, said she was there to listen. “I can assure you,” she said to the councillors, “that this level of engagement from the mayor’s office will continue as we move toward and through the recovery and reopening phases.” 

Joyce broke down some possible conflicts and issues that she said the council should keep in mind. “We are working every day with other city departments to get our restaurants ready to go when they are permitted to reopen. This proposal could prompt real practical challenges,” she said. “The city would enter into these management agreements with each operator, which would be contractual and subject to scrutiny at the state and local level. 

“Under this type of licensing agreement, restaurant employees would technically become city employees,” she said. “In this situation the city would still own the license but delegate rights and responsibilities to the restaurant operator. I’m not clear how this would work.”

Joyce also noted that the value of liquor licenses is determined by the market, and the licenses themselves are subject to negotiation. “Of the 1,000 existing transferable licenses in the city, 100 of them have existing pledges. Those are real monetary assets attached to them,” she said. 
Phil Frattaroli, managing partner and CEO of Filmark Hospitality Group, which operates several popular Boston restaurants, said the city’s licensing process is often “expensive” and difficult for restaurateurs to navigate. 

“The two-tiered licensing system — with restrictive and nonrestrictive classes— isn’t perfect for either of the classes,” he said. “In my opinion this reset moment that we have as a city might be a good opportunity for us to join the licensing systems of the other 49 states. I think there are only five or six municipalities in Massachusetts that have a licensing system like the one we have.” 

Gustavo Quiroga of Graffito, a Boston-based real estate development and urban design firm, participated in the hearing as a panelist.

“I’m joining you today to voice support for the city pursuing a restaurant liquor licenses buyback, a program to make a payment to restaurants and create an opportunity to change the licensing paradigm,” he said. “This would finally give the city local control over licensing matters that other cities in the region already enjoy.” 

Edwards continued to emphasize the importance of finding a way to reform the licensing system and prevent small business closings. “When I think about this moment and the [chance] to reset and take a different course,” she said, “that is the goal of this conversation: [To ask] the city of Boston to rise to the occasion to look at ways in which it can reform the system.”

She added: “If the city of Boston doesn’t buy the licenses, someone else will. City grants are great, but they are not fixing the system, and I am not comfortable watching some of these businesses not come back.” 

Joyce agreed that the system is complex, but still argued that city ownership of the license would result in conflicts.

“There would be conflicts if the city holds the licenses. It’s a very heavily convoluted and archaic system, and I don’t know where we would set the price,” she said. 

 “Right now the board is kind of in survival mode,” she noted. “We’re listening to what we can do to help and one of the obvious responses is using outdoor spaces. We’re doing whatever we can, and we’re living in the here and now.” 

After much more discussion, Edwards and Joyce wrapped up the session.

“I’m hoping the city will at least commit to a pilot program as something to learn from. And, secondly, I think the city needs to be thinking about the market, and about what the average liquor license is going to be,” said Edwards. 

“And either we will have set up a program that will fail because we didn’t respond to it, or we will have overfunded and won’t have enough people willing to sell because it’s working.” 

She added: “I do think it’s worth analyzing the damage to be done post-COVID. I know the focus right now in the city is to save as many restaurants as possible, but realistically we need to think that there are some that aren’t coming back and need some help.” 

Edwards asked Joyce: “Based on that, what do you think a pilot program could fund? What would those numbers look like for purchasing maybe 10 or 20 licenses? I know that we won’t have answers right away, but I don’t want these conversations to not be had.” 

Joyce said she didn’t have a detailed solution to the issue. “I’m truly thankful for the opportunity to be part of this conversation. I don’t think our city is ever going to look the same. It’s sad and frightening. The little things we are doing may not make the difference, but we are committed to trying.” 

She concluded: “We want to be helpful and creative, and we’re open to new policy and to see how that would impact the way our city looks. A lot of this is up to consumer confidence, and I think it’s up to us to bring that confidence back to our city and our neighborhoods.”