By Cole Boehler
The new-issue restaurant beer and wine license lotteries were conducted with some fanfare and, later, a few glitches in Billings and Bozeman Aug. 7 and Helena and Missoula Aug. 8.
Even though it was understood that initial application rankings resulting from those drawings were ultimately subject to change, an unexpected wrinkle in the process altered the picture considerably within a few days of its conclusion.
In each drawing location a state legislator or other government official was invited to draw the names of applicants from a large rotating drum, scrupulously rotated after every five draws.
Montana Department of Revenue Director Dan Bucks was on hand as was Liquor Division Administrator Shauna Helfert. A handful of department staff was along to keep records and make sure the drawings were entirely fair and secure. The events were video recorded as well in case any aspect of the procedure needed to be re-examined.
The lotteries to award new "cabaret" licenses were the result of Senate Bill 140 sponsored by Sen. Dan Weinberg, (D-Whitefish) in the 2007 legislative session. The bill was designed to relieve some pressure on the alcohol license quota system while preserving the state' control on the number of alcohol outlets and closing loopholes in the original cabaret license legislation passed in 1999.
The licenses are allowed for businesses with a service bar only, to serve beverages with table-served meals only, and to serve between the hours of 11 a.m. and 11 p.m. with not less than 65 percent of revenues derived from food sales. The licenses do not allow gambling.
Those who had sold a license within the previous year were barred by statute from applying.
There were more applications than licenses available in some quota areas which necessitated the lottery drawings, but it was clear that numerous applications were purely speculative as the same names often came up in the different lotteries, and many of those had no relationship to any restaurant, for which the licenses were intended.
In the Bozeman area drawing, for example, the were two Chans, two Chens, six Huangs, six Lus, two Leungs, two Lins, three Tengs and four Wangs, mostly from California, not to mention three Cetraros and four Tarantinas. The Cetraros applied in nearly every quota area as did Doug and Linda Wold, John and Margo Kaserich and Chantel and Robert MCauley.
When contacted, Montana Tavern Association Legal and Government Affairs Counsel Mark Staples said, "This speculation is abusive and futile. There's nothing to speculate on. You either put the license in use within one year in your full service restaurant, for at least a year, or you lose it, period. You can't sell your position.
"And if you've currently been in a restaurant for over a year, you get a preference over those who are just tossing their name in the hat for the hell of it. A majority of these applications were essentially bogus and would never have been actually approved.
"I have faith that, ultimately, the kind of restaurants for which these were intended will be the ones who get them," Staples said.
Applications were drawn one-by-one and a sequential list posted at the drawings. But some applications earned a "preference" for having already operated a restaurant and/or for having applied previously and been unsuccessful.
So the drawing sequence lists were re-ordered at the drawing conclusions when preferences were taken into account.
However, before the week was out, the department initiated a review of the way the preferences had been used by applicants and accounted for by the department. Ultimately, the department decided a preference could only be applied in a drawing quota area where it had originally been earned.
For example, some applicants who may have had a preference earned by operating a restaurant in Billings, or having applied unsuccessfully there in the past, applied in other quota areas and listed their preference with all applications, giving them what was later determined to be an unfair–and unintended–advantage.
Thus, several applicants who were drawn in the lotteries and appeared qualified and successful, were disqualified August 13, resulting in a shuffling of the rankings. And there were, naturally, losers and some new winners.
Helfert said a successful applicant who promptly submitted a complete application and met all qualifications could theoretically have a license within 60 to 90 days of the drawings.
Posted drawing orders could still change, Helfert noted, if some drawn applications are subsequently disqualified for failure to meet all requirements or successfully complete the application and investigation process.
Drawing rankings cannot be sold or transferred, she added. Nor can changes to business entities applying be made, such as adding stockholders or partners.
She also pointed out a successful applicant, even if a speculator, still has many hurdles to clear to obtain a license. Montana's notoriously rigorous licensing approval process will apply. That includes thorough background and financial investigations of anyone who may have a financial interest in the license (all individuals with a financial interest must have been listed on the original application or it will be disqualified).
In addition, successful applicants must file an application within 30 days of notification, must pay a $5,000, $10,000, $15,000 or $20,000 fee depending upon the number of seats in the contemplated restaurant, must put the license to use within one year of having been awarded it and, if sold, it cannot be moved for one year.
Even some successful applicants may decline to pursue a license given economic realities. For example, four new licenses were issued for Twin Bridges, a remote town of 500 in southwest Montana that already has four on-premise alcohol licenses.
An applicant may decide that the fees and other costs associated with obtaining a license– legal counsel, document procurement, hours invested in background investigations and interviews with authorities–coupled with dubious prospects of actually profitably employing the license, may simply make the proposition financially untenable.
A number of incorporated cities have cabaret licenses currently available from the original 1999 issuance simply by application and purchase, most notably Butte (19 available) and Great Falls (22) where demand is relatively low. Other larger communities with licenses available are: Lewistown, 8; Laurel, 11; Havre, 13; Miles City, 13; Polson, 3; Ronan, 1; Glendive, 5; Dillon, 3 and Sidney, 5.
When cabaret licenses first came into being, there were 304 available; 136 had been awarded and four were pending, leaving 164 of the original issue still available as of last April.
See subhead for complete listing of rankings as of Aug. 11.
Source: The Montana Tavern Times, September, 2007, published monthly by Continental Communications, 125 W. Granite St., Suite 102, Butte, MT 59701.