Can Rosen Get the Liquor Flowing in New York?

By Gamal Hennessy

Late last week a new chairman was selected to head the New York State Liquor Authority. The new appointment comes at a time when the agency is facing scandals and being criticism both inside and outside of government. Can the new Chairman turn the agency around or should the SLA be abolished altogether?

The State Liquor Authority regulates who gets to sell liquor in within the state. Every legal operator needs to obtain a license from the SLA before they can sell liquor to the public. However, many of the laws regulating liquor haven’t been changed since the 1920’s when Prohibition was part of the fabric of American society. To make matters worse, there is a severe backlog of pending applications. Operators waiting for a liquor license can wait up to 11 months to have their application processed, which means that they can lose money for most of they year waiting for a response from this agency.

The problems surrounding the SLA evolved into a scandal. Several individuals working in the New York Office of the SLA were charged with taking bribes to expedite certain applications. The fallout from this investigation led to Governor Paterson naming Dennis Rosen, a former New York State District Attorney, to head the SLA.

Mr. Rosen’s new job will not have a long honeymoon period. During his confirmation hearing, several state senators complained that the licensing process takes too long and hurts the state’s economy. One senator suggested that the SLA can’t be fixed and might need to be abolished. At the same time, Governor Paterson has signed an executive order calling for several agencies to review and modify “antiquated and burdensome regulations on businesses”. The SLA was one of the agencies named in that executive order. It appears that Mr. Rosen will be called upon to modify the Prohibition Era laws that govern the SLA and clear the backlog of applications or the whole agency might go down with him.

It is unclear at this stage how much change Mr. Rosen can bring to the SLA. It is a step in the right direction to give the new chairman a mandate to assist operators instead of hindering them. It is a step in the right direction to recognize that the Beverage Control Law needs to be brought into the 21st century. But, Governor Paterson is facing political struggles of his own and anti-nightlife factions haven’t openly commented to Rosen on their position. As members of the nightlife community we have both the ability and the right to support change in the SLA that matches the interests and needs of our culture.

Have fun.
Gamal

How Big is New York Nightlife? Part II

By Gamal Hennessy

Last night I described the size and scope of nightlife venues and what they do to directly stimulate the economy. Today we’ll look at the other side of the equation and look at the economic activity of patrons in New York clubs.

Patron Population

All the venues and operators are useless without someone to actually serve. The 2004 Impact Study concluded that the attendance in New York clubs is more than 65,000,000 entries per year. Keep in mind that ‘entries’ is not a direct measure of the number of people who patronize nightlife on an annual basis, since club hopping and bar crawling could take one person to several venues in a night. A tourist might hit a club on her vacation in New York. A nightlife native might visit 50 or 60 venues in a year. Although total entries do not translate directly into 65,000,000 patrons, it is more than three times the amount of attendance at all 8 New York sports teams combined. 64% of nightlife patrons live within the five boroughs with each New York native visiting an average of 2.14 clubs per night out. The other 36% of all nightlife patrons came into the city from out of town and they visit an average of 2 venues per stay.

Cash Flow

Pre-Club Activity: Patrons don’t just magically appear on the dance floor at night. There are many activities that they engage in and spend money on before the night begins. The Study found that each native spent an average of $67 per person on these ‘pre-club’ activities including purchasing clothing, dining out and other activities. In addition, 82% of patrons used some form of transportation to get to the venue, for another $15 per person. So in total, each New York resident spent about $80 before she even walks inside the club. Tourist spending at non nightlife venues was even higher than resident spending. 86% of tourists people engaged in some other activity when they went to a club including dinner shopping, but also including hotels, theaters and sightseeing for an average of $90 per person. The out of town group also spent an average of $110 to get to and from the city and the venues they decided to visit, bringing their per person spending total to almost $200.

