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The economic impact of alcohol

Voters weigh in on local option elections; Danville prospered from sales

ASHLAND —  In the last decade, local option elections have taken place in nearly every corner of the state with communities voting, more often than not, to allow or expand alcohol sales rather than to limit or prohibit them entirely.

The driving force behind the trend is economic. Most proponents of allowing alcohol sales view the move as a way to make their community more attractive to new and old businesses while helping to create what economists call a positive “balance of payments,” meaning more dollars are spent in the community than outside it.

According to the Kentucky Department of Alcohol Beverage Control, there were 188 local option elections from 2002 through 2012 — 113 of which were approved by voters. Only 87 local option elections took place statewide in the previous two decades.

This surging tide of alcohol expansion does not appear to be receding anytime soon. A number of local option elections are already on tap in 2013, including two in northeastern Kentucky.

On Tuesday Greenup County voters will decide whether to go wet, while Ashland residents in two downtown precincts will vote on Sunday sales in restaurants on Feb. 26.

A third local option election in a single Grayson precinct was slated for last week but was called off after the petition that led to the election was invalidated. However, another petition is already in the works to put city-wide alcohol sales on the ballot. In addition, there are unconfirmed reports that a petition is being considered in Boyd County seeking Sunday sales there, too. Organizers are reportedly waiting on the results of Ashland’s vote.

In all three counties, proponents for allowing alcohol sales cite economic development as their motivation. Opponents call it a hoax.

Locally, many opponents point to the city of Russell as proof there is no guaranteed alcohol sales will spur development. Russell approved liquor by the drink sales in restaurants back in 2008 but, to date, not a single business has applied for a license to sell it despite proponents claims it would make the city attractive to new restaurant development.

Other cities, though, have seen positive results quickly.


In Boyle County and the city of Danville, which expanded alcohol sales to seven days in mid-2009 and then went completely wet a year later, the results have been indisputably positive for the local economy.

Regulatory fees, amounting to more than $1.2 million from June 2010 through August 2012, flowed into city coffers. Local payroll and business taxes also increased, tripling expectations.

Last year, the city of Danville finished the year with $1.8 million in surplus funds, due in large part to expanded alcohol sales, officials there said. Three new police officers and two new code enforcement officers have also been hired because of alcohol proceeds, according to the Advocate Messenger in Danville.

Alcohol-related crimes including DUIs, alcohol-related collisions and alcohol intoxication arrests  have remained in line with historical averages.

Jody Lassiter of the Danville-Boyle County Economic Development Partnership said overall the decision to allow broad sales of alcohol in Danville has been good for the town of more than 16,200 residents.

“In Danville’s case, the results are evident, not only with what we’ve documented in revenues but the business development that has taken place.”

The move had broad public and city support, following a comprehensive study conducted by an Alcohol Sales Task Force, which examined the issue strictly from a commercial expansion and tourism development standpoint, and made recommendations based on its findings.

The study found limitations to alcohol sales was not only taking dollars out of town but preventing new businesses from locating in Danville and hampering the growth of existing ones.

At the time the alcohol sales study was commissioned, the city of Danville allowed alcohol sales by the drink in establishments seating a minimum of 100 individuals with 70 percent of gross receipts from food sales Monday through Saturday. Much like Ashland, however, sales were only happening at big box chain restaurants located outside of the downtown area on the bypass road, said Lassiter.

“Our objective from an economic development standpoint was to open up some options for downtown businesses,” Lassiter said.

Through the study, officials learned that not only were Danville’s historic downtown structures not able to immediately accommodate 100-seat restaurants to meet the requirements for a licenses but the cost to reconfigure the buildings was “prohibitively expensive.” Furthermore, it found that the 100-seat restaurant was not necessarily “an economically viable business model.” Most restaurants wanted to start small and grow larger. Alcohol sales, the study found, are also more profitable than food and often generate the revenue needed for small restaurants to offset losses in their first years.

Based on those findings and many others, the task force recommended the city go wet in order to encourage smaller bistro and cafe-style businesses to locate in the downtown central business district.  It also recommended the city commission take action to allow Sunday sales.

Sunday sales allowed existing businesses to immediately capture dollars originally spent out-of-town on that day and instantly allowed officials to attracted new entertainment events like a large golf tournament and new festivals, said Lassiter.

“We were just missing out, with what is today is a seven-day, 24-hour economy,” explained Lassiter.  “The only way for us to crack that nut was to get the six bar licenses that became available by going wet.”

Two years out, he said, all six of those licenses are being used by small, locally owned businesses. Not one is being used for a traditional bar, said Lassiter.

“It has also brought other businesses in who want to take advantage of what is a growing buzz in downtown, no pun intended,” added Lassiter, listing them. There is a women’s accessories boutique, a tea shop and a confectionary among them.

In Danville, as in other “wet” or “moist” communities, the bulk of alcohol sales are package sales of liquor and beer. From June to August 2012, package sales accounted for $3.9 million in sales compared to by the drink sales of just more than $481,300.

Two other Kentucky communities that have made the switch from wet to moist in recent years are also reporting instant growth. Most of it from package stores as well.

In western Kentucky, the city of Calloway went wet in November 2012. It previously had been “moist.”  Signs of growth are already showing there, too, said Mark Manning, president of Murray-Calloway Economic Development.

“It has had an economic impact. A lot of dollars that had been going out of the community are now being spent in the community and it is bringing in some dollars from outside,” said Manning. He added the changes haven’t been fully implemented yet, but there are plenty of applications pending for package stores and establishments hoping to sell alcohol by the drink without the burden of quotas for food sales.

The city of Corbin went wet last February. Already two new package stores have opened and a third is under construction, according to economic development folks there.