Franchot to Propose Legislation Opening Montgomery County Liquor Control System to Competition

Bill would allow restaurants, retailers to choose between DLC and private distributors

By Louis Peck

Comptroller Peter Franchot Aaron Kraut

Updated at 5:50 p.m. – When the Maryland General Assembly convenes early next year, state Comptroller Peter Franchot—a long-time critic of Montgomery County’s public liquor control regime—plans to propose legislation designed to inject full-scale private sector competition into the current system.

The plan being crafted is modeled on legislation the General Assembly adopted in 2011—at Franchot’s urging—to steer the liquor control system in Worcester County on Maryland’s Eastern Shore toward privatization. The latter measure did not force the county out of the distribution of alcoholic beverages, but instead gave restaurants and retail stores the option of purchasing beer, wine and liquor from either the county dispensary or a private wholesaler/distributor.

Franchot now hopes to take what he termed the “very successful” experience in Worcester County—he noted that a large majority of establishments in that county selling alcoholic beverages have opted to deal with private distributors—and to implement it in Montgomery, the state’s largest jurisdiction.

“Look, we’re not going to demand that the county end its monopoly—we’re simply going to call their bluff and ask that the private sector be allowed to compete, both for the distribution and retailing of spirits and distribution of beer and wine,” Franchot said in an interview Wednesday. “I would anticipate that in a very short period of time, several years at the most, restaurants and consumers would move—organically, so to speak—from the county monopoly to the private sector.”

Currently, privately owned retailers can sell beer and wine for off-premise consumption in Montgomery County, but they must purchase these products from the county’s Department of Liquor Control (DLC).In addition, retail sale of hard liquor is limited to 25 county-owned stores and restaurants must also obtain alcoholic beverages from the DLC warehouse in Gaithersburg.

Related: Frick, Other State Legislators Want Referendum on Whether to End Montgomery County's Alcohol Monopoly

Outlining his proposal, Franchot, a Takoma Park resident, declared, “This would be a very efficient…approach to a problem that that bedevils the county right now, because everyone knows the restaurants are not happy, everyone knows the consumers are getting gouged, and everyone knows that Montgomery County stands almost alone as far as having the most Prohibition-type system.”

Montgomery is believed to be the only county in the country to retain control over both the distribution and retail sale of alcoholic beverages, a system that dates back to the end of Prohibition in 1933.

Franchot said his office has not yet determined all the details of his forthcoming legislation, including the length of time over which the dual public/private system of distribution would be phased in. “I think we would ask for the implementation to begin as soon as possible,” Franchot said.

There is also the political question as to whether the legislation will be put before the General Assembly as a so-called departmental bill—introduced at Franchot’s request by leaders of the Senate and House of Delegates—or whether it will be sponsored by members of the Montgomery County delegation.

“I have tremendous respect for the Montgomery County delegation,” said Franchot, who served as a member of the House of Delegates for two decades prior to his election as comptroller. “I’m happy to work with them on the successful transition [such as] occurred in Worcester County, and look forward to communicating with them about this new legislation.”

He added, “I have expressed myself very clearly to them that we need a wholesale change, not a piecemeal change.”

The latter comment was clearly aimed at a recent proposal by the Montgomery County Council to privatize so-called special order sales, but to leave the rest of the current public liquor control structure in place. So-called special orders involve products not stocked in the county warehouse, and many restaurant owners have complained repeatedly about the delays in receiving delivery of such orders, particularly wine.

Referring to at-large council member Hans Riemer, who headed an ad hoc committee that came up with the proposed changes in special order sales, Franchot said: “I appreciate the hard work of Hans Riemer and others, and I appreciate what they’re trying to do. But that’s not the fundamental answer that our constituents are asking for.”

And, alluding to a recent proposal by the DLC to open five more county-owned liquor stores by next summer, Franchot complained: “The idea that those minor reforms are coupled with an expansion of county liquor stores is doubling down on a bad idea. So it’s not just that it’s a piecemeal approach—it’s coupled with a significant expansion of the existing, bad system.”

Under Franchot’s legislation, the county would be allowed to continue to own its current retail stores, but those outlets would also have the option of choosing whether to purchase their products from private distributors. “Right now, their pricing in certain products is 30 to 40 percent higher than what [consumers] can purchase across the D.C. line,” Franchot said.

Franchot said he has “not recently” spoken about the liquor control issue with County Executive Ike Leggett, who has voiced steadfast opposition to privatizing the DLC. Leggett and several members of the County Council have expressed concern about the potential loss of more than $30 million in profit that the DLC contributes each year to county revenues.

On Thursday, Legget’s spokesman Patrick Lacefield said the current system benefits the public health of the county and brings in profit of about $34 million per year.

“If that $34 million goes away… that means a reduction of county services or an increase in taxes,” Lacefield said. “That’s the choice.”

He said Leggett and the County Council have both reviewed the DLC and whether it should be privatized many times and have chosen to keep it in place.

“We respectfully disagree with Mr. Franchot on this,” Lacefield said.

Franchot, however, pointed out that the county currently has a $5 billion operating budget. “The [profit from the DLC] is a significant amount of money, but it’s de minimis compared to the entire budget. I think the county will very quickly find an increase in their tax revenues through increased economic activity…The restaurant and tavern business of Montgomery County, as vibrant as it is, would be more successful if we had the right system.”

Another leading opponent of privatization has been UFCW Local 1994 MCGEO, the union that represents about 5,000 full-time county employees—about 7 percent of whom work for the DLC. Echoing other privatization advocates, Franchot noted that most private distributors of alcoholic beverages also have unionized workforces.

“I don’t think the policy decision is ‘Should it be the union that currently represents the workers or another union?’,” Franchot said. “It’s still a union, and the workers get protection.”

Asked about the possibility of a referendum on public control during Wednesday’s interview, Franchot said, “As a last resort, I would support some kind of referendum.” But he expressed a preference for taking the legislative route, saying, “I’m not enthusiastic about a referendum right now, because we’re going to have a much better option that immediately brings relief and improvement to the current situation, which is unacceptable.”

Franchot’s move to propose legislation comes several weeks after a poll—commissioned by his campaign organization to gauge the views of statewide voters on a number of issues—included a question on public liquor control for poll respondents from Montgomery County. On that question, “Do you favor or oppose a proposal to get rid of the laws making Montgomery County an alcohol controlled county?”, 69 percent favored getting rid of the current system, with 24 percent opposed.

While the poll of Montgomery County residents involved a very small subsample—84 respondents, with an error margin of nearly 11 percent—this indicates that at least 58 percent favor doing away with the status quo, and that the number could be as high as 80 percent.

“There is some uncertainty about what was going through people’s minds when they answered this question—but I would say that the chances are very high that the majority of Montgomery County residents would favor this,” said one polling expert, Steven Kull of the University of Maryland’s School of Public Policy. “And the fact that the [result] is so robust across the different subgroups—Democrats, conservatives, Republicans, and so on—is quite interesting.”