Heated Debate Surrounds Liquor Control Bills

Business owners, government officials and individuals testified until nearly 2 a.m. Tuesday morning over proposals to alter county's Department of Liquor Control

By Andrew Metcalf

Delegate Bill Frick, right, testifies at a public hearing Monday night that extended into Tuesday morning Twitter via @CherylKagan

It was around 1 a.m. Tuesday and a half-dozen restaurant owners had just finished telling Montgomery County state legislators about why they were supporting a proposal that would end the county’s alcohol monopoly.

The restaurant owners, by that point, had sat through six hours of other testimony during a public hearing on proposed legislation held by state legislators in the County Council office building in Rockville. Their complaints were directed at the county’s Department of Liquor Control (DLC), which they said has prevented the county’s restaurant scene from properly developing.

“I’ve suffered for 12 long years under the current system and have vowed that I would never open another restaurant in Montgomery County,” said Jackie Greenbaum, owner of Jackie’s Restaurant and the Quarry House Tavern in Silver Spring.

“It is our belief that the control of all alcohol at the county level has over time resulted in a lower quality dining service in MoCo, lower expectations and the loss of great businesses, commerce and tax revenues to our competitors—specifically the District,” said the beverage manager from Jaleo Bethesda, who was reading a prepared statement from ThinkFoodGroup CEO Rob Wilder. “Where are the young and up-and-coming chefs in Bethesda? Where are the entrepreneurial culinary trend-setters in MoCo?”

Julie Verratti, a co-owner of Denizens Brewing Co. in Silver Spring, said many county restaurant managers aren’t interested in trying Denizens’ products because they’re so accustomed to using the one-seller system the DLC provides.

“I actually sell more beer in D.C. than I do right here at home because the DLC has created such a monopoly in the beer distribution system,” Verratti said.

The restaurant owners and others testified in support of Del. Bill Frick’s bill to set a referendum to ask voters if they want to open the county’s alcohol market to private distributors.

The restaurant owners were buoyed by others—including Chamber of Commerce leaders, owners of beer and wine shops and individual consumers—who explained to legislators that the county’s control over the distribution of all alcohol and retail sales of all liquor is hurting businesses and the local hospitality economy.

Those in support of Frick’s bill said competing legislation supported by the county government—which would allow private distributors to sell “special order” products in the county—is overly complicated and falls short of fixing the problems they experience.

However, it appeared last night that the political will required to eliminate the monopoly may not yet exist.

After the business owners shared their stories, state Sen. Cheryl Kagan (D-District 17) asked them if they’d be willing to reconsider and join county leaders in supporting a bill that would allow private distributors to sell only special order products.

“Sometimes you have to accomplish a little bit,” Kagan said. “Right now this may be the only thing that’s viable. A year or two or five down the road, there could be other conversations.”

Joanne Gilchrist, owner of Gilly’s Craft Beer and Fine Wine in Rockville, responded, “The answer is to skip this and go straight to Del. Frick’s bill. It gives us a lot of solutions.”

County Council member Hans Riemer, who helped draft and guide the special order proposal through the council, defended the proposed legislation. He said restaurants that experience problems with the DLC typically order mostly special order products—the approximately 25,000 types of craft beers, fine wines and craft liquor that the DLC doesn’t stock in its Gaithersburg distribution warehouse.

These items have to be specially ordered by the DLC, a process that can often take weeks and adds an extra layer of price markups. He said that allowing private distributors to sell these products addresses many of the concerns of restaurateurs and beer and wine shop owners. He called the proposal “realistic” and said it was a compromise that protected most of the county’s more than $30 million in annual profits generated by the DLC.

The county proposal does not enable private distributors to sell craft liquor in the county—a point raised by Del. Kirill Reznik (D-District 39), who is co-sponsoring Frick’s bill. Riemer said he was neutral about amending the legislation to include craft liquor as well.

Riemer was joined by other county leaders, including County Executive Ike Leggett and outgoing County Council President George Leventhal, who urged legislators not to support Frick’s proposal because of the impact the loss of the DLC’s revenue would have on the county’s $5 billion operating budget.

