Five Myths About MoCo’s Department of Liquor Control

Today, I am pleased to present a guest blog by Adam Pagnucco.

Few issues in county government have received more attention over the past two years than the operations of its Department of Liquor Control (DLC). In most parts of the United States, the alcohol industry has been divided into three tiers since the end of Prohibition: producers, distributors and retailers. DLC, which is a county department but derives its authority from state law, inserts itself into this structure as an extra middle-man between distributors and retailers. Instead of being able to sell directly to Montgomery County-based retailers, distributors must sell their products to DLC which in turn sells them to stores and restaurants. DLC then charges an extra mark-up which, after paying for its cost of operations, is returned to the county’s general fund as revenue. DLC also has a complete wholesale and retail monopoly on hard alcohol and sells it through county stores.

A sure way to increase costs, delays and inefficiencies in any distribution system is to add more middle-men, especially ones who do not add value to compensate for their fees. DLC is no exception and has been the subject of complaints for years. But mounting problems, growing press interest and the emergence of the agency as a political issue in last year’s election have brought DLC to the forefront of public attention.

It’s time for a hard look at the myth and reality of DLC.

Myth 1. The county needs DLC’s net income to function.

In Fiscal Year 2016, DLC is expected to transfer $24.5 million in net income to the county’s general fund. That amount represents 0.48% of the county’s total $5.1 billion in projected revenues.

The county regularly adapts to revenue shortfalls of much larger amounts. Its six-year fiscal plans contain revenue estimates that vary up and down by tens of millions of dollars before actual revenues are recorded. The council just approved a $54 million reduction in its recently passed operating budget. The Silver Spring Transit Center is $50 million over budget (and counting). Between Fiscal Years 2013 and 2015, the council reduced energy tax revenues by a cumulative $31 million per year. And in 2010, the council approved a $191 million reduction from the prior year’s tax-supported budget. None of these adjustments were painless, but the county got through them and the world did not end.

The county government can survive without DLC’s money. It simply chooses to collect it because it can.

Myth 2. DLC’s monopoly is needed for public safety.

Last year, Council Member Craig Rice claimed that “county control of liquor sales promotes safety, particularly when it comes to sales to those who are under age 21.” The DLC does indeed vigorously regulate alcohol licensees. It has an eleven-person Licensure, Regulation, and Education program that conducts 400 minor consumption compliance checks annually and trained more than 1,300 licensees in safe alcohol service last year. Additionally, the county’s Board of License Commissioners issues liquor licenses and can revoke and suspend them for violators. But these functions are separate from the county’s role as an alcohol merchant and do not depend on a sales monopoly to be effective. In fact, there is no evidence that the county’s monopoly itself contributes one way or the other to regulatory efficacy. In Washington State, which gave up its alcohol sales monopoly in 2012, both DUI arrests and drunk driving collisions actually FELL a year later.

Myth 3. Without DLC, high paying union jobs will be lost.

This claim is frequently made by MCGEO (Municipal and County Government Employees Organization), the union which represents more than 300 DLC employees along with many other rank-and-file workers in county government. The union has a responsibility to protect its members and generally does an excellent job of it, so its position is understandable. But if DLC’s operations are eventually eclipsed by the private sector, there is no guarantee that union employment will suffer a net loss. That is because many private wholesalers are organized by the International Brotherhood of Teamsters, another union noted for its aggressive defense of its members. MCGEO may prefer that wholesale alcohol employees pay dues to its treasury rather than the coffers of the Teamsters, but that is not a public policy concern that warrants large-scale extractions from county residents.

Myth 4. DLC is getting better.

George Griffin, the long-time Director of DLC, is a happy warrior and tireless defender of his agency. In 2005, Griffin was elected President of the National Alcohol Beverage Control Association (NABCA), a group of public alcohol organizations. He told NABCA of his efforts to continually improve DLC’s operations, including its new Enterprise Resource Planning program to increase efficiency and its installation of security cameras in warehouses. Griffin said, “POS (point of sale), inventory control, accounting, the warehouse, licensee ordering, buyers: they’ll all be tied together… from the retail stores, which will have running inventories, to our drivers, who will be equipped with handhelds.”

