2015 | Politics

Report: Ending Alcohol Monopoly Could Increase Economic Activity by Nearly $200 Million

County executive's spokesman says comptroller's report actually proves that introducing competition for alcohol sales would hurt the county

A new report released by the Maryland Comptroller’s office Tuesday found that Montgomery County could increase economic activity by $193.7 million, if it were to give up its government-run monopoly of the sale and distribution of alcohol in the county.

The report was compiled by staff at the Bureau of Revenue Estimates, which estimates state revenues for the Comptroller, state treasurer and secretary of budget and management.

It serves as a counterpoint to county officials, including eight of nine County Council members and County Executive Ike Leggett, who have said efforts to end the county’s alcohol monopoly are irresponsible because doing so could eliminate the approximately $34 million in profit the Department of Liquor Control (DLC) generates for the county. Without that profit, Leggett has said either taxes will need to be increased or local services will have to be slashed and that the county’s financial stability could be put at risk.

At an event in Silver Spring Tuesday, Comptroller Peter Franchot, an ardent opponent of the monopoly, hailed the report.

“We’ve known for some time that the lack of private market competition has a cost and now that cost has a price tag,” Franchot said.

For more than a year Franchot has been criticizing the DLC for what he says are high prices, a lack of selection and an inefficient wholesale distribution system. Those criticisms have been echoed by local business owners and restaurateurs who have described their problems with the department in several county meetings over the previous year.

The report estimates 1,364 new jobs would be created generating an estimated $52.6 million in new wages. The increased economic activity would also bring in an estimated $22.8 million in state and local taxes, according to the report.

Patrick Lacefield, a spokesman for County Executive Ike Leggett, said the tax revenue estimates presented in the report actually prove the county’s point that opening the alcohol market would only benefit the state. He said the county would receive less than $1 million of the revenue, while the rest would go to the state’s general fund.

“We would get less than $1 million and give up $35 million,” Lacefield said.

Franchot had to defend the credibility of the report Tuesday because it was created by staff members who work for his office. In response to a question about why an independent, outside study wasn’t commissioned, Franchot said with outside studies “you generally get what you pay for.” He added, “This report will stand the test of time.”

The report relied on per capita wholesale deliveries of spirits, wine and beer to determine consumption rates in Maryland jurisdictions, which were based on annual alcohol tax reports filed with the comptroller’s office. Those statistics showed that nearly 41 percent less beer and distilled spirits is purchased in Montgomery County than the statewide average.

Franchot said that it’s “no coincidence” that lower rate of purchase is nearly identical to the 40 percent of county residents who commute outside of the county to work. He said this shows county residents are buying their alcohol outside the county, most often in Washington, D.C.

“Is there a massive temperance movement underway in Montgomery County?” Franchot, a Takoma Park resident, said. “Well, I’ve lived here for over 30 years and frankly it’s no coincidence that the figures for residents who work outside the county are virtually identical to the drastic drop in Montgomery County’s consumption figures.”

The report also noted that the county has 7 percent less bars and restaurants as well as 46 percent less alcohol retail stores compared to state averages. Franchot said adding more retail stores and restaurants would create new jobs and additional sales, resulting in the increased economic activity in the county.

Del. Bill Frick (D-Bethesda) joined Franchot at the event Tuesday and the comptroller said he would support Frick’s bill that calls for a referendum that would ask voters if they support ending the county’s alcohol monopoly.

County officials, who fear a referendum would pass easily without residents understanding the details of the debate, have been attempting to chip away at support for Frick’s bill by directly lobbying the county’s state legislative delegation, as well as speaking out against the bill in public.

In an interview with Bethesda Beat Monday, County Executive Ike Leggett said losing the DLC’s profits would result in tax increases of around $100 per year.

“People proceed on these assumptions without really thinking through all the consequences,” Leggett said. “For example, when you look at it and you say to the average voter, ‘Well, the county should be out of the liquor business.’ I think fundamentally, most people would say, ‘Yeah, that’s right.’ But what you have to say is, ‘The county should be out of it, but it will cost us, the taxpayers X in order to make that transition. Then everybody will say, ‘Oh, wait a minute. I didn’t understand it, please explain that to me.”

Franchot, a Democrat who recently engaged in a public spat with Maryland Senate President Mike Miller, demurred when asked for what he thinks are the chances of the bill passing in the upcoming session.

“We can predict the economy better than the legislature,” Franchot said.

The bill’s chances of passing may improve if a proposal is put forth to make up the revenue deficit. Some ideas include a new excise tax or charging distributors a fee to sell alcohol in the county. Even Leggett has said he’s open to proposals to get the county out of the alcohol business, but only if the revenue the DLC generates can be replaced.

Frick said if the bill doesn’t gain traction among the county delegation, it could move forward as a state bill, rather than a local bill, given its possible implications to state sales tax revenue.

“I think there’s a lot of support from the public, from consumers, from voters,” Frick said. “They need to let their opinions be heard because if all the members are hearing from are special interests, that’s a skewed vision.”

Frick added that even if the referendum were to pass in the 2016 election, the county’s alcohol monopoly wouldn’t end until 2018, giving the county time to figure out the revenue question.

“The lines of communication will be open,” Frick said.

Economic Impact of DLC – Bureau of Revenue Estimates