Booze News: Distilled in Room 215

A blog about the Baltimore City Liquor Board

Rules & Regulations Committee #5

Written by Becky Witt

Below are notes from the fifth meeting of the BLLC’s Rules and Regulations Committee, held on Wednesday, September 16, 2015, from 10-12am.

Mr. Stanley Fine, chair of the committee, opened with a discussion of the state law that requires that the agency review its rules and regulations before October 31, 2015. Mr. Thomas Akras, Deputy Executive Secretary of the Board, reported that he had spoken with Brian Oliner from the Maryland Attorney General’s office, and Mr. Oliner interprets the law to require that the Board simply examine the rules, not that the Board must actually promulgate them by October 31. Mr. Fine then said that the committee will complete their review of the rules and submit their recommendations to the commissioners by the end of October; the Board will hold one or two public hearings to collect public comment. Then, thirty days after the public hearing(s), the Board will promulgate the new rules.

Before returning to the section that the committee had previously been working on, Ms. Minda Goldberg, of the City Solicitor’s office, brought up the sole proprietorship Baltimore City resident requirement that the committee had discussed and decided to omit due to controversy among the committee members. She said that the group should bring back the original drafted language that they had decided to omit, because Article 2B section 10-103(b)(4) states that an applicant must state on their application that they are a city resident. Without much discussion, the committee agreed with Goldberg and re-inserted that section of the proposed rules.

Rule 2.03 – Substitute Applications (a) Any changes in the pertinent information contained in any application filed with the Board must be reported to the Board in a timely manner. This includes, for example, change of name, change of telephone number, change of address, death of a licensee, dissolution of a corporation, election or change of an officer or authorized person who is listed as an applicant or licensee: (b) Any change on a licensee’s application concerning the removal, addition, or substitution of a licensee must be accompanied by a $250.00 processing fee and a $200.00 application fee. (c) Substitution of Corporate Officers or Members of a Partnership: Any change concerning a corporate or limited liability company application also requires: (i) an application for substitution of corporate officers or authorized persons on the form provided by the Board; and (ii) a signed letter of resignation from the outgoing corporate official(s) or authorized person(s); and/or (iii) a signed copy of the contract indicating that the holder(s) of a license transfer(s) less than 51% of the ownership interest of the licensed premises and the name and information of the transferee; and/or if applicable (iii) a certified copy of the corporate or limited liability company minutes or resolution indicating the substitution of corporate officer(s) or authorized person(s).

2.05 Transfer of a License (a) Holder(s) of a license may transfer 51% or more of the ownership interest in the licensed premises only if: (1) A completed written alcoholic beverage license transfer application is filed with the Board before the proposed transferee begins operation of the business.

Ms. Becky Witt, of Community Law Center (and Booze News writer), had submitted written comments ahead of the meeting, expressing concern over the delineation between substitution of licensees and transfers of licensees in Rules 2.04 and 2.05. The draft rules state that if there is a 50% or more transfer of ownership of a corporation, the licensees must file a transfer of ownership application. If there is less than a 50% transfer of ownership of a corporation, the licensees do not have to file a transfer application and can substitute the old owners for new owners at renewal. Under the rules, there would be no notice to the community that the licensees had changed and no opportunity for public comment or protest. There would also be no significant investigation into the substituted licensees’ character or fitness besides the standard background check.

In response to this concern, Mr. Thomas Akras stated that the Board has interpreted “ownership” in the statute to mean “50%+ ownership,” because a majority ownership gives a person “dominion and control.” If a minority ownership changes hands, the licensees don’t have to go through the normal transfer process, because the “dominion and control” of the corporation has not changed. There is no 50% threshold in Article 2B, and no other county in Maryland makes this distinction. In fact, there are no other counties in Maryland that have a corporate officer “substitution” process in their rules and regulations. When this point was raised, Mr. Fine, Mr. Akras and Ms. Michelle Bailey-Hedgepeth, Executive Secretary of the agency, all stated that it would be administratively difficult for the agency to schedule even expedited transfer hearings for all transfers of ownership. No committee members found this lack of notice to the community about licensee changes to be problematic, so the drafted rule remained as it was.

2.06 Notice and Hearings (a) (New Application/Transfer/Substitute) (1) Before considering a license application, the Board must publish a notice of the application twice a week for two (2) consecutive weeks in three (3) newspapers of general circulation in the City of Baltimore. (2) The notice must specify the name(s) of the applicant(s), the kind of license applied for, the location of the place of business proposed to be licensed, and the time and place fixed by the Board for a hearing upon the application. (3) The hearing on the application will not be held less than seven (7) days nor more than thirty (30) days after the last date of publication. (4) At the hearing, any person to be heard on either side is allowed to be heard on the date of the hearing, even if the applicant is asking for a postponement. (5) In New Applications/Transfers/Substitute hearings the Board shall consider the factors outlined in Article 2B, Section 10-202(a)(2) in making a determination as to whether or not to allow the action requested from the Board by the applicant.

Mr. Fine pointed out that Baltimore City does not have three newspapers of general circulation, and that the committee should recommend a revision to the state legislature of this requirement. The committee suggested that the staff add a requirement that the property be posted with notice of the hearing.

