Case Study: How a Bad Regulation is Passed

City of El Cajon Ordinance Alcoholic Beverage SalesOn August 28, 2013, the Mayor and City Council of the City of El Cajon passed a new alcoholic beverage ordinance.  The room was packed.  The various non-profit groups that have popped up with alcohol and tobacco tax funding made sure there was a good turn out to support the ordinance.  Though greatly outnumbered, there were also a number of neighborhood grocery store and liquor store owners and their allies.  The key issue was whether the City should have its own power (independent of the State’s Dept. of Alcoholic Beverages aka “ABC”) to revoke the ability of businesses, even older “grandfathered” businesses, to sell alcohol if they are deemed a problem.  So there was a great deal of testimony about the City’s problems, and society’s problems, with alcohol abuse and the contribution to the problem by “bad operators.”  There was also testimony expressing the fear that a power to revoke would be used arbitrarily, selectively, or for minor offenses.  Even City staff seemed unusually biased toward the ordinance it had drafted, unwilling to consider further amendments and confronting questions evasively and argumentatively.

Of course, as with all regulations, the devil was in the details.  In addition to enforcement against businesses selling alcoholic beverages for consumption off the premises where sold (“off-sale”), the regulations included restrictions on the type, location, and operation of new stores, and restrictions on “on-sale” such as restaurants and bars.  Unfortunately, there was only one speaker (myself) among nearly fifty who spoke directly to the new store restrictions.  That speaker was unceremoniously cut-off by the Mayor at the 3 minute presentation limit without any questions by the Council.  The next speaker, a local favorite, was provided an unlimited time to deliver allegory and anecdote in general support of the ordinance.  There was also only one speaker to speak regarding the conditional use permit requirements on restaurants but lost in his message was that the City was one of the few statewide that had such a requirement for restaurants without entertainment or dancing.

So it was that at the end of the City Council session, the ordinance passed to loud applause.  Council seemed unaware that the ordinance  prohibits the opening of a new store under 10,000 square feet selling any type of off-sale alcoholic beverage in all but two remote corners of the city – even if the business buys an existing license, moves it to a better location, agrees to much greater restrictions and substantially upgrades the products sold.  Thus, certain “bad operators” will continue to operate rather than sell their license to better operators.  Thus, specialty and gourmet grocers, high end wine and craft beer stores, and other creative new business ideas coming under the ordinance will be prohibited – unless they exceed 10,000 square feet.  The City Council has abdicated its authority to make exceptions.

The City’s rational for the 10,000 square-foot-plus exemption?  They want to encourage big box grocers.  While that goal in of itself might be questionable, the logic to reach it seems particularly flawed.  A ban on smaller stores rarely serves to attract larger stores.  It just makes smaller commercial properties harder to rent, adding to the hurdles of revitalization, deterring corporate chains.

The City, which like many cities struggles to revitalize it’s business core, will confront prospective restaurants, specialty or gourmet off-sale stores, and other yet unknown creatives with more regulatory hurdles, costs, and delays than its neighboring cities.  City staff has reasoned that the City’s demographics don’t support those high-end stores.  Their analysis may become a self-fulfilling prophecy.

Ironically, most of the City’s populace views itself pro-business, anti-regulation, and conservative.  But the process demonstrates that political philosophy and action rarely match, and that nuance and detail cannot be communicated in 3 minute soundbites (the time limit for testimony at City Council sessions.  Thus, another over-broad ordinance is passed, with unintended consequences getting lost in its main purpose, proving that the problem is not so much over-regulation (though there is some of that too) as it is bad regulation.

So if you are any one of the described businesses considering the City of El Cajon: Off-sale will need to get their applications in before November 1 (the effective date of the new ordinance) or be barred for the foreseeable future (no exceptions) from most of the city; and restaurants, be prepared to face delay, uncertainty, and costs that you won’t face in many other cities.

About William Adams

Attorney at Norton, Moore, & Adams, LLP.
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