Category Archives: Department of Liquor Control

Riemer Proposes Liquor Monopoly Payment Holiday

By Adam Pagnucco.

In a letter to County Executive Marc Elrich, Council Member Hans Riemer has proposed that liquor licensees be allowed to defer payments owed to the county’s Alcohol Beverage Services (ABS). Specifically, Riemer wrote, “I am writing to request that ABS allow restaurant licensees to defer payments or make partial payments on all products purchased from ABS for the next 12 months.” Riemer notes the extreme financial losses being experienced by licensees and suggests that the county “explore options that could allow the County to smooth the revenue impact of this proposal over a longer period of time.”

We reprint Riemer’s letter below. We intend to print the executive’s response when we receive it.

Share

Liquor Monopoly Ends Takeout Cocktail Ban

By Adam Pagnucco.

Council Members Andrew Friedson and Evan Glass have announced that the liquor monopoly has ended its ban on takeout cocktails.

Friedson announced the news on Twitter.

Glass announced it on Facebook.

The official announcement from Alcohol Beverage Services appears below.

And here is a link to the application form for licensees.

Thank you to Council Members Friedson and Glass, Comptroller Peter Franchot and everyone else who worked to turn this around!

Share

Franchot Blasts Liquor Monopoly

By Adam Pagnucco.

After reading our post on the county liquor monopoly’s takeout cocktail ban, Comptroller Peter Franchot has come out swinging against the monopoly.  The Comptroller wrote on his Facebook page:

As your Comptroller and as a Montgomery County resident, this story makes me viscerally frustrated. There is no constructive purpose served by the continued existence of our government-run alcohol monopoly. It is inefficient, costly and unresponsive to the needs of its customers.

Now, at a time when our restaurants, bars and taverns are looking at possible financial ruin as a result of the COVID-19 pandemic, and are fighting a daily battle simply to survive, we get this tone-deaf ruling from the Department of Liquor Control. By prohibiting the sale of liquor and mixed drinks for carryout and home delivery, the DLC is acting in violation of both Governor Hogan’s Executive Order and a basic standard of common sense.

If there ever was a time for an outdated government agency to flaunt its administrative prerogatives, this certainly isn’t it. Hoping the DLC will reverse this ruling and do everything it possibly can to support our local, community-based businesses. Or, failing that, at least get out of the way while the rest of us help them #KeepTheLightsOn.

Franchot even took out a Facebook ad for this post.  At the moment, his post has 116 reactions, 40 comments and – most critically – 27 shares.  The original blog post has been shared countless more times across Facebook.

With outrage growing against the monopoly, it must lift the ban or face a renewed push to abolish it.

What will it do?

Share

What’s More Important? The Liquor Monopoly or a Thousand Bartenders?

By Adam Pagnucco.

Battered by shutdowns of dine-in service, restaurants across Maryland and beyond are taking a severe beating.  As a measure of modest compensation, Governor Larry Hogan has allowed restaurants and bars to engage in something unprecedented: takeout and delivery service of alcohol.  That partly applies in MoCo too, but there is a holdup.

The county liquor monopoly.

The monopoly has approved takeout and delivery of beer and wine but not of cocktails and other spirits-related products.  Meanwhile, California, New York, Florida, Colorado, Vermont, Iowa and the District of Columbia allow takeout and/or delivery of cocktails, although they often require them to be offered in sealed containers and only with food.  Governor Hogan’s executive order allows takeout and delivery of spirits too but that is subject to additional restrictions imposed by local jurisdictions.  The City of Baltimore has chosen to allow takeout and delivery of cocktails.  MoCo has not.  Its grant of takeout and delivery authority explicitly says, “This permission does not include liquor.”

Nepenthe Brewing Company in Baltimore advertises takeout cocktails.

The liquor monopoly enjoys a retail monopoly on spirits sales and jealously protects it.  For example, after the General Assembly passed a law three years ago allowing the monopoly to contract with private stores to sell spirits, the monopoly simply refused to enter into any such contracts.  Loosening its retail spirits sales monopoly might damage its profits, which are the only reason it continues to exist.  (Profits are no problem at the moment as the monopoly’s business is booming while folks are stocking up.)

