Montgomery County should declare “Perestroika” on liquor sales

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By Andrew Moore

Commentary for MarylandReporter.com

President Ronald Reagan

President Ronald Reagan

In a 1988 speech to Reynolds Metal Company employees in Richmond, Virginia, Ronald Reagan joked about what it was like to buy a car in the Soviet Union. As Reagan tells it, a man went to a Soviet car dealership, paid upfront (which was required), and the dealer told him he’d get his new car in 10 years. “Morning or afternoon?” the buyer asked. “Ten years from now, what difference does it make?” the man said. “Well, the plumber is coming in the morning.”

The lesson we can learn today from this story is the same as it was during the Cold War and it applies to the current debate over privatizing liquor sales in Montgomery County. When government tries to control a particular industry and interfere with natural market forces, even when it comes to something  as straightforward as selling cars or liquor, it leads to all sorts of problems, like inefficiency, limited product choice, artificially high prices, and corruption.

Problems in other states

Everywhere local or state governments exert direct control over the liquor industry, like in Montgomery County and approximately 17 other states or jurisdictions, exist these negative, anti-market effects. The horror stories are myriad.

In Michigan, the state monopolizes wholesale liquor sales. When the government shut down for a short period in 2007 because Michigan’s legislature and governor couldn’t pass a budget, the state’s liquor industry came to a halt. All liquor sales ceased. Employees who worked for the Michigan Liquor Control Commission, from the person stacking pallets in the warehouse to the sales people, were told not to come to work. Restaurants and bars couldn’t replenish their inventory and thousands of customers were inconvenienced.

James Short, the official in charge of Pennsylvania’s alcoholic beverage selection and acquisition from 2003-2012, faces up to 20 years in prison for accepting bribes and kick-backs in the form of private jet rides, expensive golf trips, meals, and cold hard cash.

Corruption in MoCo

Some Montgomery County Department of Liquor Control (DLC) employees have also engaged in malicious or corrupt activities over the years. Last November, a local news investigation revealed that DLC deliverymen were stealing cases of beer and selling them on the black market, sometimes even pressuring customer businesses to buy or trade for the illegal stock. Two other employees, including one truck driver, were taped drinking on the job and endangering the public by getting behind the wheel while intoxicated.

Gino Renne, president of the union that represents most DLC workers, told the Ad Hoc Committee on Liquor Control earlier this year that the committee should push for reform that makes the DLC more like a private business, but half-measures won’t solve the problem. The only way to do that is to open the market up to private wholesalers and retailers.

Opponents of reform say eliminating the DLC will result in a $30 million revenue shortfall for Montgomery County and hundreds of jobs lost. These concerns are valid, but it’s important to put them in context. DLC revenue only represents a tiny 0.6 percent of Montgomery County’s annual budget. Although some jobs will be lost, many more will be created as new private liquor stores open and begin hiring.

Rather than masquerading excuses to protect entrenched interests and their own political hides as legitimate reasons to oppose reform, Montgomery County officials should proclaim their own “perestroika” and shed their control over liquor sales.

About a year ago this author emailed a DLC bureaucrat, or “purchasing specialist”, to express his interest in purchasing a bottle of Pappy Van Winkle’s, a rare brand of bourbon that is difficult but not impossible to find locally. I never heard back.

Andrew Moore is a public affairs consultant at DDC Public Affairs in Washington, DC. Follow him on Twitter: @MooreIam. He has no client interests related to this issue.

  • bendix20

    These guys are in Total Wine and Beverage’s pockets. The DLC is the only thing the county does well for it’s residents. They provide a service and they control it. Do we want what they have in PG and other surrounding areas? Dirty liquor stores selling all kinds of things with vagrants about? No selection and high pricing? Then there is the question of the revenue the county gets. Like it or not they will recoup it somewhere either through a higher tax added on purchase of spirits further raising the cost or more property taxes. Legget and our country council need the money to support the illegal aliens they value more then the legal residents of the county.

  • Vidi

    MoCo needs to get out of the liquor business. Period. To the specious argument that we will lose revenue, is THAT the reason we are in the liquor business? Well, let’s get into the laundry business, the used car business, the prescription drug business! Why are we losing these sources of revenue?

  • TonyC

    I’ve been posting my views on Comptroller Franchot’s Website Franchot.com. Below is the latest in response to this piece, and you can find all my comments here.

    http://www.franchot.com/end_montgomery_s_prohibition_style_liquor_control

    Andrew Moore penned the piece below at marylandreporter.com and I wanted to make sure all were aware of it.

    Montgomery County should declare ‘perestroika’ on liquor sales

    When government tries to control a particular industry and interfere with natural market forces, even when it comes to something as straightforward as selling cars or liquor, it leads to all sorts of
    problems, like inefficiency, limited product choice, artificially high prices, and corruption.

    I also want to address an issue he raises, that at first might seem pettyor relatively unimportant, but is actually more substantial than many doubters may believe.

    Moore laments his inability to buy some Pappy Van Winkle Bourbon from the DLC. I don’t know why
    specifically he didn’t receive a call back from the DLC, but I can make
    an educated guess, or series of guesses.

    1: The DLC either had no allocation, or maybe refused an allocation of the product from the Md. distributor Republic National.

