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End the Monopoly Coalition Submits Letter to the House Economic Matters Committee

I mentioned back in November that the effort to end the liquor monopoly in Montgomery County was creating strange allies and adversaries, including pro-market forces being on the same side of the issue as Comptroller Peter Franchot and Delegate Bill Frick.

Now there is an End the Monopoly Coalition led by Adam Pagnucco, former blogger for Maryland Politics Watch and longtime foil to Red Maryland. His coalition sent the following letter, below, to the members of the House Economic Matters Committee today.

It’s worth noting again that fact that you have Democrats divided between those supporting the pro-market solution of ending the County liquor monopoly and those anti-market Democrats who wish to retain country control over the market. But even many of those working to end the monopoly are left-wing Democrats who Republicans often find little common cause. The sponsors of the bill include Frick, Senators Brian Feldman and Nancy King, along with Delegates Kirill Reznik, Aruna Miller, and Kathleen Dumais. These are not our traditional allies on the right.

The rest of the Democrats in Montgomery County are left with a Catch-22; they can do the right thing and end the monopoly, or they can keep doing the same old same old. If they do that, it creates an opportunity for Republicans to exploit the issue in 2018 as another example of anti-consumer Democrats and would help conservatives build momentum toward picking off a House or Senate seat.

More to follow, but there seems to be at least some momentum toward change.

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Dear Members of the House Economic Matters Committee:

I am writing to you on HB1237 and HB1033 as the organizer of the End the Monopoly coalition in Montgomery County. We are an alliance of small business owners and consumers who are seeking to end Montgomery County’s monopoly on alcohol sales.

Montgomery County has had a complete wholesale monopoly on alcohol sales along with a retail monopoly on spirits since the end of Prohibition. The Department of Liquor Control, which administers those sales, is the worst run department of county government. It is unable to maintain a stock of beverages that matches private distributors in other jurisdictions. Its warehouse was, until recently, run with sticky notes and rife with shortages. Its employees have been caught by the press drinking and driving on the job and skimming liquor to sell for cash. Its stores are poorly lit, unattractive, deficient in products and staffed by people who, for the most part, know little about beer, wine or spirits. And during the week between Christmas and New Year’s Eve last year, it had a complete delivery meltdown, leaving many licensees short of product at an incredibly busy time.

I understand that representatives of the Maryland State Licensed Beverage Association and the Restaurant Association of Maryland, as well as individual licensees, will be sharing with you their experiences with the liquor monopoly. Please consider the following additional data from the perspective of consumers.

1. The Comptroller collects per capita licensee sales data by county. In FY14, Montgomery County ranked 13th of 24 jurisdictions in per capita wine sales, tied for 23rd in spirits and dead last (by far) in beer. This is despite the fact that Montgomery residents have more disposable income on average than any other county except for Howard.

2. Total Wine, the nation’s largest alcohol retailer which has its headquarters in Bethesda, refuses to open a store in the county because of the liquor monopoly. The company estimates that over 20% of its McLean store sales and nearly 25% of its Laurel store sales are accounted for by MoCo customers.

3. There are seven liquor stores in the District of Columbia within four blocks of our border. The only county liquor store near the border is shutting down because it can’t compete with private sector D.C. retailers.

4. A consultant hired by the Department of Liquor Control criticized it for a lack of administrative flexibility, staffing shortages and stores “in obvious need of basic repairs or refurbishment – including scarred floors and counters, old racks, lighting and entrances.”

5. Consumer flight is so pervasive that the state’s Bureau of Revenue Estimates issued a report that an end to the monopoly would generate $193.7 million in new economic activity, 1,364 additional jobs and $22.8 million in state and local taxes and fees per year.

Two bills are before you on the liquor monopoly.

HB1237 would allow Montgomery County voters to decide whether to end the monopoly through a referendum. We enthusiastically support this bill. I am attaching more than 2,000 petition signatures, as well as comments, of citizens who support HB1237.

HB1033 is a more limited bill that would allow licensees to purchase special order items – that is, beverages that are not in the Department of Liquor Control’s regular stock – directly from private distributors. This bill is seriously flawed. First, because most purchases would continue to go through the county, private distributors would be restricted to small deliveries – and the economics of that won’t work for many. Second, the bill would allow the county to levy a “surcharge” on all such transactions, which further deters distributors from participating. Third, the bill indefinitely postpones REAL reform, which is ending the monopoly once and for all. I am attaching a letter from the state’s largest distributors saying this proposal won’t work and they won’t participate.

The “surcharge” in HB1033 bears a closer look. Article 2B § 12-102 of state law prevents wholesalers from charging different prices to different customers on the same product. So if a distributor sells a product under HB1033 and has to raise the price to pay for the surcharge, all customers everywhere around the state would have to pay the same higher price.

Why should consumers in the rest of the State of Maryland have to pay higher prices just because Montgomery County can’t get rid of its liquor monopoly?

The county’s liquor monopoly is a blight on our restaurant and retail industries and it chases away consumers. We support HB1237 because it would give voters the right to decide the monopoly’s fate. We don’t support band-aids that entrench the monopoly and don’t provide meaningful change.

Thank you for considering our point of view.

Adam Pagnucco
Organizer, End the Monopoly






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