Leggett To Propose Liquor Authority To Change Structure of Department of Liquor Control

Leggett To Propose Liquor Authority To Change Structure of Department of Liquor Control

The authority would retain the DLC's monopoly structure, according to the proposal

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Montgomery County Executive Ike Leggett

File photo by Aaron Kraut

Montgomery County Executive Ike Leggett is proposing to put the Department of Liquor Control’s (DLC) wholesale and retail operations under the control of a liquor authority, which would maintain the monopoly structure over the wholesale distribution of most alcohol and the retail sale of all liquor in the county.

Leggett detailed his plan Thursday afternoon in a press release.

The plan calls for creating a “Liquor Control Authority” that would be separate from county government, but still return profits to the county. The new authority would take over the DLC's wholesale distribution of almost all alcohol in the county as well as the retail sale of liquor and the DLC would be abolished. Currently, only some breweries and distilleries can self-distribute in the county—otherwise the DLC is responsible for distributing alcohol to all restaurants and alcohol stores.

Leggett said in an interview Thursday afternoon with Bethesda Beat he chose the model because it would protect the approximately $30 million to $35 million in profits the DLC generates annually.

“It doesn’t lose a boatload of money—that’s the most significant reason,” Leggett said. “This protects our county from the financial hit. There’s no way for us to simply cough up and lose $35 million.”

The authority would be free from the procurement requirements of county government and its operating and capital budgets would not be subject to county approval, according to Leggett’s plan. The authority would also have the ability to incur debt and issue bonds.

Alcohol licensing and inspection duties, which includes administering fines, would stay under the county’s purview and would not become part of the authority. Currently, the DLC handles licensing and violation issues.

The authority would be created with legislation that’s being drafted by the county executive’s office to be introduced by a state representative during the 2017 General Assembly session. The legislation would be written to ensure the county retains the profits the DLC earns annually in the form of an annual payment from the authority.

The approximately 350 DLC employees who are members of UFCW  Local 1994 MCGEO would be assigned to the authority and remain under the county’s collective bargaining law and other union agreements. The county executive would bargain with the union over such issues as compensation, benefits and hours, while the authority would bargain for “all other purposes,” according to the release.

The new authority would be managed by a board of directors with experience in wholesale distribution and retail management, according to the release. Leggett said the county executive would appoint the board members, who would then be confirmed by the County Council.

Leggett said the structure would give the authority the efficiency of the private sector. He said the authority would be given the flexibility to make business decisions such as adding new retail stores and hiring experienced managers.

He added that he has no problems with privatization, an option favored by some, but had to take a different approach with the DLC because of the money it generates for the county.

“One thing we don’t do is allow the profit that would normally be there to go directly to the private sector,” Leggett said.

Leggett said he pursued the authority model based on recommendations from the liquor control working group, which met three times earlier this year, and from the consulting firm Public Financial Management, which was hired by the county to examine potential changes to the DLC proposed by the working group and issued a report Nov. 14.

That report found a liquor authority model would have neutral or slightly positive fiscal impact on county finances and also not significantly affect the approximately $100 million in bonds that are being paid off with the DLC’s profits.

The report found fully privatizing the department would cost the county about $34.6 million per year and cause a “very significant” impact on payment of debt, although it noted the debt could be whittled down by selling the department’s assets—its products, truck fleet, warehouse and by auctioning off its retail licenses.

Some restaurants and privately-owned beer and wine shops as well as the county’s chambers of commerce have called on the county to privatize the alcohol business in the county. Restaurant and shop owners have complained about delivery issues, a lack of product selection and expensive pricing on certain items. Last year, state Del. Bill Frick (D-Bethesda) led an effort to pass a bill in the General Assembly that would call for a referendum to allow voters decide whether to keep the county’s alcohol monopoly. Frick withdrew the legislation after failing to get support from the county’s state delegation.

In the release, Leggett said state Del. Charles Barkley may submit legislation in the 2017 General Assembly session to institute an agency model, which would allow the county to license privately-owned stores to sell liquor. Currently, only the county’s 25 retail liquor stores are permitted to sell liquor.

Leggett said Barkley’s proposal wouldn’t be consistent with his plan because the liquor authority could license the new stores. He said he believed his plan addressed the concerns of  the public and business community.

“We need to try and put this issue behind us and I think this will do so,” Leggett said. “If not, we’ll continue to look at it.”

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