Two New Mexico retail liquor licenses have sold for $975,000 each, the highest ever in the state. Other businesses and investors have routinely paid between $300,000 and $600,000 for a liquor license in 2013.
By comparison, in neighboring Colorado, the most expensive liquor license costs under $2,500. It’s even cheaper in Texas: A two-year “package store permit” (a license to run a liquor store) is less than $1,500.
But unlike those states, New Mexico has a quota system for liquor licenses, with the cap currently at 1,411. The quota is supposedly restricted to one liquor license (either a bar or liquor store) for every 2,000 people, though there are some exemptions.
According to the Rio Grande Foundation, a free market think tank in New Mexico, the quota system fosters “artificial scarcity,” which in turn “creates a cartel run by those who can afford to invest outrageous sums in liquor licenses.”
In addition, New Mexico’s quota system adversely affects some bar owners, mainly in small, rural towns. Take Gilbert Gomez. He’s 69 and has owned the last bar in his hometown for almost 25 years. But as KPBS reports, “He wants to sell the bar and retire, but the law will not allow it.”
“Being the last remaining license…we cannot sell it,” Gomez said. “The law prohibits it from being transferred to outside the municipality.”
In a town of less than 2,000 people, selling a bar that is tied to an asset worth hundreds of thousands of dollars is unlikely. The price of a liquor license in tiny Santa Clara is about what you would pay in San Francisco, California.
A reform bill was introduced earlier this year by state Sen. Ron Griggs, but it has been “postponed indefinitely.” Until New Mexico sobers up, Gilbert Gomez will be “sitting on a retirement check he cannot cash in.”
— Nick Sibilla
Nick Sibilla is a writer at the Institute for Justice