Ann Arbor officials are taking the first steps toward what may result in recommendations that the state deny renewal of the liquor licenses of two troubled bars downtown: The Fifth Quarter and the former Studio 4, now operating as Dream Niteclub.

A committee of the city's Liquor License Review Committee met Friday with representatives of both establishments to formally detail the reasons the city is pursuing a denial of the annual renewals.

The Fifth Quarter

There is a different reason for each: City objections to Dream Niteclub’s renewal stems from unpaid back property taxes, while officials sought the non-renewal for The Fifth Quarter due to numerous police calls to the bar.

In addition, both bars have been targeted with public nuisance lawsuits filed by the city.

The committee will finalize its recommendation to the City Council this week, and the City Council will vote on them at a March 21 meeting. The decision on the licenses renewals will be decided by the Michigan Liquor Control Commission.

Multiple bars in Ann Arbor were notified that their license renewal would be scrutinized because they were behind on personal property taxes, according to city documents. An initial list included Live at PJs, The Arena, Melange, Café Zola, Champion House and Ashley’s, in addition to Dream Niteclub.

Minutes from previous meetings indicate that all except Dream Niteclub's taxes were paid.

Unpaid personal property taxes at the club, 314 S. Fourth, totaled $4,841.06 as of Friday, according to city Treasurer Matt Horning, with amounts due going back to 2009, when it operated as Studio 4.

Jeffrey Mangray said at the hearing that his company, VR Entertainment, managed the club until July 30, 2010, when it signed a lease to assume the space.

“We feel we are responsible (only) for personal property taxes from August to today,” he said.

Court files in the city’s litigation against the bar indicate that VR Entertainment bought the assets of the bar in 2009 from former owners. Bob West, assistant city attorney, accepted multiple documents from Mangray to review.

However, he added, “it’s our position that the operator of this entity has not changed in any respect.”

Mangray has until City Hall closes on Monday to respond with additional arguments, committee chair and Council Member Tony Derezenski said.

The hearing for The Fifth Quarter was adjourned until 2 p.m. Thursday, when police witnesses would be available to provide evidence to the committee.

“It’s an issue of an ongoing series of problems (there),” West said, “an inordinate amount of police response.”

West said the city has compiled a list of 71 incidents over the last 13 months involving the bar and its patrons.

In the lawsuit seeking to have the bar declared a public nuisance, filed Nov. 4, the city had compiled 89 calls for service year-to-date in 2010. The total was 48 in all of 2009.

That litigation — filed against Jeff Starman and Francis Clark, who owned the building at 210 S. Fifth Ave., and Starman and Andrus McDonald, owner of the business — remains active, West said.

Paula Gardner is Business News Director of AnnArbor.com. Contact her at 734-623-2586 or by e-mail. Sign up for the weekly Business Review newsletter, distributed every Thursday, here.