Liquor Purchases: The Study and the Zagat guide don’t estimate how much patrons spend when they are actually in a venue, but we can develop an educated guess. In our estimate, we’re going to assume that a person goes into a bar or club and buys four drinks; two for himself and two for the person he is with. I’m assuming a social unit of two, even though larger groups are just as common in clubs. I’m also assuming basic manners here, which means people not going Dutch. This might be overly optimistic in New York City, but in my experience New Yorkers can be very generous with alcohol, especially if they’ve already had a drink or two.

To keep things simple, I’m not including cover fees, coat check fees or bottle service, which would raise the numbers exponentially Let’s say each drink is $10. This is an average between the $5 beer and the $15 martini. That means in every club this guy goes into, our theoretical patron spends a total of $40. Let’s project that out to the total group. If there are 65,000,000 entries per year and only half of them pay for drinks then that’s 32,500,000 “drink entries” per year. If each drink entry is worth $40, then the estimated spending by nightlife patrons in clubs is 1.3 billion dollars.

Effect on the City

The amount of jobs, patronage and spending in nightlife might seem abstract until you put it in context. To place the numbers in perspective, we can look at the local film industry. According to the Mayor’s Office for Film, Theater and Broadcasting, local TV and movie production generates $5 billion dollars in economic activity for the city. In comparison, nightlife generates twice the revenue. The film industry has a government office to support and promote it. Nightlife has no such office despite repeated calls from operators to create it. If and when the city puts its full support behind the nightlife industry the benefit to the city could rise exponentially.

Have fun.
Gamal

A New Fight Over New Bars

By Gamal Hennessy

Hidden away from the major media outlets, a struggle is brewing over the nightlife industry in New York. The fight revolves around the laws that govern bars and the way nightlife is perceived. The latest battle in this conflict concerns the Beverage Control Law and how it is interpreted. Anti nightlife groups are planning to change current SLA law to serve their own interests and if their influence isn’t counterbalanced nightlife will suffer.

The current law requires a public hearing for any potential liquor license opening up within 500 feet of two other licenses. If you consider how dense New York is, you’ll quickly realize that almost every new venue requires a 500 foot hearing. Residents who oppose nightlife venues in general often use the 500 foot rule to protest the opening of new venues.

A judge in a recent court case involving Hudson Terrace held that a 500 foot hearing is only necessary for establishments of the same type, not for any liquor license. For example if a bar wants to open up within 500 feet of three other bars, then a hearing is required. But if a bar wants to open up within 500 feet of three clubs, or two clubs and a restaurant, or a club a restaurant and a cabaret, then no hearing is required.

Anti-nightlife elements within the city don’t plan to lose their main weapon without a fight. Daniel Squadron, a new State Senator who turned his back on nightlife before he was even elected, plans to re-write the law to tighten the restrictions and circumvent the judges ruling. He claims that “the decision undermines the spirit of the law”, so the law needs to be fixed.

There are at least three unspoken concepts that are flawed when it comes to the way anti nightlife elements deal with the 500 foot hearing process. First, they assume that more venues are automatically a problem. However, it is just as likely that more venues could reduce crowding and increase revenue for the city and the state. Second, there is an assumption that the community board is the best forum for making decisions about additional nightlife venues. But that body does not and cannot take in to account the cultural and financial impact of the venue on the city. Third, that the BCL needs to be changed to inhibit and restrict nightlife growth when in fact much of the law dates back to Prohibition and needs to be revised not to inhibit nightlife but to bring the law in line with the realities and needs of nightlife in the 21st century.

The BCL does need to be revised and the 500 foot rule needs to be examined but pro-nightlife and anti-nightlife groups need to weigh in on the subject. People concerned with the character of the individual neighborhoods and the viability of the city overall need to be heard. Hopefully organizations like the NYNA and the NPC will get involved with this issue and prevent further erosion of nightlife in New York.

Have fun.
Gamal

Changing of the Guard at the State Liquor Authority

By Gamal Hennessy

In recent months, the New York State Liquor Authority has gone through turmoil. Political pressure from the outside and illegal activity on the inside has left the agency vulnerable to criticism. While Governor Paterson tries to clean house by appointing a new Chairman, the question is can this new appointee reshape the agency into something more relevant and beneficial to New York nightlife.

