New liquor license ordinance stirs controversy: Does it help or hurt Kansas City?

After 18 years in New York, David Epstein returned to Kansas City to open a new distillery with his childhood friend, Steve Revare.

They wanted to be part of the Kansas City renaissance, specifically the rebirth taking place in the Crossroads Arts District.

So they spent $2 million to purchase a three-story brick building at 1701 Main St. for their new Tom’s Town Distilling Co., which they plan to turn into a national brand. Epstein and Revare, along with their investors, put in nearly $2 million more for the buildout. Tom’s Town opened in January.

But now the owners say the distillery’s growth will be “severely hampered” by concessions they had to make to get their liquor license. It wasn’t city officials asking for the concessions, or even a majority of their neighbors. They said it was just one individual, longtime Crossroads developer Brad Nicholson, who happens to own several surrounding properties.

That’s because to get a liquor license in Kansas City, businesses need to get consents from surrounding property owners. But sometimes one person or a company owns most of those properties, so that’s the deciding vote.

A new city ordinance passed in late April seeks to change all that, letting more property owners weigh in on who gets a liquor license in their community and how restrictive it will be. An individual property owner — no matter how much property he or she owns — would be limited to 10 percent of the votes. The rest of the votes would come from other property owners within a larger radius of the new business.

Jolie Justus, 4th District councilwoman, sponsored the ordinance with Quinton Lucas. She was concerned about how much effect one person’s wishes could have on a business.

“Now it still allows for input, but it doesn’t allow for one property owner to exert anti-competitive behavior,” Justus said. “Tom’s Town was the most egregious. They can only serve one type of white wine, one type of red wine, one type of beer. They had a different closing time than the businesses around them.”

But opponents of the ordinance say it was pushed through with little input from their side, and they have started a petition to block it. If they can collect 3,417 valid signatures by Tuesday, the City Council will have until Aug. 25 to repeal the ordinance or send it to a public vote during the Nov. 8 general election.

Attorney Mike White, who is representing several large property owners opposing the ordinance — including Nicholson, Kansas City Life Insurance and the Country Club Plaza — said they are close to gathering the required number. They understand the concern but want to be more involved in drafting any new ordinances.

Suzie Aron, Crossroads developer and property owner, as well as a board member of the Crossroads Community Association, said the district has been “overwhelmed with people wanting liquor licenses” from restaurants to nightclubs to event spaces.

“Sometimes we’ve been a little overprotective, and sometimes we haven’t understood the consequences,” Aron said. “People buying $300,000, $400,000 condos don’t want beer bottles rolling around at 3 a.m. in the morning, but young people renting want a good street life.”

Why consents exist

Jim Ready, manager of the city’s Regulated Industries Division, said the conditional liquor license agreements started about a decade ago as a way for communities and businesses selling liquor to compromise on issues. So a business in a residential area might agree to be a sports bar only, not a dance club, or to close at 1:30 a.m. instead of 3 a.m.

“We take the politics out of it. They go directly to the folks that are going to be the most affected,” Ready explained.

There are now more than 60 businesses operating under the conditional licenses all across the city, but the majority of the licenses are in the Crossroads.

For example, the Record Bar, which recently relocated to 1520 Grand, agreed that it would not ask for an extended hours license, that it would not have standalone DJs unless they were part of a live music act, that its sidewalk cafe would close at 11 p.m. Sunday through Thursday and 1 a.m. Friday and Saturday, and that it would keep its sidewalk free of trash daily.

Tom’s Town’s agreement calls for 14 conditions, such as “the licensee is allowed to use the event space to promote their own products for special events by invitation only 12 times per year and on any first Friday of the month, that it will have food service available during all hours of operation, no live music, DJ or dancing, and it can offer for sale by the drink only one selection each of red wine, white wine and beer.”

“In the last couple of years, it seemed like the demands were getting higher and higher. Which I thought would be a very bitter, tough pill to swallow for a business owner to be put in that position,” Ready said. “I have to believe that was never the intent of the ordinance.”

Justus spent a year talking to businesses about what she calls the “broken liquor regulation” and has fielded about two dozen calls from people supportive of the change. Previously, one individual property owner had more power and control than the mayor, City Council or city manager in determining who received a license, and even conditions, in exchange for liquor license consent, she said.

And that’s just what new business owner Anna Cole said she is up against in the West Bottoms.

Cole plans to open The Mulberry Room, a 9,000-square-foot event space, in July. The event space, in the Oliver Building at 1321 W. 13th St., will be a place for business meetings, fundraisers and other events. But she told the council the majority of the consents she needs are held by just one property owner and that person wants conditions — she can’t play hip-hop music at any of her events and has to hire his security staff — that she doesn’t want to agree to.

Cole, who declined to name the property owner, said she can still open without the liquor license and book weddings using a caterer. But she will need liquor sales as a revenue stream to stay profitable.

