Like most states, Ohio and Kentucky place quota restrictions on the type and number of liquor licenses that may be issued in a certain geographical area. These quotas serve a rational purpose: they limit the number of premises in a locale that can sell intoxicating spirits. This also prevents an over-saturation of bars and taverns, balances the needs of family-based communities, and ensures that responsible adults still have a place where they may imbibe.
However, quota limitations can have other, less desirable consequences. For example, with a finite number of liquor licenses available in a given area, the price for purchasing a quota license can skyrocket. It is not uncommon for aspiring barkeeps to purchase quota liquor licenses for anywhere from $20,000 to $30,000 from existing license holders. This creates inefficiencies in the marketplace and raises unnecessarily high burdens to entry. Likewise, seemingly-arbitrary restrictions on the number of available licenses may not always reflect the culture or the aspirations of a given community.
Cognizant of these realities, Ohio lawmakers created what are called “Community Entertainment Districts,” or “CEDs.” Community Entertainment Districts are bounded areas (no less than 20 acres in size), which contain a combination of entertainment, retail, social, or cultural establishments. Designation as a CED allows the state to grant up to five additional liquor licenses to food-serving establishments within the bounded area. This allows applicants for those licenses to avoid the astronomical costs that typically exist within the quota license marketplace. And those additional licenses are an ongoing asset to the Community Entertainment District because – unlike standard liquor licenses – they cannot be transferred outside of the District’s set boundaries. The City of Cincinnati has enjoyed great success with its Community Entertainment Districts located at The Banks development and in the Over-The-Rhine and Pleasant Ridge neighborhoods.
But beyond the expanded availability of liquor licenses, CEDs provide other practical benefits to a community. Indeed, CED designation allows neighborhoods to shape their entertainment options and zoning areas by drawing set boundaries for where certain activities may occur. Thus, a community can draw its CED boundary to specifically prevent late night entertainment in residential areas. Likewise, the communities that create a CED generate expanded opportunities for jobs which may lead to increases in payroll tax revenue – not to mention the additional revenue that the state receives from fees associated with obtaining the newly available CED licenses.
Simply put, CEDs are an effective way to thwart unwanted externalities within the quota license marketplace; and they allow communities to firmly define their respective entertainment districts. While CEDs are not currently recognized under Kentucky law, the General Assembly would be wise to consider the prospect. Regardless, the concept of Community Entertainment Districts isn’t going anywhere, and that is something worth raising a glass to.
Mark Hervey is a Northern Kentucky attorney practicing at Dressman Benzinger LaVelle psc.
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