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City of San Marcos Development Services Development Planning Division (512) 393-8230 (512) 396-9190 Fax V1 L'Va"I" ii 7'e To: Laurie Anderson Moyer, PE, Assistant City Manager Fran: Chance Sparks, AICP, Development Planning Manager Date: November 26, 2008 Re: Implications of extended bar hours on restricted (downtown) TABC conditional use permits This memo is in response to City Council's plans to hold a workshop on December 2, 2008 to discuss the extension of bar hours supported by voters in the November 4th election. Extending the bar hours may have implications for other areas of alcohol regulation in San Marcos, particularly the TABC conditional use permits (CUPS) in downtown. Summary of Current Regulation For at least the past two decades, San Marcos has placed restrictions on the on-premise consumption of alcohol in downtown. These regulations included a point system and process for revocation. For much of this time, TABC CUPS were restricted to a 12-permit cap. About four years ago, the Code was amended to allow for restaurants (TABC Restricted CUPS). The TABC Restricted CUP had several conditions placed on it, including monthly/quarterly financial reporting. Most significant, however, was the definition placed in the code defining a "bona-fide restaurant" as having no more than 50% of gross sales attributable to on-premise alcohol consumption. Since 2004, 3-4 Restricted CUPS have been active in the CBA zoning district with varying levels of success. The Key Issues Several holders of the Restricted CUP have commented of their difficulties maintaining alcohol sales below 50%. Some chose to relocate out of the downtown as a result, including the All-Nighter Diner/Grey Horse Grill. Others have struggled to comply with the 50% rule and teetered on the edge of non-compliance, including Sean Patrick's. Staff's experience thus far has found the reporting of finances for the restaurants difficult to track. In addition, businesses like Sean Patrick's, which many people indicated were the types of business downtown should attract during the Downtown Master Plan public process, have frequently abandoned plans for similar establishments due to concerns they could not meet the requirements. Staff expects pressure will mount to alter the TABC CUPS for downtown, especially if the hours of operation are extended. From discussions with bar and restaurant owners, the extended time is expected to be profitable for those businesses serving alcohol. However, little food is ordered during that period. Some restaurant owners have commented that they simply cannot ignore the profit potential of the longer hours. In addition, all 12 of the Unrestricted TABC CUPS have been in use for the past several years. In short, staff believes the Council may want to consider alterations to the downtown TABC CUP requirements in conjunction with extending the alcohol serving hours. Options The City Council has several options for how to address these concerns. The table on the following page attempts to summarize some options staff feels may be viable. In many cases, the options can be intermixed.