AREA — A state-level bill that would gradually phase out New Jersey’s longstanding liquor-license limits over the next six years currently is making its way through the legislature, with the support of more than 90 municipal leaders who say the change is long overdue.

“Our downtowns have been struggling to bring in new businesses since well before the pandemic began, and this type of reform will open up a lot of doors,” said Westfield Mayor Shelley Brindle. “But this isn’t the first time that the state has tried to make some changes. It’s a very complicated issue with a lot of moving parts.”

Since 1947, New Jersey has restricted the number of liquor licenses a municipality can grant based on its population. Under the law, towns can issue one consumption license for every 3,000 residents and one retail license per 7,500 residents.

And while that may be well and good for densely-populated communities like Newark (311,549), Jersey City (292,449) and Elizabeth (137,298), smaller municipalities, like Fanwood (7,699), have been left with very few options.

“Smaller towns just can’t compete in this market,” said Fanwood Economic Development Director Elizabeth Jeffery. “I have had so many conversations with restaurant owners that would love to invest in Fanwood, but they turn tail as soon as they learn that there’s no way to obtain a liquor license here. These restrictions are part of the reason why so many downtown communities are struggling to fill their vacancies. The reform is long overdue.”

Governor Phil Murphy announced his intentions to introduce a reform plan during his State of the State address in January, noting, “There’s no other way to put it — our liquor licensing regime is antiquated and confusing. We rely on a foundation of rules written in the days immediately after Prohibition to govern a 21st-century economy. That makes no sense.”

In February, Governor Murphy laid out the details of his plan in a legislative proposal. According to information provided by the state, the bill, if approved, would: gradually phase out the existing population cap on licenses over five years until it is permanently eliminated; maintain local control; establish progressive prices and associated fees based upon business size and a cap on the annual renewal fee not to exceed $2,500; repatriate inactive licenses to boost availability; eliminate the secondary market that currently makes licenses unaffordable for small-business owners; permanently ease the restrictions that have hampered breweries; and provide a mechanism to support existing license holders.

The bill also would alleviate a number of restrictions currently attached to wineries, breweries and distilleries across the state.

Mayor Brindle, along with Fanwood Mayor Colleen Mahr, signed on to a newly-formed, bipartisan coalition known as “Mayors for Liquor License Reform.”

“These reforms are long overdue and all the more pressing in light of the devastating impact the Covid-19 pandemic has had on the hospitality industry in general and the distress it has caused for downtowns and Main Streets throughout New Jersey,” representatives from the coalition wrote in an open letter of support for the proposal earlier this year. “Not only will this create greater equity across the board, it will also serve as a major catalyst to spur economic development and strengthen and revitalize downtowns throughout New Jersey.”

“It has turned into an issue of supply and demand,” Mayor Brindle said. “When one of these licenses does become available, it almost always turns into a bidding war. The independent businesses are getting priced out of the competition, and it’s just not sustainable.”

A Westfield liquor license recently sold for more than $950,000.

But while the measure has garnered a certain amount of support among municipal leaders and would-be restaurateurs, existing holders — some of whom have spent upwards of $1 million to get and maintain their licenses — stand to lose out on their investments in a big way once the market opens up.

“We cannot sit idly by while the Governor attempts to reduce our sweat equity and financial investments to nothing more than a scrap of paper to be picked up at town hall,” said Diane Weiss, executive director of the New Jersey Licensed Beverage Association (NJLBA) in a recent press release. “We are committed to protecting the value and integrity of New Jersey liquor license holders.”

Dana Lancellotti, president and CEO of the New Jersey Restaurant and Hospitality Association, noted in a recent public statement that the hospitality industry continues to struggle in the wake of pandemic-era restrictions that shuttered numerous businesses and limited customer capacities for more than a year. The administration’s plan, she said, would hurt the “hardworking business owners who followed the rules while investing in a liquor license.

“The problem we can’t turn away from is those investments were already made, and those liquor licensees did exactly what they were required to do under a system created by the state,” Ms. Lancellotti said. “The administration’s plan would immediately diminish the value of these licenses and would financially devastate many small business owners who are continuing to face issues stemming from the pandemic, including workforce shortages and supply-chain issues.”

Members of the mayors’ coalition have expressed similar concerns regarding the current state of the market, noting in their open letter, “we wholeheartedly support two other key tenets of Governor Murphy’s proposal, one of which will provide relief for current plenary retail consumption license holders impacted by the expanded supply of licenses, and the other which will maintain local control over the liquor license issuing process so that communities across New Jersey have the power to control what the future of their town will look like.”

As introduced, the bill (S3675) outlines a series of sliding-scale tax credits designed to offset some of the anticipated loss for current license holders.

Establishments with less than $1.5 million in taxable sales for all three preceding calendar years would get $50,000, while those with sales exceeding $2.9 million in any of those three years would receive $30,000. Those in the middle would be eligible for a $40,000 credit.

The measure also would allow local elected officials to deny renewal requests made on licenses that have been inactive for two or more years, providing that the holder has not made any type of good-faith effort to bring the license back into use.

To date, however, the proposal does not include provisions sought by industry groups that would allow towns to transfer inactive licenses between themselves.

“It’s not perfect,” Mayor Brindle said. “We have communities like Newark that are sitting on more licenses than they will ever need to use, but as of right now, there is no way to redistribute those licenses to municipalities like Westfield that could really benefit from them.”