State College Borough Council on Monday held a public hearing on a liquor license transfer request for a new, upscale restaurant being planned for the former location of Spats Cafe and Speakeasy.
The New Zealand restaurant, tentatively named Queenstown, will be located above Doggie’s Pub in the Foster/Gentzel Building at the corner of South Pugh Street and East College Avenue. The liquor license transfer request is for 138 and 142 E. College Ave. and 114 S. Pugh St. In addition to the former Spats, that would include the space currently held by The Clothesline Penn State apparel outlet, which will move next door to the former Apple Tree location, and the floor above Sadie’s Waffles.
AKE Enterprises, whose principals are State College natives and Penn State alumni Dr. Paul and Deanna Gillespie, is the owner of the new restaurant. Paul Gillespie is the founder of a restaurant ownership group that operates five successful New Zealand restaurants with the Queenstown name in San Diego, Calif.
‘Its very similar to American food but has a lot of different sauces,’ Paul Gillespie said of the New Zealand cuisine. ‘[There is a] high emphasis on being quality and being well served. You will find it’s really quite delicious.’
Gillespie and general manager Cole Ghidella said the plan is to have large windows making use of natural light, which on the second floor will open up for contained patio seating above College Avenue. It also will have deck seating above Doggie’s patio and new outdoor garden connecting to the space above Sadie’s.
The restaurant will serve breakfast, lunch and dinner. Gillespie and attorney Ellen Freeman stressed the location is not a bar and is not geared toward undergraduate students.
‘This is a high-end restaurant… where you’re not going to see the younger generation spend too much time, mainly because it will be more pricey,’ Freeman said.
The restaurant liquor license, if approved, would be transferred from Moerschbacher Enterprises in College Township — the former Celebration Hall. Intermunicipal license transfers first require the receiving municipality’s approval when it has more than one liquor license per 3,000 population. State College has 48 retail establishments that sell alcohol, including 26 bars and restaurants operating under 19 restaurant liquor licenses, according to Tom King, assistant borough manager. Under the one per 3,000 quota, the borough would have 14 restaurant liquor licenses.
King noted the volume of police calls in State College related to alcohol, but said that calls to establishments operating primarily as restaurants average about 2.7 per year compared to an average of 16 for those that are primarily bars.
‘Having licenses transfer into the borough that are predominantly related to selling food — which would be very good for our community… where you can get a drink but are primarily designed to be a dining establishment — those certainly do not nearly create the problems as a true bar that’s predominantly serving alcohol,’ King said.
Borough staff recommended that the license be approved with conditions. The concern, King said, is not with the planned restaurant but what could be done with the license in the future.
‘While it could be an intended use today, it could be something else at another time. Without any restrictions it could become a nightclub,’ he said. ‘It absolutely has nothing to do with the applicant in this case. I have no reason to doubt the sincerity and interest of the applicant in doing what’s right for our community. Each time [there has been a transfer request] I remind council that with no restrictions we have no control over how that license is used going forward.’
King proposed the license require 65% of sales be food and that sales of alcohol for off-premises consumption end at midnight — conditions that are typically automatically adopted by the Pennsylvania Liquor Control Board. Other conditions included that the restaurant could not be rented out to a third party, though it could still cater private events. The license also could not be transferred to another location in the borough without council approval or expanded beyond the three addresses applied for, with the exception of 118 S. Pugh St., the current location of Sadie’s.
“It’s concerning to me… if they fail as the type of restaurant they are describing,” said councilwoman Theresa Lafer. “My question is, do we end up with yet another bar? My problem with this request is we simply have too many alcohol licenses in the borough.”
King said the goal of the conditions is to prevent it from becoming another nightclub or bar in the future but also not put the restaurant at a disadvantage where it cannot be successful. He added that part of the downtown master plan is to have destination restaurants.
Gillespie and Freeman asked that the liquor license be unrestricted, as was the case with Spats’ liquor license. Gillespie said he wants to be able to offer high-end wine and liquor, and that if someone buys a $200 bottle of champagne with a $50 meal, the sales percentages quickly become skewed.
He suggested that food sales be set at 40%, which is what his insurer requires to insure as a restaurant and not a bar.
Lafer told Gillespie it was a “fantasy” to think because his San Diego locations do not have problems with alcohol-related disturbances that the State College restaurant will be the same without having conditions on the license.
Gillespie said he has no interest in dealing with the challenges that come with operating a bar.
“We’ve been operating as a restaurant and not a bar for more than 15 years. We don’t want to be a bar,” Gillespie said. “… I would just use the insurance parameters for the food percentages, because they’ve already done the actuarials and the homework. If you want a higher end restaurant with higher end wine and choices, the 65 percent ratio will be difficult to get if you’re successful.”
About 10 residents spoke in favor of granting the license transfer, all expressing a desire for a new dining option that is aimed at adults and families.
Local attorney Matt McClenahen, speaking as a resident, said the decision is a “no-brainer,” and that an artificially-created shortage of liquor licenses actually creates more problems.
“Liquor licenses are so expensive in this town, coupled with high rent. So when you have that artificial shortage, it puts too much pressure on those who have liquor licenses to sell as much alcohol as they can and it also drives out niche businesses,” McClenahen said. “So what do we end up with? Downtown is filled with bars for students. We don’t have enough adult venues. If we have an opportunity to bring a business like this into downtown State College, all of you would be negligent in your duties to this community if you don’t vote yes on this.”
Rob Schmidt, executive director of the Downtown State College Improvement District, said that one of the most frequent comments he hears is that “more adult dining options” are needed to get local residents to want to go downtown. He said he understands the concerns about alcohol misuse, but would like to see council work with the new restaurant owners on the liquor license in a way that accommodates both sides.
He also said that the Herlocher family, which purchased the Foster/Gentzel Building in 2017, sought to bring in a new kind of restaurant when it would have been easier to use the liquor license for Doggie’s Pub and just expand upstairs with another student bar. A bar owner with a license already within the borough and with no conditions could open a new bar without council approval.
“If [the new restaurant] didn’t succeed and it becomes empty again, what is to prevent someone from doing exactly that?” Schmidt said.
Council is expected to discuss the transfer at its July 8 work session and vote at its meeting on July 15.
Since Spats closed in January 2018, along with the former Rathskeller, owners Duke and Monica Gastiger teamed with the Allen Street Grill to rebrand the restaurant above the Corner Room as Spats at the Grill.