Years later, subsequent investigations revealed DLC to be anything but a model of efficiency. This past February, the county’s Inspector General found that DLC employees used “informal, handwritten notes” to track inventory, resulting in “significant decreases in the recorded quantities of warehouse inventories in FY2013 and FY2014.” NBC4 discovered DLC employees drinking and driving on the job and skimming cases of beer to sell on the black market. Restaurant owners have gone on the record with searing complaints about DLC’s service, with one even calling the agency an “evil empire.” Even Gino Renne, leader of the union that represents DLC’s employees and one of its biggest defenders, concedes, “This department needs to be more nimble.”

Myth 5. The County Council has called for “historic reform” at DLC.

On July 28, the County Council passed a resolution calling for a procedural change concerning some of DLC’s sales. The resolution is not binding but may be the basis for a future state-level bill, which is required to affect DLC. County Council Member Hans Riemer called the resolution “historic” in a mass email. But is it really?

The resolution addresses “special orders,” or products that are requested by DLC customers that are not part of its regular stock. These products are often specialty wines or craft beers that have not yet developed wide distribution in the county. Restauranteurs have complained for many years that DLC special orders are subject to long delays, big markups and substantial shortages, particularly when compared to the service offered by private wholesalers. The council’s resolution would allow customers to bypass DLC and deal directly with the private sector when requesting these items.

That sounds great except when considering the actual details of the resolution itself. Among other things, the resolution authorizes the county to establish a fee to “replace DLC estimated revenue lost by allowing the sale of special order beer and wines by private wholesalers.” That’s right, DLC would earn money on alcohol it does not even deliver. Multiple distributors testified at the council’s hearing on this resolution that the size of the fee, along with the additional cost of direct delivery to customers, might deter them from participating in this program. In other words, there would be no effective change.

DLC’s fee for doing nothing is reminiscent of Pepco’s “bill stabilization adjustment,” under which the utility was allowed to charge customers for power it did not deliver during outages. Many people condemned Pepco’s ability to charge for a service it did not provide. But Pepco is not part of county government. Perhaps that explains why what is unacceptable for Pepco is apparently acceptable for DLC.

The biggest myth of all is that DLC can be reformed from within by a series of small tweaks like this one. The idea resembles former Soviet Union leader Mikhail Gorbachev’s concept of “perestroika,” under which his communist government was expected to reform itself. The Soviet Union ultimately collapsed. But with its powerful protectors, DLC goes ever on.

Bickerman Misleads Constituents on the Law

Town of Chevy Chase Vice Mayor John Bickerman is a lawyer and BickermanJunemediator who is often quick to tout his legal talents, which makes it all the more surprising that he has failed to apologize for misleading his constituents on a key legal point related to his involvement in election shenanigans.

Specifically, as part of his defense for his support for a secret write-in campaign about which only the “right people” were informed as to who was running as a write-in candidate, Bickerman asserted in an email to the Town that it is a “Constitutional right” to be a write-in candidate. Wrote Bickerman:

A person’s right to be an a write-in candidate, and the corresponding right to seek others to vote for a write-in candidate is a Constitutional right that has been clearly acknowledged by the federal court of appeals for Maryland.

However, as Town Resident Ben Delancy has explained, Bickerman’s characterization of the law concerning write-in campaigns is simply wrong:

Mr. Bickerman and others on this board have frequently referred to a Fourth Circuit opinion confirming a constitutional right to have write-in candidates and campaigns. He suggests that any attempt to limit the ability to write-in would violate those constitutional rights. He finally implies that we would obviously understand all of this if we had bothered to consult with an election lawyer.

He is wrong.

