Montgomery County Executive Releases Statement on Liquor Control
“A Liquor Authority will bring private sector experience and management to the table in the form of a Board of Directors; the organization will be more nimble and adaptive to market changes and community needs, and would improve operational efficiency and effectiveness, while continuing to transfer profits to the County. Therefore, I instructed my staff to draft legislation to accomplish this objective,” Leggett said.
You can read the County Executive’s statement in its entirety, below.
“Earlier this year, the future of the Department of Liquor Control (DLC), and in particular, efforts to privatize the distribution of alcoholic beverages in Montgomery County arose as an issue in the General Assembly. In my view, these legislative efforts, which were supported by several local chambers of commerce and some licensees, did not garner widespread support nor were they fully analyzed for the potential impact to Montgomery County.
“To more thoroughly address the issue, I proposed a workgroup to explore options for different organizational models for liquor control and distribution that would meet the goals of privatization while maintaining the reliable revenue stream that is generated each year by this taxpayer asset. The Montgomery County Delegation, the Alcoholic Beverages Advisory Board, and the Chambers of Commerce supported that idea.
“As I said on numerous occasions, I am not philosophically opposed to the idea of privatization and was interested in hearing and exploring any and all ideas. My charge to the Workgroup was that it evaluate proposals for privatization against the goals of continuing to build on the improvements being made in providing quality service, excellent product selection and competitive prices, holding the County harmless in terms of existing and future revenue generated by DLC, protecting our bonds currently guaranteed by DLC revenue and protecting our valued County employees.
“The Workgroup included representatives of the manufacturing, wholesale and retail segments of the industry, the Chambers of Commerce, labor, the County Delegation and County Council and Executive Branch. I want to thank the members of the Workgroup for their time and assistance in this endeavor. The Workgroup met over several months, heard from industry representatives and experts, both local and from around the country.
“Additionally, we engaged the services of Public Financial Management (PFM) to analyze the options brought forward, with a primary focus on the fiscal impact of the options and the impact, if any, on the outstanding bonds supported by DLC revenue. PFM was also asked to comment on other impacts such as convenience, customer service and price.
“Those options included full privatization and a variety of partial privatization ideas, private management of DLC, establishment of an independent Liquor Authority, Bailment for the warehouse and use of agency stores to increase the number of spirits outlets.Click here to see the PFM Report.
“Based on the PFM analysis, the privatization option that best meets the goals I laid out is to create a Liquor Control Authority. A Liquor Authority will bring private sector experience and management to the table in the form of a Board of Directors; the organization will be more nimble and adaptive to market changes and community needs, and would improve operational efficiency and effectiveness, while continuing to transfer profits to the County. Therefore, I instructed my staff to draft legislation to accomplish this objective. The full bill will be available on the Montgomery County Delegation website soon.
“The legislation would:
- Create a Liquor Control Authority (Authority) as a public benefit corporation that provides a formal separation between the Authority and County government.
- On October 1, 2019, all liquor control functions and all related assets, obligations, powers and duties will transfer from the Department of Liquor Control (DLC) to the Authority. At that time, the DLC will be abolished.
- The Authority will retain control of the wholesale distribution of beer, wine and liquor and retail distribution of off-premises liquor.
- The Board of License Commissioners, which regulates the sale and distribution of alcohol through issuance of licenses, revocations and fines, will remain a separate entity and will not become part of the Authority.
- The Authority will be administered by a Board of Directors who must have experience in retail sales, wholesale distribution or management, or a related business. The Board will be appointed by the County Executive with approval by the County Council. The Board will appoint a Chief Executive Officer to manage the Authority’s operations.
- The Authority will be exempt from County procurement requirements and the Authority’s operating and capital budgets are not subject to County approval. The Authority will also have the ability to incur debt and issue bonds.
- The intent of the bill is to create a new business model for administering Montgomery County’s liquor control functions that will enhance operational efficiencies, customer service, product selection, and revenue generating capacity. In light of the fact that the DLC has been transferring an annual net profit of approximately $35 million to the County each year, it is intended that the County will obtain a fair return on its investment in assets that are transferred to the Authority by receiving an annual payment of net profits from the Authority.
- Current DLC employees who are members of a collective bargaining unit will remain County employees and be assigned to the Authority to perform duties under the direction of the Authority. These employees will remain subject to the County’s Collective Bargaining Law, applicable collective bargaining agreements and the County merit system. The County Executive will bargain with the collective bargaining representative for compensation, pension, fringe benefits and hours. The Authority will bargain with the collective bargaining representative for all other purposes.
- DLC’s management and other non-union employees will be transferred to the employ of the Authority unless the employee declines the transfer. Transferred employees will retain current pay, accrued leave and, until the Authority adopts its own policies regarding compensation, benefits and personnel, will retain County benefits and rights under the merit system.
“I also understand that Delegate Charles Barkley, who was a member of the Workgroup intends to introduce legislation to authorize the County to establish Agency stores. I am very interested in this proposal, which could be implemented by the County or the Liquor Control Authority.
“In the meantime, as these proposals are considered and potentially implemented, we firmly maintain our commitment to continue to implement improvements to the operations of the DLC. In addition to hiring new managers from the private sector, in the past year, we have improved:
- Customer service with the creation of a customer service center and improvements to iStore;
- Warehouse operations with enhanced inventory controls, more efficient organization and automated tracking systems;
- Accuracy and timeliness of special order deliveries;
- Delivery fleet vehicles; and
- Retail operations with opening of new stores.”