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CB3 Approves New Liquor Licensing Rules

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CB3 held hearings on liquor licensing policy last summer and fall.

Last night Community Board 3 voted to put in place comprehensive new policies that could have a dramatic impact on the nightlife industry on the Lower East Side for years to come.  The revised rules, governing how CB3’s SLA Committee evaluates liquor license applications, are intended to streamline and standardize a process that has been harshly criticized by bar owners and community activists alike as inconsistent and capricious.

Reversing a decision made at the committee level last week, the full board decided to phase out the controversial practice of automatically transferring licenses from one operator to another. During a heated meeting last Wednesday, CB3 member and bar owner David McWater persuaded his colleagues to make the practice official community board policy. But last night, key members of the panel changed their minds. Acting on a proposal from longtime CB3 member David Crane, the full board then voted 37-0-3-1, to throw out the automatic transfer language (there were 3 abstentions; one member did not vote).

The abstentions included Ariel Palitz and Meghan Joye, who are both Lower East Side bar owners.  Responding to complaints from residents, the NYC Conflicts of Interest Board advised CB3 yesterday afternoon that Palitz and Joye could face investigations if they voted on the new policies. The complaint resulted from comments made by McWater last week. Recovering from a fall, he was not present last night.

In New York, community boards offer non-binding recommendations to the State Liquor Authority on  license applications.  In an effort to control the onslaught of bars and restaurants in the neighborhood, CB3 has struggled to balance the desires of fed up residents and business owners.  The board has been examining its current policies for the past five months.

A report prepared last year by a planning associate working with CB3 stated, “(The committee)  must start to carefully and gradually change the current defacto policy of not reviewing transfers as new applications.  Instead CB3′s SLA Committee must move towards a policy of reviewing each transfer as a new applicant.”   The report added that existing businesses would be “grandfathered,” allowed to transfer their licenses if they were good operators and “as long as they maintain(ed) the (same) stipulations and operations.”

Last week, McWater argued forcefully that changing the policy on transfers would be fundamentally unfair to hundreds of bar owners who are counting on  eventually selling their businesses and retiring. Without the guarantee of a liquor license, he warned, their bars would be worth less. “So now you’re saying to us, in order to fix the over-saturation problem, we’re going to take away from your retirement fund,” McWater said.

The committee voted unanimously to tie licenses to location rather then to individual applicants, which would have had the effect of making transfers automatic. But several board members, said the contentious tone during the meeting clouded their judgment. Here’s how Mary Spink described the atmosphere during the tense deliberations:

I felt so beat on, a lot of us did. It was never ending. The screaming, the yelling, ‘I demand this,’ ‘I must have this,’ ‘I will have this or else.’ It was continuous. We glazed over and we voted. And the next day I said, ‘am I out of my mind, what I voted for?’

SLA Committee Chair Alexandra Militano added:

I voted for the revisions that attached the license to location at the policy meeting, but I didn’t vote my conscience and I’m going to withdraw that vote… I really felt there was little choice in how I voted at the policy meeting and I think otherwise now.

Although he wasn’t in the room, the conversation last night kept returning (somewhat obliquely) to David McWater, who is widely respected by many community board members for leading major initiatives, such as the rezoning of the Lower East Side three years ago and (just last month) the successful completion of Seward Park planning guidelines. But, at the same time, a lot of his colleagues, take exception to McWater’s combative style when advocating for the neighborhood’s nightlife establishments.

Generally speaking, the city’s Conflicts of Interests Board does not have a problem with bar owners sitting on community boards, so long as they refrain from voting on matters in which they have a direct financial interest.   In an email message yesterday board officials told CB3: “Based on the facts you outline it appears this vote may result in a personal or direct economic gain for three members within this district.” McWater, of course, was not present to defend himself.  Joye and Palitz were outraged:

Joye: This has been sent to the New York Conflicts of Interest Board, which I knew nothing about until the minute I walked into this meeting. So we’re talking about the biggest sweeping policy change that this community board has ever seen and hundreds of bar owners’ voices are now going to be silent. We get no say in the matter. I just think it’s undemocratic and wrong… It’s crazy. It’s absolutely crazy. And you know what, you don’t like David McWater, whatever you want to say about him personally, say that about him personally. But I’m someone who has always been middle ground, has always kept my cool. I want to let you know that this is nuts. It’s absolutely nuts.

Palitz: To disallow us after the hours we have put in on this and if it was a conflict of interest we would have never been allowed to be on that board in the first place… There is no direct economic impact on any of us… I ask all of you to support us in postponing this vote until we rectify what has happened to our right to vote here tonight.

