Should Montgomery County’s Department of Liquor Control (DLC) be privatized?
That was the central issue in a debate Thursday night between Edward Cooper, vice president of public affairs & community relations of Total Wine & More, and George Griffin, the director of the DLC.
The discussion between Cooper and Griffin was sponsored by the Montgomery County Taxpayers League and it examined the DLC’s unique role in handling the wholesale distribution and retail sale of beer, wine and liquor in the county. That role has recently been questioned by elected officials, restaurant owners and retail businesses who say the system limits selection and drives up prices.
Total Wine, the largest privately held seller of wine and beer in the nation, is headquartered in Potomac, but doesn’t have a store in the county, which Cooper said is because the county’s system of liquor control “doesn’t favor the free market.”
Cooper treaded lightly on perhaps the biggest issue in the debate—what would happen to the 350 union employees who work for the DLC if it were to close because of privatization. He said lessons could be learned from Washington state’s privatization of its system and that companies like his would hire county employees.
More than 30 UCFW Local 1994 MCGEO employees filled the small sixth floor conference room at the County Council office building, wearing bright yellow shirts, emblazoned with the union’s logo. The employees cheered points made by Griffin in DLC’s defense and expressed concerns about their livelihoods if the DLC were privatized.
Gino Renne, president of Local 1994, sat in the seat right next to Cooper. Renne joined the discussion briefly and spoke about his employees, but also discussed the other major issue in the debate—how to replace the revenue generated for the county by the department.
He said privatizing the DLC has been debated since the administration of County Executive Doug Duncan and there has been no solution on how to replace the approximately $30 million in revenue the department contributes to the county’s general fund and debt service obligations every year. He added that the private sector can’t match the wages and benefits paid by the county.
“The citizens in Montgomery County take pride in excellent public service and they take pride in paying employees a fair wage for the work they do,” Renne said. “There’s no way for the private sector to match the wages and benefits offered by the county.”
DLC employees are paid an average of $54,353 including overtime, according to 2013 employee salary data posted on Montgomery County’s data website. Griffin said DLC expects to pay about $1 million in overtime to its employees in the fiscal year that ends June 30.
Cooper pointed out that when Washington state privatized liquor sales in 2012, many of the employees of the state’s liquor department were hired by private wholesalers or privately-owned retail stores.
But Griffin responded that prices didn’t decline. After Washington privatized its system, liquor prices rose, causing Washington residents to travel to bordering states to purchase alcohol, Griffin said. Washington privatized its system by voting for a ballot initiative.
However, a Seattle spirits company owner, Steven Stone, wrote in a January op-ed in the Seattle Times that the cause of the price increases wasn’t because private sellers were marking up prices, it was because the state imposed higher taxes on spirits to recoup the lost revenue from closing the stores.
“Right now, Washington consumers pay an astounding 20.5 percent sales tax on all spirits purchases, while most other goods in Washington are taxed at 6.5 percent,” Stone wrote. “That means a consumer is paying nearly $5 more in sales tax on a $30 spirits purchase, in addition to the confusing array of other costly taxes applied to a bottle of spirits. This is sending residents to find better deals in other states.”
Cooper and Griffin also discussed price and selection issues in Montgomery County. Cooper said larger private stores in Northern Virginia and Anne Arundel County are giving customers a “tremendous” selection of craft beers, wines and spirits. Something he doesn’t see in Montgomery County.
Griffin said the DLC is working to improve its selection of craft beers and special order wines. In particular, he said they’re developing a new ordering system that will allow restaurants to see what is available in the county.
“It will be similar to ordering from Amazon,” Griffin said. “Restaurant managers won’t be guessing” about what the department has in stock.
Throughout the discussion, Griffin used the line “modernize not privatize” in reference to how he would like to deal with issues at the DLC. For example, he said county regulations force the department to go through the Department of General Services to build a store, that the DLC must obtain budget approval to spend money and that hiring for the DLC has to go through the county’s human resources department. He said these factors slow the DLC's ability to react to changing market pressures.
Griffin added DLC has contracted with a consulting firm, Public Financial Management, to come up with a strategic business plan for the department.
But Cooper said the main issue “is [to] what degree do you want your government to be involved in the control of alcohol?”
“I can’t answer that question as well as other retailers in the county,” Cooper said. “I will tell you that many retailers, the ones I’ve spoken to, find it difficult to compete against the county and to get all their product from the county.”
Previous articles on this topic:
The comptroller called on business leaders to spearhead the effort