PURPOSE:

The purpose of this report is to request Council authorization for the City Manager to file a comment letter on behalf of the City to the California Department of Alcoholic Beverage Control (ABC) on a pending alcohol license application at 237 East Olive Avenue.  In addition, this report requests Council authorization to send additional protest or comment letters to ABC on 237 or 245 East Olive Avenue should additional licenses be requested in the future, but only when determined appropriate by the City Manager.

BACKGROUND:

Before operations of the nightclub at 237 and 245 East Olive Avenue ceased in December 2002, the Police Department had many problems with this establishment.  Problems included several violations of the law both by the operator and the patrons of the establishment including battery and public intoxication.  City staff worked closely with ABC and eventually ABC did not issue a permanent license to the operators.  This put the establishment out of business before the City had an opportunity to revoke their Conditional Use Permit (CUP).  New operators have now applied to transfer the liquor license and begin operations again.

When an operator wishes to sell alcoholic beverages within the City, ABC notifies the City of their pending application.  On certain licenses (like this request for transfer), the City has the opportunity to comment on the pending license and even protest the license.  The governing body, or their designee, however, is the only entity permitted to file a protest letter on behalf of the City.  Therefore, if staff believes it appropriate to file a comment or protest letter, authorization from the City Council is necessary.

It is not required that a City protest the issuance of an alcohol license.  The City may instead request certain conditions to be placed on the license by way of a comment letter.  ABC staff reviews the conditions and may impose, reject or modify the conditions.  The applicant has the ability to appeal any conditions imposed by ABC.

It is not often that the City would protest or comment on alcohol licenses.  The reason is that the City maintains control over locations where alcohol is sold.  Specifically, no one may conduct a business that sells alcohol without receiving a CUP except for restaurants with incidental alcohol that are not residentially adjacent[1].  This CUP requirement applies to convenience stores, billiard halls, dance clubs and residentially adjacent restaurants.[2]  Therefore, the City is able to process a CUP and impose conditions on most establishments selling alcohol or simply deny the CUP.  This process is appropriate and a good way to place site specific conditions on an establishment which is the reason that the City would not often file protest letters with ABC for an alcohol license.  However, some establishments were given CUP approval in the early 1990s when the City was first beginning to realize the potential impacts of such establishments.  These establishments have the right through the CUP to operate a business that sells alcohol under City Code, but such CUP might not have appropriate conditions to limit impact on adjacent neighbors and citywide safety services.  It is with these establishments that staff has concern and therefore requests the ability to further impose conditions by way of the ABC alcohol license.  The process to request conditions on the ABC license can be simpler then the lengthy process to modify or revoke the CUP which requires making difficult findings.  With this CUP, monitoring compliance with conditions is more straightforward when the business is actually in operation.

Specific case

In 1994, the City Council approved a CUP to operate a nightclub at 237 East Olive Avenue.  This CUP may have been the first for a nightclub under new alcohol ordinances.  This establishment requested to sell alcohol, have a dance floor and billiard tables.  They also agreed to sell food, but did not guarantee that such food sales would be at least 65% of gross sales revenue.  Police, Planning and other staff crafted conditions which were approved by Council in an effort to reduce impacts the establishment may have on the community.  However, in the last ten years, we have learned a lot about how this type of establishment operates and can now offer different and better conditions.

Why not simply modify the CUP?  The operator and property owner have to agree to modify any conditions and they would probably not be supportive of some that we may propose, especially when it would limit their business operations that they are proposing.  Also, in discussions with the potential operator, they were offered such a process and decided not to proceed.  They currently have applied for a business license but staff has not approved it as they must first receive their alcohol license.

Why not revoke the CUP?  The business is not currently operating.  The conditions, which again were written when the City first started issuing CUPs for alcohol sales, rely upon an operator performing poorly.  The City Attorney�s office has opined that that best course of action is to wait until the new operator has begun business.  In order to state reasons for revocation, the operator has to be violating the conditions or operating as a nuisance.  In order to revoke a CUP, the City would have to wait.  But if the City wishes to impose conditions on the alcohol license, this can be done now through ABC and possibly prevent problems before operations for this new business begins.

