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City of Mitchell considers plan to offer restaurant liquor licenses

The city of Mitchell may offer more liquor licenses soon.

The City Council gave initial approval to Ordinance 2387, establishing full-service restaurant on-sale licenses, during its meeting Monday night at City Hall. Under a state law passed in 2008, there would be no limit to the number the city could issue.

The vote was 7-1 in favor, with Councilman Mel Olson the sole "no" vote.

If it receives final approval, it would allow the city to issue a liquor license above and beyond existing quotas if the applying business is classified as a full-service restaurant. No more than 40 percent of sales can come from alcohol under this definition.

Mayor Lou Sebert said there has been a request for such a license. Other South Dakota cities offer such licenses.

If the city decides to issue the licenses, and voters do not overturn such a decision, it could be a financial windfall for the city.

City Attorney Randy Stiles said the "benchmark price" for the license would be set by examining what the last liquor license sold for in Mitchell from 2003 to 2008. State law mandates that, he said.

Stiles did not disclose what the price would be for the license.

"I have an idea," he said.

In some parts of South Dakota, liquor licenses have sold for more than $200,000.

This fall, the city of Brookings set a $100,000 price on a restaurant liquor license. In 2010, the city of Rapid City was asking $295,000 for such a license.

If a Mitchell business owner who now has a liquor license wants to sell it, that business owner would have the right to sell it to an applicant at the price that was set by the city, the council was told.

Stiles said video lottery would likely be permitted if the owners obtained a liquor license.

Council members said as a community that relies on tourism and hunters, it makes sense to offer this option to a business.

"I think it's proactive to the community," Council Vice President Marty Barington said. "We have to move forward."

"The way I look at it, it's more of an economic development approach," Council President Jeff Smith said.

The city considered this law in the past but took no action. However, the proposed ordinance was accidentally placed in the city code until The Daily Republic pointed out the error this summer. It was not legally binding, according to the city, but was simply a clerical error.

State law ties the numbers of most liquor licenses to population, but there are ways around that.

Because some businesses with licenses were annexed into the city, and because some licenses were issued before the current quota system was enacted, the city has more licenses than state and local quotas technically allow.

The state law passed in 2008 is intended to draw more restaurants, hotels and other businesses to cities where no more liquor licenses are available.