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Home My WebLink About2.a. Club Liquor License RequirementsREXECUTIVE SUMMARY CITY COUNCIL City Counci Work Session: July 14, 2010 BACKGRO1.1ND Liquor license regulations in both the City Code and Minnesota state statute include definitions and provisions specific to clubs. Clubs by definition are not open to the general public for the sale of alcoholic beverages except for special events. Because of the limited access to clubs, a reduced license fee is charged for a club liquor license. Events open to the general public require a temporary liquor license for the event at an additional cost to the club. Clubs are limited in the number of events that can be held in a 30 day period, also. In Rosemount, both the American Legion and the VFW hold club licenses. Staff is aware that each of these licensees advertises dinners, bingo and other events that are open to the public. Other cities have dealt with this licensing issue with clubs in recent years. Compliance with licensing regulations can be attained by either operating a general on -sale liquor license or by obtaining a temporary license for each event and staying within the allowed number of events annually. Locally, the American Legion in Farmington chose to obtain a full license and is open to the public. The Brackets in Lakeville also obtained a full license, primarily to host events in their banquet facility. ISSUE The VFW and American Legion hold club licenses and expressed a desire to remain classified as clubs when this topic was discussed with the managers and Post commanders. They asked that the City consider options for licensing regulations based on the actual operations of the VFW and Legion. In addition to the options currently available, i.e. pay for temporary permits or obtain a full license, City Attorney LeFevere was asked to provide guidelines for further discussion by Council. His memorandum is attached. It does provide a framework for discussion of options and also clarifies that liquor license fees are established based upon the projected costs to regulate the licensee. Staff is requesting further discussion related to the Club licenses and direction on potentially moving forward with a new liquor license class. The current Club licenses expire December 31, 2010. AGENDA SECTION: AGENDA ITEM: Club Liquor License Requirements Discussion PREPARE'.) BY: Amy Domeier, City Clerk AGENDA NO. Gary Kalstabakken, Chief of Police ATTACHMENTS: City Attorney comments APPROVED BY: p RECOMMENDED ACTION: Discussion only BACKGRO1.1ND Liquor license regulations in both the City Code and Minnesota state statute include definitions and provisions specific to clubs. Clubs by definition are not open to the general public for the sale of alcoholic beverages except for special events. Because of the limited access to clubs, a reduced license fee is charged for a club liquor license. Events open to the general public require a temporary liquor license for the event at an additional cost to the club. Clubs are limited in the number of events that can be held in a 30 day period, also. In Rosemount, both the American Legion and the VFW hold club licenses. Staff is aware that each of these licensees advertises dinners, bingo and other events that are open to the public. Other cities have dealt with this licensing issue with clubs in recent years. Compliance with licensing regulations can be attained by either operating a general on -sale liquor license or by obtaining a temporary license for each event and staying within the allowed number of events annually. Locally, the American Legion in Farmington chose to obtain a full license and is open to the public. The Brackets in Lakeville also obtained a full license, primarily to host events in their banquet facility. ISSUE The VFW and American Legion hold club licenses and expressed a desire to remain classified as clubs when this topic was discussed with the managers and Post commanders. They asked that the City consider options for licensing regulations based on the actual operations of the VFW and Legion. In addition to the options currently available, i.e. pay for temporary permits or obtain a full license, City Attorney LeFevere was asked to provide guidelines for further discussion by Council. His memorandum is attached. It does provide a framework for discussion of options and also clarifies that liquor license fees are established based upon the projected costs to regulate the licensee. Staff is requesting further discussion related to the Club licenses and direction on potentially moving forward with a new liquor license class. The current Club licenses expire December 31, 2010. Domeier, Amy From: LeFevere, Charlie L. [clefevere @Kennedy- Graven.com] Sent: Tuesday, July 06, 2010 3:42 PM To: Domeier, Amy Subject: Club liquor licenses Amy, You have asked for my comment on holders of club licenses that are not operating as bona fide clubs and whether the city could create a special license class or license fees for non - profit organizations. One of the kinds of liquor licenses authorized by state law is a license for clubs or congressionally chartered veterans' organizations provided that "liquor sales will only be to members and bona fide guests." Minnesota Statutes, Section 340A.404, Subd. 1(a)(4). Clubs are defined as an incorporated organization organized under the laws of the state for civic, fraternal, social, or business purposes, for intellectual improvement, or for the promotion of sports, or a congressionally chartered veterans' organization, that (1) has more than 30 members; (2) has owned or rented a building or space in a building for more than one year that is suitable and adequate for the accommodation of its members; and (3) is directed by a board of directors, executive committee, or other similar body chosen by the members at a meeting held for that purpose. No member, officer, agent, or employee shall receive any profit from the distribution or sale of beverages to the members of the club, or their guests, beyond a reasonable salary or wages fixed and voted each year by the governing body. Some such clubs acquire regular liquor licenses so that they will be free to serve the public at large, and not just members and bona fide guests. I believe that the reason for doing so is essentially an economic one. By accepting and serving the public at large, clubs can make enough money to survive as clubs and carry on their charitable and community service activities. However, if a veterans' organization, or other club, secures only a club license, it must operate as a club, which means that it can only serve liquor to its members and bona fide guests. Cities sometimes have problems with clubs that are operating with club licenses but do not restrict services to members and bona fide guests. Such clubs sometimes even encourage the pubic at large to become patrons by advertisements and promotions. It is difficult to enforce the requirement that only members and bona fide guests may be served alcoholic beverages. One approach that some cities have followed is to require all patrons to sign in at a log book kept for that purpose, giving the name and signature of the guest and the name and signature of the member host. The city's ordinances could be amended to include this requirement. As an alternative to operating under a club license, a club can acquire a regular on -sale liquor license. Clubs may be reluctant to do this oecause of the higher license fees usually associated with a regular on -sale liquor license. You have asked whether the pity could charge lower license fees for non - profit organizations. If the government creates two classes and treats them differently under the law, there must be a rational and lawful public purpose for doing so. Liquor license fees are not generally revenue raising measures. That is, they are not taxes. Rather, the cost of icense fees must be reasonably related to the city's cost of issuing licenses, and administering and enforcing its licensi -ig program. If there is something about the nature of the operation that is different in a way that reduces the city's costs of licensing, administration, and enforcement, the city could recognize this difference by setting lower license fees. However, if two on -sale liquor operations are identical in all respects except that one is owned by a non - profit organization and the other is not, it would be difficult to justify charging different fees for the two licenses. The Legislature has created a different class of license that is available to a club that is willing to operate by serving only its members and bona fide guests. The license fees that are charged for such licenses are substantially lower. In fact, the legislature limits the amount of fees that can be charged to a club based on the number of its members. Minnesota Statutes, Section 340A.408, Subd. 2(b). Under the Rosemojnt City Code, there are two classes of on -sale regular liquor licenses. Class B licenses are available only to hotels and restaurants where 51 % or more of total revenues are derived from the sale of food and non - alcoholic beverages. Class A licenses are unrestricted as to the percentage of revenue derived from the sale of food and non- alcoholic beverages. Charging different license fees to these two classes of licenses could be based on a finding by the city council that the more an operation is like a restaurant with the incidental sale of alcoholic beverages, the lower the cost of enforcement, whereas the more an on -sale liquor operation is like a bar, the greater the costs of enforcement. If a club conducted liquor operations that were indistinguishable from other regular liquor licensees in the city, it would be difficult to justify charging the club a lower license fee. However, if the council determines that the cost of licensing, administration, and enforcement of another class of licenses (for example, a Class C on -sale license available only to clubs) was likely to be lower because those operations had more of the attributes of a club and fewer of the attributes of a commercial restaurant or bar, it could charge lower license fees for such a class of licenses. For example, if a club operated as a club, serving only members and bona fide guests six days of the week, but sold liquor to the public at large on Saturday nights, the council might find that it was reasonable to charge a lower license fee for a club with only such limited non -club liquor sale operations. Therefore, the council could consider creating a new class of licenses, which would be available only to clubs, for a lower fee, that had certain operational characteristics (such as a higher percentage of food sales, reduced operating hours, or the like) that could reasonably be expected to result in lower costs of enforcement to the city. Let me know if you have any further questions. Charlie Charles L. LeFevere Kennedy and Graven, Chartered 470 U. S. Bank Pla!a 200 South Sixth Street Minneapolis, MN 51402 Telephone: (612) ;:,37 -9215 Fax: (612) 337 -9310 clefevere(cD_kennedy- graven.com