CB3 District Manager Susan Stetzer said she forwarded the complaint to the conflicts board after concerned residents contacted her. She added that it’s a routine part of her job — complaints are received on a fairly regular basis. Explaining why Joye and Palitz only found out about the advisory when they arrived at the meeting, Stetzer said the response only came in two hours earlier.

During the course of the evening, it became clear not all SLA Committee members came away from last week’s meeting with the same understanding about what was decided. Joye, for example, said she didn’t think the McWater proposal on transfer applications would have prevented the community board from placing restrictions (referred to as stipulations) on licensees. Spink, on the other hand, had a different impression:

Technically speaking, what we were asked to vote for, and I heard something different than you did, was transfers – if there are no stips we can’t put any in – and it’s forever, period. I’m not looking to destroy all businesses on the Lower East Side. I feel strongly about a lot of the proliferation, but only because we have become a destination… To take away any ability that we have to make a decision for our community (seems unwise).

Militano sought to refute McWater’s contention that the SLA actually approves almost all transfer applications. She said CB3’s transfer practices were out of line with state policy and the policies of other community boards and should be changed — and she explained why her committee felt it was important to accommodate longstanding businesses by adding the “grandfather clause:”

Even though we’ve been doing something wrong… our tacit policy is not consistent with the other community boards or the SLA. We acknowledge that even though we’ve been doing something wrong, the committee wanted to give a benefit to the people who relied on that… That’s the way we chose to phase out the inappropriate way in which we were reviewing licenses.

Last night’s vote was a big step but it’s not the end of the SLA policy review. A task force will now be formed to work out implementation of the new rules.

As for the ethics complaints, it remains to be seen whether Palitz and Joye will formally protest the Conflicts of Interests decision, which Palitz called “an eleventh hour effort to gag us.”   We asked Manhattan Borough President Scott Stringer, who oversees the boards and appoints their members, for a statement on the thinking behind seating bar owners. His press secretary, Audrey Gelman, replied this afternoon:

“The Borough President feels strongly that all voices in the neighborhood should be represented on community boards.  As public officials, all members are required to abide by the City’s Conflicts of Interest Laws.”

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  1. Ariel Palitz and Meghan Joye are outraged that they have to follow the conflict-of-interest laws? Oh, please. All the board members have a training session about this. If they don’t like it, they don’t have to serve on the board. And if they don’t have a direct financial interest, they should have a word with their fellow bar-owner David McWater, who couldn’t disagree with them more strongly. In any event, their votes wouldn’t have changed the outcome. (By the way, they abstained, but Anne Johnson, making some sort of principled stand, although it’s not clear for which principle, voted “no” so the vote was 37-2-1, not 37-3-0.)

  2. According to the vote sheet, it was 37-0-3-1 (3 abstentions, 1 present-not voting). We’ve changed the story to reflect these numbers.

  3. I applaud cb3’s decision to change the liquor license transfer law.Every potential bar owner should be evaluatuated individually,and not be automatically allowed to take over for the previous owner,when in fact residents may have a problem with noise coming from that particular venue.Bravo! Then noise and chaos have gotten completely out of hand on Ludlow Street.Also bravo to the 7th precinct for cracking down on noisy bars!

  4. I just want to point out that the dramatic “we have no voice” speech by Ariel wasn’t exactly true. When they read the decision it said that they were allowed to participate in the discussion, just not allowed to vote on it. And only on this one particular thing. I certainly understand that she felt blindsided coming into the meeting to find out she couldn’t vote, but I think she also spent too much of her floor time trying to get the vote postponed rather than educating the rest of the board on her position. She put her eggs in the wrong argument.

    It is telling, however, that the only 3 people who supported this language were the bar owners (and one real estate developer’s lawyer, which is almost the same because the landlords get a cut of the sale of a license).

  5. Absent from the coverage of this story is the fact that a group of residents have been consistently raising the issue of the legality and appropriateness of CB3’s transfer policy for months. They have spoken at all of the policy meetings, submitted written testimony, and appeared at full community board meetings. At Tuesdays meeting residents turned out in force again with ten people speaking against the transfer policy and others handing flyers outlining their position on this very important issue. Congratulations to them and Power To The People.

  6. Sorry, I was the victim of some data compression. There were two votes, the first was the amendment to the policy document, and the second was the policy doc itself. The amendment was to phase out the practice of automatic support for license transfers; arguably this was the important vote, since it determined that language for the policy doc in the second vote. It was 36-1-2-2 (yes-no-abstain-presentnotvoting). The second vote was a foregone conclusion based on the first, and that went 37-0-3-1. So we’re both right, and this is not very interesting.

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