Report on Economic Development Ramifications of BYOB Ordinance

Report on Economic Development ramifications of BYOB Ordinance as approved by the Groton Town Council.

By Michael Whitehouse

Respectfully submitted September 3rd, 2018

Summary

The BYOB Ordinance as approved by the Groton Town Council will have negative effects on economic development in four areas:

1. The likely closure of a locally owned business and loss of late night entertainment
2. Town reputation and business recruitment
3. Events, conference, and special events
4. Loss of downstream economic activity

From an economic development standpoint, there are no clear benefit to this ordinance.

On September 12th, 2018, the RTM will consider vetoing this ordinance. A veto requires a ⅔ vote of members in attendance to pass.

Purpose and Background

I became interested in the ramifications of this ordinance based on my considerable experience as an event organizer. On countless occasions, organizations I have worked with have suffered economic losses or elected not to run an event in a particular municipality or state due to laws which inadvertently impacted the event that we were to run. I have personally seen communities lose out on hundreds of thousands of dollars of economic activity due to poorly structured laws, and I was concerned that this ordinance had that potential.

Subsequent investigation led to me to discover Midnight Hookah and the direct impacts that this ordinance would have on that particular business. While there is not specific evidence that the impact upon Midnight Hookah is intentional, the fact that remains that the impact is real and profound. 

Prior to this research, I was not familiar with hookah lounges, had never been to one, had never smoked a hookah, and had never met or had contact with the owner of Midnight Hookah or his staff. After visiting Midnight Hookah, while it is not a place I would personally patronize, I found a professional staff and a pleasant and inviting clientele.

Some sections of this report are condensed from a letter shared with the RTM Community Development and Services Committee.

Research

During the course of this research, I have spoken with Town Councilors Heede, Franco, and Obrey, Mayor Granatosky, Police Chief Fusaro, Economic Development Chair Young, Midnight Hookah owner Hassam Abudawood, various Midnight Hookah staff and customers, as well as an assortment of residents. 

During the nights of August 31st and September 1st, I was at Midnight Hookah from 10 PM to 4 AM in order to see their operation. I spoke extensively to their security team and a number of patrons in addition to observing the patrons.

Impact #1 - Likely Closure of Local Business Midnight Hookah

A concern that has been discussed on the EDC is Groton’s ability to recruit and retain younger workers, especially for Electric Boat. Many younger workers have complained of a lack of entertainment options in general and night life in particular.

One of the very few businesses that offers night life is Midnight Hookah, a facility located at 403 Pleasant Valley Rd South, behind the Mobil gas station, and owned by Mr. Hassam Abudawood, a man who sold his business and moved to Groton in 2017 after falling in love with the town during a visit to see his cousin, and Electric Boat employee. While open seven days a week, the vast bulk of their activity is between 1 AM and 4 AM on Saturday and Sunday mornings.

While I had originally assumed that the owner would have been part of the conversation in crafting this ordinance, according to Mr. Abudawood, I was the first person from the town to ever mention this ordinance to him. He was completely unaware of it when I first contacted him. I know that everyone involved in this process is a good, honest, well meaning public servant, and I believe that this lack of due diligence may be responsible for the unfortunate impacts of this ordinance.

For those not familiar with Midnight Hookah, it could best be described as a lounge. Patrons are charged a $15 cover on the weekend, and may pay for hookah service (a hookah is a water filtered tobacco consumption device that uses hot coals rather that combustion to generate a pleasant and mildly stimulating gas). Patrons may also bring their own alcohol into the establishment.

Inside the lounge, some patrons smoke hookah, while others do not. Some drink and others do not. Some dance to the music provided by a live local DJ. Some simply relax and observe. The floorplan is quite open, and the security staff caps attendance around 60 people, leaving the space full but comfortable for patrons. The environment is noticeably different from any bar or nightclub that I have visited, seeming more relaxed and social.

From conversations with staff as well as from speaking directly to patrons during my visit, the customer base is a mix primarily of two groups: individuals who work second shift such as Electric Boat staff, restaurant staff, bartenders, casino workers, etc and people who are choosing to socialize during later hours either because the bar they were patronizing closed or because they enjoy the lounge’s environment.

Patrons begin to arrive around 10 PM, but most arrive after 2 AM. Approximately half of the patrons took advantage of the ability to bring alcohol, but the loss of that business would likely cause a loss of other patrons. For example, about 15-20% of patrons were people watching without drinking, but they would likely not attend if the people who were drinking were not present.