The SLA has faced several problems under the leadership of its former Chairman, Daniel Boyle. Carl Andrews, an aide to Governor Paterson, was forced to resign after he allegedly tried to force Boyle to renew the liquor license for Cipriani when the iconic restaurateur’s license was in trouble last year. Just last month, the New York offices of the SLA were raided as part of a corruption investigation. Other SLA officials have recently resigned under a cloud. It was only a matter of time before Boyle had to pay a political price for all of this. His appointment was not renewed after the term expired in February.

Boyle’s successor is Dennis Rosen, a graduate of Harvard Law School who has been with the NYS District Attorney’s office since 1982. During his tenure, Rosen has prosecuted civil and legal cases against attorneys, stockbrokers, insurance agents, telemarketers and construction contractors. His most relevant investigation involved going after infractions regarding the SLA. After his nomination is confirmed, the agency he inspected will be the one he has to lead.

The agency that Mr. Rosen inherits has a number of problems that need to be addressed. It was the agency’s chronic lack of inspectors that created the circumstances for corruption to occur in the first place. The overall number of licenses granted is down, limiting the industry’s ability to be a viable economic force in the state. There is a backlog of about 2,400 outstanding license applications due to both the lack of inspectors and the conservative stance of Mr. Boyle. On top of all of that, the SLA is governed by a set of laws that haven’t been changed in any meaningful way since Prohibition.

It is an open question whether Mr. Rosen will be willing or able to bring in more inspectors, clear the backlog, and revise the laws to bring them in line with the economic and social realities of the 21st century while at the same time dealing with state politics, local government and community boards. The nightlife advocates I spoke to last week didn’t have any preconceived opinion of Mr. Rosen, but they are hoping for more balanced treatment than the previous administration.

Have fun.
Gamal

The Liquor Authority Gets a Wake Up Call

By Gamal Hennessy

Last week the Inspector General raided the offices of the State Liquor Authority. Former SLA employees are being accused of bribing employees to manipulate the system. While the investigation focuses on the gift cards and other petty items offered in exchange for “preferred” treatment, officials need to focus on the underlying situation that created the fraud and clean up the liquor licensing system.

The New York State Alcohol Beverage Control Law (ABC) states that an application for a liquor license should get an initial review within 30 days. Nightlife operators have complained for years that the review often took 2-3 months because of a lack of inspectors among other issues. Recently, nightlife opponents in the outgoing administration managed to drag out that period to 6-8 months.

Operators became increasingly frustrated with the process, since the investment in a bar or club can’t start to make money until they can sell liquor and they can’t sell liquor without a license. That’s where the “handlers” would come in. For a fee, these former SLA employees would offer ‘expedited service’ for an application. The IG claims that the service they performed was calling up their friends who still worked in the SLA, and asking for the applications to get moved to the top of the pile. In return, the handlers would give their friends gift cards and, ironically, bottles of liquor. The IG alleges that some applicants got their forms processed in as little as 11 days instead of waiting half a year or more.

It is regrettable that people in positions of authority, however minor, are willing to manipulate the bureaucracy for their own personal advantage. But the larger issue revolves around the system itself. Robert Bookman, attorney for the New York Nightlife Association, sees this raid as the result of a dysfunctional system:

“It takes 8 months to get a liquor license when the law requires it be done in 30 days. Huge investments are sitting and waiting for a license that is long overdue. Is it any wonder that people will get desperate and will do whatever they have to just to get an honest review of their application? That is the real scandal here. Notice there are no allegations that anyone got a license that they were not entitled to. The crime is that the applications were reviewed quickly…the way they are supposed to be reviewed. I am not condoning illegal activity, but no one has been listening about this unlawful, unacceptable wait for liquor licenses before now.”

