Burnsville leaders plan to loosen liquor laws by removing the city cap on the number of off-sale licenses, enabling new businesses to dabble in craft brewing.

The move could widen the market for brew pubs, gourmet food shops and upscale wine superstores, which were previously banned because all 12 of Burnsville’s off-sale licenses had already been issued.

In January, city staff compared Burnsville’s ordinance with neighboring cities. The study acknowledged a rise in craft brewing throughout the state and an interest by specialty grocery stores such as Trader Joe’s and Whole Foods to seek liquor sales.

“Now that we’ve had some space and seen that Burnsville is really a retail draw for outside of this area, I think that to leave that cap on there would be a mistake,” City Council Member Mary Sherry said during last week’s meeting.

The 12-license cap was based on the ordinance’s ratio restriction, which states there can only be one off-sale license per 5,000 residents.

In addition to the cap on the number of licenses distributed, Burnsville places a restriction on where liquor stores can operate. Businesses that hold off-sale licenses must be at least ¾-mile apart and inside a free-standing building.

An ordinance amendment in 2009 removed the free-standing building and geographic spacing requirement within the Burnsville Center retail area. Five stores now sell liquor in that zone: MGM Wine & Spirits, Costco, Cub Foods, Byerly’s and Total Wine. Haskell’s, also in the retail zone, closed last month, which other liquor store owners attributed to steep competition from larger chains in the vicinity.

In an informal poll at the meeting, the council was unanimous in favor of removing the license cap because they felt the ¾-mile restriction would be limiting enough on its own.

India Palace, which is expanding to become a brew pub, would be eligible for an off-sale license because it is located in one of the last available spots that meets the geographic requirements. Under the ordinance change, the Burnsville Center retail area can have as many liquor stores as the market allows, staff said, but few are likely to take their chances against the five that already exist.

David Hautman, general manager of Red Lion Liquors on Nicollet Av., advocated against oversaturating the liquor store market by creating an “accessory use” category to permit alcohol sales at businesses like Trader Joe’s that specialize in products other than liquor.

“We want to bring in new business, but we also want to retain business,” Hautman said during the council meeting. “[An accessory store] sounds palatable, but it’s really just a full-blown liquor store.”

And if enough grocery stores added alcohol sales, he said, it could close smaller businesses like his.

“It worries me that we’d be the one to go, just because we don’t have all those other items,” Hautman said. “It’s cutting up a piece of the pie.”

The City Council is expected to formally approve the changes in the coming weeks. Members agreed to allow taprooms to operate in the limited industrial zone, as long as all businesses selling popular 64-ounce growlers were restricted to the ¾-mile separation. Accessory use stores would be constrained to the same geographic guidelines, except for in Burnsville Center retail area.

Mayor Elizabeth Kautz said these changes were a way to address the booming new market while protecting longtime establishments in the city.

“The businesses we have now in Burnsville have stayed engaged with us, have helped us along the way, have been great partners in many ways, so I want to make sure they, too, are successful,” she said.