Is the liquor license cap stunting the growth of Sioux Falls?

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SIOUX FALLS, S.D. (KSFY) - The City of Sioux Falls currently has a 22-person waiting list for on-sale liquor licenses and a 17-person list for off-sale licenses.

Right now with dozens of new businesses trying to get open in Sioux Falls, many of them restaurants, the liquor license situation can make things complicated.

"If you're a restaurant with a bar that's going to do a pretty significant percent of your sales in alcohol it's very difficult to open because liquor licenses are capped," said Jodi Schwan of SiouxFalls.Business.

City licensing specialist Jamie Palmer said it's all based on state law.

South Dakota state law says the city can only issue a certain amount of liquor licenses based on the population. Under SD 35-4-11, "The number of on-sale licenses issued may not exceed three each for the first one thousand of population or fraction thereof and not exceed one each of such licenses for each additional one thousand five hundred of population or fraction thereof."

The city can currently issue 107 full liquor licenses and the next time they'll assess the population isn't until 2019. The cost for a license isn't cheap either -- and it's also based on the population. The state says the license has to cost, at minimum, a dollar per person per the population of the city or municipality.

"The regular on-sale liquor license is $192,360," said Palmer.

And while all those licenses are taken up, there are alternatives.

"We also offer what's called a full service restaurant liquor license and I can offer those when I don't have any of the regular liquor licenses available," Palmer said.

For that license, the business has to prove that 60 percent of its sales are from food and non-alcoholic beverages and that the other 40 percent are alcohol ... each year. That license is even more costly. Palmer said she's issued just two of them.

"They're $260,000, annual renewal of $1,500 dollars," Palmer said.

But there is one more option...

"If businesses want to open sooner, they need to find an existing license and negotiate a deal with that license holder," Schwan said.

Buying it on the secondary market means the city isn't involved until the license holder has agreed to terms with the buyer and the price isn't disclosed, but Schwan said by word of mouth, that option isn't any cheaper.

"We're hearing anywhere from $300,000 to $350,000," Schwan said.

Some of the businesses on the waiting list have been on there for years. When they get to the top, the city contacts them to let them know. They have the option to purchase the license, request to move to the bottom of the list, or have themselves taken off the list completely. Some businesses have gone out of business before ever getting to the top. If that's the case, they can still buy the license, but it has to be ready-to-go within two years. The business owner can also buy the license and sell it on the secondary market.

Some of the newest members of the list are upcoming developments downtown.

"Is it going to hold up projects downtown? Probably not in any huge way, but it doesn't help," Schwan said. "Washington Square, for instance, has been trying to attract a bar and a restaurant and a liquor license has been a sticking point."

Unfortunately, the Palmer said the city can't make things move along any more quickly.

"I get a lot of questions and frustrations... and my hands are really tied to be able to help you because we do follow South Dakota law," Palmer said.

The cost of the licenses can be regulated by the city, as long as the minimum charge is a dollar per person. Sioux Falls charges about a $1.25 per person right now. City Councilor Theresa Stehly said it's something she wants to consider taking a look at.

Lawmakers in Pierre revised some alcohol sale provisions on Tuesday -- the Senate passed H.B. 1070 -- which includes some changes to language in the law about on- and off- sale liquor licenses, but does not change the current issue with the population.