Privately Owned ‘Agency’ Liquor Stores Appear Unlikely To Begin Operating Anytime Soon in Montgomery County

Although the county was given the authority to license private store owners to sell liquor, the Department of Liquor Control director said there's no timeline to do so

A county liquor store in Cloverly Andrew Metcalf/ file photo

The Montgomery County Department of Liquor Control’s director said this week the department hasn’t set a timeline or established a policy to begin licensing privately owned beer and wine stores in the county to sell liquor.

The DLC has had the ability to license the privately owned stores to sell spirits for more than a year.

If implemented, such a policy could change the county’s long-held monopoly on the retail sale of liquor at its 27 government-run retail stores, which are the only locations where residents and others can buy spirits such as whiskey, vodka and rum in the county.

Hundreds of privately owned beer and wine store owners could potentially apply for spirits licenses if the county created a policy for them to do so. However, Dorfman said any new policy would likely not permit a privately owned store that wants to sell liquor to operate within five miles of a county liquor store.

The county has been legally permitted by the state to license privately owned beer and wine stores to sell liquor since the General Assembly approved enabling legislation in the spring of 2017. The legislation allowed the DLC to establish criteria governing which stores would be permitted to sell liquor. The privately owned liquor stores would still be required to buy their products from the county department, which also has a monopoly over the wholesale distribution of all alcohol in the county.

Dorfman said shortly after the bill was approved that the department expected to license local stores to sell liquor by Jan. 1, 2018. This week, however, he said DLC officials were continuing to consider how or if to roll out the new licenses.

He said he formed a panel of local beer and wine store owners, liquor company executives and health officials last year to make recommendations on a potential policy. He said that group came up with the recommendation to not locate a privately owned liquor store within five miles of a county liquor store.

If this policy were approved, it would mean privately owned liquor stores would basically be prohibited from operating anywhere in southern Montgomery County because of proximity to existing county stores.

A map with five mile circles centered around three county liquor stores in downtown Bethesda (green), downtown Silver Spring (red) and downtown Rockville (blue). Map created by Bethesda Beat using Google maps

“I personally live about four and a half miles from a county store in North Potomac,” Dorfman said. “It isn’t inconvenient. I have never, ever gotten a phone call, email or text from anyone in this county complaining about access to distilled spirits.”

Arash Tafakor, owner of Downtown Crown Wine & Beer in Gaithersburg and a frequent critic of the DLC, said the five-mile radius protection for county liquor stores would prevent privately owned stores from selling spirits.

“It just shows the county doesn’t want to give up control,” Tafakor said.

County Council President Hans Riemer said Wednesday the proposed five-mile separation “seems quite large.” He added that while he doesn’t want a policy that permits a “liquor store on every corner,” he would like the county to grant some licenses to beer and wine store owners to sell spirits.

“It sounds like something we’re going to have look into,” Riemer said. “I think it could meet the need in some communities to have more access to spirits.”

Riemer added that he’s more interested in trying to change state regulations that prevent beer and wine from being sold in most grocery stores.

“I would still like to see that moving ahead,” Riemer said. “I think people’s biggest concern is getting beer and wine in grocery stores above all else.”

Proposals to enable grocery stores to sell beer and wine have been fiercely fought in the General Assembly by alcohol store owners in the state. A powerful association of store owners—The Maryland State Licensed Beverage Association—consistently lobbies against potential legislation that could negatively impact their businesses.

Representatives from the Distilled Spirits Council, an association that represents liquor producers, previously told a county DLC reform group in 2016 that the county’s alcohol market is underserved by the existing government-run liquor stores. A study done by the group found the county has about 0.34 liquor stores per 10,000 residents—far less than the Maryland average of about three stores per 10,000 residents. The representatives said the county could increase its wholesale alcohol distribution profits by licensing privately owned “agency” stores to sell spirits.

A Distilled Spirits Council chart showing liquor store rates in Montgomery County compared to elsewhere.

Each year the DLC generates about $30 million in profits for the county which is transferred to the general fund and used to pay off long-term bonds. In the fiscal 2019 budget proposal, the department estimates it will generate about $40 million in profit.

Dorfman also said there’s no timeline yet for licensing privately owned stores partly because the department is now working on creating smaller, county-run “boutique” liquor stores that could be set up and operate next to privately owned beer and wine stores. The stores could help increase DLC sales and increase foot traffic to the privately owned stores, Dorfman said.

He also said licensing private stores to sell spirits has become complicated because some beer and wine store owners are concerned that a rival store near them could get a license to sell liquor and then poach their customers.

“There are licensees out there who are fearful that we’re awarding contracts because they’re afraid someone closer to them will get one and they won’t,” Dorfman said. “I’m not in any serious rush on this. I want to do it right.”

Tafakor indicated this was a concern for his Gaithersburg store.

“If one store can get [the license], then all stores should be able to get it,” he said.