(b) Violation Notice and Hearing: (1) Incident/violation reports concerning licensed establishments are generated through various Federal, State, and local agencies, including reports generated by Board inspectors themselves. Each report generated about each licensed establishment will be reviewed administratively by the board staff to determine if there is an allegation of a violation of the rules, regulations, or laws by licensees. (2) After conducting a preliminary review of the report, the board staff will prepare charges based on the allegations within the report for the violation of the rules, regulations, or laws governing the sale of alcoholic beverages, which will be served on the licensee and presented to the Board at a public hearing. (3) At least ten (10) days before any hearing shall be had by the Board upon any charge of violation or rules, regulations or laws governing the sale of alcoholic beverages, the Board shall cause to be served upon the licensee charged therewith, a summons containing the following information: (i) Name and address of the licensee as same appears on the license (ii) The rules, regulations or laws which the licensee is charged with having violated together with the date of such violation if it relates to a specific instance, and (iii) Time and place of hearing.

Mr. Kodenski, attorney for licensees, raised an issue with the way that the Board has recently been constructing its docket and charges. Kodenski said that the Board should not know whether or not the licensee has had prior violations when they decide if s/he is responsible for the particular charge before them. He also said that the Board should not have the summary of the charges in front of them, because they are just allegations. Mr. Hurdle agreed, and he also said that the committee should think about coming up with a rule about how far back the Board can look for prior violations; Hurdle said, “five years is forever.” Ms. Bailey-Hedgepeth noted that each Board is different; the Board under Mr. Steve Fogleman did not consider violations older than three years, but the Board under Judge Thomas Ward looked at all violations since the license was in the name of the licensee. Mr. Fine stated that each administration can have their own policy on the length of time that they will look back for prior violations, but he did agree with Kodenski that the commissioners should not see the violation record until after they have determined responsibility for the charge, as a matter of fairness.

Rule 2.07 – Protests

Mr. Tom Yeager asked about proposed Rule 2.07, which lays out the process for protests of issuance or transfer of a license. If more than 50% of property owners and tenants within 200 feet of an establishment either testify or submit affidavits that they oppose the issuance or transfer, the Board must deny it. Mr. Yeager wondered how the Board would determine who qualified, and Mr. Fine said that Baltimore City’s Property Location office would determine it. Mr. Hurdle stated that he had seen case law that held that testimony was inadmissible from an affidavit of a person who did not appear at a hearing where the affidavit was presented. Hurdle did not cite this caselaw or provide a copy to the committee members. Mr. Akras stated that he would rewrite the rule to more closely approximate the requirements laid out in Article 2B (which are very complicated and very rarely used by communities).

Rule 2.08 – Number of Licenses: With the exceptions as indicted in this rule, no new alcoholic beverage licenses shall be issued so long as the number of all licensed premises is more than one (1) for each
thousand (1,000), or major fraction thereof, of the residents of Baltimore City. The Board shall accept the population statistics prepared by the Baltimore City Health Department. This rule shall not prevent the renewal of licenses outstanding, nor shall it prohibit the transfer of ownership and/our location of any such license.

Mr. Fine questioned whether this rule was necessary; Mr. Akras replied that it is a holdover from the old rules. Ms. Goldberg asked how often the Baltimore City Health Department gives new statistics. Mr. Kodenski responded that it didn’t really matter, because it will be a long time before the number of licenses gets anywhere close to 1 per 1,000 residents. Currently, there are roughly 1,300 licenses and the United States census says that the city had 622,104 residents in 2013.

(a) Notwithstanding any other provisions of this rule, The Board may issue any of the following types of new licenses: (1) Class “B” Beer and Wine and Class “B” Beer, Wine and Liquor licenses wherein:
(i) There is a minimum capital investment of two hundred thousand dollars ($200,000) for restaurant facilities which shall not include the cost of land and /or building. (ii) Such restaurant must have a minimum table seating capacity of seventy-five (75) persons as approved by the Baltimore City Fire department. Seating at bars or counters will not be considered as a part of the seventy-five (75) seat requirement. (iii) Any license issued under this exception cannot be converted to any different class of license.

Mr. Peter Kimos, licensee, expressed concern about the exception which allows restaurant owners to acquire a new Class B restaurant license if they can show that they have invested $200,000 (in a few places in Baltimore City, that requirement rises to $500,000) into the physical space. Kimos said that every additional license takes away the value of his license. The licensees’ attorneys in the room assured him that BD-7 tavern licenses are going up, not down, in value.

Rule 3.03 – Records. 1.(a) Licensee shall keep accurate records of all purchases of alcoholic beverages for a period of one year from the date of each purchase. Such records shall include the date of
each purchase, the quantity purchased, and the name and address of each seller. Such records shall be open for inspection at all times by duly authorized representatives of the Board.

Mr. Hurdle and Mr. Kodenski raised an issue with this rule, arguing that the law doesn’t require licensees to keep these records of their purchases on site for BLLC inspectors to review. The Board staff disagreed. Hurdle and Kodenski also argued that a full year of records would be too onerous for the licensees to keep on site. There were two licensee committee members present at the meeting, and they both, when asked how long would be a reasonable requirement, stated that they routinely keep well over one year of records at this location. The rule was left as drafted.

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