Report finds inequities in liquor license process, calls for local control

The liquor license framework in Massachusetts, which relies on a population-based quota dating to 1933, fails to account for modern realities and creates a two-tier system where the vast majority of municipalities cannot control the number of licenses in their communities, according to a new report from the Office of the State Auditor.

The report, License to Pour: Access and Equity in Massachusetts Liquor Licensing, published on Oct. 13, examines the Commonwealth’s system for licensing restaurants, bars, hotels, and clubs to serve alcohol. It finds that the quota formula results in a shortage of on-premises liquor licenses in communities where businesses want to open, while pushing prospective business owners into a legislative process and private resale market in an effort to acquire licenses.

Produced by the Division of Local Mandates, the report analyzed municipal licensing data, surveyed 260 municipal officials and business owners, and interviewed license holders, municipal officials, legislators, and industry participants.

Twenty-six municipalities were allowed local control due to a limited opportunity between 1978 and 1984 to opt out of the state-imposed quota, but this created an inequitable system that leaves many municipalities unable to respond to local needs and priorities, according to the report.

The population-based quota, which allocates roughly one all-alcohol license per 1,000 residents and one wine and malt license per 5,000 residents, fails to account for modern tourism, commuter populations, or seasonal shifts, the report states.

Scarcity has turned licenses into expensive private commodities, the report found, with business owners reporting that they pay up to $600,000 for an all-alcohol license in Boston or $175,000 in Somerville, compared to around $2,500 in Cambridge (which operates under local control).

Alternative routes — such as home rule petitions (special legislation) and Alcoholic Beverages Control Commission processes — are inefficient and disproportionately benefit wealthier communities, the report found.

A lack of centralized statewide data and inconsistent municipal websites leave prospective business owners navigating an opaque system. Further, the home rule petition process has no written criteria and no complete, readily accessible public record.

Compared to neighboring states, Massachusetts has fewer full-service restaurants per resident; matching the regional average could mean 490 additional restaurants, 9,500 jobs, $311 million in annual wages, and $56 million a year in state and local meals taxes.

The report recommends eliminating the state-imposed, population-based quota and establishing local control for on-premises liquor licensing; addressing the equity and wealth-access barriers created by the secondary market; and creating a statewide, public licensing data platform to increase information access, equity and transparency.