Serving the Public? 

Nick Karabelas sat in a hearing room in the basement of Burlington City Hall, holding back the urge to speak, while city officials critiqued his idea for a new downtown business. Staying quiet wasn’t easy for the loquacious 26-year-old, a budding entrepreneur with two years and a quarter-million dollars sunk into his dream. To him, it looked as though everything he’d worked for was slipping away.

Last month, Karabelas went before Burlington’s local control subcommittee seeking its recommendation for a restaurant liquor license — which is granted by the state — and the city’s indoor entertainment permit. Next month, the University of New Hampshire business school grad plans to open his first business: Das Bierhaus, a three-story, German-style eatery and bar, including a rooftop beer garden, at 175 Church Street. It’s being built on the site of the former Five Spice Café, which burned down in January 2007.

Karabelas, who’s footing the bill for most of the interior construction work, envisions a restaurant with an “après-ski chalet feel” — gas fireplace, bench seating, sofas and a waitstaff bedecked in dirndls and lederhosen. True to its name, Das Bierhaus will also offer a wide selection of imported and domestic suds.

However, Karabelas first had to convince the subcommittee — and later, the entire city council — that his establishment will primarily be a restaurant, not a bar, which requires a “cabaret” license.

But subcommittee chair Clarence Davis and fellow councilor Vince Dober, who were reviewing the application, were skeptical. A big red flag for them was Das Bierhaus’ proposed hours of operation — 8 a.m. to 3 a.m., seven nights a week. Both councilors were concerned that an establishment open that late would quickly morph into a nightclub and become a nuisance to residents living on the block. As Davis put it, such late-night hours aren’t those of a “typical restaurant.”

Vermont’s Department of Liquor Control has a strict, quantifiable definition for what constitutes a “restaurant:” At least 51 percent of an establishment’s revenues must be derived from food sales. The DLC doesn’t prevent a proprietor from getting creative to make the numbers work. Many restaurants do a brisk, post-dinner business in liquor sales.

In contrast, the city of Burlington takes a more hands-on approach: Critics say it uses its licensing process to define how a restaurant or a bar should look — and, ultimately, to control what the city and its neighborhoods look like. Some call that responsible planning; others call it government overstepping its bounds.

“It’s not so much that I don’t want a specific type of restaurant or bar in town,” Davis says. “What I want to make sure is that, wherever that bar or restaurant is placed, what they’re offering is in the best interest of the neighborhood or street.

“We let people know up front, a liquor license or an entertainment permit is a privilege, not a right” he adds. “Just because you come in and apply for one doesn’t mean you’re gonna get one.”

Karabelas tried to allay the subcommittee’s concerns by spelling out his efforts to be a good neighbor. He’s installing security cameras inside and outside the joint, viewable in his office and via the Internet. He explained that his door staff will be outfitted with two-way radios to manage any crowds. He’s made a deal with the neighboring Flynn Theater to shut down the rooftop deck if things get too noisy. And, he’s talked to a local taxi company about providing rides home for intoxicated patrons.

Still, the councilors were wary.

“I understand what you’re trying to do and I applaud your altruism,” Davis said. “But I’ve been around long enough to know that even though what you’re proposing is thoughtful and well intentioned, the reality of what happens at two o’clock in the morning is dramatically different … My real feeling is, it’ll create a bigger headache than you’re actually anticipating.”

“Oh, I’m anticipating a huge headache,” Karabelas answered. Apparently, though, he believes the extra revenue earned by selling schnitzel and sauerkraut to night owls will be worth it. As he put it, “There’s no gain without risk.”

Eventually, the subcommittee granted Das Bierhaus its reluctant approval, but not before reducing its booze-serving hours. Karabelas looked disappointed, but took it in stride.

Next, the subcommittee took up Das Bierhaus’ application for an indoor entertainment permit; Karabelas was asking for permission to entertain his customers until 2 a.m. His application laid out an ambitious plan for attracting patrons with comedians, karaoke and World Cup soccer.

