By Edward J. Castellani, J.D., C.P.A.

Effective December 29, 2006, Governor Granholm signed legislation to authorize a new type of liquor license in Michigan in addition to the existing quota licenses.  While only one liquor license is generally allowed for each 1500 residents, the new law allows the State to issue additional liquor licenses, without regard to the number of quota licenses allowed, for businesses that will offer dining, recreation or entertainment in redevelopment areas or development districts that are any of the following:

1. An authority district established under the Tax Increment Finance Act Authority;
2. A development area established under the Corridor Improvement Authority Act;
3. A downtown district established under the Downtown Development Authority Act;
4. A principal shopping district established under the Principal Shopping District Act.

To be eligible for the new licenses, the business must demonstrate the following:

1. It provides activities determined by the Michigan Liquor Control Commission to be related to dining, entertainment or recreation at least five days a week;
2. It is open to the public at least ten hours per day, five days a week; and
3. It presents verification of redevelopment project area status to the Michigan Liquor Control Commission.

An applicant must be located in a city that meets one of the investment requirements described below during the three years preceding the application or within the preceding five years in the case of an applicant applying during the first license cycle after the bill’s effective date.  Total investment in real and personal property in the redevelopment project area within the city over the appropriate time period must be one of the following:

1. At least $5,000,000 in cities having a population of 50,000 or more; and
2. At least an amount reflecting $1,000,000 per 1,000 people in cities with a population of over 50,000.

The licensee may not transfer the license to another location, and a licensee that goes out of business will have to surrender the license to the Michigan Liquor Control Commission. The fee for the license is $20,000.

The individual signing the application for a license must demonstrate that the applicant attempted to secure an appropriate on-premise escrowed license or quota license and that such a license is not readily available.

A second but related bill eliminated the Michigan Liquor Control Commission’s right to issue any Class C or tavern licenses to a business located in a development district.  The licenses previously issued before the effective date of the bill remain valid and may be renewed if in compliance with the licensing requirements, but no additional licenses may be issued.

Edward J. Castellani is an attorney and certified public accountant specializing in the acquisition, sale and transfer of Michigan Liquor Licenses and hearings and appeals before the Michigan Liquor Control Commission.  He may be contacted at (517) 377-0845 or ecast@fraserlawfirm.com.