Free Booze in MoCo? (Bethesda, Rockville: sale, 2015, house)

[CBMD]

OK, thread title is a tease.

That said, MoCo is contemplating it's biggest alcohol policy shift since the repeal of Prohibition in 1933.
These Bethesda Beat pieces caught my eye. Mud slinging in the comments section has already begun.

Frick, Other Local State Legislators Want Referendum on Whether to End Montgomery County’s Alcohol Monopoly - Bethesda Beat - Bethesda, MD

Businesses Pleased, but Some County Leaders Wary About Proposals to Open Montgomery County’s Liquor Control System to Competition - Bethesda Beat - Bethesda, MD

Franchot to Propose Legislation Opening Montgomery County Liquor Control System to Competition - Bethesda Beat - Bethesda, MD

Looks like two separate bills have already been filed for Annapolis 2016, and Comptroller Franchot is promising a third.

MC 3-16 Montgomery County – Alcoholic Beverages – Class A Beer, Wine, and Liquor Licenses and Purchases From Licensed Wholesalers

MC 21-16 Montgomery County – Alcoholic Beverages – Class A Beer, Wine and Liquor Licenses

I believe MoCo ended up with it's current "unique" system because when Prohibition was repealed Mormons & Seventh Day Adventists were influential in local politics. Evidence? The only two Adventist hospitals in the Washington region, plus the Mormon Tabernacle are in MoCO. Now those interests, plus other vested (union) interests, are fighting a rearguard action to maintain the status quo.
I think it's pretty clear a majority of the public want change, but some pols (Ike Legget, and County Councilors) are still resistant.

This stuff is not rocket science, the sky has not fallen elsewhere, the money aspect is miniscule in the big picture. Get on with it.

[CBMD]

They were rattlin/rumblin/shoutinanspoutin until 2.am this morning in Rockville.

Heated Debate Surrounds Liquor Control Bills

[bufflove]

I wouldn't call $30M/year added to county coffers miniscule, but I agree that reform is badly needed. I think everyone thinks that at this point - the question is how far to take it. Personally, I'm fine with the county keeping their liquor stores (the vast majority of the $30M/year profit), but should end the distribution monopoly altogether and let businesses buy from whichever distributor they prefer. Currently, it looks like the county will go half-way on that and allow businesses to fulfill "special orders"/craft selections w/whoever but would still have to buy through the county for beer/wine/liquor staples. Seems like a stupid and overly complex "solution."

[Smiley32699]

I don't like the idea of increased taxes in MoCo, but I really do think that it's time to end this type of distribution monopoly. If there's no change, people will continue to go to Magruder's/DC or PG to buy liquor.

[CBMD]

$30M is just 0.6% of a $5B budget.

The real issue though is the unsustainabilty of the retail operation, which benefits from an accounting system, that while I assume is legal, is to say the least unorthodox. If that gets exposed (and it will) by the separation of retail from wholesale operations then in a few years the retail operation will be bankrupt. The county insiders know this, and that's why they are resistant to change.

Here's how it works.

County warehouse buys a bottle of wine from winery for $10, applies a 35% wholesale mark up and sells it to restaurant and private retailer for $13.50.

Same bottle gets transferred into a county store at $10, and the retail store first applies the 35% wholesale mark up, (alarm bells), and then a further 28% retail mark up for a compound 73% mark up.

The wholesale operation which bears similar costs for distributing to county and private, makes zero money on distribution to county stores. The wholesale operation is subsidizing the retail operation. If they applied a wholesale mark up to wholesale operations, and deprived retail of a wholesale mark up, county would get the same amount of money, just accounted for differently. But doing that exposes the weakness of the retail position.

A private store paying the $13.50 price will typically apply a 50% mark up and sell for $19.99. The county store paying the $10 price will sell for $17.29.

Separate county wholesale from county retail and the chickens come home to roost. If the retail stores have to pay wholesale price, and are allowed only to book a retail mark up, just like every other retail store, then every single county store is losing money. That is a monumental achievement for an operation that has a monopoly on the sale of liquor, and is by far the dominant retailer of wine in the county. The 24/25 county retail stores sell way more wine than the 200 private stores.

On price front, post separation, one of two things happens, either the county retail stores purchase prices get raised to the level of the private stores, or the private stores fall to the level of the county stores. Either way, big trouble for the county stores. If their purchase price goes up to $13.50 they have raise their selling price to around $23, to maintain current ratios. They could afford to sell for less, but not a whole lot. Some of the stores are only marginally profitable as is.

Alternatively, everyone pays $10, the private stores sell at $14.99 and the county is at $17.30, or close to. If the county goes to $14.99 it loses money, is a revenue drag, and meanwhile the private sector is rolling along fine. It's the worst of both worlds. the county gets neither the money or temperance it desires.

