2018-05-31 / Around Town

Town and City See Wide Divide in Liquor Licenses

By Christopher Allen

Although they share a common slice of Atlantic Ocean waterfront, there is a wide gulf between Middletown and Newport when it comes to the cost of a liquor license.

There are various categories of licenses in both communities, including 10 in Newport. However, it’s the full bar and restaurant licenses, called BV, that have taken on special significance in recent years.

A BV license in Newport could add hundreds of thousands of dollars to the value of a business, which is why the council-approved transfer of liquor licenses in recent years has become more controversial, with increasing speculation about the price tag on the transfers. The Newport City Council isn’t awarding any additional bar and restaurant licenses. In Middletown, the value of the right to serve alcoholic beverages doesn’t come close to approaching the value for its Newport neighbors.

Steve Kirby, president of Kirby Commercial real estate, has experience negotiating these commercial transactions. A former bar and restaurant owner himself, he said that it’s important to keep in mind the technicalities when discussing the value of a Newport liquor license. “Everyone says you can sell a license for x, but technically no. You are selling a barstool that happens to have a license with it,” he said, referring to the fact that often these transfers are private business matters with no public accounting for what the license was sold for.

“It’s not something that you own. It’s a right that the city grants you,” Kirby said.

The disparity in value between Newport and Middletown would seem extreme in nearly any other circumstance. Newport and Middletown real estate and income levels are comparable, and both have pristine waterfronts and multiple attractions. But a liquor license in Newport could fetch six figures, whereas in Middletown, all that is required is a nominal annual fee and the blessing of the Town Council.

“You cross the [city] line, and you pay [comparatively] nothing,” Kirby said.

One reason for this disparity is that Middletown currently has a few licenses left that have not been issued. In Newport, anyone looking to open up a new, alcohol-serving establishment must secure one of the licenses currently in circulation. This requires either approval from the council for a transfer, or purchasing a piece of real estate with a license already attached.

According to City Hall data, there are currently 56 full food and beverage liquor licenses (classed as BV) in Newport. And with a decades old moratorium placed on increasing the number of these licenses, the price of this much sought-after commodity continues to climb.

“The city decided this [limiting new licenses] years ago before I got elected,” said Newport councilor Kate Leonard. “And I’ve been here 20 years.”

Leonard said that looking at the history of how the current set-up came about is important. Placing a cap on any market good increases its value. “I don’t think it’s out of whack,” she said. “You need to look at how they were created.”

The past few years have seen a flurry of liquor licenses being jockeyed about in Newport, with the city council taking up multiple requests for transfer from both established and up-and-coming restaurants. In 2016, Stoneacre Pantry on Thames Street exchanged its full license for a beer and wine license from the Wharf Pub.

Last year, Alex and Ani founder Carolyn Rafaelian bought a full license from Willy’s Burger Bar to open the forthcoming Local Mercantile Café at 282 Thames St., the sight of the former Tea and Javas Café, which she also owned. The cost of that license has not been made public, but sources said the price tag was around $350,000.

“It’s strictly a supply-and-demand thing,” Kirby said. “They’ve become a commodity.”

According to the Middletown town clerk’s office, there is currently a cap at 39 total licenses allowed, 24 of which are classed as BV. Four BV licenses are available, with one pending. The licenses include an annual fee of between $1,500 and $2,000.

Middletown Town Clerk Wendy Marshall says that although there are openings, all liquor licenses are issued through the Town Council and must be renewed. As for the current cap of 39, she said, “The council could vote to change that.”

There has been a hotel boom in Middletown in recent years, with additions to properties and new entities springing up. The development push began two years ago with the sale of the Atlantic Beach Club, which was converted into a large-scale wedding venue. Since then, the Atlantic Beach Resort opened on the old Seaview Inn property, and there are two other proposed hotels on the sites of Rusty’s Pub on Wave Avenue and the recently shuttered KJ’s Pub on Aquidneck Avenue.

Scott Kirmil, co-owner of the newly opened Diego's Barrio Cantina on Aquidneck Avenue, along with Newport’s Diego's Restaurant and The Wharf Pub, has witnessed the disparity first-hand.

Kirmil paid $200,000 in 2009 for a liquor license for Diego’s. “The value [of the license] has gone up,” he said.

“It’s really just the money,” he said. “The big difference is having to pay [upwards of] $300,000 [to purchase an available license]... It’s a huge asset. But Newport is really daunting.”

Kirmil thinks the Newport moratorium on the number of available liquor licenses is most likely here to stay because it helps keep a handle on the character of the city, and it also makes a business owner think hard about the amount of debt one must take on to get started.

Although it is not an asset that is deeded, it is also not something that the council can very easily revoke. Asked if a license could ever be voided by the council, Leonard said, “Not without due cause.”

“The system is what it is,” Kirmil said. “They created a monster [with the moratorium], but I understand why they did it.”

But with the decades-long vision for the Atlantic Beach District beginning to take shape, and with proposed redesigns of several intersections and updated safe and walkable sidewalks along Aquidneck Avenue, the desire for restaurateurs to set up shop and serve liquor could increase.

Kirmil said he welcomes the development vision currently in the works with the state and town. And his new Middletown venture is eyeing a more local clientele to ensure year-round business.

“We catch a different crowd over here,” he said. “It’s one of the reasons we wanted to invest in this [lower Aquidneck] area... I’ve been to a couple of the [town] meetings. The plans look awesome. They [Middletown] could use their own strip.”

As for Newport, Kirby said he understands both sides of the argument between development and preservation.

“There is such [an important] balance between the residents and the commerce,” he said. “It’s very circular.”

Asked if she would ever entertain the thought of increasing the available BV licenses in Newport, Leonard said she would be opposed. “We’d be sued. People would say, ‘Why would you give them that for free? I had to pay for mine.’”

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