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Sunday, 26 April 2015 22:00

Despite Snyder’s efforts, liquor license fees unlikely to increase

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Under a budget proposal from Gov. Rick Snyder, liquor license fees would increase 50 percent to pay for increased funding for local law enforcement efforts and the Michigan Liquor Control Commission. However, the measure hit a roadblock in the state Legislature, where lawmakers argued the fees punished job creators unnecessarily since the MLCC already operates at a surplus. Under a budget proposal from Gov. Rick Snyder, liquor license fees would increase 50 percent to pay for increased funding for local law enforcement efforts and the Michigan Liquor Control Commission. However, the measure hit a roadblock in the state Legislature, where lawmakers argued the fees punished job creators unnecessarily since the MLCC already operates at a surplus. COURTESY PHOTO: JILL DEVRIES PHOTOGRAPHY

The push by Gov. Rick Snyder to increase liquor license fees by 50 percent appears to be “dead.”

At least that’s how one state lawmaker — echoing the sentiment from both chambers in the state Legislature — described the proposed fee increase in Snyder’s latest budget proposal.

While the administration is still interested in updating a variety of statewide fee structures, a spokesman for the state Budget Office conceded the initial proposal faces “an uphill battle” and said a new deal may need to be worked out over liquor licenses.

In an effort to modernize fees and increase funding for local law enforcement and the Michigan Liquor Control Commission (MLCC), Snyder proposed what would have amounted to $6.2 million in additional revenue from bars, restaurants and most liquor retailers.

But the Legislature saw the move as unfairly targeting small businesses.

“It’s a self-supporting agency,” Sen. Marty Knollenberg, R-Troy, said of the MLCC.

Knollenberg chairs the Senate Appropriations subcommittee that rejected Snyder’s proposal.

“I don’t think we should punish job providers, and at the end of the day, (the commission) is able to use existing revenue,” he said. “(The proposal is) dead.”

Knollenberg’s response captures the main arguments against Snyder’s proposed increases.

Critics of the fee increase — including the Michigan Restaurant Association and the Michigan Licensed Beverage Association — contend that the Liquor Control Commission is already self-sustaining, generating nearly $200 million in net revenue through the Liquor Purchase Revolving Fund, which gets diverted elsewhere in the state budget.

They also say that the hospitality industry plays a key role in generating economic activity for the state and argue that the fee increase is an unfair penalty.

“The only group that would see an increase from the status quo (in Snyder’s budget) is the restaurant industry,” said Justin Winslow, vice president of government affairs for the Michigan Restaurant Association. “We make the case that the way the system is structured, we produce a massive surplus in state government.”

According to Winslow, the increases would affect on-premise licensees like bars and restaurants, as well as off-premise license holders like grocery or liquor stores. A total of 16,000 licensees would have been affected, he said. Those annual fees on license holders vary based on the type of license.

The state, as the sole buyer, purchases spirits from manufacturers before selling it back to retailers with a markup. That revenue — a little more than $1 billion a year — in the Liquor Purchase Revolving Fund goes toward purchasing product as well as commission administrative costs. Last fiscal year, the fund returned nearly $170 million in surplus back to the state’s General Fund.

“It’s a slush fund for a variety of things,” Winslow said of the revolving fund. “The money is easily there for the commission if it needs money. License fee increases are not the way to go about it.”

Jason Moon, a spokesman for the Department of Licensing and Regulatory Affairs (LARA), said a majority of liquor license fees are “severely out of date,” as some of them are nearly 40 years old. The $6.2 million generated in the first year of the increase would “support law enforcement, improve customer service and enhance substance abuse programs,” he said.

Fifty-five percent of the funds in the first year would be used for law enforcement, he said, while the $2.6 million generated for the commission would mostly be used to update its I.T. system that manages license applications. The 50-percent increase was to sunset after three years and be cut in half after that.

According to LARA, the typical restaurant’s $600 annual liquor license fee (which Winslow said is on the low end of the scale) would increase to $900 in the first year and drop to $750. Average liquor store fees would increase from $800 to $1,200 under the plan, Moon said.

After being rejected in House and Senate subcommittees, the proposal isn’t likely to resurface in the budget process, sources said.

Kurt Weiss, a spokesman for the governor’s Budget Office, conceded recently that the increases “face an uphill battle in the Legislature. It doesn’t mean we’re going to quit discussion or quit trying” to find funding to support the commission and update fee structures.

The Associated Press reported recently that a deal is in the works to use money from the revolving fund to pay for upgrades at the commission, a plan that is supported by Rep. Al Pscholka, R-Stevensville, and Sen. Dave Hildenbrand, R-Lowell, the chairs of the House and Senate Appropriations committees, respectively.

“We’ll have negotiations and discussion moving forward,” Weiss said. “If that’s part of the discussion the Legislature wants to have, we’ll have any discussion they want.”

Weiss said the administration has a “pretty strong commitment from the Legislature” to have a final budget recommendation finished by the end of May.

Read 3224 times Last modified on Wednesday, 29 April 2015 09:30

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