More Bars are Better Than More Taxes

By Gamal Hennessy

Governor Paterson recently announced a plan to balance the New York State budget that includes higher taxes and fewer services across the board. The plan has been met with attacks from all sides. Unemployment is rising and the constant barrage of Wall Street failures has sucked faith out of the market. If the Governor is looking for an alternative to his current plan, he might consider how much money can be generated by improving the SLA.

Businesses can’t sell liquor in New York State without a license from the State Liquor Authority (SLA). The process that an applicant has to go through is very involved. The application itself is dozens of pages long and the review process is detrimental to the nightlife industry and the state.

According to the liquor control law, the SLA is supposed to review a properly filed application within 30 days. Experts say that this has never been the case. In previous years, the turnaround time for an application was 2-3 months. Current estimates are that it takes 4-8 months for an application to be reviewed.

There is a school of thought that sees a strong stream of revenue coming into the state if the licenses under review are processed as soon as possible. According to unofficial estimates there are currently close to 2,400. While all of these licenses are not for bars or clubs (on premises licenses) even if only half the licenses resulted in new bars, the economic affect on the city could be dramatic.

If 1,200 open licenses translated into open venues, New York could experience direct and indirect benefits. If you assume each bar employs a manager, a bartender and a server, then 1,200 bars would lead to 3,600 jobs. Keep in mind that a New York bar with 3 employees is an extremely low estimate that doesn’t take into account security, bar backs, DJ’s, hostesses, or multiple people in each position. The actual number of new jobs could be as high as 7-10 thousand. To place this in perspective, Mayor Bloomberg recently had a press conference where he publicized the fact that more than 4,000 jobs would be created from the 17 on location TV productions lined up for 2009. Approval of outstanding SLA licenses could lead to twice as many new jobs.

There is also a potential for secondary job creation. Bars have to be constructed, maintained and serviced. This creates work for construction crews, lawyers, accountants and hospitality vendors. An influx of 1,000 bars would also lead to commerce associated with nightlife. Despite the way nightlife is depicted in music videos, people don’t just magically appear on the dance floor. They go out and buy clothing and beauty services before they go out. They take cabs and public transportation to and from the venue. They eat in restaurants before and after they go out. The ripple effect in terms of jobs in New York can be substantial if the venues are allowed to open.

There could also be a positive effect on local investment. As investors take their money out of the stock and bond markets and look for places to put it, nightlife can be an attractive option. A significant portion of the owners, managers and promoters in nightlife come from the finance, investment and real estate industries. But those investors are not willing to tie up money in a business that might require them to wait a half a year or more after the construction of the business to actually be able to open for business. The current waiting cycle of the SLA creates a chilling effect on nightlife investment that ultimately deprives the state of millions in revenue.

Of course, a sudden influx of venues would alarm certain groups and the frenzy of competition would prove chaotic initially. But the patrons would weed out the poorly run establishments and they will close. And the community boards, police and other advocacy groups will continue to make their displeasure known if and when a venue goes too far. But in this economic climate it might be better for the state to promote viable businesses in New York by allowing them to open, rather than drive them out of the state with increased taxes.

I am not advocating wholesale approval of all licenses. I am not implying that the SLA should abdicate its authority by rubber stamping every applicant. I do think that the Governor can realize his economic goals with less hardship to the citizens of New York if he takes a responsible look at the SLA review process and takes steps to overhaul it.

Have fun.