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Councillor Gord Perks says a potential resolution to a dispute between Toronto and the province over liquor licencing is a ‘big win’ for the city.Deborah Baic/The Globe and Mail

Toronto City Council's licensing and standards committee has moved one step closer toward resolving a liquor-licence dispute between the city and the province that left restaurateurs caught in the middle.

The committee voted on Monday to remove a new condition it had imposed on businesses seeking a new liquor licence to have a letter of recommendation from their local MPP. That requirement proved impossible to meet, after the province's Integrity Commissioner advised MPPs against offering such letters, leaving more than 100 new restaurants and businesses in the city in the lurch.

"It's good news, but we're not there yet," said Jesse Fader, a Toronto chef who estimates that the MPP letter rule – implemented in March – has cost him $15,000.

Mr. Fader, who is trying to open a restaurant in the Queen West area, said he stopped all construction because of uncertainty over the new rules, and rent alone has been costing him $6,500 a month. "We can't build until we find out if we're getting a liquor licence or not. It would just be sinking money into a sinking ship," he said.

The committee's decision, which is still subject to council approval next week, comes after a long back-and-forth between the city and the province over liquor licences.

In the past, councillors have negotiated directly with new businesses applying for a liquor licence, including coming up with a list of conditions involving noise and crowds that fit the local community.

But in the spring, the Alcohol and Gaming Commission of Ontario – the arm's-length agency that regulates liquor licensing in the province – told the city that it would no longer enforce such conditions, arguing that issues such as noise and garbage removal went beyond the agency's mandate.

In response, Councillor Gord Perks moved, and council passed, a motion for new licensing requirements – including the MPP-letter requirement – as a means to push responsibility back toward the province.

"We made it clear that if the province wasn't prepared to enforce the existing conditions, we would be forced to take every single application to a hearing and argue the merits of it," Mr. Perks said Monday, adding that this led to "long delays" and an "administrative headache" for the AGCO.

As a result, the AGCO reversed its position on enforcing conditions and took the added step of taking municipal bylaws into consideration in the future when granting new licences and imposing penalties on current ones. In a statement, Ab Campion, a spokesman for the AGCO, said the agency is aware of the committee's decision, but he declined to comment because the matter will still have to go to council.

Although Mr. Perks acknowledged on Monday that the dispute with the province resulted in business owners being "thrown to the wolves," he described the potential resolution as a "big win."

"The province showed a real lack of understanding of how the system worked," he said. "They put communities and businesses at risk. The city took strong action. We brought them to the table, and now we're actually better off than we were before the province made its mistake in March."

But Mr. Fader – who had hoped to have his restaurant open in the summer, but is now likely looking at an October opening, or even later – was not convinced. "I just wish that the big win for the city didn't cost me money," he said.