Coalition Fights Changes To New Jersey's Liquor Laws

By Christian Wade | The Center Square contributor, The Center Square New Jersey

April 24, 2023

(The Center Square) — A coalition of industry groups has formed to push back against New Jersey Gov. Phil Murphy’s proposal to update the state’s Prohibition-era liquor licensing laws.

The Coalition for Responsible Alcohol Licensing, which includes the New Jersey Licensed Beverage Association and three other industry groups, argues Murphy's proposal would "flood" the state with "cheap and unlimited licenses forcing many of our state’s family-owned bars, taverns, and restaurants to go out of business."

“The governor has stated that the goal of his liquor license proposal was to spur development, encourage development of downtowns and provide opportunities to people of color and other small entrepreneurs,” the coalition said in a statement. “Instead, the governor’s plan devastates our family-owned bars, taverns and restaurants by putting them in a huge, competitive disadvantage and out of business.”

Murphy's plan, unveiled during his State of the State speech, calls for the state to "gradually relax" a cap on liquor licenses that limits local governments to one license per 3,000 residents until it’s eventually eliminated.

Murphy argues the current licensing rules have "purposely created market scarcity and driven up costs to the point where a liquor license can draw seven figures." He said that prevents cities and towns from redeveloping Main Streets and hurts the state's overall competitiveness.

But the coalition members say the changes would flood the market with cheap licenses and prohibit the sale of privately held licenses after five years, which would effectively render current licenses now held by local bars, taverns and restaurants "completely worthless."

"To compensate these family-owned bars, taverns, and restaurants, the governor’s plan proposes a complicated system of tax credits to compensate for the loss of value of the licenses," the group wrote. "Unfortunately, a tax credit is worthless when your business goes bankrupt."

The coalition is pitching an alternative plan that would achieve Murphy's goals "without threatening financial ruin upon our state’s family-owned and operated bars, taverns, and restaurants."

"Put simply, New Jersey does not have a problem with the number of liquor licenses, it has a problem with the distribution of its liquor licenses," the group wrote.

To correct the imbalance, the coalition is backing a proposal that would require New Jersey’s nearly 1,400 inactive liquor licenses to be reactivated and transferred to other bars and restaurants and another bill that would create special licenses for bars and restaurants in malls, which would free up existing alcoholic beverage licenses.

The group also calls for loosening the requirements to get a Smart Growth license, which allows additional liquor licenses beyond a community's designated cap.

The coalition is also calling on the New Jersey Economic Development Authority to subsidize new entrants into the marketplace with low or zero-interest loans or grants instead of compensating liquor license holders for a loss of revenue.

“In this manner, the state, and specifically Taylor eligibility for such loans or grants to appropriate developments and borrowers including historically, disadvantage populations, veterans, and women owned businesses," the group said.

New Jersey restricts the number of alcoholic-beverage licenses a city or town can issue, based on population. Under the current law last updated in the 1960s, local governments can only issue one license for every 3,000 residents. Unless a community’s population increases, it can’t create any more licenses. That has dramatically increased the value of the existing licenses.

Earlier this month, 90 Democratic mayors across New Jersey endorsed Murphy’s proposal, releasing a letter that calls for promptly approving the legislation.

The mayors said the exorbitant cost for a license to cover the lack of availability and the population caps “favors the economically advantaged, well hampering, mom and pop businesses and towns with smaller populations.”

“These reforms are long overdue and all the more pressing in light of the devastating impact the COVID-19 pandemic has had on the hospitality industry in general and the distress it has caused for downtowns and Main Streets throughout New Jersey,” they wrote.

Murphy said the mayors represent hundreds of small bars and restaurants that are “at risk” because they “do not have access to liquor licenses."

“They understand the patent unfairness of our current liquor law regime and the significant local economic benefits that our proposed reforms would bring,” he said in a recent statement.

The focus of the work of The Center Square New Jersey is state and local-level government and economic reporting that approaches stories with a taxpayer sensibility.