City revisits liquor fee

Is $125K license bottling up Brandon's growth?

 

When El Tapatio owners Maria Guitron and Leopoldo Mora decided to open a restaurant in Brandon last month, the couple looked into purchasing a retail on-sale liquor license – the permit needed for a bar or restaurant to sell beer, wine and spirits for customers to consume on the premises inside the city limits.

But the $125,000 price tag forced a change of plans.

“It’s too expensive. We get lots of requests for whiskey, rum, tequila,” Mora said. “We have $1.5 million invested in the Brandon location. When people come here and hear $125,000, they’re going to go someplace else. “It’s a little overpriced.”

The El Tapatio scenario is what led alderwoman Jo Hausman to broach the topic of lowering the city’s liquor license fee at Monday’s city council meeting.   

“I thought, ‘This has got to change,’” Hausman said. “Once I knew the Mexican place didn’t buy one, I was back on my high horse. 

In 2012 the city raised the price of its on-sale liquor license from $8,785 to $125,000. 

At the time Brandon had three licenses available. Five years later, the city still has the same three liquor licenses up for grabs. 

The state of South Dakota issues liquor licenses to cities based on their populations, and that number is capped until the next U.S. census. 

Similar-sized towns sell their licenses for a lot less. The price is $70,000 in Yankton, $75,000 in Huron and $95,000 in Vermillion. Aberdeen, with nearly triple the population of Brandon, charges $25,000 less than the city of Brandon.

“I just about fell over when it went up to $125,000,” Hausman said. “It’s stifling growth and keeping restaurants from coming wanting to come to town.” 

Kim Cerwick also took note when El Tapatio didn’t buy a $125,000 liquor license from the city. As director of the Brandon Valley Area Chamber of Commerce, Cerwick is concerned about any factor that may impact economic development. 

“If it has the potential to inhibit growth, the discussion needs to happen,” Cerwick said. 

That discussion happened at Monday night’s city council meeting.  

Alderman Blaine Jones, who sat on the council in 2012 when the $125,000 amount was set, said at Monday’s meeting that the council arrived at $125,000 by asking Brandon business owners who owned retail on-sale liquor licenses what they had paid. 

While the state sets a minimum price for cities to sell those licenses – $1 per resident for towns over 5,000 in population – cities set their own fair market values. 

Liquor licenses that go back on the market do not, however, go through city channels; they’re sold among business owners in private transactions.  

Several Brandon restaurant and bar owners were at Monday’s meeting, including Mora and Guitron. 

Guitron spoke about her experiences in owning Brandon’s El Tapatio thus far. The couple also owns restaurants in Yankton, Dell Rapids and Sioux Falls.

“Obviously, it’s affecting our business. It’s quite the investment we’ve put in, and quite a bit of customers ask if we have full liquor – whiskies and others,” she said. “We do sell food of course but to complement that, people do request a drink. Sometimes they are turned away because we don’t have it.”

Hausman last brought the issue before city council in 2015, but a 5-1 vote stopped any action on Ordinance 528 - Setting Liquor Liquor License Fee.

“The ink is barely dry from the last time we changed it,” Jones said. 

The alderman was more open to the topic Monday night. 

“I agree it’s a lot of money,” Jones said, adding that the council couldn’t, however, decide on a new price “willy-nilly.”

Alderman Don Wells said he’s been wanting to address the license price since he joined city council in May.

“If we want quality restaurants to come to town, we need to be more affordable – $125,000 is astronomical,” Wells said. “It’s not realistic.”

Alderman Jon McIrney said it seemed unfair to Brandon’s current liquor license owners to lower the price. 

“But no one has approached us asking for a license. So what’s in the best interests of citizens? Future tax revenue growth and additional options to citizens,” McIrney said. “If we set it too low, it’s not going to produce tax revenue; if we set it too high, we’re pricing ourselves out of the market.

“What is the actual value of that license?”

Mayor Larry Beesley said Brandon was in an unusual position because of its proximity to Sioux Falls. A town 50 miles from Sioux Falls, like Brookings, he said, probably wouldn’t have this problem: three licenses that have sat five years with no takers and little interest.

“We’re too close to Sioux Falls,” Beesley said. “We’re in a unique situation, and we’ll have to find a unique solution.”

The mayor stated that the city would look into leasing liquor licenses, which is the arrangement Guitron and Mora have with the city of Dell Rapids for that El Tapatio. 

Bryan Read, city administrator, said he would find a commercial appraiser with experience in liquor license market values.

“We will explore options and have many discussions,” Beesley said.