Council backs historic liquor reforms

Since the end of prohibition in 1933, Montgomery County government has barred private restaurants and stores from purchasing alcohol from private distributors, requiring them to buy exclusively from the Department of Liquor Control warehouse.

As a result, Montgomery County has become known as a very difficult place to run great restaurants or beer and wine stores and a place where consumers cannot get the choices that are available in other communities.

This policy is the aspect of liquor control that I feel most needs to change, and I am pleased to share that today the County Council backed a resolution that will ask our state lawmakers to move forward with an historic reform: to liberate our 1,000 restaurants and stores to buy craft beer and fine wines directly from private distributors.

Throughout 2015, the County Council’s Ad-Hoc Committee on Liquor Control, which I chair and which also includes Council President George Leventhal and Councilmember Marc Elrich, has taken a deep look into the County’s liquor regulations and how they affect our community.

What we have found has been disheartening. Our restaurants and our beer and wine stores are having tremendous problems ordering from the DLC — all too often they are stuck with empty shelves and empty taps because their orders never arrive.

Problems at the DLC have become more significant partly because the consumer environment today is radically different from 80 years ago when our system was established, or even 20 years ago when the modern craft beer movement began. Today, to prosper, our restaurants and stores need an ever-expanding list of choices of specialty beer and wine — because that is what our residents want and can get elsewhere in the region.

Sales data, unfortunately shows that county residents are spending their money outside of the county — our per person in-county sales are about 1/3 less here than in Howard, Frederick and Prince George’s counties. What a loss of economic impact for our restaurants and stores and the families that depend on jobs in those industries.

The Council Committee’s solution is to allow restaurants and stores to buy “special order” products directly from private distributors. The DLC maintains a list of about 29,000 products that can be bought by restaurants and stores. About 4,500 are stocked in the warehouse for delivery, while about 24,500, largely craft beer and wine, are special order.

For restaurants and stores that want to showcase variety and choice with craft beer and wine, and the consumers who love those products, the committee’s proposed reforms are a game changer. Some restaurants and stores today have as high as 90% or even 100% of their beer/wine lists as special order.

The fiscal and employment impact on the county is manageable, particularly if the county does a better job running the department more profitably. Towards that goal, the committee has recommended expanding the number of county liquor stores. Montgomery County is the only retailer of spirits in the county, and operates 25 stores. Thanks to committee progress already embraced by the County Council and the DLC, the county will open 3 more stores in FY16 and more in subsequent years as part of a “retail modernization” plan. Each store averages about $750,000 in profits to the county while employing about 8 county workers. These new stores can absorb any workers who might be displaced by the change in distribution policy.

A second reform recommended by the committee is for the state to establish a small fee on distributors for the rights to sell into the county — a clean and simple way for the county to change how it claims revenue from alcohol sales.

The full Council’s actions today constitute a recommendation to the Montgomery County delegation in the state legislature, which has jurisdiction over liquor laws. We hope to advance legislation in the Spring 2016 session to take effect later in 2016.