The issue matters because it affects the employment of a key category of personnel in the restaurant industry: bartenders.  Data from the U.S. Bureau of Labor Statistics indicates that MoCo and Frederick establishments together employed 1,410 bartenders in 2017, so at least 1,000 of them work in MoCo owing to the comparative size of the counties.  The two counties employed an additional 2,680 people classified as “dining room and cafeteria attendants and bartender helpers.”  When takeout and delivery is restricted to beer and wine, bartenders are not needed because anyone can handle bottles and cans.  But when spirits beverages are allowed, bartenders are necessary.

Clavel Mezcaleria – Taqueria in Baltimore has an online menu of pre-bottled cocktails.

One restaurant owner who contacted me put MoCo’s cocktail ban in economic terms.  “Maryland allows it.  Montgomery County does not.  Baltimore can sell a margarita to go.  We cannot.  That’s my point. The DLC [liquor monopoly] restricts us again.  If they allowed it I could keep some of my staff employed instead of on the unemployment line.”

So what’s more important?  The continued employment of a thousand MoCo bartenders?  Or the liquor monopoly’s long-time retail spirits monopoly?  County officials, you decide.

Share

Is This Moving Into the 21st Century?

By Adam Pagnucco.

Montgomery County Executive Marc Elrich has announced that he is “focused on building a 21st century economy that will help the County maintain its leadership position in the State, while being more competitive in the Washington D.C. metropolitan region.”  And how will that be done?

By marketing the county’s 1930s-era soviet liquor monopoly, of course!

The county’s Alcohol Beverage Services (ABS), formerly known as the Department of Liquor Control, has a monopoly on wholesale distribution of alcohol from which only small, local craft breweries and distilleries are exempt.  Through its county liquor stores, ABS also has a monopoly on off-premises retail sales of spirits.  This structure has been in place since the end of prohibition.

The original purpose of the liquor monopoly was to “control certain obnoxious practices” and “keep the county an attractive place to live.”  Now, however, the purpose of the monopoly is to make money.  During the current fiscal year, ABS is projected to contribute $28 million to the general fund and an additional $9 million to pay off county debt service.  Despite its overall profitability, ABS is under heavy pressure to make even more money for four primary reasons.

First, the county projected a $100 million revenue shortfall back in December.  It’s unknown whether that number will change when the executive’s recommended budget is released next month, but if there is a shortfall of close to that amount, that’s a problem.

Second, the county has been raiding its retiree health care fund to balance its budget in recent years.  A statement by Wall Street credit agency Moody’s warned the county to stop doing that.  If the county takes heed, how will it replace that money?

Third, the county council clearly has no appetite for tax increases at the moment.

Fourth, Council Member Hans Riemer recently revealed that the county liquor stores as a group are actually losing money, not making it.  That prompted an explosive reaction from ABS Director Bob Dorfman amid questions about whether the stores should continue operations.

An excerpt from an email by the county executive calling for a 21st Century economy and simultaneously promoting the liquor monopoly.

ABS has now proposed a solution for increasing the stores’ profitability: it wants to rebrand them.  In a council session on February 20, the council reviewed a letter from the county attorney asking for permission to hire outside counsel specializing in trademarks to secure a new name.  The county’s chief administrative officer told the council that the specific name being considered is “Cork and Barrel,” which a simple Google search confirms is widely used around the country (including in Maryland).  The initial outlay to the trademark attorney is expected to be less than $6,000.  But if ABS does go through with a name change, there will be many additional expenses for logo design and changes to facilities and equipment.  Last summer, when water and sewer utility WSSC proposed a name change, the projected expenses totaled $850,000.  Council Member Evan Glass raised the experience of WSSC and said, “If a government monopoly or a quasi-government monopoly needs a marketing and outreach strategy then there is a problem.”

