Gov. Phil Murphy on Feb. 23 hosted a roundtable event at Pru Thai, a Clinton restaurant, as his office unveiled new details of a proposal to update the state’s decades-old liquor licensing program. — Photo by Edwin Torres/Governor’s Office
By Joshua Burd
Gov. Phil Murphy has revealed new details of a proposal to update the state’s decades-old liquor licensing program, seeking to balance new economic growth with the interests of existing operators.
The long-awaited reforms, which the governor teased last month, would expand a system that currently allows local governments to issue just one consumption liquor license for every 3,000 residents, limiting the supply of available licenses and driving up prices significantly. Under the proposal, the state would phase out the population cap over five years, while seasonal retail consumption licenses would be reduced each year by 10 percent during that time until it is completely removed, seeking to grow the market in individual municipalities but not overwhelm it.
After the phase-out, local authorities will issue licenses as needed and without a cap, subject to the same local review process that exists today, with supervision by the state Division of Alcohol Beverage Control, according to Murphy’s office. Each local authority will be able to determine and regulate the number and type of licenses to be issued upon reduction and removal of the existing population cap.
The proposal also calls for establishing a means-tested tax credit for current plenary retail consumption license holders impacted by the expanded supply of licenses, according to a news release. The tax credit — which would look to address what has been the biggest barrier to liquor license reform — would be determined based on the taxable sales within the preceding three calendar years.
“Our current liquor license law is a relic of Prohibition New Jersey,” Murphy said. “We need a liquor license law for the next New Jersey. We need to face the simple reality that a liquor license is a game-changer. Current financial barriers prevent equitable access for small businesses and those in underserved communities while suppressing New Jersey’s economy. Our impending proposal will create an affordable, equitable path for the next generation of aspiring restauranteurs, brewers, distillers and vintners, making them more competitive with small businesses in neighboring states while transforming our economies and our downtowns.
“Equally important, it will establish a tax credit to support existing license holders and it will maintain local control over the licensing process so that communities have a say in the future of their town.”
Murphy’s team released the proposal in conjunction with a roundtable discussion at Pru Thai, a Clinton restaurant, with several stakeholders in an issue that has proved difficult for policymakers to tackle in the past. He said the event would help inform final decisions as he prepares to introduce a formal legislative proposal, seemingly with lawmakers such as state Sen. Gordon Johnson and Assemblyman Raj Mukherji, who were both on hand.
As outlined by Murphy’s office, other steps in the framework include:
- Establish administrative prices and fees for new licenses: New licenses would be issued at progressive prices and associated fees based upon business size, which will be measured by number of employees. These prices will be reviewed and set annually by the Division of Alcoholic Beverage Control, while municipalities would maintain the right to assess local fees upon the issuance of a new license with a cap on the annual renewal fee, not to exceed $2,500, in order to maintain affordability.
- Address breweries, distilleries and wineries:The proposal would also expand the rights of holders of certain brewery, cidery and meadery, distillery and winery licenses, many of which are restricted from serving food and nonalcoholic beverages, limited from participating in events, and required to host tours. Under the proposed legislation, the restrictions would be lifted, allowing for coordination with food vendors; attendance at unlimited off-premises events; and the hosting of unlimited events on premises. Restricted brewery licensees may convert to a limited brewery license, and receive the new benefits, upon payment of a fee to be established by the ABC.
- Repatriation of inactive licenses to boost availability:Under the proposal, licenses that have been purchased but not in use for more than two years can no longer be held in perpetuity by the license owner. Additionally, existing licenses that have not been active for five years preceding enactment of this legislation, will go to the municipality for reissuance at public sale. Any future issues with inactive licenses will be handled by the municipality, rather than the ABC.
As Murphy and other supporters of the reform noted, limits on the existing supply forces prospective buyers to either purchase licenses from existing holders on a secondary market — sometimes for as high as seven figures — or pay a high price to a municipality through an auction.
“I am excited to be working alongside the Governor to reform our archaic liquor license laws,” Johnson said. “Updating these outdated statutes will uplift our main streets and finally give our local restaurants a real chance to purchase a license.”
Liquor license reform was among several agenda items that Murphy outlined during last month’s State of State speech in Trenton. Commercial developers and property owners have long called for such an update and an expansion of liquor licenses, arguing it would boost downtowns and mixed-use projects, but concerns about compensating existing license holders have stymied any attempt at reform.
According to 2019 U.S. Census figures and data from the ABC, New Jersey trails New York in number of restaurants per capita and both New York and Pennsylvania in number of liquor licenses per capita, Murphy’s office said. Additionally, New York and Pennsylvania have more than three times as many breweries and distilleries as New Jersey and generate billions more in economic impact.
The state’s Economic Development Authority estimates that reforming New Jersey’s liquor license system could generate up to $10 billion in new economic activity over 10 years and create upwards of 10,000 jobs annually.
“New Jersey’s antiquated liquor license laws are an obstacle to realizing the full potential of economic growth and job creation in the industry and are stifling competition,” Mukherji said. “I applaud the Governor’s call for modernization and the creation of new opportunities for restauranteurs and small business operators throughout our state, while seeking a fair and innovative approach to balancing growth with the interests and significant investments of existing liquor license holders.”