Wyoming’s Other Liquor Problem (Part 1)

by Wyoming Liberty Group Staff

Wyoming's disturbing rate of alcohol-related calamity is no secret. Two ways to measure alcohol abuse among adults are to look at DUI arrests per capita and binge drinking rate. These measures show Wyoming leads the nation in DUI arrests per capita and is in the CDC's second tier of states (out of three tiers) for binge drinking prevalence. Based on these data points, Wyoming's system for regulating the alcohol market appears to be ineffective in deterring destructive behavior attributable to alcohol.

At the same time, Wyoming has another alcohol problem. Wyoming's system for regulating the alcohol market also harms small business, entrepreneurship, and local economic development. State law imposes a formula that limits the number of retail liquor licenses in each community which allow businesses to sell or serve alcohol as the primary income source. The formula also reduces the rate of growth for new retail liquor licenses for cities having populations larger than 9,500 people. This means the number of these businesses cannot grow at the same pace as the number of potential customers in larger cities.

Ironically, as cities grow, businesses get more concentrated and specialized retail shops emerge there. By contrast, Wyoming's liquor licensing structure actually forces new business growth to slow down compared to population growth as the state's largest markets grow larger. This imposes artificial, market costs when licenses are resold and inhibits entrepreneurial opportunities in at exactly the time and place when new business should accelerate.

Wyoming's liquor licensing system blocks private-sector business development in two ways. The price of an operational license in the secondary market can be cost prohibitive and numerous potential new businesses vying for newly-available, retail liquor licenses are simply don't get permits due to the quota. Both have been recently demonstrated in Wyoming cities.

In Cheyenne, the secondary market for retail liquor licenses is almost 100 times more expensive than the maximum fee the city can charge for the license when first issued. For example, as of September 12, 2016, one full retail liquor license was listed on the commercial real estate site loopnet.com for $250,000.

Laramie City Council had to sort through eleven applications and presentations for a single liquor license in 2015. The Cheyenne City Council received six applications for one additional license from hopeful businesses. Similarly, the Gillette City Council had to hear proposals from four applicants in September 2015 when it had one additional license to grant to a lucky winner.

Given the gap between the number of willing and eager business investors and the number of liquor licenses cities may award, the question Wyoming faces is whether to fundamentally change the way local governments allocate the right to sell alcohol among businesses. Wyoming is more supportive of small business and entrepreneurs than many states by allowing private ownership of package liquor stores. However, the population quota system used to protect these stores from competition created an artificial, but valuable asset for license holders. This government-crated asset is now a major barrier to any serious alcohol licensing reform effort.

Undoubtedly, any future changes should avoid encouraging irresponsible drinking. However, the CDC and StatisticBrain.com data show that Wyoming's regulatory model based on blocking new business start-ups does not necessarily prevent destructive behavior. These sources also offer several examples of rural states that manage to achieve both better alcohol safety records and market-oriented permitting systems.