Legislative Update for Social Districts
In the summer of 2020, amidst the relatively early stages of the COVID-19 pandemic, the State of Michigan enacted legislation to allow local governments to create social districts, which are public spaces where people may purchase alcoholic beverages from establishments that hold a social district permit and consume the beverages in a common area within the social district. Since enactment of the legislation, many Michigan municipalities have established social districts to boost sales for bars and restaurants, which have experienced significant hardships caused by the pandemic. By providing a public space for people to consume beverages from local dining establishments, social districts present an option to attract customers who may be wary of indoor gatherings or who may otherwise prefer to enjoy their drinks outside. Local government officials may be interested in some changes that were recently made to the statute governing social districts.
Section 551 of the Michigan Liquor Control Code, being MCL 436.1551, provides the authorization for and requirements applicable to social districts. That section was amended in March of this year with the enactment of Public Act 27 of 2022.
Prior to the enactment of Public Act 27 of 2022, MCL 436.1551 contained a sunset clause that would have resulted in the authorization of social districts expiring at the beginning of January 2025. With social districts becoming increasingly popular across Michigan, the Legislature decided to eliminate the sunset clause with Public Act 27 of 2022. Now that social districts are no longer limited to being a temporary endeavor, more municipalities may be willing to consider establishing social districts.
Generally, a drink purchased from a social district permittee must be consumed on the premises of the social district permittee from which the drink was purchased, or within the commons area. However, because of Public Act 27 of 2022, the statute now allows for someone who purchases a drink from a social district permittee to bring their drink to a hotel that is within the social district and that holds both a Class B hotel liquor license and a social district permit. Some hotel guests may be grateful for the opportunity to consume drinks in the common areas of the hotel without having to pay the price of drinks from the hotel bar.
Two other changes from Public Act 27 of 2022 provide local units of government with greater control and flexibility in the management of social districts. Previously, if the Michigan Liquor Control Commission (MLCC) issued a special license to a nonprofit organization for a fundraising event to be held within a commons area of a social district, no social district permittee could sell or serve alcoholic beverages for consumption in the commons area while the special license was in effect, regardless of whether or not the entire commons area is used for the event. As amended, MCL 436.1551 now allows the local unit of government, subject to the MLCC’s approval, to delineate a portion of the commons area to be used exclusively by the special licensee, while social district permittees may continue to serve alcoholic beverages for consumption in other parts of the commons area. Public Act 27 of 2022 also now allows the local unit of government to determine the times during which drinks can be consumed in a commons area. Before the amendment, a drink purchased from a social district permittee could be consumed in a commons area only during the legal hours for the sale of alcohol by the social district permittee.
With the amendments provided by Public Act 27 of 2022, social districts are now an even more practical prospect for local governments to consider. Municipal government officials are encouraged to contact Mika Meyers for any assistance, legal advice, or additional information regarding social districts.