Marc Korman: Time to rethink county’s options on alcohol sales

Montgomery is one of 18 jurisdictions in the country, and one of the only counties, to have direct control of retail and wholesale distribution of alcohol through the county’s Department of Liquor Control. In practice, this means that the county’s wholesale operation purchases alcohol from the manufacturers and sells it to more than 900 licensed establishments, including bars, restaurants, and beer and wine stores.

For retail, the county itself operates 25 liquor stores, which purchase from manufacturers and sell directly to consumers.

There are three major reasons cited for the county’s unique direct control over alcohol:

*First, it brings the county extra revenue for the general fund. In the last fiscal year, alcohol sales grossed more than $191 million. However, after paying for operations and inventory, only $20.5 million was transferred to the general fund.

*Second, the reliable revenue stream from alcohol sales can be used by the county to issue bonds for larger spending needs, like transportation projects.

*Third, direct control of alcohol helps the county enforce responsible consumption through regulatory control and the funding of special programs to inform and educate the public.

Given the county’s projected deficit and the minimal amount of money it receives from alcohol sales ($20.5 million out of a $4 billion budget), it is time for the county to consider new options that might help balance the budget and fund priorities like schools and transit. Importantly, each of the reasons cited for direct control can be maintained through an alternative approach.

Privatization of government resources should not be considered lightly. But unlike police, schools or roads, alcohol sales are not a vital government function. The county needs to have an open and honest discussion about its current regulatory system and determine what is best for the county and its residents. Let me suggest two possible alternatives to the status quo:

The first option is to convert to a licensing system, which is how 32 states regulate alcohol. The county can sell licenses to multiple private sector wholesalers to sell alcohol to licensed retail stores, restaurants and bars. The county would control the licenses and charge a fee, so it would still generate revenue, allow regulation and fund programs to encourage moderate consumption.

The second option is leasing the county’s own wholesale and retail operation to a single private entity. Rather than issuing multiple licenses to several private wholesalers, one competitively selected company would operate the county’s alcohol sales. Again, this would be designed to maintain the current benefits of direct control.

Any change to the county’s alcohol regulatory structure will be controversial. But rather than dismiss these options out of hand, the county should carefully review the issue, and seek public and private sector input to see if another system could generate more revenue and maintain sensible regulation.

Some opponents will scream that this is a corporate handout. Others will claim this will lead to an increase in drunk driving. The county itself cites a number of statistics to support direct control. For example, one report has found that control systems generate 102 percent more per gallon in revenue than licensing. Another says that consumption is reduced in control jurisdictions. These statistics are interesting, but a well designed alternative can ensure responsible consumption, increase the revenue the county gains from alcohol sales through general revenue and bonding authority, increase consumer choice, remove the county from a non-governmental function, and increase the revenue the county gains from alcohol sales through general revenue and bonding authority to fund our real priorities.

The county needs to start discussing these options as they work to balance the budget.

Marc Korman of Chevy Chase is a county native. He has no ties to the alcohol industry.