September 9, 2003

The Board of Commissioners of the City of Lawrence met in regular session at 5:30 p.m., in the City Commission Chambers in City Hall with Mayor Dunfield presiding and members Hack, Highberger, Schauner were present.  Vice Mayor Rundle was initially absent, but arrived by executive session. 

*                                   *                                   *

Commissioner Hack pulled from the consent agenda, for discussion, the approval of a Drinking Establishment Licenses for BrewHawk, 733 Massachusetts Street.  She said she had several emails and phone calls concerning this establishment’s transfer of ownership as well as being a good neighbor to downtown.  She asked staff to update the City Commission on the licensing process and the monitoring of the 55% food sales requirement for the downtown area.

Frank Reeb, Administrative Service Director/City Clerk, said in the administrative procedure, the City Clerk’s office enforced the food sales requirement based on renewal licenses or new licenses.  As far as renewal licensing, the City Clerk’s Office asked for copies of the Liquor Excise Tax Returns that the business would send monthly to the Kansas Department of Revenue, Division of Alcohol Beverage Control.  He said from those Liquor Excise Tax Returns, information was gained on a monthly basis from gross receipts.  It was also broken out into gross receipts from the sale of alcohol and from that remaining number, non-alcohol sales could be calculated.  He said the ordinance required the annual food sales, not on a monthly or quarterly basis, but the 55% was based on an annual number.  Therefore, those monthly gross receipts would be added together for a 12 month period to come up with a percentage of sales from alcohol versus non-alcohol sales.

Reeb said a new license was a lot more difficult to calculate.  He said for obtaining a new license, the City Clerk’s Office asked for a copy of the menu that the establishment would be providing to their patrons which would give staff an idea of the type of food they would be selling and hopefully, some indication of the volume of the sales.  Also, a copy of the lease was required to get some indication of how long they planned on remaining in their business.  That lease requirement was also a State requirement for a State Drinking Establishment License.  He said obviously staff could not obtain Liquor Excise Tax Returns because there would not have been any legal sales up to that point.  

He received an email from Vice Mayor Rundle asking how other Municipalities might be handling enforcement of food sales requirements.  He was only aware of two Municipalities that had some type of food sales requirement.  He said in the City of Pittsburg, Kansas, if the drinking establishment had more than 70 percent of their gross receipts from food, then someone under the age of 21 could remain in that establishment without a parent or legal guardian.  If the gross receipts were below 70 percent that minor would need to have a parent or legal guardian present.  That ordinance was enforced by their Police Department.  A sworn law enforcement officer with an accounting background performed spot audits looking at a businesses inventory to verify there was an adequate amount of inventory for the sale of food, cash register receipts, liquor excise tax returns, and sales tax returns.  The officer would then determine if the business was in compliance.

The other Municipality that had a food sale requirement was the Unified Government of Wyandotte County/Kansas City, Kansas, in which they enforced their food sale requirement much like Lawrence.  He said they look at sales tax records on renewals and did not have a lot of enforcement on the new licenses. 

As for the BrewHawk, the City Clerk’s Office had a couple of initial concerns when the applicant submitted his application.  One concern was that the applicant submitted a proposed menu and not an actual menu because it was early on in getting his business formed.  Reeb called the applicant indicating that he wanted a copy of the actual menu and a day or two later, a copy of the actual menu was submitted.                    

The other concern was the lease which appeared to be a draft lease.  Reeb also indicated to the applicant that he wanted to see a valid executed lease and it was submitted along with the menu.                   

Reeb said with the exception of the State Drinking Establishment License, the applicant had complied with all the requirements needed to obtain a City license.  Reeb said he spoke with the applicant before the meeting and understood that the applicant had received his State license.  

Mayor Dunfield asked if it was feasible to require a probationary period so that after ninety days the receipts could be examined rather than waiting the full year for the first analysis of the receipts.

Reeb deferred the legal issue to David Corliss, Assistant City Manager/Legal Services Director, but from what he understood, there was nothing to prohibit that type of requirement.

Corliss concurred with Reeb.  He said the license could be conditioned and it was a reasonable interpretation of the zoning code requirement for this property.

Commissioner Highberger had a question concerning complaint enforcement.  He asked if a complaint was received, did the City have the authority to review the records.

