Montgomery Co., MD: Leggett Says Restaurants’ Concerns About County’s Alcohol Monopoly “Overblown”

Attorneys for county say more than $100 million in bonds backed by alcohol sales would be at risk by ending county government control of alcohol

Bethesda Magazine

By Aaron Kraut

November 24, 2015

Montgomery County Executive Ike Leggett on Monday offered his strongest defense yet of the county’s alcohol control system in the face of proposals from state elected officials seeking to end the county’s monopoly on alcohol distribution and liquor retail sales.

“The problems that we hear from those in the industry—I’m sure there are some problems—but a lot of it is really overblown,” Leggett said, referring to complaints from restaurant owners about poor service from the county’s Department of Liquor Control (DLC). “It’s really not as bad as people have described. But if you’re in the business and you find a way to make a couple extra dollars, you’ll hype everything up as well.”

Leggett made the remarks at a Monday press conference in Rockville to highlight progress made on six economic development initiatives he first announced last December during his third inaugural address.

This year, the county moved to essentially privatize its economic development activities under a nonprofit led by a board made up mostly of private industry leaders called the Montgomery County Economic Development Corp.

But while Leggett admitted Monday “I’m not a person who believes strongly in monopolies” and that he “would love to get out of the [alcohol] business,” he pointed to the roughly $30 million in profit the DLC brings in annually, plus more than $100 million in outstanding bonds the county has against DLC revenue, as reasons to keep the alcohol control system.

Some state lawmakers have proposed a bill that would set up a referendum on the November 2016 ballot asking county voters if private alcohol distributors and private liquor retailers should be allowed to compete against the DLC. State Comptroller Peter Franchot, long a critic of the county’s alcohol system, said he’ll also pursue legislation aimed at ending the county’s unique level of control over the industry.

“I have no problem with a discussion about us moving away from it,” Leggett said Monday. “But please provide a viable plan to show us how we’re going to get in excess of $30 million, not in one year, but every year. And no plan has come forward. I think there is an irresponsibility on the part of some who say, ‘We can just make that up.’ No, we can’t just make that up. That’s not going to happen.”

Eight of nine County Council members and DLC Director George Griffin have backed Leggett in recent weeks by also pointing out the $114 million in outstanding bonds.

County officials on Monday shared a Nov. 17 memo from two Baltimore-based attorneys they asked to review how one of the state bills would impact the bonds. In their review, attorneys Paul Shelton and Carlos Santos wrote that the county could be held liable by bondholders if it no longer has a consistent flow of liquor revenue.

“A total disposal of the source of payments would be a clear breach of the Trust Agreement; what is not clear is what level of reduction in security for the bond payments through the issuance of the new licenses would prompt an action by the bondholders,” the memo read.

The memo also says the county’s bond rating could be negatively affected, though it does say the county could issue general obligation bonds and refund all of the existing liquor revenue bonds with no adverse effect on its bond ratings.

But doing so could hurt the county’s ability to pay for other services. As he did in front of the county’s legislative delegation last week, Leggett said around 85 percent of spending in the county’s annual budget is already locked in—in some cases by law—for schools, debt service, employee health and retirement payments, public safety and transportation.

“What you’re asking, basically, is for the taxpayer of Montgomery County to pay higher taxes for roads, for schools and for libraries and everything else in order for someone to have more convenience for liquor in the county,” Leggett said.

Click to review the Memorandum.