Wednesday, July 29, 2009

Exiting Downtown Iowa City Bars?

Last week, the Daily Iowan reported that two downtown Iowa City bars may lose their liquor licenses due to high PAULA rates, data (in .pdf) for 3rd Base (i.e. the Field House) and Etc.. Given that a new bar cannot open within 500 feet of an existing bar, if these two bars lose their liquor license, this will effectively reduce the concentration of bars in downtown Iowa City. Ah, the power of government. Assuming that the bars exit the downtown area, this will increase the number of patrons (if the remaining bars are not at capacity) and most likely increase the existing bars profitability. Alternatively, bars could open outside of the downtown area.

As an economist, one of the things that I think about is what effect this will that have on economic behavior? If bars face a higher probability of not having their liquor licenses renewed, they will monitor and enforce the under-age drinking to a greater degree and also act in ways they believe that will reduce the number of arrests by police at their establishments. This may take a lot of forms, such as only allowing those 21 and over, creating policies limiting the amount of alcohol that can be consumed, and/or refusing service to those who have been arrested for alcohol related violations. (This is not an exhaustive list - but just an example).

Additionally, I am thinking about the implications for bars that lose their liquor licenses. Will they go out of business? Maybe, maybe not. Some can operate as restaurants, but most likely their profits will decrease. So if they exit, other existing stores can buy or lease (I do not know how property is rented - let me know!) the current establishments to expand their businesses, or new stores can enter - such as the yoga place coming to where the old Bread Garden used to be.

UPDATE: City Council votes to not renew either bar's liquor license.

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