Utah’s liquor board gave out coveted licenses to four bars and five restaurants on Friday — and heard a report from the state’s auditor that called out how the Department of Alcoholic Beverage Services handles booze makers who sell their product on-site.
The four bars getting new licenses are:
• Citizens, 33 S. 300 East, Salt Lake City.
• Finca Pintxos Bar, 126 S. Regent St., Salt Lake City.
• Number 36, 545 S. 1750 West, Springville.
• The White House (operated by O’Shucks), at 628 S. Park Ave. (at the corner of Heber Ave.), Park City.
The bars will be able to open immediately, which is one of the stipulations the DABS board has set on applicants before giving out licenses.
The board briefly questioned Scott Evans, owner of the Pago Restaurant Group, which owns Finca, about that bar’s proposed opening date of next Wednesday. He said Finca is ready to open as soon as he can order alcohol through the DABS — and allowed a couple of days leeway for delayed delivery, particularly with the three-day Pioneer Day weekend.
The five restaurants that received new liquor licenses are:
• Cafe Sabor, 1327 S. Interstate Drive, Cedar City.
• La Costa Mexican Restaurant, 852 E. State St., American Fork.
• Lulu’s Hot Oven, 10949 S. Redwood Road, South Jordan.
• Taqueria Martini, 1732 W. 5400 South, Taylorsville.
• Vintage Restaurant Bar & Grill, 650 W. 100 South, Heber City.
The board approved the five licenses without comment, except for Cafe Sabor — because of questions about past violations at the restaurant’s Layton and Logan locations. The restaurant’s operations manager, Skylar Parkhurst, assured commissioners that the restaurant group had fired employees who allowed the violations, and had recently passed a sting inspection.
The state’s auditor, John Dougall, and financial audit director Bertha Liu presented their office’s annual audit of DABS. Dougall said “there are lots of great things the agency is doing,” but the report highlighted areas where improvement was needed.
The areas most likely to be seen by consumers involved so-called Type 5 package agencies — stores set up in alcohol manufacturers, such as wineries and distilleries, to sell the maker’s products on-site. The audit found several instances where DABS was treating those stores differently than other types of package agencies, such as those that sell alcohol at resorts or rural grocery stores.
The markup that state law requires DABS charge on alcohol sales isn’t being collected evenly at the Type 5 package stores, the audit found.
Auditors cited an example of a wine bottle that costs consumers $29.76. With most package stores, the state would receive $13.93 of that retail price as the markup. With the Type 5 package stores, DABS receives only $4.73 of the markup, and the store pockets the other $9.20. (The store also keeps, on this one bottle, the 83 cents that DABS would normally charge in handling, since the bottle is moving from the winery’s manufacturing floor to the on-site store.)
Those markups add up. DABS lost out on an estimated $3.95 million in markup money not collected from Type 5 package stores in the 12 months that ended on June 30, 2022, the audit found.
In its answer to the audit, DABS officials said the lower markup was “a long-standing practice, in place for decades, as an effort to support entrepreneurs and business owners who locally manufacture and sell alcoholic beverage products.” The officials said DABS would work with other state agencies, the Legislature and “stakeholders who are impacted by this issue” on what to do next.
On the other hand, the audit reported, DABS has been charging a 5% administrative fee to the Type 5 package agencies — a fee mentioned nowhere in state law. On that one wine bottle, that fee amounted to $1.49 of the retail price. In the 12 months ending in June 2022, DABS collected $829,060 from that administrative fee.
Auditors said no one working at DABS knew how or when the fee started being charged.
Also, the auditors said, DABS isn’t collecting earmarks from Type 5 package agencies as promptly as from other package stores. The major delay is in the money — about 18 cents from that $29.76 wine bottle — that goes to the state’s underage drinking prevention program. That money, the audit found, is being paid out two years after the liquor sales happen.
Another concern the audit found was in how well DABS is adapting to the state’s accounting software, called FINET. DABS has been using a new enterprise reporting planning (ERP) system since last October, but that system has had problems interfacing with FINET, the audit said.
The computer problem “is challenging,” said Tiffany Clason, DABS executive director. “The state in general, and DABS, has had a huge technological deficit.” She added that Gov. Spencer Cox’s administration has shown “a clear and intentional effort to modernize, to improve, these practices.”
Clason said that DABS staff “are throwing everything at this, to ensure the DABS meets its statutory obligations.”
The audit also suggested that DABS’ governance could be simplified. Clason, as executive director, now answers both to Cox and to the DABS commission. Other agencies have streamlined that process, the auditors noted, by having their executive director report to a commission that reports to the governor (as the Utah State Tax Commission does), or have the commission report to the executive director, who then reports to the governor (which is how the Utah Department of Transportation works).
Lastly, auditors found that the way DABS distributes rare and high-demand products could be susceptible to favoritism. Utah uses a lottery system to distribute rare products when they become available. Such favoritism hasn’t happened yet in Utah, the auditors said.
Clason mentioned a scandal that went public in Oregon earlier this year, in which state liquor officials there were caught setting aside rare bottles of Pappy Van Winkle bourbon and other products for themselves.
DABS officials said they accepted the audit’s findings, and would work to correct them. Some of the problems, they said, may require action from Gov. Cox and the Utah Legislature.
Friday’s meeting was a transition time for the DABS commission. The board’s new chair, former vice-chair Tara Thue, presided over the meeting for the first time, two days after Cox appointed her to succeed outgoing chair Juliette Tennert. The board elected commissioner Natalie Randall to be the new vice-chair.
Thue announced that commissioner Stanley Parrish, who has served on the board since 2019, was leaving the commission. Former state legislator Steve Handy has been recommended to succeed Parrish, pending confirmation by the Legislature. Clason said a chocolate cake was waiting in Parrish’s honor after the meeting.