arizona government protects bars and liquor stores from competition and keeps the price of booze artificially high by limiting the number of liquor licenses.
The Arizona Licensed Beverage Association worked with the state to ensure the number of new licenses would not flood the market and devalue existing licenses. (yes the regulators sleeping with the regulated)
Thinking of selling packaged liquor? A Series 9 license recently sold for $240,000.
they (state officials) don't want to get lynched" for diluting the market value of existing licenses. (again the regulators sleeping with the regulated give a monopoly to the regulated)
Liquor licenses go on sale Limited few will be issued to businesses that apply
Yvette Armendariz The Arizona Republic Feb. 13, 2006 12:00 AM
For the first time since 1988, Arizona retailers and aspiring bar owners will be able to apply to buy a limited number of new liquor licenses from the state.
Applications can be filled out starting today.
For the past 18 years, the only way to get a bar or liquor license had been to buy it from another business. The renewable and transferable certificates have become prized assets for nightclubs, pubs, grocery stores and pizza parlors. Prices on the secondary market have skyrocketed, making them an investment, much like housing, for their buyers.
Prices for the licenses have reached four and five times their value when last issued.
Today an aspiring bar owner would need to pony up $85,000 to $90,000 to buy an existing Series 6 license needed to operate a bar. They were selling for as low as $65,000 three years ago.
Thinking of selling packaged liquor? One of those Series 9 licenses recently fetched $240,000. Three years ago, prices tended to range between $110,000 to $135,000.
The additional 126 licenses to be issued statewide this year are unlikely to bring down prices for the "quota" licenses held by current owners. The state is seeking to sell the new licenses at the going market price.
The state agency, as of Friday, had yet to post the market price for these quota licenses. The Arizona Licensed Beverage Association, which represents liquor retailer and wholesalers, worked with the state to ensure the number of new licenses would not flood the market and devalue existing licenses.
"I don't see any downside for the state or the industry in this (plan). It's a plus," said Bill Weigele, president of the state association.
A Series 6 license is needed to operate a bar, Series 7 is needed to serve beer and wine, and Series 9 is needed to sell liquor at retail. Maricopa County will be allotted 10 of each of the three quota licenses. Pima County gets five each, while Pinal, Yavapai and Yuma counties get three each.
Economist Tracy Clark said the numbers issued may be below market demand, given the population growth and rising prices of these licenses. But societal concerns play a role, as communities don't want to feel like there are too many bars.
Also, "they (state officials) don't want to get lynched" for diluting the market value of existing licenses, said Clark, who is associate director of the Bank One Economic Outlook Center at Arizona State University.
Interest has been healthy, according to the state Department of Liquor Licenses and Control.
Calls have been coming in daily since the beginning of the year seeking information on the process, and the state is preparing for the possibility that there will be more applicants than licenses available in some counties.
Agency Director Leesa Berens Morrison said she has heard no complaints about the small number, although it could frustrate some entrepreneurs' efforts to break into the industry because of the high cost.
"I think people are happy that there are going to be 10 more of each type" in Maricopa County, she said.
The state has had the ability to release more licenses based on population growth, but refrained from issuing any to appease strong anti-alcohol sentiment in communities.
Applicants will have to choose a location for the license, and only one of each type of license can be sought at each address.
"We're trying to avoid speculative, or what we call 'pocket' licenses," Morrison said.
Prices will be based on three independent appraisals that were averaged out by an independent accountant. If more interest than licenses are available, the state will randomly assign numbers to applications and a drawing will be held April 12.
Weigele is doubtful the new licenses will create a surge of new bars.
"Zoning laws are still in place," he said.
The Department of Liquor sought to release licenses last year as a way to pay for a $2.5 million computer system.
The state will release a limited number of licenses each year through fiscal 2010, based on a new population formula, which is expected to raise as much as $6.3 million annually for the state. Of that, the agency will receive $1.25 million the next two years to fund its computer upgrade.
"This whole thing came about because of a negotiation last legislative session," Morrison said. She doesn't expect a sellout of the quota licenses in all counties; market prices may discourage applicants.