Montgomery County has been in the alcohol business since Prohibition ended in 1933. And business has been very good for Maryland’s most populous county.
It makes about $22 million a year as the exclusive wholesaler of adult beverages. That means the restaurant where you’re having a drink or the store you visit for beer and wine is required by law to buy its products from the county’s Department of Liquor Control. If you’re looking for a bottle of Jack Daniels or Stolichnaya and don’t want to travel outside the county, your destination will be one of 25 county-owned retail liquor outlets.
But the long, lucrative monopoly could be coming to an end. A bill sponsored by Del. C. William Frick (D-Montgomery) would ask voters to decide, through a referendum on the county’s 2016 ballot, whether establishments that sell alcohol can bypass the liquor control department to buy directly from private distributors. State Comptroller Peter Franchot (D) has said he intends to file similar legislation for the upcoming General Assembly session.
Frick and Franchot said they are responding to years of complaints from consumers and businesses about liquor control’s late deliveries and limited supply. While the agency has no trouble moving plenty of Miller Light and Kendall Jackson from its Gaithersburg warehouse to customers, owners say, it takes too long with fine wines and increasingly popular craft beers.
The lack of availability, poor service and high county markups drive customers — and their dollars — to neighboring jurisdictions, such as the District or Virginia, detractors contend. State data shows Montgomery County with significantly lower per-capita rates of alcohol consumption than neighboring Howard, Prince George’s and Frederick counties. That’s not because Montgomery residents are uncommonly abstemious, those in the industry argue.
“I can’t run a business properly if I don’t know what’s coming and when it’s coming. And the prices are uncompetitively high,” said Justin McInerny, owner of Capital Beer and Wine in Bethesda. “Someone comes in and says they have a rehearsal dinner in six weeks and they have to have this wine that they drank when they met. Six weeks later, it doesn’t show up.”
Frick called the system “a relic” that has reached last call. “It’s a system that isn’t serving the public. For a top-flight market, we should have top-flight service,” he said.
A public hearing on the bill is scheduled Monday evening in County Council chambers in Rockville.
Liquor control director George Griffin acknowledges the problems but said there have been significant improvements in the past eight to 10 months.
The proposed bill has also touched off a larger political scuffle involving big money, union jobs and accusations of conflicts of interest.
Montgomery County Executive Isiah Leggett (D) and nearly all County Council members contend that revenue loss resulting from privatization would be ruinous. It also would effectively put the liquor control department out of business, endangering more than 250 union-wage jobs for members of the politically influential United Food and Commercial Workers Local 1994 (MCGEO), who work in the warehouse and retail stores.
Leggett said last week that he is not opposed to getting out of the liquor business, as long as there is a plan to make the county whole.
“And no plan has come forward. I think there is an irresponsibility on the part of some who say, ‘We can just make that up.’ No, we can’t just make that up,” said Leggett, citing new drains on the county budget, including millions of dollars in income tax refunds it faces as a result of the Supreme Court’s decision in the C0mptroller v. Wynne case. The court ruled 5 to 4 that some Maryland residents with out-of-state earnings had been illegally double-taxed under state law.
About a third of the states, including Virginia, exert some form of direct control over the distribution and sale of alcohol. But Montgomery County is an outlier in Maryland, the legacy of a powerful local temperance movement.
Montgomery went dry in the late 19th century, and after the repeal of Prohibition, the state legislature established the basis for the county’s regulatory system.
As late as 1955, hard liquor was available only in country clubs and a handful of restaurants, according to the Montgomery County Historical Society.
In the view of civic leaders who aspired to see the county grow into a prosperous suburb, tight control of alcohol was a must.
“We think of our county as a bedroom community rather than a center of revelry,” William R. McCaullum, president of the Allied Civic Group, explained in 1962.
That elite consensus remained largely undisturbed until a couple of years ago, when county leaders, concerned about the higher concentrations of younger residents in Arlington and the District, started looking for ways to goose Montgomery’s placid night life.
A task force that included Council member Hans Riemer (D-At Large) recommended a series of measures, including legislation seeking state permission to modify liquor laws so that bars and restaurants could buy “special order” items — rare wines, craft beers — from private wholesalers.
The council voted in July to seek state action. But an unintended consequence was renewed interest among county businesses and industry groups in pushing for full privatization.
Frick’s bill has frustrated county officials. Liquor money supports more than $100 million in revenue bonds issued for road construction and other services. If revenue flowing from the liquor control department dries up, the county must find other funds for an estimated $11 million in annual interest payments. Revenue bondholders could sue for breach of contract, the county’s bond counsel warned.
Proponents argue that a $30 million loss can surely be absorbed by a $5 billion annual operating budget. But Leggett points out that more than 80 percent of that money is already earmarked for schools, police and fire protection, and debt service. He has warned that he is likely to include a major property tax increase in his next proposed budget this spring.
Council member Marc Elrich (D-At Large), who served with Riemer on an ad hoc committee that studied county liquor control, said the bill amounts to a brazen money grab.
“If these are Republicans doing this, dismantling something in government that actually made money and then handing it over to the private sector, I’d get that,” he said. “But these are not Republicans. This is just beyond the pale to me.”
Council member Roger Berliner (D-Potomac-Bethesda), the lone member in support of Frick’s bill, said the current system imposes a significant hidden tax on Montgomery consumers and ultimately hampers the county economy.
“I ask myself three fundamental questions,” Berliner said. “Is this a core government responsibility? Do we perform it well? And is it in our best interest long term? And I believe the answer to all three is an emphatic ‘No.’ ”
Questions have also been raised about the influence of the liquor industry on county and state officials. David Trone, co-owner of Total Wine and More, the huge Bethesda-based retailer, is a major contributor to Democrats, including Franchot. A study this year by the Center for Public Integrity found that alcohol distributors employed at least 315 registered lobbyists at the state level nationwide.
Opponents of Frick’s bill have also pointed out that his wife, Bethany Frick, is a national accounts vice president for international liquor giant Diageo, which makes Johnny Walker, Crown Royal and other major brands. The couple’s financial disclosure forms show holdings of at least $20,000 in Diageo North America stock.
MCGEO President Gino Renne called last week for an investigation by the state legislature’s Joint Committee on Legislative Ethics, contending that Frick would directly benefit from passage of his bill. State Sen. Jamie B. Raskin (D-Montgomery), chairman of the committee, declined to comment Friday, citing a policy of not discussing matters pending before the panel.
Frick said Renne’s allegations, based on his own financial disclosures, are without merit.
“The entrenched interests can’t defend this system on the merits so they are trying to use intimidation and baseless personal attacks to preserve the status quo,” Frick said. “The voters deserve to be heard.”