Montgomery is staying in the booze business
In a move that should be disappointing to taxpayers, Montgomery County is staying in the liquor business.
The county council’s Ad Hoc Committee on Liquor Control will recommend that the county limit privatization of alcohol sales to wholesale distribution of specialty beer and wine.
That was the fourth of five options provided in an Office of Legislative Oversight report and just one step up from doing nothing. According to the office’s estimates, full privatization would be more than revenue neutral; it would generate an additional $8 million annually for the general fund.
No one believes the county’s monopoly will ever serve our residents as efficiently and effectively as private businesses would. Chief Administrative Officer Timothy L. Firestine correctly noted that the county will continue to compete with private beer and wine sellers (who pay taxes) and has high operating costs and low profits compared with other control states, including Virginia and Pennsylvania, for which he offered no remedies.
Several years ago, I did an analysis of the Department of Liquor Control’s balance sheet and found high inventory costs. I reported my findings to County Executive Isiah Leggett’s (D) Reform Commission and the Department of Liquor Control. Not much has changed.
I didn’t know then that these high inventory costs were in part because of poor inventory controls that let drivers fraudulently sell beer off the back of their trucks. That was discovered just a month after an internal audit gave the Department of Liquor Control a clean bill of health on its internal controls. The Office of Legislative Oversight report noted that licensees have problems with wholesale operations, product availability, high wholesale prices and the control structure. The AdHoc Committee on Liquor Control’s proposed solution only partially addresses these issues.
Further, as long as the county stays in the booze business, its regulation and enforcement of liquor laws will be seen as a conflict of interest by licensees and the public.
Taxpayers have another beef: We’ve been bankrolling this enterprise’s above-average salaries and benefits. In return, we get substandard profits, according to Firestine ($21 million last year).
Even that’s a stretch. The profits seem to be overstated because some costs are not included.
The Office of Legislative Oversight estimates that privatization would yield one-time proceeds of $66 million to $76 million. That’s enough to avoid busting the charter limit on property tax increases next year.
Forgive the cliche, but this has to be the last drink that’s on the taxpayers’ house.