Three council members – Riemer, Glass and Andrew Friedson – voted against the appointment of counsel.  Friedson and Glass have gone on record in opposition to the liquor monopoly.  Riemer thinks it is time for the county to close its retail liquor stores.  The rest of the council voted in favor of hiring outside counsel.

The county council has almost no power to control the liquor monopoly under state law.  But the General Assembly does and its vision for the monopoly is very different from the Elrich administration’s.  In 2017, the General Assembly passed a state law enabling the monopoly to contract with private stores to allow them to sell spirits.  (Right now, only county liquor stores may sell hard alcohol – a crucial advantage for the county.)  But ABS has ignored the law’s intent and has so far refused to allow private retail sales of spirits.  Its rationale is understandable: without its retail spirits monopoly, its stores might never be profitable.  No dissenting votes were cast in Annapolis against the law that the monopoly now flouts.  Will MoCo’s state legislators hold it accountable?

As for the name change and marketing expenses, consider this.  State law requires private beer and wine stores to purchase products from the county liquor monopoly’s wholesale operation.  Their payments will now be used to rebrand and market the county liquor stores that are in direct competition with them.  In essence, they will be required to pay for the county’s attempt to raid their market share and take away their business.

How is this a legitimate function of government?

How can Montgomery County do this and claim that it is business friendly??

MoCo faces a choice.  It can move into the 21st Century and allow competition.  Or it can have a 1930s-era soviet liquor monopoly.

It can’t do both.

Share

Mila Johns: End the Monopoly

By Adam Pagnucco.

District 18 House candidate Mila Johns has sent out a mailer calling for an end to MoCo’s liquor monopoly.  The mailer contains an endorsement from Comptroller Peter Franchot, a hero to monopoly opponents who has been calling for its end for years.  This is the first mailer we can recall seeing on this subject and we appreciate Johns’s courage in calling this question so publicly.

Share

Is the Liquor Monopoly Improving?

By Adam Pagnucco.

Once again, Montgomery County’s liquor monopoly is a hot issue in local politics.  As far as we know, MoCo is the only county in the nation in which the county government has a monopoly on the distribution of beer, wine and spirits and also a monopoly on retail sales of spirits.  Candidates for office disagree on whether it is needed.  In a response to David Lublin’s recent post on the subject, Department of Liquor Control (DLC) Director Bob Dorfman claims it has improved.

Has it?

We will give the monopoly credit for one thing: it did not see system-wide distribution failures in the critical week between Christmas and New Year’s last year as it did in 2015 and 2016.  That has not stopped two anti-monopoly groups from forming in the last few months, one representing licensees and another representing consumers.  But what’s really going on?  Let’s look at the data.

According to Gallup and the U.S. Department of Health and Human Services, alcohol consumption tends to be correlated with education and income.  That makes sense – people with college and graduate degrees tend to make more money, and people with more disposable income have more money available for alcohol purchases.  MoCo has lots of highly educated and wealthy people so we should be one of the leaders in alcohol spending in Maryland.

The Comptroller of Maryland, who collects alcohol taxes, posts annual reports of alcohol sales per capita for each of Maryland’s twenty-four jurisdictions on his website.  We collected the last ten fiscal years of that data and present it below.  Let’s remember when recent changes at the DLC occurred.  After many revelations of bad performance in 2014, DLC launched an “Action Plan” to improve performance in June 2015.  George Griffin, the former DLC Director who was blamed for the first New Year’s Eve meltdown, left in January 2016, about halfway through Fiscal Year 2016 (which ended on June 30).  Bob Dorfman, the new DLC Director, started in December 2016, about halfway through Fiscal Year 2017.  If these events were associated with genuine operational improvements, we would expect to see significant increases in both per capita sales and rank among jurisdictions over the last three years.

That has not happened.

Below is data on per capita sales of spirits, wine and beer in Montgomery County over the last ten fiscal years.