The insiders all know this, they're just afraid to say it publicly.

[bufflove]

Originally Posted by CBMD

$30M is just 0.6% of a $5B budget.

True, but the vast majority of that $5B is non-discretionary and I'm not particularly eager to create a $30M/year budget gap that'll surely just be made up with w/more taxes elsewhere. I'm all for reform, but also want the budget effects mitigated. If that means the county still runs their cash-cow liquor stores, I'm fine with that as I find the selection adequate and the pricing much better than you see in NoVa. It's the restaurant/bar distribution side of things that I find most problematic, personally.

[CBMD]

Originally Posted by bufflove

True, but the vast majority of that $5B is non-discretionary and I'm not particularly eager to create a $30M/year budget gap that'll surely just be made up with w/more taxes elsewhere. I'm all for reform, but also want the budget effects mitigated. If that means the county still runs their cash-cow liquor stores, I'm fine with that as I find the selection adequate and the pricing much better than you see in NoVa. It's the restaurant/bar distribution side of things that I find most problematic, personally.

I think you're missing the point. The wholesale side is the cash cow, retail is profitable only because of unorthodox accounting. Separate them and the house of cards collapses.

Also, I neglected to say earlier, MoCo would not give up an entire $30M, some of that would be replaced by new fees and taxes, on wholesalers, restaurants, retailers, amount to be decided later.

An extra $10,000 per licensee per year in fees, would generate approx. $10M per year. That equates to the notional extra $3.50 per bottle, on 3,000 bottles a year. That's just 5 cases per licensee per week, a relative pittance that could probably be easily doubled, with the balance coming from wholesalers.
Relatively easy to make the whole thing revenue neutral. County would just have to figure out what to do with employees.

[bufflove]

Originally Posted by CBMD

I think you're missing the point. The wholesale side is the cash cow, retail is profitable only because of unorthodox accounting. Separate them and the house of cards collapses.

Also, I neglected to say earlier, MoCo would not give up an entire $30M, some of that would be replaced by new fees and taxes, on wholesalers, restaurants, retailers, amount to be decided later.

An extra $10,000 per licensee per year in fees, would generate approx. $10M per year. That equates to the notional extra $3.50 per bottle, on 3,000 bottles a year. That's just 5 cases per licensee per week, a relative pittance that could probably be easily doubled, with the balance coming from wholesalers.
Relatively easy to make the whole thing revenue neutral. County would just have to figure out what to do with employees.

The 25 (soon to be 27, I believe) liquor stores account for $18-20M of the 30M profit. I'm eager for the DLC to get out of the retail distribution business as it's a smaller slice of profit than their liquor store monopoly and it's the vast majority of what retailers/restaurants/consumers complain about.

I'm fine with continuing the liquor store monopoly, personally, as many states have the same practice, the MoCo stores are decently run, and the pricing is much better than you see in the rest of the region (especially compared to VA's ABC stores). It's not worth the $20M in lost profit (read: new taxes) just so I can buy my liquor from Peter instead of Paul, IMO.

[CBMD]

Originally Posted by bufflove

The 25 (soon to be 27, I believe) liquor stores account for $18-20M of the 30M profit. I'm eager for the DLC to get out of the retail distribution business as it's a smaller slice of profit than their liquor store monopoly and it's the vast majority of what retailers/restaurants/consumers complain about.

I'm fine with continuing the liquor store monopoly, personally, as many states have the same practice, the MoCo stores are decently run, and the pricing is much better than you see in the rest of the region (especially compared to VA's ABC stores). It's not worth the $20M in lost profit (read: new taxes) just so I can buy my liquor from Peter instead of Paul, IMO.

You seem to be contradicting yourself here. I think you mean you would like to see the county out of the wholesale side, not retail as you stated.

There are a lot more retail store customers, than there are restaurants. Ratio is about 1,000 : 1.
So why would you be more concerned about what restaurants complain about, than what consumers complain about?


Not quite. There are 16 "control" states, plus MoCo. All of them control liquor, most like NC. Va. WV. Oh, Mi. control liquor only. A few like Pa control liquor & wine.
MoCo is the only jurisdiction in the country that controls beer, wine, and liquor. Ever wondered why you never see a Bud/Miller truck etc. on MoCo's roads?


If you heard the Kojo show on 88.5 today, the WAMU reporter Matt Bush said that pricing, on liquor only, is a mixed bag. MoCo has both higher and lower pricing compared to other jurisdictions. On beer and wine price is uniformly higher.


The proposals under consideration would replace some of the lost profit with new fees on restaurants, retailers, and wholesalers, and you would likely get your wine at about a 25% lower price.



Map of control states.


Control States : NABCA

[papichulo2]

drinking and smoking is OK!