Liqour licenses

Brittni Repnak pours a cocktail Friday afternoon at Fusion Grille. Capped by Montana’s quota system, economic gains are driving up the price of liquor licenses.

Thom Bridge, Independent Record

HELENA — The state department that renews liquor licenses will create a system to improve how it checks to see if a bar, restaurant or other place that serves alcohol has any violations cited by local law enforcement agencies.

A performance audit by the state Legislative Audit Division found that while most liquor license violations, like over-serving people or providing alcohol to people under the age of 21, are reported to local law enforcement, there is no requirement in state law that sheriffs or city police report the violations to the Liquor Control Division.

“Citizens as a rule do not tend to complain to the state when they have an issue with an alcohol licensee,” said John Harrington, a performance auditor with the division. Harrington spoke to a state legislative interim committee last week.

On license renewal forms, licensees are asked if they have received any alcohol violations in the past year, such as serving a person who is underage, but if they answer no there is no additional compliance work to make sure they're telling the truth.

“While local police and sheriff’s officers who would have written these tickets are strongly encouraged to report these violations to the state, there’s no formal mechanism where local law enforcement agencies are required to report all violations,” Harrington said.

In a response to the audit, Department of Revenue Director Mike Kadas said his department will implement a system to contact local law enforcement agencies when renewing licenses to see if any violations happened.

When conducting the audit, the division learned of one instance where tickets were being written locally but not reported to the state.

The audit looked at the function of the liquor licensing and compliance programs.

The state has controlled the making, distributing and selling of alcohol for more than 80 years. Liquor is the most tightly regulated alcoholic drink, and nearly every bottle of liquor sold in the state goes through a warehouse run by the Department of Revenue in Helena. Beer and wine sales are also regulated, though they can be sold through private distribution networks.

Retail sales licenses are done through a quota system based on the population of cities and counties where licensed businesses are located.

There are several types of alcohol licenses, with most being retail licenses. There's a total of about 3,200 retail liquor licenses in the state.

Liquor licensing is handled by the Department of Revenue's Liquor Control Division and the Department of Justice Gambling Control Division.

The Gambling Control Division is a law enforcement agency formed in 1989, when the state took away gambling regulation from local authorities.

It has 18 investigators who do complaint investigations on active liquor license holders and background checks on people who apply for licenses. They also conduct unannounced visits for compliance checks. There are also four auditors who do financial reviews on liquor license applications.

The Liquor Control Division of the Department of Revenue has two bureaus — licensing and distribution. The audit focused on the Licensing Bureau, which makes sure applications meet requirements laid out in state law and confirm available licenses within population quote guidelines.

It also processes license renewals and communications with the Gambling Control division and local law enforcement agencies on matters of compliance and violations or citations.

The audit also found the agencies do not verify that when a restaurant reapplies for a beer and wine license at least 65 percent of the restaurant's gross income comes from food sales. There are 244 of these types of licenses in the state.

"By not being more proactive in seeking proof of compliance from licensees, Liquor Control is unable to verify that licensees are complying with all appropriate statutes and rules," the audit says. "A (restaurant beer and wine) licensee could be earning half or more of its gross revenue from the sale of alcohol, yet report to (the Department of Revenue) that its food revenue is 65 percent of the business as required by law. Liquor Control currently trusts the licensee's response on the annual renewal form."

Kadas said the department will see what additional information it should gather from licensees as well as review and assess current liquor laws and see if changes should be made.

Another recommendation the audit made and the department has already implemented is to allow for Gambling Control workers, who already make unannounced compliance visits, to expand the scope of their work to include compliance checks for alcohol. The agencies have drafted new inspection forms that are expected to start being used this month.

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Reporter covering statewide issues for The Billings Gazette.