Local Government Approval (UPDATED)

Posted on February 29, 2012

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UPDATED:  MLCC recently put out this document, which details when local approvals are/are not required.

This is a follow-up post to yesterday’s news regarding changes announced by MLCC.  Due to time/length constraints, this post will not discuss MLCC’s announcement regarding escrowed licenses.

As most of you will know, applicants for a new/transfer on-premise license (other than a Club) must receive local legislative approval (and pass police investigation) prior  to licensure.  Local law enforcement investigation is also required for all new/transfer licenses (on & off-premises).  Historically, after the Commission received an application, the request would be “authorized for investigation,” and the file would be mailed to the appropriate District Office for assignment to an investigator.  At the same time, the forms for approval/disapproval would be provided to the local governmental unit and law enforcement agency.  Liquor Control’s investigation phase then proceeded while the necessary local approvals were being obtained.  Once all three (local government approval, law enforcement investigation, and liquor control investigation) were complete, the request was submitted to the Commission for its approval.  This is no longer the process:   As of April 1st (we are 99% sure this is not an April Fool’s joke), applicants/their attorneys will be required to submit all forms directly to the local government and law enforcement.  Furthermore, local approvals must be received prior to sending in your application to liquor control.

Having reviewed the law, we believe that the Commission’s interpretation of the law is subject to a strong counterargument.  We rely on the following sections of the Code:

MCL 436.1501(2) states that “An application for a license to sell alcoholic liquor for consumption on the premises . . . shall be approved by the local legislative body in which the applicant’s place of business is located before the license is granted by the commission . . . . The commission shall provide the local legislative body and the local chief of police with the name, home and business addresses, and home and business phone numbers to accomplish the local legislative reviews of new and transferred license applications required by this subsection.” (emphasis added).

MCL 436.1525(3) and .1525(3)(b) provide that the 90-day period for action by MLCC (commencing after receipt of a “complete application”) is tolled during “[t]he time period during which actions required by a party other than the applicant or commission are completed that include . . . approval by the legislative body of a local unit of government . . . .”

When read together, we understand these passages to mean that: (1) MLCC will provide the necessary documentation to local government officials and (2) there is no requirement that the local approval be received prior to application, otherwise, there would be no reason for tolling the 90-day while awaiting approval by the legislative body of a local unit of government.  MLCC does not ignore 436.1501(2) in its ruling – the Commission states that it “will continue to provide the applicant’s names, home and business addresses, and home and business phone numbers to the local unit of government and to the local chief of police when required to do so under MCL 436.1501(2).”  What is not clear to us (yet) is when MLCC is required to provide such information, if not in order to obtain the necessary government approval.  Hopefully, this will be clarified in the near future.

The Commission has recently become very focused on the principle of the “completed application.”  “As used in [MCL 436.1525], ‘completed application’ means an application complete on its face and submitted with any applicable licensing fee as well as any other information, records, approval, security, or similar item . . .” (MCL 436.1525(6)).  Based on this subsection of MCL 436.1525, MLCC believes that all portions of a “completed application” must be submitted before any action is taken by the Commission.  We believe that MCL 436.1525(3) and .1525(3)(b) contradict the Commission’s interpretation.  Furthermore, we have not yet found the MCL section that bars the Commission from beginning the investigation phase prior to receipt of a “completed application” (if you know where it is, comment below).  That said, we also recognize a possible disagreement in the law.  If, in fact, the Commission is barred from even investigating an incomplete application, then 436.1525(b)(3) is unnecessary and in contradiction of such a requirement.

In addition to the legal basis for arguing against the Commission, we believe that this decision has the potential to greatly lengthen the amount of time the application process takes.  Historically, investigation and local approval occurred simultaneously.  Now, the entire process is put on hold until local approval can be secured.  While greater contact with local governments may reduce the length of time they take to give their approval, the investigation phase will not even begin until after approval is received.  That said, we have envisioned several scenarios where it is possible that this move by the Commission is part of a much larger effort to streamline the entire make-up of the Commission, thereby expediting the application process.  For example, perhaps the Commission intends to eliminate investigation by their Enforcement Division and have applications supported through the use affidavits, as is the practice in other states.  Whether or not these scenarios will come to fruition is unpredictable at this point.

Despite what we have written above, we recognize that “we are all in this together.”  We applaud the Commission’s attempts to further streamline the law.  We also recognize that our interpretation of the law could be subject to a counterargument by the Commission.  Because we are not yet aware of the “big picture” regarding possible changes to the Commission in the near future, we are withholding our full judgment on the wisdom of this decision.

For now, we intend to do business as usual.  Come April 1st, we will be following the instructions as provided by the Commission.  Most importantly, we will focus on working closely with local governments to expedite the process of obtaining local approval.  If nothing else, this announcement has the potential to greatly affect the level of accountability placed on local government units that have historically failed to provide prompt response to requests for approval.

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