Opinion, Government, Business New Year’s Wishes for a Drunken County
The Montgomery County Council recently announced budget cuts to neighborhood senior programs. Sobering up after a drunken spending spree is no fun. Wouldn’t it be nice if there was a painless way to balance the budget? happy new year wishes quo Three hundred million dollars is a lot of money, but there’s an easy way to finance 20 percent of it, while improving services to citizens.
First, riddle me this: What do three small Southern Maryland counties have in common with Montgomery County? Along with Montgomery, they are the only counties left in the state that still control liquor distribution and sales with programs implemented in 1933. Montgomery County has six times more people than these three small counties combined, and triple their per capita incomes.
Last year, it took back $10 million more gmmxle google than the Department of Liquor Control’s true profits, after accounting for indirect overhead and capital costs. The county used “cookie jar accounting” to justify this. Transfers prior to the current pickle were equal to or less than profits (for the years 2003 to 2008). The county spends more than nearby liquor control programs in Pennsylvania and Virginia to buy its booze (the “costs of goods sold” percentage is significantly higher here), but enjoys monopoly protection from the consequences of its poor performance.
Privatizing liquor distribution and sales could generate $11 million more in annual revenues to the county and $30 million more for the state, while keeping an independent and currently profitable licensing and enforcement function in place. No more conflicts of interest for a county that both sells booze and enforces the law. New revenues would largely come from a small fee (as low as 4 percent) on wholesalers who would replace the county and would still capture the lion’s share of the county’s current 18 percent markup. Wholesalers also would gain control of the even bigger markup the county charges restaurants and bars, but due to market forces would have to give some of this back. That’s right — lower prices.
Defenders of the status quo say privatization will not increase sales enough to be revenue neutral. This is silly. According to the state treasurer, the county is dead last in the state for sales of distilled spirits and beer. These sales are largely going to DC, and would be repatriated once more convenient retailing is established.
Some are concerned that there would be more stores selling liquor. My projections [see the accompanying report] show the same number of stores, bars and restaurants (950) would generate sales and offer convenient service after privatization. Others are concerned that prices might go up. Actually the county has the lowest excise taxes in the nation, matched by DC and commodity prices are a function of supply and demand, not costs. Prices would stay low for competitive reasons.
The biggest gift is the last. The DLC is loaded with cash and other assets — more as a percent of sales than liquor programs in Virginia and Pennsylvania. After liquidation, there would be $40 million-$50 million left to finance the deficit.
The author presented the accompanying report last month to the county’s Organizational Reform Commission. He is from Silver Spring.
Do you think the county should privatize liquor sales and distribution or is the current system of county stores working? Tell us in the comments.
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