FARMINGTON — Phil McKinney is nearly ready to open a billiards hall and bar in downtown Farmington. All he needs is a liquor license.
Obtaining a liquor license in New Mexico is an expensive and complex process. The state has a quota for how many liquor licenses are allowed in New Mexico, creating a lucrative market for the documents that give permission to sell liquor. Licenses are frequently sold between businesses, and brokers exist who bring buyers and sellers together.
A report from the Rio Grande Foundation, an Albuquerque think tank, said New Mexico's system "creates artificial scarcity and limits the ability of those of modest means to involve themselves in the business of serving liquor. In other words, it creates a cartel run by those who can afford to invest outrageous sums in liquor licenses. Current law, therefore, penalizes small business people and their potential employees."
McKinney is trying to buy a wine, beer and spirits liquor license for Bandit Bistro and Billiards, 110 E. Main Street. He's spent thousands renovating the interior of the building, and he's looking to recoup his investment. But McKinney doesn't want to open the billiards hall until a liquor license is in place.
"We were planning on opening by now, but it's three months until we're looking at approval, maybe," he said. "They keep you in limbo for a little bit."
McKinney said he's in the process of buying a liquor license from an owner in Albuquerque. Liquor licenses of that type cost about $200,000 to $300,000, he said.
"You can go through brokers," he said. "For me, it was word of mouth."
A few local liquor licenses have changed hands in recent years. Western Refining Southwest bought two licenses in 2012, one sold by Tres Martin Ltd. and another sold by PI Farmington Inc. Each license sold for $450,000, according to state records.
PI Farmington Inc. bought a license only days later, from Steak & Ale of New Mexico Inc., for $300,000.
Dan McMullen, co-owner of Clancy's Pub in Farmington, said Clancy's purchased its license from a Socorro tavern for about $100,000 in 1984.
New Mexico's liquor license rules have the effect of favoring large corporations, and preventing small businesses from entering the market, McMullen said.
"It's good for the chains, but it stifles individual developments," he said. "Mom and Pop places -- it's just hard to do that anymore."
Not surprisingly, the licenses are highly coveted because liquor is particularly profitable compared to food and helps draw customers.
"There's enough margin in liquor sales to carry it as long as your volume is there," said McKinney.
McMullen suggested New Mexico adopt a greater variety of licenses to fit different types of businesses. But as the owner of a liquor license, he also doesn't want to see the asset be devalued with a freer system.
"It's really not fair at this point to just hand them out," he said.
Bar and restaurant operators can also lease liquor licenses from their owners.
A spokesman for the New Mexico Regulation and Licensing Department could not be reached for an interview on the topic.
At Navajo Dam, Fisheads San Juan River Lodge has battled San Juan County officials for months in a quest to obtain a restaurant license to sell wine and beer. At issue are procedures to call an election to approve the license.
In Colorado, liquor license applicants must be approved by a local authority -- typically, the relevant city or county government -- and then the state Department of Revenue. Applicants must pass a background check. Fees depend on the type of license applied for, but fees for the most expensive license top out at $2,025 -- a pittance compared to costs in New Mexico.
In Durango, the City Council or La Plata County Board of County Commissioners votes on whether to approve the licenses.