Montgomery County Executive Ike Leggett on Monday night defended a state bill he has proposed to move the county’s embattled Department of Liquor Control (DLC) under the control of a liquor authority by saying the department’s annual profits are too important for the county to lose and that county businesses and event venues can’t compete with those in neighboring jurisdictions when it comes to alcohol sales.
Leggett made his comments to state legislators during a public hearing in Rockville on proposed legislation for the 2017 General Assembly Session, which starts in January. He said that Washington, D.C., which he described as a tourist town that’s home to professional baseball, basketball and hockey teams as well as large conventions, has an ability to attract people to alcohol-serving venues that Montgomery County doesn’t. He made a similar point about the draw of FedEx Field in Landover where the Washington Redskins play and the University of Maryland in Prince George’s County.
He said the county’s lack of such venues and that people were unlikely to leave conferences or sports venues to travel to Montgomery County for a drink impacts alcohol sales in the county compared to neighboring jurisdictions.
He said privatizing the county’s alcohol business wouldn’t solve this problem, but would lead to budget issues because the county’s $5 billion annual operating budget is already constrained with more than 80 percent of the funds going to schools, debt service and public safety commitments. He said the county can’t afford to lose the $30 million in annual profits the DLC generates and that no one has offered a proposal that would make up the $30 million each year to enable privatization to take place.
The county has a lower rate of per capita wholesale alcohol deliveries to stores and restaurants—a tool to measure consumption—than other parts of the state, according to the state comptroller’s office. Critics of the DLC have pointed to that rate to say the state is losing sales tax revenue to D.C. and Northern Virginia because people are buying their alcohol across borders.
Leggett’s proposal would create an independent liquor authority, which he has said would put the DLC’s existing monopoly over the distribution of alcohol and retail sale of liquor under the control of a board of directors and management that could more nimbly direct the department without the restraints of direct government control. The authority would still transfer the DLC’s profits, which are partly used to pay off bonds, to the county.
“I didn’t do this out of some fantasy idea,” Leggett said. “I think this is a good proposal.”
He said criticisms of the DLC are not about efficiency or effectiveness issues at the department, but because the private sector “wants their hands” on the $30 million in profit the DLC generates.
“Very few complaints are real,” Leggett said. “Most are hyperbole.”
He said even if the department were privatized, local alcohol stores and restaurants would still have to deal with a monopoly system in the state that enables specific distributors to hold exclusive rights over selling certain products.
Leggett’s comments were supported by state Del. Ben Kramer (D-Wheaton), who said Leggett has done a “phenomenal job” in turning around the DLC.
“We don’t hear the changes you’ve made when we read in the media about the DLC,” Kramer said.
Kramer, who has defended the DLC publicly in the past, owns a Cloverly building where the DLC leases space to house one of its 25 liquor stores. He stands to collect about $2.7 million in lease payments from the department over the next 10 years, according to county lease documents.
Leggett’s proposal has received a cool reception, with critics saying it won’t fix the selection, delivery and pricing issues that have plagued the department for the past two years.
The County Council has declined to support Leggett’s proposal and on Monday evening council President Nancy Floreen said council members believe Leggett’s proposal doesn’t “offer any genuine advantages.” She said the authority would be far less accountable to county government than the DLC.
Marilyn Balcombe, president and CEO of the Gaithersburg Germantown Chamber of Commerce, said retailers and restaurants in her community would be best served by the private sector.
“This is not about catering to an elite population to ensure access to luxury goods,” Balcombe said. “It is about a county that prides itself on being world class in terms of trying to attract the best and brightest.”
Mike Fratantoni, an economist and Bethesda resident, said he is part of a new group called Voters Opposing Alcohol Laws in Montgomery County that will be raising awareness until the 2018 election to inform voters about “all that is lost to the county and state through this monopoly” in cross-border alcohol sales and about other DLC-related issues.
Even the county employees union—UFCW Local 1994 MCGEO that represents about 350 DLC employees—opposed Leggett’s proposal Monday evening. Erin Yeagley, a union representative, told legislators that the union is seeking a compromise supported by DLC critics, which the authority proposal lacks.
Brian Vasile, owner of Brickside Food & Drink in Bethesda, who also served as a member of the DLC working group that Leggett appointed earlier this year to examine proposals to reform or privatize the department, said that the working group was not given enough time to reach a consensus on a specific proposal.
He also disputed Leggett’s assertion that alcohol-related businesses were satisfied by the department’s operations by pointing to a county survey conducted in October of 144 DLC licensees that showed a majority of the surveyed licensees found DLC’s operations had improved in only one category—ease of ordering—over the past six months.
“This should be proof enough that the system did not work and improvements were not made,” Vasile said.
That survey, however, did find that 40 percent or more of the respondents found selection, delivery, customer service and overall department performance to be “much improved or somewhat improved.”
Ken Loren, the owner of Kenco Beverage Distributors in Williamsport, testified in favor of Leggett’s proposal Monday. He said his business has seen a 9 percent increase in sales this year and that wouldn’t have happened “unless the system is working.”
“In 2015, it was not,” Loren said. “I saw it at its worst.”
