Liquor license moratoriums highlight unchecked power of Chicago aldermen

It may seem obvious that a business owner should have the right to sell their business to someone else. But in Chicago, basic property rights take a back seat to arbitrary regulation and a system of aldermanic privilege that can put those rights in the hands of a single politician. Parlour on Clark, a once-popular...

It may seem obvious that a business owner should have the right to sell their business to someone else. But in Chicago, basic property rights take a back seat to arbitrary regulation and a system of aldermanic privilege that can put those rights in the hands of a single politician.

Parlour on Clark, a once-popular bar that operated for four years in Chicago’s Andersonville neighborhood, closed its doors for the last time on Aug. 10. The owners had hoped to sell their bar to new operators and entertained several offers. But their hopes were in vain.

That’s because City Council passed a liquor license moratorium for the area last year, which practically forbids the opening of any establishment selling alcohol that isn’t a restaurant.

As a result, the property the owners had hoped to sell for $125,000 became, in their words, “worthless,” as they were forced to shut down instead of selling the space to new owners.

Is there any way for a business owner to get around a liquor license moratorium? The law makes very narrow exceptions, such as when a liquor license is passed to a spouse, child or an heir. Otherwise, prospective buyers have to get the permission of 51 percent of registered voters within a 500-foot radius of the location.

Outside of this, the only way to get a license is to earn the approval of the area’s alderman, who can introduce an ordinance to have the restriction overturned. City Council would then almost certainly pass the ordinance because of its long-standing system of “aldermanic privilege,” under which the Council effectively allows each alderman to act as a mini-dictator within his or her ward, deciding who will and won’t be allowed to open various types of businesses.

But getting aldermanic approval is an unlikely solution for anyone in Parlour on Clark’s situation. It was their current alderman, Patrick O’Connor, who in early 2013 introduced and passed the very moratorium that stopped their business from being sold.

Why does Chicago force its entrepreneurs to deal with the effects of such a bizarre system? Anyone who starts a business already faces enormous difficulties; eight out of 10 fail in the first 18 months. Then there are the substantial regulatory burdens Chicago businesses in particular have to meet. They range from obtaining business permits, to arranging inspections, to following extensive advertising rules and paying a laundry list of fees just for the right to operate. It’s no wonder one writer trying to start a business in Chicago described the process as a “dystopian nightmare.”

Liquor stores and bars are even prohibited from opening within 100 feet of churches, schools, libraries, hospitals and homes “for the indigent or elderly” – unless the owner has the clout to get an exception. And, as Parlour on Clark’s experience shows, even after a business fails, the city can make it difficult or impossible to sell it to a new owner who might make better use of it.

If Chicago wants to attract and encourage economic growth, it needs to start treating residents and business like adults. This means making liquor license moratoriums – for which no good public-policy case exists – a thing of the past. Consumers are perfectly capable of deciding for themselves what businesses to patronize, and entrepreneurs shouldn’t be forced to curry the favor of aldermen just to use and sell their own property.

Simple, transparent licensing requirements, such as holding an insurance policy and submitting contact information to city authorities, should be all anyone needs to open a business in the Windy City. Not the favor of politicians.