    2:The DLC employee tasked with procuring the product, a special order, either knew or believed that Republic National 1: didn’t have the product, or 2: had the product but wouldn’t sell it to MoCo. If the
    situation was #2, the employee probably felt it would take too much work/effort to confirm what they suspected and communicate that to Mr. Moore. If so, the DLC employee was probably right about that. Here’s why.

    Sellers, lying to buyers at all tiers of the three tier system is a widespread, but not particularly frequent
    occurrence, I’ve done it myself over the years, including to buyers at top white table cloth expense account restaurants in DC, and to regular customers while managing a DLC retail store.

    Example: Buyer asks seller for some of product X which is in high demand and short supply.
    Seller says sorry I’m out of stock, but secretly has a few bottles stashed away for preferred customers.

    This is much more common on the wine side than liquor side but Pappy is a notable exception. For
    “good” retail stores attracting “preferred” customers, such as wine collectors is important, because it demonstrates to wholesalers their ability to play at the top level, which in turn will likely result in
    larger allocations of more sought after product.

    Mister Moore’s experience reinforces my point. Here’s why. Pappy Van Winkle was available this past holiday season to select stores in Md, and I assume DC also.

    Below is an email I received from Eastport Liquors in Annapolis. If they had Pappy, then it’s likely that
    at least three other retailers in Annapolis had it also. Plus the best retailers in Baltimore, DC etc.

    Problem is: MoCo DLC is not a “preferred” customer of anyone in the alcohol business who has a
    product to sell that is in short supply, and likely never will be either.

    While the Pappy incident is small potatoes, its reflective of a much larger problem. What happened to Mr.Moore happens with much greater frequency to wine collectors. There are lots
    of wine collectors in MoCo. I’ve arranged for some to get wine though unofficial channels. Prominent people hold events in MoCo where $500,000 of wine is served in one evening, and best I can tell none of it
    purchased thru the DLC. The smallest DLC store sells about $850,000 worth of wine in a whole year. These events are advertised on the interwebs.

    Here’s the Pappy email from Eastport.

    To Our Friends, Customers and All Bourbon Aficionados –

    Welcome to our Second Annual (and possibly last) auction of Pappy Van Winkle Bourbons .

    This year we will again be auctioning off our entire allotment of these highly acclaimed and increasingly-difficult to acquire bourbons. After receiving 27 total bottles last year we were allocated only 15 this year, with most of the cuts coming from the olderblends. By dipping into allotments from previous years, we are able to replace the deleted 10, 12, 15 and 20-year old bottles. And thanks to the efforts of our distributor, Republic National Distributing Company, and the generosity of a “private collector” (thanks Charlie!), we will have two bottles of the coveted 23-year old available for auction as well. A ll of the proceeds that we raise go directly to charity. We takecare of all of the costs, including Sales Tax, credit card charges,
    etc.

    We have again decided to donate the money raised through the auction to Seeds 4 Success (S4S) because we have seenthe impact that our donation has on their programs. S4S is a local
    nonprofit organization led by a group of dedicated volunteers that guide children living in public and subsidized housing so they become healthy, successful adults. Through tutoring and mentoring, S4S programs work towards ensuring that youth read on grade level and graduate high school with the skills to attend college or find a successful career. S4S’ results so far have been impressive – 50% of their Eastport Girls’ Club girls make Honor Roll each quarter, and their I Am a Reader program boys who struggled with reading in 1 st grade are now reading on 2 nd grade level. Learn more at http://www.s4sannapolis.org

    The rules for the silent auction will be the same as last year. There are 26 total bottles available – 9 bottles of 10-year old, 9 bottles of 12-year old, 3 bottles of 15-year old, 3 bottles of 20-year old and 2 bottles of 23-year old. You can bid on one,some or all of the bottles and you are welcome to bid as often as you like. Bidding will open November 25 th and will close at midnight (Eastern Standard Time) on December 18 th.

    To submit a bid, send an email to events@eastportliquors.com withyour name, telephone number, which bottle or bottles you are bidding onand what your bid(s) is/are. There will also be forms available in
    Eastport Liquors if you want to fill one out in person. We will endeavorto post a daily “scoreboard” showing the then-current leading bid for each bottle on our Eastport Liquors Facebook Events page .
    You can raise your bid(s) as often as you like. We will only post the bid amounts, not the bidders’ names (so if you are buying a bottle as a gift for someone, you are safe). If you are one of the winning bidders
    we will reach out to you on December 19 th to finalize the sale and arrange for pick-up. Please note, the one thing that we cannot do is ship bottles, so you or your designee over the age of 21 must pick the
    bottle(s) up in person whenever it is convenient. Once purchased, we will hold the bottles for as long as necessary until pick-up can be arranged. Bids must be in whole dollar amounts and the winners of any
    ties will be determined by a random drawing.

    Last year’s auction was a lot of fun and an incredible success as we raised over $18,000 for S4S. We hope to replicate that this year

    We wish you the best for the upcoming Holiday Season and thank you so much for supsporting the local community.

    Sincerely,

    Everyone at Eastport Liquor

  • Andrew Moore

    Thanks everyone for the comments. I appreciate your perspectives on the issue. Let’s keep the conversation going. Reply to me directly on Twitter @MooreIam.