Rising Tide is located in the ILb zone. This is a light industrial zone that doesn't allow housing, but does allow a large number of "light industrial" uses like: dairies, lumberyards, indoor amusement and recreation centers, commercial kitchens, bakeries, breweries, artist studios, and (this one's important): makers' markets and their associated retail sales.
They came to City Hall with this problem, and the city listened. After many meetings and brainstorming sessions, city staff came back to the Health and Human Services Committee with a recommendation to help these local businesses stay in business: the addition of makers' markets as an acceptable use in the ILb zone.
Ed Suslovic was the chair of the HHS Committee at the time, and I served on it along with former Councilor David Brenerman. We were very careful with this zoning change because we wanted to preserve the environment in East Bayside that had allowed these new food and beverage manufacturing businesses to thrive there. That meant keeping the industrial nature and feel of the area and preventing it from turning into a second Old Port or entertainment/bar district.
In order to keep things in check, we restricted these businesses to selling only wares associated with their own production and only items that could be produced within the ILb zone. We also limited the amount of space their retail activities could take up in relationship to their manufacturing area, the number of temporary events (music, lectures, exhibitions of local products, fundraisers, etc.) they could hold, and their hours of operation.
We also came up with a special liquor license (the "Brewery, Winery, Distillery License") which allowed them to serve and sell their products in their tasting rooms.
Fast Forward to Today
Sounds pretty good, right? So why did Rising Tide need something beyond the Brewery, Winery, Distillery License we originally created for this purpose back in 2016?
In order to serve alcohol in Portland, businesses need to be licensed by both the state and the City of Portland, and it turns out that our municipal liquor licenses, or more accurately, the licenses that we've been comfortable granting in the ILb zone, are in direct conflict with the corresponding state liquor licenses. Apparently that's been the case all along, but the conflict hadn't risen to the surface until Rising Tide's license came up for renewal this year.
At the municipal level, their license was automatically renewed back in February. No issues, no problem. But at the state level it stalled. The state had elected to conduct a routine audit of Rising Tide this year, so Rising Tide was issued a temporary license while the audit was in progress. Unfortunately, during the audit, it became clear that there was no combination of municipal and state liquor licenses that Rising Tide could get which would meet the requirements of the state and the requirements of the municipality.
- Some state liquor licenses require a certain amount of a business's revenue to come from food sales. But locally, in the ILb zone, we severely limit the ability of breweries, wineries, and distilleries to sell food. (Remember, we didn't want this zone overtaken with fully operational restaurants or bars when we added the makers' markets language.)
Although we do allow food trucks to operate at or near these businesses, the state doesn't count food truck sales toward the business's required food revenue minimums. The state will only count food sold directly by the business with the liquor license, even if a food truck or other vendor is on premises.
- While there is a state liquor license that doesn't have this food requirement (the Class A Lounge license), that license would allow an establishment to operate full bar service with beer, wine, and spirits. Again, that's exactly what we said we DIDN'T want businesses in the ILb doing back in 2016, which is why our ordinance prohibits them from doing so.
The Solution that Spawned the Headline
As you can see, Rising Tide had a conundrum. There was no legal way for them to continue to operate as they'd been operating for the past three and a half years. If they went with the license the state recommended (the Class A Lounge license), they would be violating the municipal ordinance. And if they went with one of the licenses the city was willing to allow, they'd be violating the state law.
So, at the Monday, April 22nd City Council meeting, Councilor Cook and I were trying to find a way out of this situation. We could see that in the long-term the situation was indeed solvable. In the two weeks leading up to this meeting, Councilor Cook, the City Manager, city staff, and I had discussed two ways in which the license conflicts to be resolved in the long-term:
- We could change the zoning in the ILb to allow businesses like Rising Tide to operate as drinking establishments with full bar privileges. (I didn't, and still don't, favor this particular change, but it was one possible solution to the inherent license conflicts.)
- We could try to get the state to allow municipalities to place conditions on state liquor licenses. This would enable us to say that even if an establishment has a Class A Lounge license (the one without the food requirement conflict), we, as a municipality, could still prohibit them from selling types of alcohol not allowed by zoning.
To make the situation even more dramatic, the state informed Rising Tide that very day, April 22nd, that they had finished calculating their food revenue sales and that Rising Tide had failed the audit. To be in compliance with the state license, they needed to have 10% of their revenue come from food sales. The state calculated that Rising Tide was at 9.75%. That meant they needed to either change their license class (thereby violating the municipal law), or lose the license they had due to a violation of the state law.
Understanding the urgency of the situation, and also that a long-term fix was underway, Councilor Cook and I agreed that we needed a short-term fix that would allow a local business in good standing in the community to continue to operate until that long-term solution was in place.
So that's what we did.
Councilor Cook raised Rising Tide's license as a non-agendaed item, and I seconded her motion. We then proceeded to explain the situation to our fellow councilors, and ultimately the Council granted the Class A Lounge license to Rising Tide with a 5-2 vote.
The Last Minute
The one thing you might still be wondering is why we waited until the last minute to bring this to the council if we'd been talking about it for at least two weeks prior. Good question.
Personally, I was loathe to grant a license in violation of our ordinance. I knew the history of the zoning and I was worried about the potential unintended consequences of making such a choice. Also, I was hopeful that the state would find that Rising Tide had indeed squeaked by on the food requirement this year, which would give us time to address the issue before another license came up for renewal in this zone.
And there was one other thing: At one point in our consideration of this issue, it appeared that city staff would be able to administratively grant Rising Tide a Class A Lounge license for a limited time period with the understanding that no liquor would be sold. Rising Tide had written an attestation that they had no intention to sell liquor and that they would not do so, and we also had the argument that the sale of liquor at their establishment was prohibited by zoning, so we still had recourse if the conditioning of the liquor license didn't hold up.
Having staff administratively grant the license change would have given us time to find a more permanent solution, and right up until Monday before the city council meeting, Councilor Cook and I thought that was going to work.
However, on Monday before the meeting we learned two things: 1) that city staff wasn't comfortable administratively granting the Class A Lounge license, and 2) that the state had determined Rising Tide was out of compliance in terms of food revenue and would not be able to renew their current liquor license.
That's what brought us right up to the last minute and put us in the position of having to take the license up as an un-agendaed item.
If you still have questions after reading this explanation, feel free to forward them my way. I've tried to be clear, but like so many issues that seem simple on the surface, this one is complex. If I ever encounter an issue that is simple from start to finish, I'll be sure to write a post about that.
Thanks for reading!
The bill allowing municipalities to condition state liquor licenses passed out of committee on April 26th with unanimous support. It will likely be voted into law within the next couple of weeks, at which point we can go back and condition Rising Tide's license properly, and everything will be as it was before.