Davis wanted more details: Are you planning to have a jukebox? A DJ? Live music? Board games? Jenga? Do you expect to do all of these activities every week, or just once a month? As Karabelas answered each question, Davis appeared more suspicious.

“Again, these are activities not typically associated with a restaurant,” he said, shaking his head.

Visibly frustrated, Karabelas pointed out the challenges of making a restaurant work, especially in today’s economy. He said he needs to recoup his investment by offering customers “something that isn’t readily available right now, so I can differentiate myself in this market.”

Dober, a Ward 7 Republican, echoed Davis’ uneasiness, noting that no restaurant in downtown has an entertainment permit running until 2 a.m. Assistant City Attorney Nikki Fuller agreed: “It’s not typical for restaurants to have large crowds of people congregating outside,” she said.

“You keep saying this isn’t ‘typical’ for a restaurant,” Karabelas countered. “My understanding is that a restaurant is defined by that 51 percent rule.”

Davis smiled. “The exact argument you’re making has been made many times before by other applicants,” he answered. “And every time we’ve heard it and granted it, without fail, without fail, they’ve run afoul of this committee.”

“I share that concern,” Karabelas responded. “But with all due respect, I am not those other businesses.”

After nearly an hour of heated discussion, the subcommittee recommended Das Bierhaus’ entertainment permit to the full council, but not before scaling back its entertainment hours and denying permission for certain types, including DJ music. Karabelas’ third application, for an outdoor consumption permit in the rooftop beer garden, was tabled until construction is completed.

Days later, Karabelas still seemed dumbfounded by what he’d gone through. Confessing to a certain naÏveté about Burlington’s regulatory climate and the level of scrutiny a new business must endure, he assumed he’d be judged on his own behavior, not that of past businesses. In a free market, he says, consumers should be the ones to decide whether a business succeeds or fails, not the government.

“I’m willing to jump through whatever flaming hoops they want, to show them that I’m serious about doing things the right way,” Karabelas adds. “But to dictate, ‘Board games are OK, but you can’t have darts.’ It’s insanity!”

Karabelas’ experience with Burlington’s licensing process isn’t unique. City councilors have long struggled to balance the needs of the businesses that cultivate the city’s vibrant nightlife with the demands of downtown residents entitled to a reasonable amount of peace and quiet.

In recent years, those efforts have been largely successful. There’s been a slow but steady decline in downtown noise complaints and other disruptive incidents, according to Burlington police, and councilors haven’t had to address the issue of late-night revelry for a while. It’s also been a few years since bar owners openly grumbled about certain city councilors being “puritanical” and “anti-fun.”

But some downtown proprietors still bristle at the notion of city officials dictating to them what should be “typical” for any establishment. A thorough vetting process is to be expected, they say. But at what point does it encroach upon a business owner’s right to offer consumers something new and innovative in order to survive?

Davis, 37, is one of two Progressives representing Ward 3, which includes the downtown district. Now in his fourth year on the council, he’s chaired the local control subcommittee for the last two. During that time, he says, he’s developed a good working relationship with Burlington’s restaurant and bars — as a college student, he worked in a couple of them.

But Davis is also a firm believer that the city has both an obligation and the authority to set clear parameters for what defines a restaurant versus a bar. He says his subcommittee’s emphasis on what is “typical” for a restaurant versus a nightclub touches on a fundamental problem the city has wrestled with for a long time.

“I can’t count how many times in the years I’ve been on this committee that an establishment has come in and said, ‘We want to be a restaurant,’” Davis says. But fast forward six months, he says, and that same restaurant has violated some condition of its license, and is facing either a suspension or revocation.

“I don’t want to set anyone up for failure, especially since I represent the downtown,” Davis adds. “I want thriving businesses. What I don’t want is a business to open and close within a few months.”

Davis cites the example of one unnamed downtown eatery that opened in the last few years — and closed several months later — because it ran into trouble with the DLC. Problems arose, he recalls, because this “restaurant” sold so much high-end liquor that it couldn’t hit the 51 percent margin on food sales.

