Photo Illustration, Liquor License Auction

The Montana Legislature recently passed a bill changing the process of obtaining a liquor license from a lottery system to an auction. 

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Bozeman and Belgrade will be the first to test the state’s new law allowing liquor licenses to be sold at auction, bringing more licenses to smaller cities and keeping them where they are bought.

The Montana Department of Revenue announced on Monday that the state’s first liquor license auction opened last week and will run until Feb. 23. The auction will create two new licenses, which include a retail beer license for Bozeman and an all-beverage license for Belgrade.

According to a new law, the starting bids for the licenses are set at 75 percent of what the market value was during the state’s lottery process. The auction’s starting price for the Belgrade all-beverage license is set at $350,000, and Bozeman’s retail beer license starts at $187,500. All bidders must also submit a $100 payment and an irrevocable letter of credit for at least the amount of the bid.

Belgrade Mayor Russell Nelson, along with the city’s chamber of commerce, was pushing for the change during the 2017 Legislature. He said the auction comes at an opportune time for the city, because it’s considering a development for restaurants and retail shops near Bozeman Yellowstone International Airport.

The new system is expected to bring 11 new liquor licenses to Belgrade over the next four years. Bozeman is estimated to see 12 new licenses over the same period.

Nelson said he’s not sure if Belgrade will see the demand for that many licenses, but “that’s what the auction will prove.”

“To bid, you have to want to open something in Belgrade,” Nelson said. “And that’s a lot to be open in Belgrade.”

Prior to the passage of the new legislation, smaller cities adjacent to bigger cities were grouped in the same jurisdiction — allowing liquor licenses to move freely in the two areas. This was the case in places like Belgrade and Bozeman, East Helena and Helena, Whitefish and Columbia Falls, Hamilton and Pinesdale, Eurkea and Rexford, and Red Lodge and Bear Creek. The former law created a problem because license owners would sell them to businesses in neighboring larger cities.

The new system is estimated to create about $2.5 million in its first year of implementation, according to a fiscal note attached to the bill. In the following three years, the change is estimated to rake in roughly $10.5 million, all of which will be deposited in the state’s general fund.

The DOR was unable to release how many bids its received or their values because of confidentiality provisions in the legislation. Once the highest bidder is identified and has accepted the license, the department would be able to release the information.

Bozeman Republican Rep. Bruce Grubbs introduced a similar bill during the regular session to deal with the floating licenses issue, which didn’t make it out of committee. Legislators cited the solution seemed like a local fix for Belgrade, rather than a statewide issue.

During the special legislative session, and in light of budget shortfalls, Gov. Steve Bullock requested the bill as a way to fill a state deficit.

Great Falls Republican Sen. Steve Fitzpatrick sponsored SB 5 during the special session. Grubbs sponsored the bill when it was sent to the House chambers.

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Freddy Monares can be reached at 406-582-2630, or by email at fmonares@dailychronicle.com.

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