ANALYSIS & CONCLUSION:

As stated before, by ABC not issuing a permanent license to the establishment at 237 and 245 East Olive Avenue, the nightclub went out of business in December 2002 before the City had an opportunity to revoke their CUP.  New operators have now applied to transfer the liquor license to their name which gives the City an opportunity to comment on the license and request conditions over and above those that were placed on the CUP in 1994.  Staff looks at this as an opportunity to prevent problems based on past experience at this location.  This might help the operator avoid circumstances that could lead to a revocation.  Any conditions imposed by ABC may be removed at a later date if the reasons for having them imposed in the first place no longer exist.

The Planning Division has and will continue to work closely with the Police Department, License and Code Services and any other department to determine the appropriate conditions to place on this potential operator.  Staff has reviewed the relevant Police reports and will document these to ABC when filing any letter.  Also, if for some reason this alcohol license transfer does not go through, staff will again perform the appropriate research with appropriate staff before filing any subsequent letter with ABC.

Specific conditions

The Police and Community Development Departments have been working closely with each other and therefore are prepared to file the appropriate documents within the 50 day time period (because ABC granted a 20 day extension).  In addition, the Police Department has worked closely with ABC who is aware of all the problems with the previous operator in this same location.  They are anticipating our proposed conditions and are optimistic that many will be placed upon the license for this potential operator.

Staff has begun drafting the letter to ABC in anticipation of Council approval, but the conditions are only in draft format at this time.  To give Council an example of what the comment letter will address, the following are areas of problems with this site and the requests we intend to make in an effort to improve the situation.

Advertising:

A current condition placed on the CUP prohibits advertising of drink specials over the radio or in the newspaper.  But staff believes there should be no advertising of drink specials or any discussion of alcohol in any of their advertising.  Specifically, the canvassing of cars with flyers identifying certain special drink nights or hours is problematic.

Hours of operation:

Contrary to popular belief, staff believes that if the establishment had longer daily hours of operation they would actually improve their business.  If the operator was forced to be open for both lunch and dinner hours (as they propose) they would have a more restaurant type business rather than simply a nightclub.

Food sales:

There are conditions placed on the CUP that require the operator to offer food between the hours of 4:00 pm to 10:00 pm.  However, there is no requirement that the food be offered during all operating hours nor is there a requirement that food be prepared on-site.  One problem with the previous operator is that they did not have any food sales (this was discovered by an ABC inspector shortly before their temporary alcohol license expired).  As the applicant has applied for a Type 47 general eating place license, they are required to have food sales equal 51% or more of gross sales revenue.  While it will be ABC�s responsibility to ensure that this condition is met, the requirement to have food prepared on-site and available during all operating hours (in accordance with the applicant�s proposal) will assist in ensuring that food is at least readily available during hours of operation.

Floor plan:

Again, as the applicant has requested a Type 47 license, staff believes the establishment should be able to properly accommodate dining guests.  A previous operator did not have all fixed tables and chairs and therefore could move them around to increase the dance floor and bar area and decrease eating locations.  This operator may find that fixed seating in all areas of the �restaurant� make it easier to comply with the Type 47 license requirements.  This location is very large with a large capacity.  By requiring fixed seating and dining areas, it essentially limits the capacity of both the bar area and the dance floor.

Dancing:

Finally, staff believes having dancing at this location in addition to the large bar area and billiard activities that are permitted makes this site a draw for large crowds.  We believe if this establishment truly wants to be a bona fide eating place, they must focus their attention on large areas devoted primarily to eating rather than to dancing.  At a minimum, ABC should require that the dance floor be reduced in size so it is not the emphasis of the establishment.

RECOMMENDATION:

Staff recommends that the City Council authorize the City Manager or her designee to send a comment letter to ABC for a pending alcohol license at 237 East Olive Avenue.  Staff further requests Council authorization to send additional protest or comment letters to ABC on 237 or 245 East Olive Avenue should additional licenses be requested in the future, but only when determined appropriate by the City Manager.

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