Public Spirits | Page 2 of 3

Public Spirits

Should Montgomery County be in the business of distributing and selling alcohol? Plenty of people say it most definitely should not.

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The current Department of Liquor Control—a successor to the Liquor Control Board that Colonel Lee established in 1933—was created in 1951 by an act of the Maryland Legislature in conjunction with Montgomery County’s move to charter government.

Today, the enterprise encompasses nearly 350 full-time positions, a fleet of 40 trucks, and a 200,000-square-foot warehouse in a former office park just west of Interstate 270 in Gaithersburg.

The warehouse distributes alcoholic beverages to more than 1,000 licensees throughout Montgomery County, from restaurants and private clubs to delicatessens, package stores and other private establishments licensed to sell beer and wine only. Distilled spirits, along with beer and wine, are sold in 25 county-owned retail stores staffed by department employees.

A former Duncan aide, Griffin was named to head the department in 2001 and is credited by many for tackling some of the department’s shortcomings.

“I think the Department of Liquor Control has much improved since George Griffin became director,” says County Councilmember Phil Andrews, a candidate for county executive this year. “We on the county council have pushed him to improve the service that the department provides to restaurants, for example, and I think they’ve done a good job in being more responsive.”

Griffin was once part owner of a Bethesda tavern. An affable man, he’s not unsympathetic to the complaints of Heineman and other restaurant owners. He points to a new warehouse tracking system, due to go into operation soon, that should take the mystery out of what will be delivered to restaurants and when.

“It’s true—they don’t have that now,” he acknowledges. “They order, and they don’t know until it gets there if it’s coming. That’s not good.”

Griffin also notes that the 35 percent markup on special orders has been cut to 25 percent—and to 15 percent for some high-priced labels—to bring prices more in line with restaurants elsewhere.

And he has moved to address perennial sore points among the county’s consumers: the number and quality of the county-run liquor stores.

Franchot, a long-time resident of Takoma Park, describes the store nearest him as an “embarrassment,” wisecracking that “it was like going back into medieval times going into that store.”

Griffin says that when he took over the department, many of the stores “were kind of dingy, bad stores. The first thing we did was to spruce them up and move them to better locations.”

That Takoma Park store Franchot mentioned? It closed in January, and was scheduled to reopen around May 1 at another location.

Two new stores will open this year, as well. And Griffin has contracted with an outside firm for a strategic business plan for the department, including a look at how many stores it should have. Two decades ago, there were 22. Today: 25.

“I believe we are underserved with our population,” Griffin says. “We should probably have 40 stores.”

By comparison, nearby Prince George’s County, second in population to Montgomery County, has 131 full-service beer, wine and liquor stores that operate six days a week. (The Montgomery stores added Sunday hours within the past few years, a revenue-raising move prompted by the recession.)

Elrich says he has been pushing to open “flagship stores where you [would have] a much broader selection of wine.” He also thinks more knowledgeable personnel should be staffing the county’s retail liquor stores.

“You ought to be able to walk into a wine store and have somebody talk with you about what they’ve got, and why you’d want it with your dinner,” he says.

Notwithstanding the decades of debate over the issue, there’s never been a comprehensive economic analysis of the costs and benefits of maintaining or privatizing the current liquor control system.

Gordon Brenne, a Silver Spring accountant and self-described libertarian, presented a privatization plan to the Organizational Reform Commission in 2010 suggesting that the county could realize more annual revenue through incremental fees and taxes than it does with the existing liquor control system. He also suggested the possibility of a one-time gain of as much as $50 million through sale of the department’s assets.

In its final report, however, the commission questioned some of Brenne’s assumptions, concluding: “The bottom line is we do not believe that privatization, at this juncture, would generate revenues sufficient to make up for the $25 [million]-$30 million that is transferred annually to the general fund, under the existing system.”

Privatization advocates say the county is actually losing out on revenue, though, by local residents crossing county and state borders in search of better prices and selection.

“[One] reason Montgomery County should be privatized is that they’re losing so many dollars out of the county in what we call cross-border leakage,” says Total Wine’s Trone. “It’s going to the District of Columbia, it’s going to other counties—Howard County and Anne Arundel County—because the consumers are voting with their feet and fleeing Montgomery County.”

According to Total Wine, more than 20 percent of sales at its McLean, Va., store come from Montgomery County residents. And nearly 25 percent of sales at its Laurel store in Anne Arundel County are made by Montgomery County visitors.

However, Griffin, a former chairman of the National Alcohol Beverage Control Association, sees social as well as fiscal benefits to the county controlling liquor sales. “One thing we know about control jurisdictions is that the abuse and misuse of alcohol is lower,” he says, a claim that privatization proponents dispute.

Elrich opposes privatization for some of the same reasons Griffin mentions. “I frankly like the idea we’re not really in the alcohol promotion business,” Elrich says, contrasting the current structure to the “blowout sales” at private retailers. But he also acknowledges the problems of operating a business within a governmental structure.

“We’re probably somewhat more risk-averse,” he says, explaining that the county might be reluctant to have a large inventory because of the risk of not being able to sell it to restaurateurs. “But I don’t think it’s all that risky,” he says, “and we really should work closer with folks to figure out how to supply their needs better than we do.”

George Griffin readily acknowledges areas within his jurisdiction where there is room for improvement. But he also wearily observes that the Department of Liquor Control often takes the blame for issues outside its purview. One thing Griffin doesn’t control—despite misperceptions that he does—is the sale of beer and wine in grocery store chains.

“It is a big complaint you hear,” he says. “People say, ‘The county ought to be out of the business because I can’t go into Giant and buy beer and wine.’ Well, it has nothing to do with the county.”

In fact, supermarket chains were permitted to sell alcoholic beverages in one store in each Maryland county up until 1978. Then the state law was repealed, though certain stores already selling alcohol were “grandfathered” in. Today, three supermarket chain outlets in Montgomery County operate under this clause: a Giant in White Oak, a Safeway in Olney and a Shoppers Food Warehouse in Germantown.

The chain store sales issue, a topic of perennial debate in Annapolis, highlights a broader historical and political reality: Just as Montgomery County’s 80-year-old control structure has proved resistant to change, so have most state statutes regulating the distribution and sale of alcoholic beverages.

Maryland has gained a reputation for being in the vanguard of embracing change on numerous social issues. But it retains some of the country’s most restrictive policies regarding the sale of beer, wine and distilled spirits. When the General Assembly agreed in 2011 to the relatively modest step of allowing wineries both inside and outside the state to ship directly to consumers, Maryland became merely the 38th state to do so.

Many in Annapolis attribute the state’s resistance to the traditional strength of the lobby that represents small retailers of liquor, wine and beer—the so-called “mom and pop stores.”

“Everything is really tightly controlled, and at some point I think some of that control is going to have to loosen up a little bit,” says Delegate Charles Barkley of Germantown, who has chaired the subcommittee with jurisdiction over alcohol laws since 2011.

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