Six questions about Montgomery County’s liquor control debate
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Version 0 of 1. Montgomery’s monopoly in the alcohol business — as the county’s exclusive wholesaler of beer and wine and retailer of hard liquor — is under fire. Two bills due to be considered by state lawmakers early next year would bring big changes to a system that has been in place, in one form or another, since Prohibition ended in 1933. [Montgomery lawmakers debate who’s best at handling liquor] One measure, sponsored by Del. C. William Frick (D-Montgomery), would ask voters to place a question on the 2016 ballot asking voters whether restaurants, bars and stores can bypass the county’s Department of Liquor Control and purchase directly from private distributors. The other, more limited proposal, backed by the County Council, would allow businesses to buy “special order” products — fine wines and craft beers — privately. Proponents of both bills say the DLC is not a reliable supplier of special-order items, making deliveries that are sometimes late or incomplete. Here are answers to some frequently asked questions: 1. How does the Department of Liquor Control work? The DLC’s operating funds come solely from fees it collects from users. Those come in two groups. One includes restaurants, bars and beer-and-wine shops required by law to buy their products from the county; the other is made up of customers of the 25 county-owned retail liquor stores. In the fiscal year that ends June 30, Montgomery projects gross profits of $83.4 million, nearly all of it from wholesale and retail sales. That is supposed to cover a $48.3 million operating budget that supports 294 full-time employees and 160 part-timers, a workforce that includes warehouse workers, truck drivers, inspectors and administrators. The entire operation has assets — buildings, delivery trucks and other equipment — valued at $104.1 million, according to county financial statements. Liabilities total $66.9 million, including $44 million in debt from the sale of revenue bonds to build a new warehouse in Gaithersburg. 2. How does the county government benefit from alcohol sales? Montgomery has transferred an average of $22 million a year in profits from the DLC to its general fund. This year, the transfer payment is estimated to be $24.5 million. The county also uses DLC revenues to support about $100 million in revenue bonds sold to finance roads and other county projects. The debt service due to bondholders this year is about $11 million. 3. What would happen to the county’s revenue under the bills? Under the council’s “special order” bill, the DLC would remain intact, with a relatively minor estimated loss of about $5 million a year. Frick and proponents of his bill contend that the ballot proposal, if approved, would merely allow “competition” between the DLC and private distributors. The DLC’s director, George Griffin, said that as a practical matter the agency would wither away as the system completely privatized. Beer, wine and liquor manufacturers would probably opt to do business with the private wholesalers they work with elsewhere in Maryland. Only one wholesaler can offer a given product in a local market, so there would be no sharing of the business in Montgomery. 4. If the DLC collapsed, how would the county replace the money it makes from alcohol? The county could raise property taxes to make up the difference, but with a major tax increase already likely to be proposed by County Executive Isiah Leggett (D) in the spring, this is not an attractive option for council members. Virtually any other fix would require asking the state for help. Maryland counties are not allowed to tax alcohol, so Montgomery would need permission from the General Assembly to impose an excise or sales tax. Getting lawmakers from other counties to approve a special revenue stream for Montgomery would be politically problematic, at best. The council’s research arm, the Office of Legislative Oversight, suggested that the rights to operate the 25 county-owned retail liquor stores could be auctioned or sold. But that’s not likely to replace all of the annual revenue. Any change in the revenue stream could also trigger lawsuits from bond holders and weaken the county’s overall creditworthiness, according to Finance Director Joe Beach. The county would probably have to refund the amount it owes to bond holders (about $100 million) and refinance the debt with general obligation bonds that would become part of the county’s capital improvement budget. But because of limits on the amount of debt the county can legally carry, the $100 million would crowd out other projects scheduled to be funded in the six-year Capital Improvement Plan, such as schools and road improvements. 5. Isn’t $34.5 million a marginal amount for a county with a $5 billion annual operating budget? After mandatory expenditures for schools, teacher pensions, debt service and employee health and retirement benefits, that $5 billion shrinks to $1.3 billion. That makes $34.5 million “a non-trivial amount,” as Council member George L. Leventhal (D-At Large) puts it. 6. What happens now? The county’s House and Senate delegations must vote on the measure, probably in late January or early February. If it clears both delegations — and that remains an open question — it goes into the committee system. It would probably be taken up by the House Economic Matters Committee and the Senate Education, Health and Environmental Affairs Committee. There it would be subject to the usual debate, amendments and lobbyist input. If it survives the committee process, it will reach the floor of both chambers. There is a General Assembly tradition of “local courtesy” that gives bills involving a single jurisdiction deference. But it is not always observed. In short, anything can happen. |