It should be noted that the city council, in its dual role as the local control committee, does not issue liquor licenses; it only makes its recommendations to the DLC, which grants final approval. Currently, 49 Burlington restaurants are licensed to sell alcohol, along with 19 “cabarets” — bars, taverns or nightclubs — three hotels and six private clubs.

In theory, there’s no limit on how many liquor licenses can be issued in Burlington — Vermont, unlike some other states, issues liquor licenses to people, not properties or business entities, so when a business goes under, so does its license. That said, Davis acknowledges that there’s been talk in the past about curtailing the number of bars in town. He’s “of two minds on the issue,” he says. He wants to encourage business downtown, “but I don’t want it to become the red-light district for the rest of the city.”

Lower Church Street is a special case — not just because it has a lively mix of bars, restaurants and nightclubs; it’s now designated as a transitional zone between the city’s commercial core and the residential neighborhood to the south. As a result, liquor licenses undergo extra scrutiny there. That’s made it more difficult for Das Bierhaus, as well as Tilley’s Café. Craig Mitchell’s new nightclub, Lift — formerly Second Floor — is still operating under the former owner’s license.

Entertainment permits in Burlington are another matter. Licensees who want to offer their patrons more than just piped-in music and televised Red Sox games must also obtain permission from the city. With more regulations come more opportunities to run afoul of the city’s goals.

“I’ve had people come before us with a straight face and say, ‘No, we’re not going to do that type of entertainment,’ and then a week later they’re advertising for the exact thing they said they were not going to do,” Davis recalls. “If your permit says you can have karaoke and you’ve got a metal band, that does not compute.”

The processes for obtaining liquor licenses and entertainment permits are separate but not necessarily equal: One is issued by the state; the other by the city. In the end, they work in tandem to determine not just the character of a place, but how it makes its money. Though state law makes no distinction between when restaurants and bars may serve alcohol — both must cut off their customers by 2 a.m. — typically, Burlington doesn’t allow restaurants to serve cocktails after 1 a.m. But even that isn’t a hard-and-fast rule.

In some cases, Burlington businesses are restricted on the type of liquor licenses available to them based on their zoning, which also limits the type of entertainment they can offer. For example, Karabelas waited three weeks before he was told that Das Bierhaus couldn’t be granted a cabaret liquor license because his block isn’t zoned for it anymore — despite the fact that there are two other cabarets on the block already. As a result, Karabelas’ entertainment permit only allows programming appropriate for a restaurant: no bands, DJs, etc.

Next door to Das Bierhaus, at Tilley’s Café, owner Suzanne Johnson faced a similar predicament. Two and a half years ago, when she and her ex-husband opened the café, they sought a cabaret license just like their upstairs neighbor, Second Floor, and their downstairs neighbor, Rasputin’s.

As Johnson explains, they always intended to run the business the way it had been run by its predecessor, Coyote Café — as a restaurant. Initially, she sought a cabaret license so she could have DJs and live music without having to apply for special-use permits each time. But time and again she was refused, not because of zoning — that changed later — but because, she was told, there were already too many nightclubs on her block.

Last October, when Johnson took over all the café’s operations, she finally got permission to hold “reggae night” on Fridays from 10 p.m. till 1 a.m., but only on a four-month trial basis. Despite “zero complaints” from the police, she says, her permit expired and Johnson had to repeat the entire process.

Today, Tilley’s Café has an entertainment permit that allows live jazz Sundays through Wednesdays, but only until 10 p.m. On Friday and Saturday nights, she’s permitted to have a DJ spinning discs until 1 a.m., but the Footloose rule applies: No dancing allowed.

“They don’t trust restaurateurs like myself,” Johnson says of city officials. “They feel that we’re going to start as a restaurant, realize that we make more money on liquor sales, and then decide to phase out serving food and ultimately become a full-blown nightclub.”

Why does it matter to city officials if customers dance, as long as they don’t create a public nuisance or excess noise? Davis insists that his job as subcommittee chair isn’t to be “the fun police,” but to consider the needs of all residents, including the safety of customers themselves.

