Auditor’s report urges liquor license overhaul after finding wealthiest communities issue 58% more licenses per resident

Massachusetts State Auditor Diana DiZoglio’s office on Tuesday released a report calling for a major overhaul of the state’s liquor license system, saying rules first written in 1933 have created artificial scarcity, raised costs for businesses, and produced uneven access across cities and towns.

The report, produced by the auditor’s Division of Local Mandates, examines how Massachusetts licenses restaurants, bars, hotels, and clubs that want to serve alcohol on site. It says the state’s population-based quota system limits the number of licenses many municipalities can issue, even when local demand for new businesses is strong. According to the report, that has pushed some business owners into a legislative process and a private resale market that favors applicants with money and political connections.

The auditor’s office said 2.5 million residents live in municipalities where the state quota constrains liquor licensing. The report also found that 26 municipalities were allowed to opt out of the state quota system during a limited period from 1978 to 1984, leaving Massachusetts with what it described as an inequitable two-tier structure in which some communities have local control while others do not.

DiZoglio said the current system should be replaced with one that is more transparent and fair. In a statement released with the report, she said business owners should not need “unlimited access to money and all of the right political connections” to obtain a license and argued that the state can support both alcohol regulation and economic opportunity at the same time.

The report, titled “License to Pour: Access and Equity in Massachusetts Liquor Licensing,” was based on municipal licensing data, a survey of 260 municipal officials and business owners, and interviews with license holders, local officials, legislators, and industry participants.

One of its central findings is that access to licenses varies sharply by local wealth. The report said the wealthiest municipalities issue 58% more licenses per resident than the least wealthy municipalities. It also said wealthier communities have been more successful in obtaining additional licenses through the home rule petition process, which the report said has no written criteria and no complete, readily accessible public record.

For businesses in quota-restricted communities, the financial barrier can be steep. The report said owners described paying six-figure sums for licenses on the private secondary market, including about $600,000 in Boston, $175,000 in Somerville, and $100,000 in Beverly. By contrast, it said the cost of obtaining a license in Cambridge, which has local control, was about $2,500.

That gap has broad implications for restaurants, bars, breweries, and other hospitality operators that depend on alcohol sales as part of their business model. Lower barriers to obtaining licenses could, if lawmakers act, make it easier for new establishments to enter the market and for existing operators to expand, potentially increasing demand across the beer, wine, and spirits trade. The report itself focused on licensing and economic access, but its findings point to possible ripple effects for the broader beverage sector because on-premises alcohol sales are tied closely to restaurant and bar growth.

The auditor’s office said Massachusetts has fewer full-service restaurants per resident than neighboring states. According to the report, if the Commonwealth matched the regional average, it could support 490 additional restaurants, 9,500 jobs, $311 million in annual wages, and $56 million a year in state and local meals taxes.

The report recommends eliminating the state-imposed, population-based quota for on-premises licenses and giving municipalities local control over those decisions. It also calls for steps to address equity and wealth-access barriers linked to the private resale market and for the creation of a statewide public licensing data platform to improve transparency and access to information.

Several local officials and industry figures endorsed the findings in statements included with the release. Holyoke Mayor Joshua A. Garcia said he supports moving toward greater local control, transparency, and equity, adding that municipalities need flexibility to make decisions that affect their local economies. Fitchburg Mayor Sam Squailia said access to liquor licenses can determine whether a restaurant or hospitality business is able to open, expand, or invest in a community, especially in Gateway Cities trying to strengthen downtown business districts.

State Rep. Joseph McKenna, a Republican from Sutton, said he has repeatedly argued that the current quota system discourages private investment in the restaurant industry and harms economic development. He described reform as a bipartisan and bicameral effort and said the report’s recommendations could be acted on immediately.

North Attleborough Town Councilor Dan Donovan said municipalities should have more flexibility to respond to local economic needs instead of being bound by an outdated population formula. Christopher Tkach, founder and president of Idle Hands Craft Ales in Malden, said the current system too often favors wealth and connections while making it harder for first-time restaurant entrepreneurs and small operators to get licensed.

The report comes as Massachusetts continues to debate how much control cities and towns should have over alcohol licensing. Under the current system, communities that remain under the state quota must often seek relief through home rule petitions to the Legislature if they want more licenses than the formula allows. The auditor’s office said that process lacks clear standards and transparent records, making outcomes harder to predict and harder to track.

By placing local governments under different rules depending on whether they were able to opt out decades ago, the report argues, the Commonwealth has created a structure that does not respond evenly to present-day economic conditions. Fast-growing communities that want to add restaurants or bars may face tight license caps, while local-control cities can issue licenses based on current policy needs.

The full report was made public Tuesday by the Office of the State Auditor. Lawmakers would need to act to change the statewide quota system, but the release adds official backing to a reform push that has been building among some municipal leaders, legislators, and hospitality businesses.