There is no Fourth Circuit opinion holding that there is an absolute constitutional right to have write-in campaigns. There is a Fourth Circuit opinion, Dixon v. Md. State Administrative Election Laws, 878 F. 2d 776 (4th Cir. 1989), finding that it was unconstitutional for Maryland to impose restrictions on one group of write-in candidates (those who fail to pay a fee), but not to impose those same restrictions on other write-in candidates. The court did not hold that there is an absolute right to have write-in candidates because it was not asked to address that issue. In fairness to Mr. Bickerman, however, I acknowledge that the Fourth Circuit did refer to the ability to vote for a write-in candidate as a fundamental right, and that Dixon is sometimes cited for that proposition.

Nevertheless, it is perfectly clear that there is no such absolute constitutional right. The United States Supreme Court, in Burdick v. Takushi, 504 US 428 (1992), upheld a state’s complete ban on write-in candidates. If there was ever any debate about the impact of Dixon, that debate was ended by Burdick.

Given our Town’s election rules, which place very few limitations on someone’s ability to be a candidate, it is entirely likely that a complete ban on write-in candidates would be permissible and should be among the options considered.

Mr. Bickerman complains below that we are confusing the community, but I think it is perfectly clear who is causing confusion.

So either Bickerman–a lawyer himself–is misinformed on the prevailing Supreme Court law concerning write-in campaigns, or he intentionally misled people in Chevy Chase. Either way, he has yet to correct his mischaracterization of the law.

Bickerman also continues to refuse to answer questions posed by the Town Elections Board and Ethics Committee regarding his actions during the election. But his refusal to answer questions itself speaks volumes. Where an elected public official is unwilling to offer any plain account of his own involvement in a decidedly unethical campaign, his constituents will not have any trouble drawing their own conclusions.

Civil War Skirmish in Rockville

Rockville Mayor Bridget Newton has no opinion on whether the statue of a Confederate cavalry private outside the courthouse in Rockville should be removed. “It’s a County decision. It’s not my choice,” Mayor Newton explained, when I asked her for personal views on the subject.

The statue, which has a memorial plaque stating “To Our Heroes of Montgomery Co., Maryland, That We Through Life May Not Forget To Love The Thin Gray Line” has been the subject of controversy lately in Rockville’s City government. On July 20, the City held a 3.5 hour public meeting on the topic.

Mayor Newton has gone to great lengths to make sure that her non-opinion is the official opinion of the City of Rockville. Here is what appears to have happened: Though the Council had planned to take up the issue publicly at its next meeting, Mayor Newton communicated to the Council that County Executive Leggett wanted a letter from the City more quickly.

Remove the Statue

City Councilmember Tom Moore’s draft of a proposed letter in support of removal of the statue from the courthouse gained approval from two of his colleagues–Councilmembers Virginia Onley and Julie Palakovich Carr. Here is the letter: Moore Letter_Page_1Moore Letter_Page_2Councilmember Beryl Feinberg wrote her colleagues that she couldn’t support it as written. The Mayor did not weigh in on Moore’s draft. However, as she has just one vote among five under Rockville’s system of government, Moore’s letter still had a majority.

How “Remove the Statue” Became No Opinion

At that point, Mayor Newton had two options in my view. She could  sign the letter and send it on to the County. Alternatively, she could present a counter proposal and see if she could gain support for it from a Council majority.

Newton chose the second approach but appears to have gone about it an unusual, problematic way. The Mayor got two of her colleagues–Feinberg and Onley–to approve a very different letter that says nothing most eloquently on the key subject of whether the statue should be removed.

But she appears to have left Moore and Palakovich Carr completely out of the loop on this significant rewrite–a major violation of conventional Council order. While colleagues often consult each other separately, all are normally invited to weigh in on a final decision, especially when an alternative approach has already gained majority support.

Here is the letter Mayor Newton sent:

Letter to County Executive for Confederate Statue_Page_3 Letter to County Executive for Confederate Statue_Page_4Newton did not notify Moore and Palakovich Carr until she had secured approval for the new letter privately and sent it to the County. Here is the email she sent:

Hi – attached please find the letters to County Executive Leggett and Council President Leventhal.

