Two tales of intervention

This is so Sarasota. And it would be amusing and worth a chuckle if it weren’t so frustrating.

But this is the way it is. Two more instances of the city government intervening — albeit with good intentions — in the affairs of the marketplace. And predictably, the consequences infringe on individuals’ liberty and private property and work to the detriment of the common good.

One is the story of Cask & Ale, an upscale, St. Petersburg-based small-plates food and cocktail lounge. It wants to open at 1548 Main St., in Sarasota. But a group of residents and city officials are concerned that Cask & Ale would contribute to Main Street having too many bars.

To operate the way it intends, Cask & Ale’s owners need to secure approval for a liquor license from the planning board and City Commission.

The opposition cites factors that typically arise in such cases: too much noise; contributor to crime and drunkenness; and creating the wrong kind of image for downtown Sarasota.

Said resident Ron McCullough, an attendee at a city workshop two weeks ago: “We just want a nice downtown. We want all kinds of opportunities for people downtown, especially young people. We just don’t want it to degrade.”

Fair enough. We all want those features for downtown Sarasota.

Likewise, we recognize that, historically, laws have allowed communities to create zoning codes designed to protect the health, safety and welfare of its citizens. Simply stated, the fundamental view of private property rights has been that you can do what you want with your property as long as you do not harm your neighbor.

Of course, what constitutes harm, or what constitutes the health, safety and welfare of individuals is a matter of interpretation. Governments throughout the country have created a liberal definition of those conditions.

How many is too many?

But here’s where it becomes sticky: How many bars is too many? And other than their being in the positions of making city laws, what makes the members of the planning board and City Commission the arbiters of the maximum number of bars in downtown Sarasota or who qualifies to obtain a liquor license?

How is it fair to say Evie’s Tavern, which would be next door to Cask & Ale, or the Gator Club or Smokin’ Joe’s Pub can have liquor licenses by virtue of the fact they opened before Cask & Ale?

For that matter, why not put a limit on the number of ice cream parlors on St. Armands Circle?

Of course that would be ridiculous. We’re guessing most people would say that’s none of the government’s business. If a property owner wants to take the risk to operate an ice cream shop, that’s his business and his property. And we’re guessing most people would say the marketplace would be the arbiter of how many ice cream shops can operate, survive and prosper on St. Armands.

Likewise with bars on Main Street. 

Indeed, the free market is a remarkably successful regulator.

Start with the property owner of 1548 Main St. 

In all likelihood, he has borrowed money to own the property. To make his loan payments and build future value in the property, he has a desire to secure a good tenant — a business that will make its payments, thrive in the competitive surroundings and add to the future value of the property. These incentives will make the property owner selective and discerning. 

At the same time, he has a strong disincentive to take on a tenant that will ruin the neighborhood and the value of his property. 

Now consider the tenant. He, too, is a business owner with his and others’ capital at stake. He wants to make money to live and one day retire comfortably. So he wants to locate where he believes his business will thrive and grow, and he wants to locate where the competition and competitive environment are favorable. 

On main streets, typically, there is ample pedestrian traffic, making downtowns attractive for multiple retail shops, restaurants and bars. A plentiful selection of each draws more shoppers, diners and drinkers — to everyone’s benefit, including the city, which collects sales-tax revenue on every purchase.

And being the great regulator that it is, the market rewards the good actors and punishes the bad. If a bar owner operates shabbily, with its patrons becoming public nuisances, the likelihood of it staying in business diminishes; the value of the property declines; the property owner suffers; and his neighbors will seek sanctions or damages for being harmed. 

Ultimately, the bad bar owner will go away or out of business, and the bad property owner likely will find a better tenant or sell.

The market regulates.

Now flip the coin — to the side on which the government decides how many bars operate on Main Street.

When the city limits supply in the face of strong demand, it creates protectionism and a benefit for existing bar owners (corporate welfare?). This limited supply and protection against competition give bar owners more leeway to increase prices. 

And ultimately, that punishes the downtown consumer. And it hurts the downtown. If the demand for bars far outstrips the supply, forcing consumers to wait, they will make other choices. They’ll go elsewhere. 

Surely longtime Sarasotans remember the days of the desolate downtown.

$250,000 shakedown

Now consider the case of Oaktree Development on Laurel Street in Laurel Park (see page 10A).

When Oaktree purchased the property last year, it was zoned for 12 “attainable” housing units, essentially an attempt to make a developer build “affordable” housing.

Oaktree in turn has sought a zoning change so it can build 17 townhomes on the site — clearly an indicator that that number makes economic sense for an acceptable return on the capital invested and risked. The city was willing to compromise, but it suggested the developer reserve two of the units to be sold as “attainable” or “affordable” housing.

But that triggered regulatory issues. Oaktree Manager Michael Infante asked: “You have regular units that are at market rates, and two units under market rate. Who decides who gets those? Who’s going to win that lottery, and what’s going to prevent them from buying it on the first day and selling it at market rates?”

Rather than jump into that regulatory quicksand, the City Commission is leaning toward accepting a $250,000 payment (we’ll call it a $250,000 shakedown) from Oaktree into a city-run affordable housing fund.

This is bizarre.

The price of housing in Laurel Park is rising, in large part because of restrictive building codes. Those codes in turn limit supply. This is the case for most of the areas near downtown. 

If the city commissioners are really intent on creating an environment that would increase the supply of affordable housing, the answer is pretty simple: Allow more units per acre and higher building heights and reduce the city’s restrictive regulations.

In other words, let free enterprise do what it does best. It works.