It is Mr. Abudawood’s belief that the introduction of a 1 AM curfew on BYOB consumption would be catastrophic to his business, and I agree with his assertions based on my research and observations.

The loss of this facility would have negative consequences for the town’s ability to retain younger workers who desire a vibrant and exciting place to live, work, and play.

Impact #2 - Town Reputation and Business Recruitment

Whether it was the intention of the authors of this ordinance, Mr. Abudawood believes that his business will not be viable under the new rules and will close his business. Prior to opening, Mr. Abudawood was copious in his attention to regulation, working with the Planning Department and Fire Department to ensure that he was within all codes and had all permits. When given a fire capacity from the fire department, he voluntarily set his own capacity considerably lower to ensure safety. Security policies, staffing and precautions are in excess of what is strictly necessary for such a facility, and a record of safety inside the lounge has been the result.

After all of this diligent effort on the part of Mr. Abudawood, a business owner who personally applied every lick of paint in the entire lounge, a new ordinance, created 9 months after his opening, and written without any attempt at contact or consultation, will close his business.

While the details and nuances may be lost, it is likely that the story that Groton, Connecticut passed an ordinance that led directly to the immediate closure of a successful, legal business will achieve traction in the business community, especially given the variety of businesses represented among the patronage of Midnight Hookah.

The idea that a town would willingly create an ordinance that will cause the closure of a business in that community is enough to give any investor or entrepreneur pause before taking the great risk that any new venture offers.

Midnight Hookah has hundreds of patrons, and almost every one of them has a social media presence. The possibility of a story going viral on the Internet that Groton, Connecticut is so actively anti-business that they shut down a successful and legal business is quite real, and the effects would be profound for the town.

Impact #3 - Events, conference, and special events

My initial impetus to investigate this ordinance was my experience with event planning. The text of this ordinance is very broad, and a reasonable person could interpret it to apply to a wide variety of events, especially because the affected areas are defined as:

business facility, such as a dance hall, club, restaurant, lounge, meeting room or association, not licensed by the State of Connecticut Liquor Control Division, wherein patrons twenty-one (21) years of age or older are allowed to bring their own alcoholic liquor to the facility and to consume thereon

It could apply to anything from a New Years Eve party, such as one which I ran at the Quality Inn in Mystic in 2016, to a wedding reception at a rented hall. It could also be interpreted to apply to a hospitality suite at a hotel.

Whether or not it would actually be enforced, the potential for embarrassment and expense to an event organizer is more than enough to disqualify our town for a variety of events. Why put your wedding reception in a place that even has a chance of being busted up by the cops and every guest being ticketed when you can just go to Stonington and be safe? In my time planning events, we’ve ruled out venues for less.

Impact #4 - Loss of Downstream Economic Activity

When people leave a bar or lounge, they often do not go directly home. I spoke to staff at both Henny Penny on Route 12 and the Groton Townhouse Restaurant. Both indicated that they receive considerable traffic on Saturday and Sunday mornings around 4 AM from Midnight Hookah.

It is difficult to precisely quantify exactly how much direct downstream activity is generated from the lounge itself, but it is reasonable to estimate between $200,000 and $600,000 per year based on average patronage numbers from Midnight Hookah and average ticket sizes at the various downstream businesses. If Midnight Hookah is forced to close and move to Norwich or New London, that downstream activity will be lost to our community and instead benefit the new community.

Potential Benefits

No clear problem has been identified by the Town Council to be solved by this ordinance, partly because the effect upon Midnight Hookah has not been officially discussed. However, it has been generally suggested that this regulation will aid the Groton Town Police in maintaining order. While there have been some issues at Midnight Hookah, particularly when they first opened prior achieving their present security staffing levels, it is consistent with any other establishment open after midnight, including Groton Townhouse Restaurant which employs security from 10 PM to 4 AM on weekend evenings.

It has been suggested that we should be proactive in preventing problems, but it has not been made clear in any conversation I have had or any public meeting what exactly the problems would be that should be proactively prevented.

Conclusion

While no clear, unequivocal benefit has been demonstrated, the likely negative consequences are clear and highly predictable. The implementation of this ordinance will likely lead directly to the closure of a successful and legal business, work against EDC efforts to retain younger residents, create a negative reputation for our town, and cause the loss of hundreds of thousands of dollars worth of economic activity.