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Published July 22 2012

A dividing line for liquor licenses?

FARGO – Land developers in the Veterans Boulevard corridor here are asking for a new type of liquor license they say will level the playing field with cheaper alternatives in neighboring West Fargo.

City officials say they’ll study the matter, but they also say there’s little evidence the disparity is driving businesses away.

At Fargo’s liquor control committee meeting last week, developers lobbied for a modified food and alcohol license, usable only in a mile-wide corridor adjacent to Veterans Boulevard, which marks the border with West Fargo.

The new license would carry no start-up costs – a sharp departure from the $100,000 issuance fee for the current FA license used by restaurants that serve alcohol at a bar. West Fargo has no issuance fee for a similar license.

The new license would also carry a higher annual fee, though the proposal did not specify how much. FA licenses currently cost $1,700 a year in Fargo. A similar license costs $1,100 a year in West Fargo.

In a letter to the city, dated July 12, two developers said the issuance fee puts Fargo at a disadvantage.

Kevin Christianson of Amber Valley West Investments and Tyler Brandt of Brandt Crossing wrote they’re “very concerned with the huge disparity in what it takes to have an FA license compared to West Fargo.”

Without changes, the city could lose businesses in the area, they wrote, saying “this may have already happened with one prospective/potential restaurateur.”

They did not name the business that may have been lost. Steve Iverson, who spoke on behalf of area developers at the liquor board meeting, declined further comment.

Steve Sprague, Fargo’s city auditor, said the liquor board agreed to study the issue.

The city has created specialized licenses to incentivize development in the past, like an FA license in the Renaissance Zone with a lower initial fee. But dropping the issuance fee altogether “would be new ground for us,” he said.

He also said it would be unfair to create a new, cheaper license when existing businesses in the area have already paid the upfront fee for an FA license.

Two dozen businesses hold FA licenses, which allows restaurants to have a bar as long as at least half their sales come from food. Another 15 hold F licenses, which cost $3,000 to issue and let restaurants serve liquor without a bar.

The only Fargo liquor licenses without issuance fees are for nonprofits on military property and Red River boat tour operators. The rest range from $400 for winemakers who want to offer small free samples to $60,000 for golf courses to $150,000 for coveted AB licenses, which allow both on-sale and off-sale business with no restrictions.

There are only 22 unrestricted licenses in Fargo allowing both on-sale and off-sale without food sales, all which are long spoken for and controlled by the license holders. The city also has caps on licenses for on-sale only and off-sale only, as well as a variety of specialized liquor licenses for specific situations.

Sprague said the costs of FA and F licenses haven’t hindered their popularity or the city’s development. If a company is going to spend millions of dollars on a building, he said, $100,000 for a liquor license isn’t a deal-breaker.

“Just drive down 13th Avenue,” he said, referring to the restaurant-rich thoroughfare linking Fargo and West Fargo.

Jim Brownlee, West Fargo’s city administrator, said bars haven’t flocked to his city in spite of cheaper licenses.

“The facts don’t bear that out at all,” he said. “We’d have hundreds of people applying for liquor licenses if that was such an advantage, and that’s just not the case.”

In the past five years, he said, the city has gained two bars and lost two.

The differences in the laws likely made a difference for at least one business.

Costco expressed interest in a Fargo location but was deterred by an ordinance barring off-sale liquor stores in the same location as grocery stores, said Fargo Mayor Dennis Walaker.

Instead, the wholesale warehouse, which sells liquor, is planning to open in West Fargo later this year.

“They thought this was very important to their strategy that they can have those things in one building,” Walaker said.

But while he would have liked to have Costco in Fargo, he said the system has generally worked well. Grocery stores like Wal-Mart that sell liquor in other states have come here anyway, he said, and he doesn’t see wide support for an overhaul.

“I’m not convinced we need to change the law,” he said.

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Readers can reach Forum reporter Marino Eccher at (701) 241-5502