Lieutenant William Ward with the Burlington Police Department explains. As the downtown lieutenant who oversees all law enforcement responses to Burlington’s restaurants, bars and clubs at night, he says the police and fire departments need to know exactly what businesses are licensed to do, so they can tailor their staffing and response protocols accordingly. For example, a disturbance call at a poetry reading is likely to warrant a different response than one at a punk-rock show.

“We want people to have good businesses, but we also want a restaurant to be a restaurant and a bar to be a bar,” Ward says. “There’s a clear delineation, but there are some lines that get a little vague at times.”

Indeed. Few people walking past Manhattan Pizza, the Church Street Tavern, Sweetwaters or RíRá Irish Pub — especially on a busy weekend night in the middle of summer, when hundreds of people are seated outside — could tell which ones are licensed as restaurants and which one as cabarets.

How do other downtown proprietors feel about city officials drawing those lines of demarcation? Not surprisingly, few are willing to speak critically about the licensing process, at least on the record. After all, liquor licenses are renewed annually, and few bar owners want to bite the hand that feeds them.

The most common complaint among them is the amount of time it takes to move through the process. “There’s no urgency,” said one establishment owner, who asked not to be identified. When she opened a restaurant, in the last couple of years, she waited more than three months for the city’s OK.

“As a business owner, you can’t start the process until you’re already in a space — and if you have a lease, you’re just burning money — so you have to make a pretty big commitment and there’s no guarantee.”

Ultimately, she got her liquor license, but just days before her establishment held its grand opening. “It was pretty touch and go at the end,” she adds. “We were really stressed.”

Proprietors who’ve been in business for years complain about licensing delays. Longtime Burlington businessman Al Gobeille has nine liquor licenses: His businesses include Burlington Bay, Shanty on the Shore and Breakwater Café and Grill.

Asked about Burlington’s regulatory climate, Gobeille offers a blunt assessment: “It’s horrible,” he says. “The Department of Liquor Control I’d give an A to deal with. Burlington, I’d give a D-minus.”

Gobeille’s complaint isn’t so much with the local control committee — “They’re very reasonable,” he says, “but, then again, I don’t do anything that tests their limits.” His complaint is the time it takes to get relicensed each year, a process that requires him to physically wait in line for each of his nine licenses.

“This is 2009,” he adds, “and this is the best we can come up with?”

Davis acknowledges that the process needs streamlining — and he’s doing something about it. He and his staff are working on a packet for new establishments that spells out the process in detail and includes all the necessary forms and contact numbers. Davis hopes the city council will approve it by year’s end.

On June 15, a few weeks after Karabelas went before the local control subcommittee, Das Bierhaus’ license and entertainment permit came up for a vote before the entire city council. Davis, who described the subcommittee’s discussion as “a spirited debate,” outlined its concerns. He explained they’d scaled back the hours for serving alcohol, and put limits on the types of entertainment, to preserve the quality of life on lower Church Street.

Likewise, Lieutenant Ward aired his concerns about Das Bierhaus’ possible “funnel effect” of drawing drinkers from other clubs down to lower Church.

Ultimately, however, Davis recommended approving Das Bierhaus’ entertainment permit and liquor license — as a restaurant. The council agreed. As Karabelas put it later, “In the end, Clarence didn’t leave us hanging out to dry.”

The owner of Big Daddy’s Pizza, Das Bierhaus’ other neighbor, feels for Karabelas. “The unfortunate truth is that Nick is paying for the mistakes of other people,” offers Francis “Cheech” Kehoe III.

But Kehoe, who himself waited more than 10 years to get a permit to sell pizza out of a vending truck on University Place, says that part of succeeding in Burlington is learning to play ball.

“I think Burlington gets a knock for being anti-business and over-regulated, but if you don’t, what do you have?” he asks. “If someone doesn’t keep an eye on it, is it gonna be anarchy down here at two o’clock in the morning?”