Commonwealth Journal

January 31, 2013

Somerset challenging liquor license quotas

Four of five approved by state not to receive licenses from city -- yet

by Chris Harris
Commonwealth Journal

Somerset —  

The City of Somerset is moving ahead with plans to pursue legal action in regards to the state’s distribution of liquor store licenses.
In the meantime, those applicants that the Kentucky Office of Alcoholic Beverage Control (ABC) gave the green light to open package stores are being held in limbo until the mat-ter can be resolved.
Somerset Mayor Eddie Girdler told the Commonwealth Journal on Wednes-day that the city and Somerset’s ABC Administrator Nick Bradley have filed a complaint against the state ABC and Tony Dehner in his official capacity as acting commissioner and distilled spirits administrator.
The complaint, filed in Pulaski Circuit Court, alleges that the “quota” number of Retail Liquor Package licenses approved for Somerset by the state ABC  — that is, a set number of licenses that may be given out to open package stores that sell distilled spirits and wine — is “arbitrary and capricious, and in conflict with the City’s rights under Section 2 of the Kentucky Constitution,” according to a statement issued by law firm Sturgill, Turner, Barker & Moloney, PLLC.
While the number of licenses for stores to sell beer, or restaurants to serve alcohol by the drink, are unlimited, package stores for hard liquor and bars falls under the “quota license” category. State alcohol officials are able to determine both the number of licenses a “wet” community receives and who they approve to get them.
Because the ABC chose smaller liquor retailers, including both local entrepreneurs and national drug store chains Walgreens and Rite-Aid, and did not approve Liquor World — a high-volume retailer ready to make a multi-million dollar investment that the city was counting on — the city stands to lose $150,000 a year in fee revenue, according to Girdler.
As such, the city is seeking to work out a deal with Kentucky ABC to add more quota licenses to Somerset’s allotment — or to see what the courts can do for them.
“We’re doing this to protect the City of Somerset and the citizen in the process,” said Girdler. “We’ve sent a letter (to Kentucky ABC) indicating the actions we’ve taken but providing an open invitation to resolve this.”
One action the city has taken is to not approve licenses for four of the five applicants that the state approved — Rite-Aid, Walgreens, Apple’s Wine and Spirits, and First Stop Party Supply and Package Store. 
Only Wildcat Beer, Wine, and Spirits, Inc. — set to be located on South U.S. 27 in the area near Lake Cumberland Regional Hospital — will receive their license from the city promptly, as Girdler said that it was one of the applicants that met the city’s own economic impact criteria.
“Since they had a state license, and under normal circumstances a local license, I decided to go ahead and give them one,” said Girdler, “but the other (state selections) don’t meet the criteria in comparison.”
Girdler hopes for the city to eventually be able to distribute all of those licenses that the state approved once the city gets what it wants — which is approval for more and bigger liquor stores. 
“We want to work with all the applicants and work with the ABC,” said Girdler. “Regulations state that we can issue our own standards or ordinance as long  as it is not less stringent than the state’s. We think that since the General Assembly gave cities that power to set local rules, the intent of the General Assembly is to let local people as much as possible make local decisions that affect local lives and well-being instead of letting some bureaucratic agency do it.”
How the applicants that the state approved but the city denied will handle the situation remains to be seen. Apple’s owner Wanda Johnson said that her store has already ordered equipment and other items, and employees have quit other jobs to come work there. A delay in the process could have a negative impact on the business.
“I don’t understand why (Apple’s would be denied) if we met the criteria,” she said. “The city listed all the economic impact (standards) and the ones that passed muster were passed on to the state to make a decision. Everyone was asked to submit a second impact report to the state. We did that. It’s not fair if we did everything that we were supposed to do that we would be delayed.”
John Burkhalter, Walgreens manager, said that his store would be “ready to roll” with alcohol sales once the situation is sorted out.
“We’ve done all we can,” said Burkhalter. “We’re just waiting on (ABC personnel).”
Girdler has stated that state ABC personnel apparently ignored the interests of Somerset and didn’t spend sufficient time discussing the city’s needs with local officials. Liquor World owner Wesley Morgan also told the Commonwealth Journal earlier this month that the state’s denial of his application may have to do with a lawsuit he filed against Kentucky ABC regarding licensing practices in nearby Corbin, Ky.
Girdler said that last week, a governor’s task force issued a report recommending changes in alcohol laws, but that Somerset needs solutions soon.
“These issues have been around for decades and nobody’s dealt with them,” he said. “...We can’t wait one or two more years for the General Assembly to resolve these problems.”
The statement from Sturgill, Turner, Barker & Moloney said that Somerset’s “primary motivation in filing the complaint is to maximize the potential investment, development, and economic activity that follow permitting the sale of alcoholic beverages,” and notes that Somerset is a “commercial hub” for a four-county region that enhances economic impact, along with the tourism factor.
“The City of Somerset alleges that the licensing irregularities by the state ABC will deprive the City of substantial economic investment and development opportunities stemming from alcoholic beverage sales,” reads the statement. 
It also states that according to Kentucky Administrative Regulations, one liquor package license is available for every 2,300 residents in counties containing second- to fourth-class cities — which would mean Pulaski County could conceivably qualify for a quota of 28 licenses.
“While the same regulation sets forth that more restrictive individual quotas may be set for smaller political subdivisions within a county, no individual license quota had been issued as of the filing of the complaint on January 30,” reads the statement. “Nevertheless, in letters from Dehner to nine otherwise qualified liquor package license applicants dated January 9, 2013, Dehner rejected their applications citing a quota of five available retail liquor package licenses in Somerset — all five of which had already been issued by Dehner.
“Further, the complaint alleges that Dehner’s notices to the recipients of the licenses were premature and preempted by Somerset’s statutory authority,” reads the statement, which points out that Somerset’s own city ordinance allows for city administrator’s approval to be necessary for an applicant’s license to be eligible. “Dehner issued five liquor package licenses in the City of Somerset before any were selected by City Administrator Nick Bradley.”
The complaint also states that the applicants selected by the state were “concentrated along one segment of the U.S. Highway 27 corridor, while the applicants selected by ... Bradley proposed locations stretching across the city to align with Somerset’s objective to best serve the region and its tourism industry.”
Girdler is hoping for court action to be resolved “very quickly,” since the city is just asking the judge to determine the rights of each party right now, and that everything possible will be done in a time frame of 30 days “to either expedite negotiations with the ABC or get a quick decision from the circuit judge,” he said.
“We want to be ready for tourist season,” he added. “We’ve got to get things issued so (applicants) can do repairs and renovations for the tourists coming in May.”