As you know – I was asked by Mr. Leggett to send a letter regarding the Worksession and the need for the County to follow Rockville’s HDC process.  As I have also mentioned – we have received several calls (5) from the CE’s office asking where the letter was.   Mr. Leggett was appearing live at 12:30 today and wanted to have the letter by then.  Unfortunately – we didn’t meet the deadline.

This has been an arduous process and unfortunately there have been many iterations of this letter.   My thanks to Councilmembers Onley and Feinberg for their time today in working with me to create an authentic recap of Monday’s Worksession.  This letter has been approved by a majority of the Council.

You will remember that we did not have a discussion among the Body regarding any of the options proposed by the SME’s –  or the public  – and therefore it is not possible for us to opine on the position of the Council or our  recommendations.  We have removed any statements from the letter that do not accurately reflect what happened Monday evening. . . .

I know this letter will not be pleasing to all members –  and while I regret that – what I don’t regret is that it is an factual reporting of a very significant meeting. The Worksession was a highpoint for the City – I’ve had positive comments and reactions from many different sources.  I sincerely hope that we can move past this point and get back to the business of working together to govern our City.

Not the Way to Do Business

When I spoke with Mayor Newton yesterday, she explained that she thought that the changes were necessary:

There were changes that needed to be made to be consistent with the Council worksession held on Monday, July 20th. It was important the letter reflect what happened at the worksession. There were no votes taken at the worksession. It would’ve been improper to indicate that decisions had been made.

That’s a nice explanation and sounds reasonable. But it doesn’t explain why two colleagues seem to have been left entirely out of the loop while the Mayor was shopping her very different letter. Clearly, Mayor Newton does not want to take a position and worked very hard to make sure that the City took a similar approach, even to the extent of keeping colleagues in the dark.

Moreover, though the Mayor avers that it was inappropriate for the City to opine on the subject, expressing no opinion does not mean that no decision was reached. Indeed, this approach can be an oblique way of making a decision and rendering an opinion, as it appears to have been in this case.

Especially as the Mayor’s letter takes positions on several topics, which undercuts her contention that it was inappropriate for the City to express an opinion in the absence of a public vote. For example, the letter states that the statue “should be moved once” if it is moved, and declared that it is of “historical significance” and there are “lessons to be learned from it.”

The claims made regarding the importance of public consultation are further belied by the Mayor’s seeming decision not to consult with two councilmembers and notify them only after the letter was sent. Not a model of open decision making.

Finally, the Mayor’s contention to me that it is inappropriate for the City to express an opinion because it’s the County’s decision makes little sense since (1) the County Executive solicited their opinion repeatedly, (2) the letter thanks the Council President for seeking their input, and (3) the Mayor encouraged the Council to respond to the request.

No doubt Rockville’s next Council meeting will be interesting.

 

The Trump and Other Meaningless Polling Moments

Poll: Trump surges to lead in big lead in GOP presidential race” is currently the lead headline trumpeted on the Washington Post website. While I am as big a poll junkie as the next person who follows politics like baseball, this seems a good opportunity to remember how meaningless presidential primary polls are at this point.

Money is Being Raised, Not Spent
While candidates are busy dialing for dollars, they aren’t spending their hoards of cash on media yet. When they do, it will play a major role in defining candidates and today’s leader easily becomes the next one on the garbage heap.

Mitt Romney became the Republican nominee in 2012 by going negative on each new anti-Romney in turn. As the following chart shows, Rick Perry, Newt Gingrich, Herman Cain, and Rick Santorum each had their 15 minutes during the last go round.

2012-GOP-CHART-570

Election expenditures by Super PACs and others will also shape public opinion. Nearly $3.4 million dollars was spent by “outside groups,” including Super PACs supporting a candidate, attacking Gingrich in Iowa after he took a polling lead. After Gingrich resurfaced in South Carolina–groups favoring him spent $3.0 million there attacking Romney–other groups spent another $9.9 million pulverizing Gingrich into oblivion in Florida.

