Leggett Withdraws Liquor Authority Bill

The state legislation was an attempt to reform county's Department of Liquor Control by placing it under an independent board

Montgomery County Executive Ike Leggett Bethesda Beat file photo

County Executive Ike Leggett has killed his proposal to reform the county’s Department of Liquor Control (DLC) by putting it under the control of an independent liquor authority.

Leggett on Friday asked the county's state delegation to withdraw the bill that would have created the authority.

He told Bethesda Beat on Friday that the bill is no longer needed because the management changes he has made and the improvement plan being implemented by the department provide the county with an opportunity to “address all the issues people have raised.”

Leggett’s proposal called for placing the department under the control of a board of directors and management that could run its distribution and retail operations more like a private business rather than a government entity. However, the proposal would have kept the monopoly protections enjoyed by the DLC in place.

The department controls the wholesale distribution of most alcohol in the county as well as the retail sale of all liquor—a control system believed to be unique in the U.S.—and generates about $30 million per year in profits for the county.

“I believe the bill struck a good balance of moving the county out of the alcohol business and putting it in the hands of the private sector while still protecting county resources,” Leggett said. “Some people accepted that idea, while others thought we should have a clean break and simply give up the $30 million-plus. But given the financial constrains we have … I thought that was unacceptable.”

Restaurant and beer and wine shop owners, including some who have called for privatization of the department, previously criticized Leggett’s proposal because it would have maintained the monopoly system that they blame for issues such as a lack of selection, inaccurate deliveries and poor customer service. The bill also failed to gain the support of the Montgomery County Council.

“The proposal accomplished its purpose, which was to delay conversation about real reforms,” said state Del. Bill Frick (D-Bethesda), who proposed a bill during last year’s General Assembly session that called for a county referendum on whether to keep the department’s monopoly. Frick’s bill failed to get enough support from the county’s House delegation after Leggett and the council opposed it.

In response, Leggett said he remains open to new ideas, but the department’s critics have failed to put forth a proposal that included replacing the DLC’s profits.

For three years, Leggett and the County Council have attempted to develop proposals, to fix complaints about the DLC, although no state legislation has been approved. State law governs alcohol regulations, so any significant changes to the department must be approved by the General Assembly.

Piecemeal changes have taken place at the department, however. Longtime DLC Director George Griffin resigned in January 2016 after the DLC missed deliveries to restaurants and retail beer and wine stores before Christmas and New Year’s Eve in 2015. In December, Leggett appointed former restaurant industry executive Robert Dorfman to lead the DLC. Leggett has also made other management changes, including hiring former alcohol distribution executive John Zeltner to oversee the DLC’s Gaithersburg warehouse. The department is also implementing a long-term improvement plan that’s focused on upgrading customer service, warehouse operations, the county’s 26 retail stores and alcohol delivery logistics.

Despite the county’s efforts, the drumbeat for privatization has continued. The county’s chambers of commerce have united in calling for privatization. And the question of whether to maintain the alcohol monopoly is likely to be an issue in the 2018 local elections.

Some potential candidates for county executive—such as current council President Roger Berliner, former council member Michael Knapp and Total Wine & More co-founder David Trone—are in favor of ending the DLC’s monopoly protections. None of the men has formally announced his candidacy, but all three are rumored to be considering runs, with Trone telling Bethesda Beat in January he’s focused on the race.

Leggett and the other eight council members have defended the DLC by saying the county needs its $30 million in annual profits to pay for education and transportation spending and other priorities. The county employee union, UFCW MCGEO Local 1994, has also opposed changes the department’s structure that could negatively impact the 350 union employees who work for the DLC.

Leggett reiterated Friday he’s not against privatization if it includes a way for the county to recoup the department’s annual profits. He noted more than 80 percent of the county’s $5 billion annual operating budget is spent on mandated or difficult to change expenses such as school maintenance of effort funding and public safety—leaving about 15 percent, which includes the alcohol profits, for discretionary funding.

Last year, Leggett convened a task force to examine alternatives to the DLC. The task force of business owners, alcohol industry professionals and government representatives met three times and put forth several proposals to change the structure of the department, including privatizing the department. The county then asked a consulting firm to evaluate the proposals. After analyzing the firm’s report, Leggett proposed his liquor authority bill.