(Every supermarket with a beer section has to mean one less restaurant or bar under PA's broken licensing regime | Image: Jon Geeting)
Pennsylvania liquor license prices have been spiraling out of reach for smaller restaurants and bars for several years now, without much interest from the political system, but one person in Harrisburg is finally starting to ask some questions, and it’s worth saying a good word about the recent work of Rep. Frank Burns, a Democratic state Rep. from Cambria County.
Liquor licenses in Pennsylvania are so expensive because it’s not like a driver’s license where anybody who meets some criteria can pay a fee to the state and get one. Pennsylvania state law caps the number of liquor licenses in each County based on a population formula, so there are only so many in rotation. It’s common these days to see licenses go for over $200,000 in Philadelphia when they go up for auction, where less than 10 years ago they went for half that.
The prices really started getting out of control in the early 2010’s when the PA Supreme Court opened to door for grocery stores to bid on the same kinds of ‘R’ licenses that bars and restaurants have to get. That decision brought large grocery chains into the competition for scarce R licenses, so now every time a grocery store gets a beer and wine section, it means another new restaurant can’t get a liquor license in that county. A liquor license in Lancaster went for a half-million dollars for the first time a few years ago, and the prices have continued to climb, despite a brief dip during the pandemic.
Despite the negative impact that exorbitant license prices have on the ability of new eateries to open, state lawmakers mostly haven’t seen it as a problem, and almost all decision-makers with any power over this issue seem to view their role as protecting sky-high values for the incumbent license holders, rather than trying to figure out how to keep it affordable for people to open new hospitality businesses, and reinvest in more of Pennsylvania’s older commercial corridors.
The Liquor Control Board openly says that preventing license values from decreasing is one of their goals, and this was one of the reasons they gave Rep. Frank Burns for refusing to turn over any information about the number of liquor licenses available. The LCB is actually spent two years appealing a 2019 request from Burns to the Office of Open Records seeking this information.
State Rep. Frank Burns, D-Cambria County, said he was stunned that after the Office of Open Records and the Commonwealth Court ordered that information’s release, the Pennsylvania Liquor Control Board decided to appeal that decision to the state Supreme Court.
“All I’m asking for is a list with two columns: one showing each county in Pennsylvania, and the other showing the number of liquor licenses available for auction in each of those counties,” Burns said in a news release [...]
The agency has declined to share the information, claiming it is exempt from disclosure under the state’s Right to Know Law. It contends that sharing the list of auctionable restaurant licenses would reveal too much information about the agency’s internal management decisions. They also argued that information was a trade secret and confidential proprietary information, and could have a chilling effect on bids for licenses up for auction in certain counties.
This is a clear example of regulatory capture by private industry, and it’s good to see a lawmaker starting to chip away at it, even mildly.
Rep. Burns eventually got the data on how many liquor licenses there are per county, reported on by the Pennsylvania Capital-Star this week. As a follow-up move, he introduced a bill that would overhaul the licensing system, allowing liquor licenses to be sold across county lines, from low-demand areas to places with higher demand and more expensive licenses. Rather than county-by-county population-based caps, there would be one statewide ratio. Only counties with above-average and below-average numbers of licenses would be affected.
“[Rep. Burns] said the change would benefit mom-and-pop bars and restaurants by freeing them from archaic regulations and red tape, adding that such a plan would even out liquor licenses, creating economic growth and thousands of jobs across Pennsylvania.
Burns noted that bar and restaurant owners in counties that have far too many licenses could sell their licenses to the prospective business owners in high-growth counties that are desperately seeking a license.
“These simple changes would allow small businesses to grow and allow the supply of licenses to shift to meet the demands of the modern era,” Burns said. “It is time for the legislature – and the LCB – to enable these cross-county sales, and to take the licensing handcuffs off of our local businesses.”
Instead of a county-by-county basis, Burns’ bill would establish a statewide liquor-license-to-population ratio.
The bill would allow licensees in counties substantially above or substantially below that average to transfer licenses across county lines. One-third of counties with license ratios around the statewide average would be unaffected. Under the bill, the PCLB would recalculate the formulas every 10 years following the census.
There are a lot of important questions left to answer about how this would work, and some good reasons to be concerned this would lead to most of the licenses gravitating geographically toward the most populous areas. The core truth that the more populous areas need more liquor licenses is worth building on, and lawmakers should consider setting a statewide ratio that effectively creates a large quantity of brand new licenses in addition—something that costs the state nothing.
Ultimately the most promising development here is just seeing any state lawmaker starting to think about high license prices as a problem worth addressing in the first place, and throwing some plausible solutions out there for discussion. We’re looking forward to seeing how this debate unfolds, and will share updates as the situation develops.