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Granting of three-way liquor licenses to restaurants downtown could be greatly expanded in the name of downtown development under a proposal from City Councilman Tom Smith.

An unwise incentive

Encouraging new and unique restaurants to open downtown is undoubtedly desirable. Having more dining choices will add to the vibrancy of downtown and attract more people, which will benefit all businesses. But dangling cheap liquor licenses in front of potential proprietors as the incentive for opening up shop is not the best strategy. Adopting a Downtown Dining District could further complicate the already-inequitable hodgepodge of state laws governing the distribution of alcohol.

Fort Wayne City Councilman Tom Smith, R-1st, plans to introduce a bill to create the special district to the City Council in July. State law allows cities to designate a district within 1,500 feet of downtown rivers where an unlimited number of three-way liquor licenses – beer, wine and spirits – could be granted. New restaurant owners would have to pay a $2,500 annual fee. The money would help pay for a marketing campaign for downtown dining.

This is the second attempt to create a special district allowing inexpensive and unlimited three-way liquor licenses for newly established eateries. In 2006, former Mayor Graham Richard’s administration pitched the idea of a Riverfront Development District that would allow new investors to get a non-transferable three-way liquor license for about $1,000 each year.

But City Council rejected the proposal when existing restaurateurs pointed out the unfairness and predicted the incentive would harm existing restaurants that already operate on slim profit margins. The restaurant owners explained that existing operations paid up to $100,000 for their alcohol permits.

Outside the special districts, the state commission grants three-way liquor licenses using a quota system based on city and town populations. There are 194 three-way restaurant permits issued in Fort Wayne, which is over the quota of 170 permits based on the city’s population of 253,691.

Because Fort Wayne is over its permit limit based on the quota system, the state won’t issue additional permits, increasing the value of existing three-way permits.

The quota system is a throwback to Prohibition and an ineffective attempt to regulate alcohol sales in Indiana. It does nothing to limit alcohol consumption, but, as with other state liquor laws, creates an uneven playing field.

The inherent inequity of the laws governing liquor licenses is something city leaders will need to consider when evaluating this latest effort to boost downtown development.