Additional licenses for restaurant liquor sales move ahead

More businesses could sell liquor by the drink in Mitchell soon, under a city ordinance that took effect recently.

Full-service restaurants that want a liquor license can try to buy one from a current license holder, or they can obtain one from the city under the law, which was passed Dec. 19. It took effect Jan. 18.

Unlike other alcohol-oriented laws, no effort was mounted to refer the council decision to a public vote, according to Finance Officer Marilyn Wilson.

Liquor cannot be the main business for companies seeking the license. A restaurant that obtains such a license must make at least 60 percent of its sales from food and will be ordered to submit an annual report on its sales to the city.

There is no limit on how many licenses the city can issue, but Wilson said no one has sought a single one yet.

“I guess we’ve had no inquiries about one,” she said. “We just want to make it available.”

During the discussion Dec. 19, the council members said they felt offering the licenses may help attract new businesses such as hotels or restaurants to the city. The ordinance passed 5-2, with councilmen Jeff Smith, Dan Allen, Ken Tracy, Greg McCurry and Phil Carlson voting yes, Mel Olson and Travis Carpenter voting no and Councilman Marty Barington absent.

The council has 90 days from Jan. 18 to set a price for the license. Once that price is set, it cannot be altered for 10 years.

City Ordinance 2387 is based on South Dakota Codified Law 35-4-110, which was passed in 2008. It was intended to help towns and cities attract hotels and restaurants, which may be interested in locating in their communities.

Those municipalities may have reached the cap on the number of liquor licenses that could be issued, but the new law allowed them to offer restaurant licenses, according to Jason Evans, deputy director of the South Dakota Department of Revenue Property and Special Taxes Division.

The city law defines a “full-service restaurant” as a business where a waiter or waitress delivers food and drink offered from a printed food menu to patrons at tables, booths or the bar. Any restaurant that only serves fry orders or foodstuffs such as sandwiches, hamburgers or salads is not a full-service restaurant, according to the ordinance.

The restaurant must have a dining room or rooms, a kitchen, and the number and kinds of employees necessary for the preparing, cooking and serving of meals. The business can only be advertised as primarily a restaurant and smoking will be prohibited.

There are 24 Mitchell businesses that have a license to sell liquor by the glass, according to Wilson. While the state law only allows one license per 1,000 people, there are ways around that, such as obtaining a license in Davison County and having the property annexed into the city.

Wilson said there are 18 businesses in the city that have on-sale beer licenses. Some are the same as the businesses that have liquor licenses.

Several other stores and businesses have off-sale licenses. There are more than 20 versions of alcohol licenses in South Dakota, according to the South Dakota Department of Revenue.

The city of Brookings is one of 13 South Dakota cities that is offering the full-service licenses. The Brookings City Council discussed the issue at its meeting Tuesday night.

Currently, the price for such a license in Brookings is $100,000 after initially considering asking $25,000 for it, according to a Brookings city staffer. Now, the city is considering dropping the price back to $25,000, she said.

Other cities and towns that offer the licenses are Sioux Falls, Rapid City, Aberdeen, Watertown, Yankton, Bell Fourche, Fort Pierre, Eagle Butte, Hartford, Whitewood and Faith. Towns and cities must pass an ordinance to put the state law into effect in their communities, Evans said.

In Mitchell, there will be two paths to obtain a license.

The applicant can buy one from the city at a price to be set by the council based on the sale of liquor licenses from Jan. 1, 2003, to Jan. 1, 2008. The council must choose the highest price or set a higher price, Evans said.

However, a prospective restaurant can buy one from an existing business that has a liquor license if they inform the city the license is for sale, Wilson said. The city will compile a list of available licenses.

“The burden is on the license holder,” she said. “They have to let me know.”

The council considered the law three years ago but did not pass it then. However, due to an error in the Finance Office, the proposed ordinance was placed on the city’s website and in its codebook as it was the law.

A story in The Daily Republic last summer pointed out the mistake, as well as another error in the city code, and both were corrected.

The law was not in effect even though it was on the city books, Wilson said, and no one applied for such a license thinking it was being offered.

Tags: city council, liquor licenses, news, liquor