Corliss said it would depend on the seriousness of the complaint.  He said staff had tried to handle this issue on an annual basis for workload purposes, but they could review those records if they thought there was cause to do so. 

Commissioner Schauner asked, the receipt of more complaints that a neighbor might have thought reasonable, but perhaps a non-neighboring objective person might have thought those complaints were not significant.  He said they would be getting into a vague area if they were going to try to condition the maintenance of a Drinking Establishment License on something less objective than 55 percent of gross sales of food.  He asked how they would structure such a restriction.   

Mayor Dunfield asked Commissioner Highberger if he indicated that an evaluation of the 55 percent food sales could be triggered by a complaint.

Commissioner Highberger said yes, if staff thought they had the authority to review records if a complaint was received.

Mayor Dunfield asked if they were talking about an enforcement method for the 55 percent rule and not a new rule.

Commissioner Highberger said yes.

Commissioner Schauner asked if they were saying that they would trigger an audit if there were complaints.

Commissioner Highberger said if a valid complaint was made about an establishment not being in compliance with the requirements of the ordinance. 

Corliss said in order to trigger an audit during a licensed period, staff needed some evidence that a business was not meeting their food sales requirement.  For instance, if staff visually inspected a business and they were not selling food or their kitchen was shut down, staff would then have cause to see if they were complying with the City’s zoning ordinance.  He said if it was a noise complaint, the connection to not selling food was more tenuous in that situation.  He thought it was reasonable for the City Commission to condition the license on a probationary period for a new business.    

Vice Mayor Rundle wanted staff to provide more information about the City of Pittsburg’s proactive enforcement, during their spot audits, for food sales compliance.    

Corliss said staff would gather additional information on Pittsburg.

Frank Tarrentino, owner and manager of BrewHawk LLC, commented about the probation period.  Under the statute, it was gross receipts over a year and having a restaurant background there were times that a business would sell more food or alcohol during that time period.  In the future, if the City placed a business on probation for 90 days, that business might be in an area where it was the worst 90 days possible for food sales.

He had no doubt that his business would surpass the 55 percent food sales requirement.  He said they would offer over 25 different sandwiches that had an Italian or New York type of flavor, New York style pizza, salads, and several appetizers on the menu.  He owned two businesses in Kansas City that had met their food requirements.  He said the place, in Lawrence, that he was trying to obtain a license for was not the caliber that his two other businesses had.  He said his business in Lawrence was only 1500 square feet and seated approximately 60 people. 

He was not trying to obtain a liquor license not to sell food because if he wanted to make any money, he would need to sell a lot of food for lunch and dinner.  He said there were two reasons why he wanted to open this business.  One reason was to make money and the other reason was because he enjoyed making food and making people happy.

Commissioner Hack appreciated Tarrentino’s choice for doing business in Lawrence.  She wanted Tarrentino to be aware of the Commission’s commitment to protect downtown.  She hoped he would be a good partner and member of downtown Lawrence.

Mayor Dunfield asked staff if the Commission should condition the license upon a probationary period.

Corliss said the Commission’s motion would be to approve the license conditioned upon a 90 day review that staff would conduct with cooperation from the licensee and provide those results back to the Commission.

Commissioner Schauner said as a friendly amendment, he asked if it was appropriate to have a period of time in which the Commission could review three monthly gross tax receipts rather than 90 days because it might not cover the paperwork of three monthly receipts from the State’s Department of Revenue.

Corliss said that was a helpful friendly amendment.

Reeb said in essence it would turn the 90 day period to 120 days because a business would file for the previous month.

Commissioner Highberger asked if this conditioning would be a new policy or was it specific to this license application.

Vice Mayor Rundle said when staff brought back information to the Commission concerning Pittsburg’s handling of enforcement of food sale requirements, then the Commission could talk about policy changes.

Moved by Rundle, seconded by Hack, to approve the drinking establishment license for the Brew Hawk conditioned on staff review of the first three state liquor excise tax returns.  Motion carried unanimously.                                                                   (13)

*                                      *                                *

Moved by Schauner, seconded by Highberger, to adjourn at 9:40 p.m.  Motion carried unanimously.