“I totally understand property owners’ rights about what is going into their neighborhood. But I feel all of the property owners should have a say, not for one to have a monopoly,” Cole said. “If I had known this, I probably wouldn’t have opened a business in the West Bottoms. This kills growth for the entire neighborhood.”

Full Moon Productions now owns 13 buildings in the West Bottoms, where it also operates four haunted houses and hosts Boulevardia, an urban street festival. Before signing off on a new liquor license, vice president Amber Arnett Bequeaith said she asks to see a business plan for a variety of reasons, including parking concerns, security and cleanup.

“For event spaces, a lot of people want to have candles for weddings these days, a lot of people want to have fireworks. What plan do you have in place so you won’t burn down the building?” she said. “It can look bad for the property owners — ‘Oh, they aren’t being considerate’ or ‘They don’t want growth.’ But we have spent years getting this structure in place. What we are asking is that they plan long term for the community as a whole.”

Balancing business and resident needs

A few years ago, Nicholson said he might have been more open to signing off on a consent without a lot of conditions.

“I’ve always been about making deals happen,” he said. “But I was even adding conditions to my own leases — like with Cellar Rat, Nara and Pizzabella — that keeps things from becoming problematic.”

But over the years, the longtime Crossroads developer said some of the biggest complaints have been from residential tenants in the Crossroads who were upset about property damage and noise in the wee hours — all stemming from liquor establishments and pop-up events operating under traditional licenses.

Businesses will say they want a dance floor just so they can be open on New Year’s Eve, but then they open a full-blown nightclub, he said. Or they say they will close at 11 p.m. and then stay open until 1:30 a.m., affecting area residents.

“Why can’t people do what they say they will do?” Nicholson said. “The conditional license is the only way to bind an applicant to how they tell you they will operate, that the city will recognize.”

When Tom’s Town first approached him about buying his building, Nicholson had been planning to sell it to a retail or office user, like his previous tenants. He also had asked for conditions for other prospective bars and restaurants that wanted to open in the area, and some then decided to locate elsewhere.

“Tom’s Town said they just wanted to open a distillery with a small tasting room, a place where they could sell their product. They would be closed before 11 p.m.,” Nicholson said. “That sounded like something I could support. It would bring something unique to the neighborhood. But then it turned into a much different operation.”

He said Tom’s Town later wanted to stock white wine for an investor who doesn’t drink hard liquor, then it was both white and red wine, as well as a local beer. So Nicholson agreed, provided they would carry only one of each.

“I was trying to compromise. I didn’t want a fight,” he said. “When I saw the hearing with their testimony saying, ‘That guy will only let us sell one white wine, one red wine.’ And if I didn’t know the story I would be thinking, ‘Who is this crazy guy?’ ”

He said Tom’s Town said it wanted to compete with surrounding businesses.

“But who are they competing with? There aren’t any other distilleries,” Nicholson said. “So you can see where this is going. Now we have a bar.”

The owners of Tom’s Town said they bought the building assuming they would have the same rights and restrictions as other bars and restaurants in the neighborhood.

“We are pro the consent process. We are just saying, ‘Let the neighbors vote,’ ” Epstein said. “I think at the core for a property owner to have more power than the mayor, City Council and average voters makes no sense. It’s unconstitutional. But we chose to go through the legislative process, and this ordinance is a compromise.”

Ready of the Regulated Industries Division said some businesses sign a lease or buy a building before they get their liquor license, so then they might have to agree to the conditional terms to be able to sell any alcohol.

“It may be better to tell everyone, ‘No more liquor licenses, period.’ At least then they are consistent,” Ready said. “No bar owner wants to stay open until 3 a.m., but they might have to compete. The property owners have to ask themselves, ‘If we make these restrictions, can this business survive?’ ”

Other licensing issues

Councilwoman Katheryn Shields was surprised the ordinance passed so quickly. She took 10 days off for a Florida vacation, leaving on the day after the ordinance was introduced and getting back after it was voted on.

“Some areas are incredibly sensitive, and liquor licenses are one of those areas,” Shields said. “Someone comes to you with a problem and you see one aspect and you don’t necessarily understand the impact, and this impacts the entire city. So usually they take several months of multiple hearings for changes occur. For someone to request for it to be held — and it was advanced out of just one hearing, so there were several requests for it to be held — the fact that they wouldn’t hold it for a week is very unusual.”

And it might not be the only change that is needed. The fight over the conditional licenses also has highlighted other issues, including the lack of density requirements in the Crossroads like those that limit the number of bars in Westport and other areas, the ease with which liquor licenses transfer to the next owners, and other “somewhat antiquated” laws that might need to be refreshed, Justus said. She has offered to form a task force to look at those issues. Groups like the Crossroads Community Association also are holding meetings to discuss other licensing issues.

“We have residential over here and businesses over there, and now we are merging our city,” said Aron of the association. “What’s the best way for us to have a dynamic and safe community?”

This story was originally published June 2, 2016 at 6:10 PM with the headline "New liquor license ordinance stirs controversy: Does it help or hurt Kansas City?."