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The Senate State Affairs Committee voted 6-3 to approve the measure revamping how Idaho regulates permission to sell liquor by the drink.

The bill, supported by Idaho Licensed Beverage Association leaders and Gov. C.L. "Butch" Otter, would give cities and counties authority to issue new licenses, but only to restaurant and lodging businesses. Holders of existing state-issued licenses would get certain privileges, including the ability to transfer the licenses almost anywhere in Idaho, cheaper annual fees, and discounts on liquor from state stores.

The privileges are so the license owners, who have in some cases paid hundreds of thousands of dollars to buy licenses on the open market, won't see the value of their investment undermined.

"We hope that over the long-term that represents a return," said David Hensley, Otter's legal adviser who helped write the bill.

The measure does away with existing quotas, designed to promote temperance and morality, that allow just a single liquor license in cities for every 1,500 people. For years, businesses such as golf courses and ski areas outside city limits had to come to the Legislature to ask for exemptions before being allowed to serve booze.

Hensley said getting rid of the quotas would do away with profiteering by speculators who get on waiting lists for licenses only to sell them, not run a restaurant or bar themselves.

There are currently about 1,150 licenses in Idaho and 584 people on the state Alcohol Beverage Control agency's waiting list.

The roughly 250 members of the beverage association were by no means unanimous in their support of the plan, said Ken Burgess, a lobbyist for the group. But he said many members realized changes were inevitable — Otter has been pushing for a revamp since 2007 — and that this proposal, in contrast to others suggested in the past, helps preserve the value of existing licenses.

Still, Susan Jenkins, owner of the Gem Lounge in Emmett, argued the proposed changes undermine small businesses to the benefit of big chains that will come in and drive them out of business.

"It's a wrecking ball," Jenkins said, telling lawmakers she and her husband have invested their life savings into restoring their Main Street watering hole.

The bill would create a new state agency to settle disputes over liquor violations. There's also a new punishment scheme, to include warnings for an establishment's first two violations of liquor laws in three years. Idaho State Police would still be responsible for enforcement.

The measure also clarifies provisions forbidding "dispensing to a drunk," to require that the person be "obviously" intoxicated. It makes it a misdemeanor for minors to knowingly misrepresent their age to get into a licensed establishment.

Brian Donesley, a Boise lawyer and former state senator who headed up Idaho's liquor control agency in the 1980s and now represents liquor-license owners in proceedings against the state, argued against the changes.

Liquor licenses are a property right, he said, and modifying existing law in a way that could undermine their value may constitute an illegal taking.

"We have a constitutional problem with this bill," Donesley told the panel.

Among his backers were Pug Ostling, a longtime restaurateur in Boise who now owns Grape Escape.

As he nears retirement, Ostling said the value of his liquor licenses are "really the last of the assets I've got."

Proponents of the plan, however, countered that the property rights question has been answered by the courts, including a 2003 Idaho Supreme Court ruling that licenses are merely a temporary permit to do something that otherwise would be illegal.

"There's no guarantee that the liquor license you purchased will have some value in the future," said Bill Nary, attorney for the city of Meridian, which hopes to use the proposed law to promote economic development by attracting new restaurants.