Two downtown bars will keep their liquor licenses, despite being denied by the Iowa City City Council for having high underage-drinking rates, a judge ruled Tuesday.

Administrative Law Judge Margaret LaMarche reversed the City Council’s decision to deny licenses to Et Cetera, 118 S. Dubuque St., and 3rd Base Sports Bar, 111 E. College St. The city had used a new ordinance to deny the licenses, which required Iowa City police to report if bars have a ratio of more than one PAULA per police visit so city councilors could deny them.

In two separate 19-page rulings, LaMarche said the underage-drinking guidelines are not enough.

The city’s decision to base the license renewals solely on “raw PAULA statistics” is inconsistent with state law and regulations defining “good moral character,” LaMarche wrote. The state uses good moral character as a standard for granting liquor licenses. The term has proved nebulous for both bar owners and the public.

George Etre, the owner of Et Cetera, said he’s relieved to have a decision in his favor. But he isn’t feeling completely triumphant.

“Everybody talks about how we won,” Etre said. “No matter what the decision was, I think we lost because of the situation of fighting with the city and not being able to come up with a compromise.”

Assistant City Attorney Eric Goers said city officials plan to appeal LaMarche’s decision to state Alcoholic Beverages Division Administrator Lynn Walding. Roughly one-third of liquor-license disputes make it that far, Walding said.

In her ruling, LaMarche also said it appeared police officials have differing opinions of what constitutes a “police visit.”

Bars’ PAULA ratios are calculated by dividing the number of underage drinking tickets issued in the establishments by the number of police visits there. Et Cetera clocked in with a 1.38 ratio, while Field House had 1.55.

“The guidelines approved by the local authority did not include a definition of the word ‘visit,’ ” LaMarche wrote.

At a hearing before LaMarche in October, Iowa City police Sgt. Troy Kelsay, who is tasked with calculating the ratios, said he only factors in visits that are classified as “bar checks.” But he admitted his idea of a visit could be different from Hargadine’s.

“I have no doubt what constitutes a visit, because I’ve been involved with it,” Kelsay said on Tuesday.

LaMarche noted that Kelsay and Hargadine said at the hearing they would have approved both bars’ licenses if the City Council hadn’t enacted the new ordinance.

She also said the presence of fake IDs could cause some bars to have high ratios.

She wrote that bar owners shouldn’t be held responsible for serving to an underage person who misrepresents her or his age if “reasonable inquiry was made to determine whether the prospective purchaser was over legal age.”

LaMarche finally concluded the city’s evidence wasn’t enough to prove the bars were aware of underage possessions. The PAULA ratio “reveals nothing about the circumstances surrounding the issuance” of those tickets, she said. LaMarche noted no officers testified, and the city’s witnesses admitted PAULAs are sometimes issued to patrons with high blood-alcohol concentration who were not in possession of a drink or for “constructive possession,” or being near an alcoholic beverage.

City officials weren’t surprised by LaMarche’s decision.

“I didn’t really know what to expect,” said Iowa City Mayor Regenia Bailey.

Goers said Iowa City officials won’t re-examine the guidelines until after Walding makes the final agency action, which could take several months.

“We’re hopeful we may do better in front of Administrator Lynn Walding,” Goers said.

Et Cetera and 3rd Base were the first bars to be denied by the council. Since then, councilors have also denied a license renewal to the Summit, 10 S. Clinton St.

In addition to appealing to the state, owner Mike Porter has brought the issue to the district court with a lawsuit against the city.

Porter said LaMarche’s decision proves the PAULA-ratio ordinance is flawed.

“We haven’t violated the law, and it sounds like the administrative law judge agrees with us,” he said.