Informational Meeting

MINUTES Informational Meeting Tuesday, November 26, 2019 at 4:00 PM Carnegie Town Hall, 235 West 10th St., Sioux Falls, SD 57104 1. Call To Order Council Members Present: Janet Brekke, Christine M. Erickson, Rick Kiley, Greg Neitzert, Marshall Selberg, Curt Soehl, Pat Starr, Theresa Stehly Council Members Absent: None Council Chair Marshall Selberg called the meeting to order at 4 p.m. 2. City Council Open Discussion Council Member Theresa Stehly said a prayer for former Council Member Kermit Staggers who recently went into hospice care. 3. Presentations A. Alcohol Licensing Changes by Councilor Christine M. Erickson Presentation: Approximately 15 minutes followed by discussion The intent of the proposed ordinance changes are to: 1) reduce the full-service restaurant on-sale initial license fee from $260,000 to $155,000; and, 2) repeal off- sale package liquor license and on-sale dealer license waiting lists with a grandfather clause. The full-service restaurant on-sale license was created by the legislature in 2008 as an alternative for restaurants. The license fee must be based on the “current fair market value” and at least $1 for each person residing within the municipality as measured by the last preceding decennial census. License can only be issued to the applicant if 60% of gross revenue is derived from the sale of food and nonalcoholic beverages. The City Council adopted Ordinance 153-08 in December, 2008. The ordinance establishes the City procedures/regulations for the license. In March, 2009, the Council adopted ordinance 23-09, instituting a license fee of $260,000 based on the “current fair market value.” Since 2009, only four full-service restaurant on-sale licenses have been issued; there are currently 18 individuals/corporations on the on-sale dealer waiting list. In 2018, HB 1070 provided clarification that the “current fair market value” requirement would sunset 10 years following local adoption. The $1/person within the municipality would continue to provide a minimum for the fee. The “current fair market value” provision has expired in Sioux Falls allowing for a more realistic price for the Full-Service Restaurant On-Sale License.  The ordinance proposal includes a fee of $155,000 based on the 2010 Census (153,888). The proposal removes the outdated references to “current fair market value” in Ordinance Sections 111.010 and 111.012. A reduced fee would allow existing restaurants to grow and incentivize new restaurants to join our community. The proposed fee recognizes that the on-sale restaurant licensee must comply with more regulatory hurdles than the on-sale dealer license – 60% food & non-alcoholic beverage gross revenue. The off-sale (package) liquor waiting list was established by Ordinance 109-16 in 2016 in response to having more license applicants than available off-sale licenses. There are currently 19 individuals/corporations on the growing list. The on-sale dealer waiting list was established by Ordinance 160-06 in 2006 in response to having more license applicants than available on-sale licenses. There are currently 18 individuals/corporations on the growing list. These lists have unintentionally created a secondary market that inflates the licenses’ $192,360 price by allowing individuals /corporations who don’t put the license into use, and resell at a price that exceeds the fee set in ordinance. The ordinance proposal would prevent any additional names from being added to the off-sale (package) liquor & on-sale dealer license waiting lists and would only allow those individuals/corporations on the waiting list as of Nov. 1, 2019 to remain on the list. Once there are no more names on either waiting list, the list will be repealed. This is not expected for several years. Discussion followed about: how the list is prioritized; the number of licenses issued to full-service restaurants; how the number of licenses are determined; how the 60- 40 percentage is verified for full-service restaurant licenses; whether state law allows for flexibility in determining the method of awarding licenses; the merits of setting the fee at less than the fair market value; and, the path forward for determining how a waiting list will be compiled. 4. Public Comment Drew Duncan provided perspectives from his client about the proposed ordinance change. Brandon DeJong stated that he has been pursuing a liquor license for some time and suggested decreasing the restuarant on-sale fee would encourage more restaurants to pursue getting one. Dan Rose recommended a fee of $192k. 5. Adjournment Council Chair Marshall Selberg adjourned the meeting at 4:47 p.m. Thomas M. Greco, City Clerk