The Santa Barbara Planning Commission went against the advice of the assistant city attorney, city planners and the Santa Barbara Police Department and allowed the transfer of a conditional use permit to allow the Isla Vista Co-Op to sell single cans and bottles of beer and wine.

The Isla Vista Co-Op purchased Cantwell’s Market at 1533 State St. and took over on Jan. 1 of this year. Cantwell’s sold single-serve alcohol containers, but the sale triggered a review of the conditional-use permit.

Even though the state Alcoholic Beverage Control issues licenses, cities have the right to regulate types, sizes and amounts of alcohol sold through a conditional-use permit process. The sale of the business triggered a review of the CUP.

In 2021, the City Council approved an ordinance that says new alcohol retail establishments must sell wine in less than 750 milliliter containers, airline bottles must be in a container with a volume of 375 milliliters or greater in size, and beer, ale or malt liquor must be sold in containers greater than 32 ounces.

Lisa Oglesby, a representative of the Isla Vista Food Cooperative, said not being able to sell the single cans and bottles smaller than 32 ounces would present a “financial hardship” for the business.

Assistant City Attorney Tava Ostrenger disagreed.

“They can still operate, and they can still operate for profit, without selling these smaller container sizes,” Ostrenger said.

The city approved the ordinance to halt nuisance behavior. Stores that weren’t able to control loitering or unruly behaviors in their parking lot risk losing their CUP, and new businesses would have to comply with the serving size rules unless they could convince the city that there was an unreasonable financial hardship.

Oglesby told the Planning Commission last week that the Co-Op makes about $102,565 annually from beer sales of containers less than 32 ounces and wine sales of less than 750 milliliter bottles.

“At current margin, that would be a loss of about $35,000 of profit that we use to cover expenses like rent, wages and expenses,” Oglesby said. “The impact on the beer and wine department would be significant.”

Since taking over, Oglesby said, the Co-Op has reduced the square footage of the alcohol sales by 125 square feet, removed tobacco and lottery sales, added produce and lowered prices.

Oglesby said it would create an unfair business advantage for the Co-Op not to be able to sell the smaller containers of beer and wine. Oglesby said the Co-Op will not sell small bottles of alcohol that one might buy on an airplane.

“Grocery stores operate with very thin profit margins,” she said. “A beer and wine department is an important component of any grocery store. Disallowing offerings that are available at other markets in town encourages customers to simply go elsewhere.”

She said the store is near a hotel, and many residential homes are in the area.

“Many of our customers want to grab a meal from our deli or grab-and-go departments and pair it with a beverage to enjoy in the comfort of their home or hotel room,” she said. “Be it water, tea, juice, coffee or alcohol. Individual-sized drinks are often the most appropriate for someone who simply does not need a larger amount.”

The meeting was spotlighted by an unusual back-and-forth dynamic between Ostrenger and Vice Chair Devon Wardlow, who was chairing the meeting. Ostrenger repeatedly told Wardlow and other commission members that a financial hardship would need to be proven to override the ordinance.

“I like the IV Co-Op,” Ostrenger said. “I went to UCSB and I shop there, and I understand they are continuing an operation that existed; but the whole point of the ordinance is to start to stop, when we can, at the point we can, to stop the nuisance that we are seeing in other areas of the city, particularly downtown.”

Ostrenger said the Co-Op would have to prove “a significant hardship and I don’t know if they can get there.”

Wardlow, however, said the ordinance was unfair because it penalized sales of independent businesses. Franchisees such as 7-Eleven, for example, wouldn’t trigger a CUP review because if there’s a sale there, it’s just of the management of the franchisee, not the ownership, she said.

“I guess that I am just concerned that we have created an ordinance that is going to disproportionately impact the businesses we are seeking to support,” Wardlow said.

Ostrenger responded: “I understand where you are going with that, but that’s definitely a policy consideration, and not a part of the findings.”

She also said it was a “slippery slope” to say not selling single smaller containers of alcohol was a financial hardship, because every business that transfers is going to make the same claim.

Oglesby said 12 ounces would be the smallest size for a beer sale and 187 milliliters would be the smallest for wine.

Planning Commissioner Donald DeLuccio at one point asked Oglesby to sit down because he felt Wardlow allowed too much interplay with the commission.

“Maybe you want to sit down because I actually think we are giving too much time to the applicant,” DeLuccio said.

The other complication in the discussion was that although city staff said the Santa Barbara Police Department did not approve of allowing the sales of the smaller sizes, there was no letter on file that expressed the reasons for their opposition.

The commission voted 5-0 to approve the CUP. Commissioners John Baucke and Brian Barnwell were absent for the vote.

Wardlow was convinced that not allowing the sales of the smaller sizes would be economically damaging.

“Based on the fact that it will reduce their sales, to the applicant’s point it will likely reduce their overall customers because people who would normally shop here to purchase a single-serving alcohol container alongside a sandwich will go elsewhere,” Wardlow said.