State launches new liquor-license landscape, with auctions, new quota areas

Posted at 4:19 PM, Aug 24, 2018
and last updated 2018-08-24 18:19:31-04

This month, the state is holding its first auction of licenses for restaurants and other establishments to sell liquor, beer or wine – and launching a new licensing landscape that creates 54 new licenses in towns where businesses had struggled to acquire them.  

One of the first licenses up for auction is a beer-and-wine license in Belgrade, which had been in a “quota area” that competed directly with the booming restaurant market in nearby Bozeman.

“All the licenses were ending up in Bozeman, so you weren’t getting a lot of restaurants in the Belgrade area,” says Becky Schlauch, head of the state Alcoholic Beverage Control Division in the Department of Revenue. “So this fixes that, by separating those quota areas and allowing licenses to stay in Belgrade.”

The new quota areas are part of a new law passed last November, by a special session of the Legislature.

The law gets rid of the old lottery system, in which bidders could acquire liquor licenses for as little as $400, in markets where the licenses are worth much more.

Now, the state will be auctioning new licenses, with the minimum bid set at 75 percent of an estimated market value.

Bidding opened last week for the first round of licenses, including an all-beverage license in Bozeman that has a minimum bid of $371,250. All-beverage licenses allow the holder to sell beer, wine and hard liquor.

The minimum bid for the beer-and-wine license in Belgrade is $168,300. Licenses in Three Forks and Townsend have minimums that are considerably less.

The new auction system is expected to generate nearly $4 million of new revenue for the state this year, and is one of several proposals passed last year to help the state get out of a budget crisis.

But another significant part of the law is the “uncombining” of several quota areas, creating separate areas for smaller towns that had been competing against larger towns and cities, where the licenses are very expensive.

“The community leaders in Belgrade are very excited about trying to invite some more restaurants and businesses, that wanted to have on-premise alcohol, into their community,” says John Iverson, director of government affairs for the Montana Tavern Association.

The law creates 18 new liquor licenses for Belgrade, including 11 restaurant beer-and-wine licenses, to be auctioned off over several years.

Other towns that now get their own quota area are Columbia Falls, East Helena, Pinesdale, Rexford and Bear Creek, which had been with Red Lodge. The cities of Helena, Hamilton, Bozeman and Eureka also get some new licenses under the new law.

The first found of auctions will close on Sept. 20. Schlauch said the state will examine the bids, determine if the bidders meet all of the qualifications, and announce the winners sometime this fall.

If all goes well, the next round of auctions will happen soon thereafter, but the state hasn’t decided which towns are next, she said.

“The law limited us to auctioning off one license, per license type, per quota area per year, so it will take a number of years before all of those licenses are up for competitive bid in all of those areas,” Schlauch said.

Iverson said he’s curious to see how the new system pans out, both for the state and local communities across Montana.

“This is a first of its kind,” he told MTN News this week. “I’m going to sit back in the bleachers and watch.”