MoCo Liquor Control should consider major changes

Montgomery County's liquor retail store in Chevy Chase, which a report says should be closed or relocated

The county’s liquor store in Chevy Chase is hemorrhaging money, the truck fleet that delivers alcohol to local bars and restaurants is outdated and typical government hiring practices make distributing alcohol an inefficient and disjointed process.

Those were three of the major findings in a report commissioned by Montgomery County’s Department of Liquor Control, the county agency that’s been under the microscope for much of the past year because of the county’s unique method of controlling alcohol sales.

Unlike nearly every other “control” jurisdiction, Montgomery County purchases its alcohol inventory from manufacturers, stores it in DLC’s Gaithersburg warehouse and then resells the products via direct delivery to beer and wine retail stores and restaurants.

The County Council’s Public Safety Committee will discuss the 95-page “Comprehensive Long-Range Strategic Business Plan,” at a hearing on Thursday morning.

The report, done by Philadelphia-based financial and investment advisor firm PFM Group, recommends better delivery methods, better branding of county-owned liquor stores and the closure or relocation of the county’s failing liquor store in Chevy Chase (11 Wisconsin Circle.)

The store lost $278,431 in fiscal year 2013, due in part to a poor location and high rent, according to the report. Only Montgomery County is allowed to operate a retail store selling liquor in Montgomery County. Of the county’s 25 stores, Chevy Chase was the only one to lose money in fiscal year 2013.

“Across nearly every metric, Chevy Chase struggles against other County stores and national benchmarks. Sales per square foot are half the County average, the inventory turnover rate is the County’s lowest level and half the industry standard and Chevy Chase is the only store to post a loss in Net Income in FY 2013,” read the report. “Given the store’s location, and its subsequent high lease rate, data suggests the store ought to be generating three times its annual revenue to be profitable. Chevy Chase is located in a challenging retail environment and its location is, in our opinion, the primary reason for its poor performance.”

Another key recommendation would be to make the DLC an authority or public benefit corporation. According to the PFM Group, such a move would allow the DLC more flexibility to operate like a private alcohol distribution company.

For example, a DLC authority could allow for temporary employees in the two peak seasons of the alcohol distribution business: the Winter holiday season and the summer Fourth of July season.

It could also allow for a dedicated capital replacement budget that would go toward replacing DLC’s fleet of old and maintenance-needy trucks.

According to the report, the DLC has not bought any new trucks since 2008 and one in three vehicles in the 42-truck fleet was bought before 1999. Most of the trucks are beyond their useful economic life — meaning operating and maintenance costs have exceeded the vehicle’s depreciation expense.

The report found other areas in need of improvement.

Retailers and restaurants have often complained of hard-to-get products or a DLC delivery process that takes too long.

According to the report, delivery loads are placed on trucks in almost the same fashion the inventory is organized in the warehouse. Beer delivery loads are placed on separate trucks from wine and liquor deliveries and beer deliveries are further divided between kegs and bottles and cans.

Some county officials and members of a county-appointed Nighttime Economy Task Force have suggested reforms to the DLC and the county’s control and distribution model.

State Comptroller Peter Franchot has frequently and at times forcefully said the DLC should be abolished and the county should let private distributors distribute alcohol.

There are, however, other political considerations.

DLC’s average annual revenue in selling alcohol covers its operating costs and is typically good for a more than $20 million contribution to the county’s General Fund, according to the County Council’s Office of Legislative Oversight. (The OLO is set to do its own study into DLC’s structure and methods this year.)

That’s money that can be used for a wide range of county services. There’s also the county employee union. While the DLC debate has simmered over the past year, union leaders have indicated they wouldn’t be happy with any reforms that would negatively affect agency employees.

The PFM Group’s report gave other recommendations — including adding five county liquor stores to underserved areas in Glenmont, Potomac and Rockville and building a “mini-warehouse” or “Regional SuperStore” that could allow for faster and more efficient alcohol deliveries.

The Public Safety Committee meeting is set to start at 9:30 a.m. and will be broadcast live on County Cable Montgomery and streamed at County Cable Montgomery’s website.

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