If the leaders of the SLA essentially broke the law and created a situation where potential operators have to wait 6-8 months for a license, and refused to hire more examiners, then they created the atmosphere for corrupt practices in the Harlem office. The responsibility for this corruption needs to go a lot higher than the clerks who took Applebee’s gift cards. It needs to lead to a revamping of the whole process. Governor Paterson said he supported “the actions of the I.G.’s office to uncover any wrongdoing that may have occurred within the S.L.A. and is working with the S.L.A. to rebuild the organization.” Hopefully this raid can be the beginning of an overhaul that helps bring jobs and revenue to the state while cleaning up a government agency at the same time.

Have fun.
Gamal

Are Police the New Health Inspectors or Tax Collectors?

By Gamal Hennessy

Imagine this. You’re sitting in your favorite bar nursing a drink and wondering how you’re going to convince the waitress to give you her phone number. Without warning three cops walk in, push behind the bar and start poking around with their flashlights, making everyone in the room very nervous. As you gather up your belongings and discreetly make your way towards the door, would you assume that this was a raid? Would you guess that the cops were looking for drugs, guns or child pornography? Would you believe they were looking for fruit flies?

Fruit flies are drawn to alcoholic beverages and bar owners are required by the state law to keep them out of liquor bottles as a matter of public health. As part of the routine inspections by the Department of Health (DOH) bars are inspected for fruit flies and any venue that has fruit flies on or in the bottles is subject to a fine that could run between $700 and $1,000 per infested bottle. This is a normal part of the nightlife business and isn’t really a cause of concern among operators. The problem arises in the way the law has recently been enforced. Even if you are a nightlife native who frequents various venues, you have probably never seen a DOH inspection taking place. That’s because inspectors keep a relatively low profile while conducting their business. Patrons usually have no idea what is going on and they don’t have to. But there have been reports of layoffs at the DOH, which could mean fewer inspectors. But inspections still need to be conducted, especially since every violation can lead to fines that cash strapped city and state governments are desperately looking for. So somehow the DOH has been replaced with the NYPD who is anything but low profile when they come into the bar.

One operator commented on the climate that the NYPD creates; “By sending a uniformed officers from the NYPD behind your bar with a flashlight looking for fruit flies and whatever else they can find at the height of your business hours creates a stressful situation for you and your customers. It looks like a crime was committed in your place and they are looking for evidence. It gets people talking about your establishment in ways you don't want.”

Bar and lounge owners in various parts of the city have described this scenario happening in their bars with increasing frequency. Some operators think that the NYPD has been given a mandate to perform random inspections as a way to “find” violations and provide the city and the state with much needed revenue. Various operators have voiced opinions about the situation: “What they are thinking is that they are going to get funds for a broke state and city no matter what the consequences. No thought is given to the outcome except that those cops better come back with some violations. With cops conducting their random inspections, we are at the whim of whoever is giving these cops the orders to do these. It is much more invasive and detrimental to our businesses. “I don't think this has anything to with revenge against a particular venue. All bars are suffering this treatment. This has more to do with the city's need to collect more revenue in the shape of fines and the fact that they've laid off a number of health inspectors.”

So instead of increasing state revenue by working with the nightlife industry, local government is trying to increase state revenue by intimidating and attacking it, using the police as its instrument. We have pointed out in previous articles that ending the backlog in liquor license applications and increasing the number of venues would actually increase state revenue significantly. And as dangerous as fruit flies are to public health, the police are probably better utilized deterring and preventing crime outside of venues instead of poking around behind the bar looking for bugs. We know that the state wants to use liquor consumption as cash cow and nightlife is an economic resource that the city can use for its benefit, but only if it takes more of a cooperative stance instead of being antagonistic.

Unfortunately, some operators don’t see things getting better because they don't feel the lobbying efforts are strong enough to support their position. “With all due respect to our lobbying groups, I really don't think they have the stomach for this kind of fight. We are just going to have to put up with this intrusive behavior by our government and keep our bars as clean as possible.”

So if you see a couple of cops climb behind your favorite bar, it might not be a raid. It might just be an abusive health inspection.

Have fun.

Gamal