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Repeal the bar zoning ordinance

BY DI EDITORIAL BOARD | NOVEMBER 14, 2012 6:30 AM

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The Iowa City City Council may consider an alteration to a city-wide zoning regulation passed in 2009 that prohibits new “drinking establishments” — bars or restaurants open between midnight and 2 a.m. — from opening within 500 feet of another such establishment.

The original intention of the law was to limit the expansion of the downtown bar scene by preventing new bars from opening (existing businesses were grandfathered in), but some are concerned that the regulation causes significant collateral damage outside of downtown.

“The ordinance as it is hurts businesses outside of downtown,” City Counselor Terry Dickens told The Daily Iowan. “There are only so many commercial areas. It’s a matter of fairness. Separate areas should have separate rules for zoning.”

This concern points to a larger problem with some zoning laws. Too often, the unintended consequences and perverse economic incentives that follow certain regulations outweigh the good intentions of policymakers. In this case, limitations on where new bars and restaurants can be built are, at best, unnecessarily restrictive for potential business owners.

At worst, they are anti-competitive. We believe the City Council should take the first step toward repealing this zoning ordinance and lift the restriction for new businesses outside the “University Impact Area” — downtown and the area directly surrounding the University of Iowa campus. The city should also take another look at the economics of the regulation that will remain on the books downtown.

Limiting the scope of the current zoning laws to include only downtown is a no-brainer, given the regulation’s original intention: to prevent downtown Iowa City from developing into an entertainment district that caters only to college students. It is only logical that the scope of the measure should be limited to the desired area of impact.

Whether the bar ban — as it was originally imagined — is still economically sound is another question entirely. The prevalence of bars downtown in 2009 could be attributed directly to high demand for their products; that bars were establishing a virtual monopoly on downtown Iowa City speaks only to the scale of that demand. In other words, bars were being opened because they had a greater potential to make money than, say, retail shops. The city took a calculated risk by limiting access to high-rent downtown space to businesses with less potential to survive.

The passage of the 21-ordinance changed the economic equation downtown, however. The bar scene’s clientele shrank dramatically overnight; the depressed demand that followed ultimately led to the closure of a few bars downtown. The market forces that previously led to a bar boom have been scaled back, which calls into question the necessity of the 500-foot rule in any part of town.

Generally speaking, we believe that market forces would be the best driver of economic development downtown, but we are sympathetic to the original intentions of the downtown-bar restrictions. Elimination of a high-density bar scene and a diverse downtown continue to be very desirable goals, but it is now unclear whether this regulation is a protection against a tidal wave of alcohol or simply another barrier for small business.

In the short term, the City Council should take the first step toward scaling back this burdensome regulation as soon as possible by exempting all businesses outside downtown. In the long term, the council should re-evaluate its approach to zoning regulation downtown and consider abolishing the current blanket regulation in favor of a case-by-case approach.


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