Media Moment
Most candidates are completely unknown to the American people, including the much smaller primary selectorate. Nothing gets media attention like making outrageous statements. Long before Donald Trump, we had Pat Buchanan closing speeches by calling people to “lock and load” for the conservanut revolution.

Inevitably, going up in the polls is followed by media scrutiny, which leads to either media gaffe or discovery of past embarrassment sure to be featured on all the news and comedy programs. Remember that Herman Cain’s ephemerally popular 9-9-9 plan was followed by “U-beki-beki-beki-beki-stan-stan.” Rick Perry couldn’t recall the Cabinet departments he planned to cut but now has new Google glasses designed to help him out this year.

In short, after the media has raised one up by giving red-meat remarks attention and the ripped them to shreds, the public and the cameras move on to the next one.

Ask a Stupid Question, Get a Stupid Answer
Asking people who they plan to support for president this far out from the event makes no sense. They haven’t focused on the election. Excepting Hillary Clinton, they don’t know much about any of the candidates.

When prompted by a question, people usually try to give answer. Doesn’t mean that their response on who they support is a fixed or remotely firm opinion. So just regard polls like the one in today’s Post as something designed to entertain us during the summer, sorta like Donald Trump’s hair, but not to be taken seriously in fall.

Purple Line Moving Forward

Surprising many, Gov. Larry Hogan announced that he plans to move forward with the Purple Line. Before analyzing this decision, I want to congratulate my many friends who have supported the project on this major step forward. While it’s not a done deal, my assumption at this point is that it will get built.

Politically Astute
Gov. Hogan has set this up nicely to flummox his opponents. He will tell his supporters that he has substantially reduced the cost and made heavily Democratic Montgomery and Prince George’s pay more for it. If they cannot come up with the money, he can shift the blame for Purple Line failure on to them.

Cost Down Less and Borrowing Up More Than Advertised
The Governor has adopted the Orwellian speak surrounding the project of referring to the money that the concessionaire (i.e. the project builders) will spend as the “private sector contribution.” Of course, it’s not a contribution but money that the State will be paying back with interest for many, many years.

A sizable chunk of the cost reductions touted by the Governor are not really reductions but additional money being put on the Giant Purple Credit Card. It’s analogous to claiming that you saved money on buying your house because you took out a bigger mortgage.

Prince George’s County Negotiates
While Montgomery seems happy to pony up another $50 million for the Purple Line, Prince George’s has been much more hesitant. But Prince George’s response looks less like a flat no than the savvy opening gambit in a negotiation.

In their eagerness for the project, Montgomery officials may have left the County in an exposed position in which we’ll end up paying a lot more than our neighbors. Is Montgomery willing to raise its contribution further? If so, how much? If others stand firm, will Prince George’s pay?

Montgomery County Pays–But How?
How does Montgomery plan to find the extra $50 million? County Executive Leggett and Councilmember Floreen said that we could issue bonds but bonds have to be paid back. As County borrowing capacity is limited, at least if it wants to maintain its credit rating, this will reduce our ability to borrow for other purposes.

As a result, Montgomery will have to cut spending in other areas. What will the cuts be? Will the County maintain its commitment to build the bike path next to the Purple Line? Alternatively, will the County try to raise taxes even though income taxes are at the legal max and raising the property tax above the Charter limit would require a unanimous Council vote?

The County could create a special taxing district on new development in the Purple Line area. It will be interesting to see if the Chevy Chase Land Company is willing to start paying substantial sums towards this project which will benefit it immensely. Or will it continue to shift costs on to the rest of us.

Who Pay for Cost Increases?
If costs rise after the contract is awarded to the concessionaire–either due to changes requested by the State or provisions within the contract with price flexibility (e.g. related to energy prices)–who will pay for the inevitable cost increases? Will it fall on the State or on Montgomery and Prince George’s County?

