Friday, June 14, 2013

Liquor Laws. Rant #1

Yesterday I sat through a meeting at the Wellington City Council at which interested parties made submissions to the Council as they attempt to draft the new Local Alcohol Policy. Some sincere, credible representatives from Police, the District Health Board and one or two other branches of Health made the case for reining in the rights of liquor licence holders. And industry representatives tried to defend their ground. Some messages were hammered home:
  • Nothing good happens after 3am. [Police]
  • Restricting availability of alcohol reduces abuse. [Health experts]
  • It’s their fault. [Hospitality and Retailers, about each other]
Now I have one or two opinions on flaws in the thinking of a few parties to discussions about alcohol, which I’ll come to soon. But with respect to the fate of Wellington’s liquor licensees, it looks as though most of the heat and noise around the policy will come down to a few a lines on maps and times of day. Specifically, what streets will have different maximum closing times and what the various closing times will be.

In particular, the concept of having a designated nightlife zone with different maximum licensing hours seems to have been negotiated in advance between the Council and local representatives of the Hospitality Association. Going by what has been said, the Council envisage an area in Courtenay Place and another area in Cuba St. Jeremy Smith of the Hospitality Association said that they think the zones should be connected. Because there would be better lighting that way or something.

I don’t really care about the details because either way I’m staggered at what a colossal blunder they are conspiring to make. Here is why.

Courtenay Place wasn’t always Wellington’s nightlife centre. In fact it’s a relatively recent phenomenon. To someone brought up in Wellington it’s not that long since Courtenay Place consisted of an ugly bus terminal and some uninspiring shops. And on its side streets were massive wholesale fruit and vegetable markets. The bus terminal and markets have gone and I assume that that evacuation by long standing businesses made the influx by bars and cafes possible. It’s a classic example of the evolution of a city and exactly how nightlife quarters spring up in cities everywhere, from Dublin’s Temple Bar to Tokyo’s Golden Gai.

The trouble is that nightlife districts have a life cycle. They don’t spring up and stay interesting and youthful forever. They stagnate and get superseded by other districts. That stagnation happened about ten years ago in Courtenay Place. It's now a big brewery-controlled, noisy, cigarette smoke-filled (that's right) ghetto. The trouble is that no-one has told the Council or the Hospitality Association. Courtenay Place has become a model for everything that can go wrong in a nightlife district. Do I need to make the case here? I hope not.

It’s no surprise that of the dozen or so craft beer oriented bars that Wellington likes to boast about, only one is in Courtenay Place. If you’re looking for a venue for a new bar like Goldings Free Dive or Rogue & Vagabond, the brief you give a real estate agent is “anywhere in the CBD except Courtenay Place”. As a consequence there are signs that a lively and colourful new nightlife is emerging in the area where these businesses found premises – in back alleys and previously unfashionable streets near, but not on, Cuba Street.

But the Council, who seem to think the scenes in Courtenay Place late on Fridays and Saturdays represent “vibrancy”, and the Hospitality Association, led by individuals who, I believe, own businesses in Courtenay Place, are planning a regime that will penalise anyone trying to establish a business anywhere else – businesses that might give discerning consumers an alternative to the chaos on Courtenay Place. It may not be what the Council intended, but it’s what’s called an unintended consequence. It’s what happens when you draw lines on a map and create differences between the two sides.

Of course not all the results will penalise businesses outside the strip. If you’re a Courtenay Place property owner learning that your tenants have privileges with respect to liquor licensing, you’re going to put their rent up. I look forward to hearing the Hospitality Association complaining about sky-rocketing rents in the street in about a year’s time.

3 comments:

  1. I have been informed that the President of the local branch of the Hospitality Association (Jeremy Smith) owns just the one Courtenay Place bar out of a much larger portfolio. I've also found myself invited to join this branch's forum that is (hopefully) working in the industry's interests on this topic. I wonder how long they'll put up with me.

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  2. This post nails it. Nails the way nightlife works in a city, even a city as small as Wellington. But, the catch is, our city planners are still thinking in terms of a village. They all need to read this.

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  3. Excellent post, Dominic.

    Gordon Tullock wrote about what he called the "Transitional Gains Trap". Here's how it works. Say Wellington designates Courtenay Place as the fun zone. The increased revenue for bars there turns into increased land value because people are willing to pay more for licensed premises in that area. Whether those gains only accrue to currently licensed bars or to the whole area depends on whether Council restricts the number of new licences in the area. Anyway, after the one-off property value gain accruing to current owners, all those owners again are only earning normal returns on their (now higher) capital value. So, a few years on, bar owners in the district are no better off than those outside of the district because they had to pay more for their bars. But it's now impossible to change the liquor regs without imposing large capital costs on those owners. Tullock called this the "transitional gains trap". The gains to owners are only transitional; it's a trap because they'll then lobby hard to prevent anything from changing. Further elaboration here: http://www.offsettingbehaviour.blogspot.co.nz/2013/06/local-rent-creation-alcohol-edition.html

    This happens, expect us to be locked into stupid policy for rather a while.

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