Outdoor Refreshment Areas Offer Major Appeal to Local Developers, But Only Time Will Determine Their Long-Term Feasibility

As seen in the November 2016 issue of Properties magazine.

It was more than 18 months ago that the Ohio legislature approved the creation of designated outdoor refreshment areas throughout the state to help spur economic growth, but Cleveland is just now in the process of getting its first one in The Flats. Within these specially designated areas, the state's open container laws do not apply, allowing customers to walk freely with open containers of beer, wine and spirits within the designated borders without fear of that criminal violation.

The creation of such outdoor refreshment areas could pay big dividends to developers who would be able to create destination locations unrestricted by existing open container liquor control laws. The concept is not unique to Ohio, as other states have similar designations under different names. One of the most famous areas in the country not subject to open container restrictions is Bourbon Street in New Orleans. While other destination points around Northeast Ohio are exploring the creation of an outdoor refreshment area, The Flats East Bank is the only one within City of Cleveland limits to have actually filed for an application. It was Middletown that had the state's first designated area under the new legislation. Other close-to-home outdoor refreshment areas can be found in downtown Canton and Lorain.

A key challenge in creating additional outdoor refreshment areas is that developers cannot directly request them. Rather, the application must be made by the municipality. It is then up to the developer and municipality to create whatever mechanisms they see fit for governing how the outdoor refreshment area will function relative to days and hours of operation and other desirable restrictions.

Another challenge under the legislation sponsored by Senator Bill Seitz is the restriction as to where these areas can be located. In the original legislation, only municipalities with populations greater than 35,000 people could qualify for a single designation. That restriction has already been amended such that, effective April 2017, municipalities with fewer than 35,000 people may create an outdoor refreshment area, assuming they meet other minimum criteria. In municipalities with populations greater than 50,000 people (such as the City of Cleveland), the legislation allows for the creation of only two designated outdoor refreshment areas. In addition, there must be at least four establishments that currently hold liquor licenses within the boundaries being designated and those boundaries must be able to be clearly defined geographically.

Beyond these criteria, health and safety issues must also be addressed with responsibilities delineated amongst the municipality, the developer and the individual permit holders. The long-term success of these outdoor refreshment areas will ultimately depend on how responsibly they are operated. Few want the reputation of a Bourbon Street to be associated with Cleveland. For that reason, the Ohio legislation allows for the dissolution of a specific designated area.

To help avoid problems, the legislation leaves a great deal of flexibility for developers to work with the city to create, for instance, an Authority that would have regulatory powers to control conduct within the area. Although there have been no high-profile problems occurring to date within these outdoor refreshment areas, all parties need to work collaboratively and cautiously to ensure a successful and safe operation and avoid events that may result in public backlash.

Assuming that adequate controls are in place, the potential for outdoor refreshment areas is tremendous, especially if they are created in conjunction with a Community Entertainment District that allows for easier liquor permitting. With the combination of the two designations, a particular development would be extremely attractive to prospective renters and retailers and have a major competitive advantage in differentiating itself and drawing foot traffic. The options are nearly endless, as developers could work with their municipalities to write any number of terms into the legislation. For example, the parties could even choose to reserve these rights only for private ticketed events, as opposed to privileges available to the general public.

It is still very early in the process to conclude how successful designated outdoor refreshment areas will be in Ohio, but savvy developers should be watching the progress being made in this area and evaluating their options with experienced legal counsel to make sure they are leveraging their opportunities.

John N. Neal is a partner and chair of the liquor control practice group at Cleveland-based Walter | Haverfield LLP.