Designating outdoor drinking areas is not only a way to modernize Michigan’s alcohol regulations, but also extends a critical lifeline for restaurants and bars grappling with limited activity during the COVID-19 pandemic.
However, these new “social districts” — the state’s relatively quick entrance into a new normal for drinking establishments — have raised a series of questions and concerns over enforcement and who will get to participate. Legal experts say the Michigan Liquor Control Commission, which oversees the sale and distribution of alcohol statewide, has been notably absent in providing owners guidance.
Social districts are necessary for struggling bars and restaurants, but it is unclear if anyone fully understands how they will work, said Joseph Infante, principal attorney at Miller Canfield Paddock and Stone PLC who leads the firm’s alcoholic beverage regulation team.
“Most people have questions and concerns, and the MLCC has concerns about enforcement,” he said. “The biggest concern I have with all of this is you’re going to create a situation of haves and have-nots. Some locations are not conducive to this.”
The MLCC does not have jurisdiction within social districts and it will be up to local authorities to police them, MLCC spokesperson Jeannie Vogel told MiBiz via email. Vogel did not respond directly to questions about liability insurance or the commission’s approval process for applicants in social districts.
Infante said the MLCC also has not put out its own rules or guidelines for how social districts should run. Establishments’ responsibility for tracking who they serve alcohol to and making sure it doesn’t leave a designated area becomes much harder in social districts, he added.
Conducive to smaller areas
Social districts were signed into law on July 1 by Gov. Gretchen Whitmer as a way to provide more outdoor options for bars and restaurants that have been negatively affected by COVID-19.
Municipalities, which can establish social districts by resolution, are required to give the first step of approval for each restaurant and bar that wishes to use them.
The Grand Rapids City Commission approved plans on July 21 for three separate designated drinking areas in and around downtown and one on Wealthy Street. The social districts include common areas where alcohol can be sold and consumed, building on outdoor social zones that the city previously established downtown. The first social districts approved by the Grand Rapids City Commission comprise:
• The hotel/arena district around DeVos Place and Calder Plaza, stretching toward Van Andel Arena and the Downtown Market.
• The Bridge Street district that stretches from Gold Avenue to Mt. Vernon Avenue.
• The Monroe North district that contains part of Monroe Avenue and Ottawa Avenue.
• The Wealthy Street district between Union and Eastern avenues.
Social districts are different from already-established social zones, which allow bars and restaurants to use adjacent public spaces such as city streets and sidewalks to seat customers. However, alcohol sold within each licensees’ zone must be consumed within that zone; only unopened, sealed beer and wine containers can be transferred out of the zone.
The statewide social district legislation is more conducive to smaller towns, Infante said, where there is a small main street area that can be blocked off — unlike Grand Rapids with multiple pockets around downtown that may want to use social districts.
“The larger the zone or district is, the harder it is to regulate or control that,” Infante said.
“Overall, it’s still a great tool that we need,” he added. “People don’t want to eat indoors and the ones that don’t have outdoor space will have to participate in this.”
With lingering questions about the specifics of social districts, Infante said bars and business owners should make sure they are keeping a paper trail of questions they ask city officials and the MLCC about how to operate within social districts.
Downtown Grand Rapids Inc. and the city will monitor how the social districts are operating once they are up and running, said Lou Canfield, the city’s development center manager. Options to change the districts based on use could include shrinking the districts or breaking up a larger area into smaller districts if safety or enforcement becomes an issue, he said.
Social districts are required to be marked off with designated borders. The city is still working out exactly how it will mark off the districts, Canfield said.
“There will be signs where the (social districts) end and you will see it clearly marked where you reach the end, and see rules on how you can utilize it,” Canfield said.
‘Not worried about it’
Karie Koster, co-owner of Osteria Rossa in downtown Grand Rapids, said she is confident her restaurant will be able to enforce the new social district policies. Osteria Rossa was also among the 23 establishments approved by the City Commission.
“I’m not worried about it. The staff has been here a long time and are good about asking for IDs and knowing who can drink and who can’t,” Koster said.
The rules for restaurants and bars this summer have been changing frequently, but the city has done a good job of working with owners and operators, Koster said.
“They’re trying to think outside of the box as much as they can,” Koster said. “We’ve got to kind of figure it out, think it through and be able to adjust. Throughout this whole COVID-19 situation, there has been a learning curve and adjustment and you have to learn something new every day.”
Businesses permitted to use the districts will need to have clearly marked cups that identify which district they can be used in, Canfield said.
The plan is for special event permits to still be available in social districts, but if a nonprofit wants to do a fundraiser, those entities will not be eligible to get a social district permit, Canfield said.
The state legislation allows social districts until the end of 2024. In Grand Rapids, the city will evaluate each district at the end of 2020 to determine whether to keep or revoke the district’s license. Canfield said it’s important for businesses to spend the time learning about the social district process.
“Both the state and the city are wanting to be helpful to businesses and adopt an approach that enables them to be successful, rather than be punitive. Businesses should trust that if they are doing their best to follow the guidelines, they should be OK.”
Grand Rapids approved 23 restaurants and bars on July 21 to use the future social districts. The designated drinking districts will not be established until the MLCC approves each business.
Canfield said he expects the MLCC could possibly grant the social district permits approval by mid August. Applying for a social district permit costs business owners $320 in fees.
There is no local criteria the Grand Rapids City Commission considered when approving the 23 establishments, Canfield said. About 100 liquor license holders downtown can apply for a social district permit, and Canfield expects more will apply in the future.
Social districts will not be allowed any place in the city where there is not an already established social zone, Canfield said. This was done because social zones require a group to step forward and apply for the zones, and also be in charge of maintaining the space. DGRI applied for the social zones in the downtown area, so it will be the body responsible for maintaining the future social districts as well.
“This was a tremendous collaboration between the city and Downtown Grand Rapids Inc.,” said DGRI President Tim Kelly. “This will be an important tool for businesses.”
Restaurants and bars have struggled this summer with a variety of executive orders limiting operations in order to slow the spread of the coronavirus. Across most of the Lower Peninsula, restaurants and bars are allowed to have indoor dining at 50 percent capacity, and indoor dining is prohibited for establishments that earn more than 70 percent of their gross receipts from alcohol sales.
“Anything you can do to draw more people to a business district really just opens up more opportunities for retail and other businesses as well to have more people around,” said Paul Lee, who co-owns Winchester, Donkey, Hancock and Royals restaurants along Wealthy Street.
Lee wishes the social districts would have been implemented sooner, especially because of Michigan’s short summer season and the close proximity to the upcoming school year.
Lee applied to the MLCC for social districts for three of his restaurants — Donkey, Winchester and Royals — which are located in the Wealthy Street district and were among the 23 approved by the city.
Koster, of Osteria Rossa, is also waiting for MLCC approval and agrees with the potential added benefits of social districts.
“Hopefully this will create a cozier, more neighborhood feel downtown,” Koster said.