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Erik Burgess, Published October 22 2013

Fargo to consider allowing more standalone bars

FARGO – Fargo has historically restricted liquor licenses for standalone bars, which allow for unrestricted liquor sales with no food sale requirements.

The city offers 33 such licenses now, a number that doesn’t go up often.

But if Fargo operated under the laws of South Dakota, it would have about 75 such licenses.

If Fargo was picked up and moved across the river to Minnesota, it could have 73 standalone bars, based on the city’s population and Minnesota state law.

And if the city had the same liquor laws as Grand Forks or Des Moines, Iowa, there would be no limit on how many standalone bars could open in Fargo.

This is all according to research done by city staff, as city leaders here begin a debate today about liberalizing Fargo’s liquor license system to allow more new standalone bars. The city’s liquor control board will discuss the topic at its 1:30 p.m. meeting at City Hall.

It’s a proposal many owners of full-service bars – most who own their full liquor licenses as property – are bound to oppose because more bars could reduce the value of their licenses if and when they sell them.

Rule ‘sort of ludicrous’

Thirty of the standalone bar licenses in Fargo are capped by city ordinance. There are only eight Class A licenses, which only allow for unrestricted on-sale, and 22 Class AB licenses, which allow for unrestricted on- and off-sale.

Four Class Z licenses, which are comparable to the Class A, were created in 2005 and designed to increase with the city’s population. When Fargo hit 100,000 people in 2010, Mahoney’s Bar and Grill opened downtown. A new Z is added for every 10,000 people after that, based on the official U.S. Census.

Unlike the Class A or AB licenses, a Z license is owned by the city and is returned to the city if the license is vacated. Class A and AB licenses remain the personal property of the owner once purchased.

But the issue came to a head at the Sept. 30 City Commission meeting, when three businesses applied for a Z license vacated by Mahoney’s, which closed this summer, and city officials discussed adding more Z licenses to the pool without waiting for the next census in 2020. Fargo’s population is 109,779, according to the 2012 US Census estimate.

The three applicants are:

  • Julie Thorson and Rosemary Ackley, who are proposing a downtown bar and grill called Catherine’s;

  • Jeff Thomas, who is proposing a south Fargo bar and grill called The Pink Pussy Cat; and

  • Daniel Labernik, who wants a standalone bar license for his north Fargo bar and grill, Labby’s.

    At the Sept. 30 meeting, commissioners floated the possibility of issuing licenses to all three prospective bar owners before kicking to the liquor board for a recommendation.

    Commissioner Brad Wimmer, who serves on the liquor board, said he’d like to see all three businesses get a Z license.

    Police Chief Keith Ternes expressed some concern at the commission meeting that three new bars in one fell swoop could put a strain on law enforcement.

    Wimmer argued that because Labby’s is an existing bar asking for a different license and Catherine’s would essentially replace Mahoney’s downtown, the city is really only adding one more bar.

    “So do we have the population in place today to add one new license?” Wimmer asked.

    City staff studied how other cities add more standalone bar licenses and found that many regional cities have a smaller population trigger than Fargo, said City Auditor Steve Sprague.

    Wimmer said he’d like to at least lower Fargo’s 10,000-person threshold.

    “They kind of grabbed that out of thin air,” he said.

    Bismarck issues a new license for every 2,500 increase in population, and Minot increases one license per 1,500 person jump in population.

    Wimmer also said it’s “sort of ludicrous” that the city has to wait 10 years for an official U.S. Census before allowing licenses to pave the way for new bars.

    “I think we need to be able to trigger that sooner if need be,” he said.

    Avoiding ‘can of worms’

    Adding more standalone bar licenses to the pool is likely to be opposed by the 30 people who own Class A or AB licenses.

    The licenses were first sold for $115,000 for Class A and $150,000 for Class AB, but their actual values on the market are assumed to be much higher.

    Sprague agreed that owners of Class A and AB licenses generally don’t support any initiative to allow for more standalone bar licenses.

    “Whenever we make a proposal to make a change to the license structure … the kickback or the feedback that we hear from them is almost like ‘Everything’s fine. Don’t make any changes,’ ” he said.

    City leaders have long said a cure-all for its liquor laws would be to buy back all the licenses that are by law personal property and only issue liquor licenses that are owned by the city.

    But Wimmer said that’s a costly affair and it’s unlikely the conversation about Z licenses will break into that bigger issue.

    “That’s kind of a can of worms and I’m not, I don’t think, ready to attack that yet,” he said. “That’s an overall restructure of the whole system, and we know it needs that. I just don’t think anybody wants the undertaking.”

    Readers can reach Forum reporter

    Erik Burgess at (701) 241-5518