Spirits sales per capita have increased over the last decade, although they have barely changed since 2013.  Wine is stagnant.  Both wine and spirits fell in FY17, the first year of the new Director.  Beer sales per capita are down over the last decade and rose slightly in FY17.  But here’s the thing: MoCo’s new craft breweries are exempted from the liquor monopoly and, as a result, are doing really well.  The tiny gain in beer could be due to FREEDOM from the monopoly, not better operations at the monopoly.

Now let’s compare MoCo’s rank in per capita sales to the 23 other local jurisdictions in Maryland.

Because of its education and wealth, MoCo should be one of the leading counties in per capita alcohol sales.  It’s not.  In terms of spirits, the only county that’s worse is Somerset, which perhaps not coincidentally has its own monopoly on spirits sales.  In terms of beer, MoCo is dead last.  In terms of wine, MoCo has slid from ninth in the state to fourteenth, moving down a spot in FY17.  Jurisdictions in which residents bought more wine per capita than MoCo in FY17 included Anne Arundel, Baltimore City, Baltimore County, Calvert, Carroll, Cecil, Frederick, Garrett, Harford, Howard, Kent, Talbot and Worcester.  Does anyone believe that residents of counties with two-thirds of MoCo’s household income (or less) drink more wine than we do?

What’s happening is that consumers leave the county to buy alcohol.  That’s why numerous D.C. liquor stores are located within blocks of the MoCo border.  That’s why a fifth to a quarter of customers at Total Wine stores in McLean and Laurel come from MoCo.  The state’s Bureau of Revenue Estimates found that if MoCo customers were to return to the county to shop for alcohol in the absence of the liquor monopoly, the county would see a surge of almost $200 million in new economic activity, enabling a path forward for the county to replace every cent of lost revenue.

Dorfman is a better manager than his predecessor and we believe he is genuinely trying to improve DLC.  But Dorfman won’t be there forever and DLC has a long history of problems.  The monopoly also has a long history of promising improvement, mostly resulting in fleeting or ineffective fixes with quick relapses.  Even modest liberalization passed by the General Assembly to allow some private retail sales of spirits has been blocked.  What the above data on per capita alcohol sales shows is that, despite claims to the contrary, not much has changed.  And unless MoCo starts behaving like a normal county and allows private sector competition, true change may never come.

Share

No Free Drinks for Me: The DLC Bites Back

Yesterday, the Director of the Montgomery County Department of Liquor Control wrote me regarding about my recent post on the DLC. It’s unusual for a civil servant to dive into public political debates involving his department, especially during an election, so I thought I would print his email and my response.

David,

As I finished reading your blog ON “THOSE GOOD UNION JOBS” AT THE DEPARTMENT OF LIQUOR CONTROL, I was inclined to finally respond to your ongoing one-sided, dated, often inaccurate portrayal of the DLC, and particularly your lack of knowledge of the Federal and State alcohol regulations.

Simply put, you need to get out more.

Even our most vocal critics have acknowledged the significant improvements that we’ve made. You should come and see for yourself.

We can disagree with this or that policy but the demeaning and disparaging comments that you made about our several hundred hard working and dedicated DLC employees really crossed the line. I am proud of the work they do. You should be ashamed of yourself.

Regards,
Bob

Here is my reply:

Bob,

I did not disparage the work. I also did not attack the job done by the employees as a group. However, I think it is well within my rights to describe the service experience as variable despite the stores having seemingly more staff than equivalent private competitors inside and and outside the County. It’s also utterly reasonable to think that the DLC should exist to serve county residents, not that we exist to provide employment at the DLC. I just saw your latest sales figures and I see little sign of any change in the sales pattern that would indicate residents perceive a change. Certainly, I have heard little in the community or from restaurant operators.

More broadly, I’m entitled to my opinion, and one voice countering the weight of the DLC and county government agitprop hardly seems close to balance. In any case, I get vocal pushback on many posts, but heard less criticism than I thought I’d get on that one.

I call them as I see them and I see no shame in that.

If you have good news to share instead of shaking your finger at me, please let me know. I’m always glad to learn more.

David

Share