“I can’t understand why we would want to do this in this fashion,” Leggett said in a forceful speech to the legislators. “This is irresponsible. It will not help our county. It will hold us back.”

Leggett said ending the whole monopoly DLC currently enjoys would result in an increase in annual property taxes of approximately $100 per household.

The county government-supported proposal also calls for a surcharge on special orders to replace the approximately $5 million in profit the county expects to lose by allowing private distributors to sell special order products. The surcharge would be set by the DLC, according to the bill.

This surcharge drew questions from J. Steven Wise, a prominent alcohol industry lobbyist in Annapolis. He said it’s most likely illegal for the county to attempt to implement a surcharge, which he said would amount to a tax, on alcohol. He also said that it would not be economical for many distributors to sell only special order products in the county. The businesses depend on selling products the DLC considers “stock”—such as Bud Light or Sutter Home wines—as well as craft beer and fine wines as part of their delivery rounds to make a profit, Wise said.

It was often noted during the marathon meeting Monday night that Frick’s proposal would not eliminate the DLC, but instead allow private distributors to compete directly with the entity. If the legislation calling for a referendum were to pass in the General Assembly, the referendum wouldn’t take place until the fall 2016 election. If the proposal to open the county to private competition passes, which almost every official predicted it would, private distributors wouldn’t be able to enter the market until the summer of 2018, according to Frick.

“Hopefully if [the DLC] is operated better in the next five years, we won’t see a line of distributors walking into here looking to take over,” Del. Kathleen Dumais (D-District 15) said. Dumais is a co-sponsor of Frick’s bill.

Yet county officials dismissed this argument—and said opening the county’s alcohol market would basically put the DLC out of business.

Frick said he’s pushing for the change to enable voters’ opinions to be heard on “our outdated alcohol laws in this county.”

“This would amount to a major reform that our constituents have been clamoring for,” Frick said. “We have an engaged, opinionated electorate…we should trust their judgment. I hope that when the time comes you will join me in deciding to let the people vote on this important issue.”

The room was filled with members of the union that represents the more than 300 DLC workers. The employees were clad in yellow shirts with the UFCW Local 1994 MCGEO logo and would cheer and clap for speakers who defended the DLC.

“You will lose this public asset that I consider to be the golden goose of Montgomery County,” Gino Renne, president of the union, said. He was flanked by Josslyn Williams, president of the Metro Washington Council AFL-CIO, who said he was adamantly opposed to Frick’s bill.

Even the Democratic officials who make up the county’s delegation and council engaged in heated debates with each other over the proposals. Reznik and Leventhal squared off over whether private distributors would stop selling alcohol to county liquor stores. Reznik said the distributors would continue to do so even if privately-run liquor stores existed, Leventhal contended the private entities would cut the county of out of the business by not selling alcohol to the county stores.

Reznik also got into a debate with state Sen. Roger Manno (D-District 19). Manno contended that selling alcohol has become a core government function because of the services it helps to fund. Reznik said it’s not.

“We have a fundamental conflict of interest in Montgomery County,” Reznik said. “The role of government is not to sell hooch.”

Manno deadpanned, “Why would we put this issue on the ballot? Should we put issue of privatizing parks? K-12 education?”

Del. Ben Kramer (D-District 19) said in 10 years he has “not on one single occasion” had a constituent say they have problems with the DLC. Frick, meanwhile, responded that he has heard from many who have.

The DLC debate seems to have touched a nerve that has resulted in previously allied Democratic officials splitting into factions. However, it’s unclear if either proposal will pass the legislature in its current form.

The issues with Frick’s proposal include the potential loss of approximately $30 million from an already strained county budget, union employees losing jobs and whether the political will is present to push through such a major change.

On the other side, the county’s proposal was described as vague by its opponents who have questioned the legality of the surcharge and whether it makes economic sense for private distributors to only sell certain craft beers and fine wines in the county. It also lacks a provision to allow private distributors to sell craft spirits.

Legislators speaking on background because they haven't decided yet how they will vote said the delegation is divided on the issue and it will likely examine the concerns raised by restaurants and others as they further analyze the bills.