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New Utah liquor law challenged

Members of the Utah Hospitality Association are challenging a new law that further restricts the sale of alcohol in Utah by banning drink specials and tightening the hold on available club and bar licenses.  The new law, SB314, went into effect on July 1, even after the board of the Department of Alcoholic Beverage Control asked Gov. Gary Herbert to veto the bill.

The sponsor of SB314, Sen. John Valentine, R-Orem, said the bill is designed to limit the consumption of alcohol and encourage people to eat when they consume alcoholic beverages. However, there were no studies submitted with the bill that show any statistical or scientific evidence that the steps would curb drunk driving or other alcohol-related issues.

In fact, since Utah’s last major overhaul of liquor laws which did away with the requirement for private clubs, the Salt Lake Tribune reported that the amount of alcohol-related accidents decreased. However, Valentine told the Tribune that he read many studies and the general sense he gathered was his policies would be beneficial.

The bill clarifies the restrictions for new club licenses based on Utah’s population growth and based on current projections, no new licenses will open for two years. The new law also restricts the transfer of liquor licenses so a new establishment cannot simply assume an old license.

Jay Gamble, an attorney involved in a recent real-estate purchase in Park City, told the Alcoholic Beverage Control Commission that the inability to transfer licenses stopped a $25 million hotel purchase. The perspective owners decided against the purchase after they discovered they were unable to assume ownership of the existing license.

“I’m not sure the Legislature understood the cause-and-effect of failing to correct the club quota situation,” Gamble told the Tribune.

Because Utah’s growth was slower than expected, it will take approximately two years before any new licenses can be issued. The state’s population must grow by more than 93,600 before it will catch up with the quota. Each new license will then require a growth of 7,850 people.

Valentine said he was surprised and saddened to hear about the lawsuit challenging provisions of his bill. He said drink specials have always been illegal and SB314 was meant to clarify the law.

The lawsuit challenging SB314 is questioning the state’s ability to monitor prices and restrict licenses so tightly under the Sherman Anti-Trust Act. Although the outcome of the lawsuit is far from certain, there is some precedent for the challenge. In 2005, the U.S. Supreme Court struck down two state laws that banned the mail-order purchase of out-of-state wine.

Beginning next summer, club and bar licenses can be sold by existing club owners. However, the prices are not set or regulated by the government and current offers are already beginning around $50,000 and could be triple that price next year. This makes the initial investment much more difficult and makes it harder for locally owned and smaller bars and clubs to make the large investment in a license.

The newly imposed law also imposes other restrictions on restaurants opening in 2011 and later. Drinks may not be made in public view and open bottles of liquor must also be concealed. Restaurants cannot service any alcohol until 11:30 a.m. and 70 percent of revenues must come from food, leaving, at most, 30 percent of sales from alcohol.

July 1 Liquor Law Changes

  • No daily drink specials
  • No new club licenses for approximately two years
  • No transfer of licenses until 2012
  • Club licenses can be sold starting in 2012– Going rate is around $50,000
  • Bartenders must be hidden from public view
  • Open liquor bottles must be hidden
  • Restaurants must have 70 percent of sales through food purchases
  • Governor appoints the chairman of the liquor commission
  • Ban on minikegs or “Chubbies”
  • Restaurant alcohol service now begins at 11:30 a.m.
  • Single glasses of alcohol can be purchased in hotel rooms

Lawsuit Challenging Liquor Law

  • Quota system for distribution of licenses
  • Ban on daily drink specials

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About the author

Seth Bracken

Seth Bracken is the editor of QSaltLake

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