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February 24 2021

Social Districting: Creating a Common Area Where Customers from Different Local Bars and Restaurants Can Enjoy Drinks Together

By: Alexander P. Henderson

2020 was a rough year for many local businesses, and municipal governments may be looking for ways to make 2021 a bit more enjoyable and prosperous for their constituents. It is no secret that restaurants and bars have suffered some of the hardest economic impacts resulting from the COVID-19 pandemic. Last year, the State of Michigan enacted legislation that allows local governments to establish “social districts,” which provide a designated public space where customers may take alcoholic beverages purchased from a licensed bar or restaurant located within the social district and enjoy them together with customers who purchase drinks from other bars and restaurants in the social district. Dozens of Michigan municipalities have already created social districts in their jurisdictions. Social districts present an opportunity for local governments to support and stimulate interest in the local bar and restaurant scene.

Under Section 551 of the Michigan Liquor Control Code, the government of a city, village, or township may designate a social district that contains a “commons area,” which is the area where alcoholic beverages can be consumed if they were purchased from a nearby business that holds a social district permit. The designation of a social district and commons area may be done through the passage of a resolution. The legislative body of a municipality has discretion as to where a social district and commons area are to be located, but any road closure that would result from the designation of a social district must receive approval from the relevant government body with jurisdiction over the road, which may be a county road commission, the Michigan Department of Transportation, or a road agency of the municipality itself. A commons area must be shared by and contiguous to the premises of at least two “qualified licensees,” but the qualified licensees’ premises do not constitute part of the commons area. Nearly any business licensed to sell alcohol for on-premises consumption may be a qualified licensee, unless the license only pertains to a special event.

In addition to designating the location of a social district and commons area, there are a few other responsibilities for a local government that establishes a social district and commons area. The governing body of the local government is required to institute management and maintenance plans for the commons area, including the hours of operation. The local government must clearly mark the designated commons area with signs, and maintain the commons area in a manner that protects the health and safety of the community. Furthermore, in order for a qualified licensee’s application for a social district permit to be considered by the Michigan Liquor Control Commission, the governing body of the local government must approve of the application first. A fillable resolution for a local government’s approval of a qualified licensee’s application is provided on the Michigan Department of Licensing and Regulatory Affairs website with the application form.

A municipal government seeking to establish a social district must file the following items with the Michigan Liquor Control Commission: a copy of the resolution designating the social district and commons area; a copy of the management and maintenance plans for the social district and commons area, including the hours of operation; and a diagram or map depicting the boundaries of the social district and commons area. The diagram or map must indicate the name, address, and location of the qualified licensees that are contiguous to the commons area.

According to a provision in Section 551 of the Michigan Liquor Control Code, the authority for social districts to be established will expire on December 31, 2024. Unless the legislature amends the statute, social districts may be a time-limited opportunity for municipalities. With the summer season approaching and people more eager than ever to enjoy being outside with others as the COVID-19 pandemic subsides, there is no better time than the present for local governments to begin work on creating a social district for their community. Our attorneys are ready to advise and assist any municipal government that is considering whether to establish a social district.