These are tough questions, which is why many smart proponents of the project have been more cautiously celebratory than might be expected and carefully sorting through the Governor’s new proposal. And now that the project is moving forward, County officials will have to begin really answering them.

Edwards Refuses to Join Van Hollen in Rejecting Campaign Spending by Outside Groups

Both Chris Van Hollen and Donna Edwards support rolling back the tidal wave of independent expenditures unleashed by the Supreme Court’s “disastrous Citizens United decision,” as Edwards put it. Now, Van Hollen challenged Edwards to agree with him to practice what they preach and pledge to reject spending by outside groups.

But  despite stating that “Marylanders deserve a Senator who will lead with bold solutions in the fight for campaign finance reform,” Edwards quickly rejected Van Hollen’s proposal–one pioneered by Elizabeth Warren in her race in Massachusetts.

So why is Edwards saying one thing and doing another? Van Hollen is far outpacing Edwards in “hard money” donations that fall under the legal limits for direct contributions to campaigns under the Bipartisan Campaign Reform Act.

Edwards hope that “soft money” expenditures by outside groups –the same type of spending denounced on her website–in support of her campaign will help her close the gap. In other words, she is unwilling to campaign under the rules she claims to support.

 

VH LetterHere is the proposed pledge:

Free State Pledge_Page_1 Free State Pledge_Page_2

Valerie Ervin Announces for the Eighth

Her announcement video and email announcement:

Your support has meant so much to me over the years. It’s because of you that I’ve been able to do the work I love, serving the working families of Maryland.

From raising the minimum wage to expanding universal pre-K and school breakfast programs, our accomplishments in Montgomery County are a testament to the power of community-based leadership.

But it’s not enough to stop there. If we want to make lasting change for Maryland’s working families, we need to take that kind of community-based leadership to the nation’s capitol.

I hope you’ll join me on this journey. Show your support by signing up on my website at www.valerieervin.com and liking my Facebook page right away.

Thank you for your faith in me. Together, we are going to build a stronger community for all of us.

Sincerely,
Valerie Ervin

Seventh State was the first to report on Valerie’s plans to run back in March. Welcome to the race!

Del. Waldstreicher Staying Put–Not Running for Congress

The following is a preview of an email that Jeff is sending out later today:

waldstreicher

I was born and raised right here in Montgomery County.  I love this place, and I’m proud to raise my family here.  But as I sat down to write you this email about an important decision I’ve made, I realized how illustrative the past few days of my life have been when it comes to the challenges we face here together.

On Sunday, I took my twins to a playdate for incoming Kindergartners at our local public school.  What I saw there was the best of our community: parents caring deeply about their children, meeting each other with neighborliness, and facing the future with the all-in-this-together spirit that makes Montgomery County so wonderful.

But we were also struck by the number of portable classrooms that shadowed the event, potent symbols of the challenges our County faces.  And come Fall, whether inside the school or outside, those classrooms will be filled to the brim with 25-28 children, including my own.  We can do better.

On Monday, I took the Metro to work as usual.  The ride was quick, uneventful, and shared with folks like me who prefer a less stressful, more environmentally friendly way to commute.  The return trip, however, was a disaster. Sardine-packed trains unloaded onto dangerously crowded platforms as delays mounted upon single-tracked delays.  We must do better.

I am NOT running for Congress–I love this County and have too much work to do locally.  I want to thank the many friends, family members, and business & labor leaders who enthusiastically asked me to put my name forward.  Your phone calls and emails were overwhelming and truly humbling.  I have no doubt that this opportunity may yet arise again.

For me, now is the time to double down on making Montgomery County better: investing in our local schools, fixing our local transportation system, and fighting for an economy that works for local families.  I love this place we all call home.  If you do, too, I hope you’ll join me once more.

Yours,
Jeff Waldstreicher

See Red Line Rush Hour Fail for more information on the Metro disaster that Jeff references.

Maryland Politics Watch

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