pwood,
Luckily I never had that problem; hopefully will never have that problem. So it is easy for me to say what I would do.. but who knows.
What I think I would do (keep in mind we have some added wording in NY which would make it easier).. Calculate the OL at 70 people. Tell the owner he needs an additional exit per "Means of Egress for Existing Buildings", or he can partition a space off as storage, souvenir sales, a lounge room.. whatever.. to get the OL below 50, or apply for a variance from the State (fat chance after RI). I would not issue an occupancy sign for 70 because the space cannot accommodate them.
At a night check the sections cited would be not enough exits (FC1019.1), unlawful occupancy (FC107.4), failure of door to swing out (FC1008.1.2).. anything that would deal with too many people.
Next would be a referral to the SLA and recommendation that the municipality does not endorse the renewal of their liquor license.
A call to the health department to determine if the sanitary system is adequate for the occupant load.
If it is clearly an unsafe condition you can move to the penal law.
I don't think a sign will change anything. Enforcement, yes.
Is this a new occupancy (I realize existing building)? When did the occupancy increase to 70 people?