Proposal Seeks To Downsize LCB To Retail Only

BERLIN – Despite some measure of closure this week with the Liquor Control Board for Worcester County (LCB) reaching an agreement with the state to pay a fine in lieu of a suspension, the effort to abolish or at least modify the troubled monopoly has gained some momentum.

On Monday, the state Comptroller’s Office announced it and the LCB had reached an agreement to pay a $16,000 fine for the infractions uncovered during a months-long investigation into the agency’s practices. On Tuesday, the County Commissioners held the LCB’s collective feet to the fire over the agency’s illegal practices, its dwindling revenue stream to the county and its municipalities and the $16,000 fine, which will ultimately be paid out of those same dwindling revenues.

When the allegations against the LCB started trickling out late last spring and early summer, an effort was launched fueled largely by the Worcester County Licensed Beverage Association (WCLBA) to take steps to abolish the beleaguered agency. Delegate Jim Mathias said at the time he would initiate legislative action to abolish or modify the agency if the allegations proved true, and if a reasonable approach to replacing the revenue could be determined.

With the first part of the equation in place, a proposal was released this week by the licensees through the Worcester Alliance for Fair Markets, Inc., a not-for-profit corporation formed by the alcoholic beverage retailers and other interested parties that support the repeal or modification of the LCB, to abolish the wholesale side of the agency’s operation while retaining the LCB’s retail operation, which contribute roughly 80 percent to the agency’s bottom line.

According to the proposal, the net profits distributed to the county and its municipalities have averaged around $500,000 since 2007 with much of the profit stemming from the retail side of the operation and not the wholesale side, where many of the problems exposed the comptroller’s investigation occurred.

By comparison, the retail side, with its six stores including three in the Ocean City area and one each in the other four municipalities, has consistently produced profits averaging $400,000 since 2007 including over $533,000 in 2010. Based on those figures, the newly formed alliance’s proposal includes abolishing the entire wholesale side of the LCB’s operation while retaining the profit producing retail aspect.

Under the proposal, the LCB’s wholesale operations would cease by the end of 2011 while the six retail stores would continue to operate under the control of a manager and a newly established governing board. The retail operation’s net profits would be distributed as they are currently.

The proposal would require legislative action as promised by Mathias on the Senate side and presumably Delegates Norm Conway and Michael McDermott on the House side, but perhaps more importantly, it would require the County Commissioners’ support.

“The system is broken, there isn’t any question about that,” said County Commission President Bud Church this week. “I think it’s time we look at solving the problem.”

Church said he thinks the commissioners would support a plan that ensured a stable revenue stream.

“I think they would,” he said. “It would have to be the right plan. We want everything to be fair and equitable. I think there is a solution. They’re talking about keeping the retail stores and letting the licensees deal directly with the wholesalers. On the surface, it seems like a reasonable approach, but we need to let the dust settle a bit and see what fair and equitable solution we can come up with.”

From the beginning, the licensees were tasked with finding a way to replace the revenue should the LCB be abolished including a possible hike in the license fees on a graduated scale based on volume, for example. However, the proposal on the table does not appear to include any concessions from the licensees, at least in its current form.

“I like the proposal, but I’m not sure if it’s completely equitable,” said Church. “It’s kind of like they’re getting their pie and eating it too.”

Meanwhile, Mathias said this week he is ready to take action in terms of submitting legislation to abolish or modify the LCB with the appropriate support of the commissioners and the taxpayers.

“I’m ready to stand by my statement,” he said. “From the beginning, I said if the allegations are proven to be true, I would file a bill to abolish the LCB and after an extensive investigation, it appears the allegations are true. They’ve all but admitted it. By paying that fine, they’ve admitted to the charges and that’s the first part of the equation.”

However, Mathias said he still wants to see a plan to maintain the level of revenue the county and its municipalities receive.

“I’m still waiting to hear the solution,” he said. “I haven’t seen it. Part A of this was an investigation into the allegations and that has been completed. Part B is the revenue side and there has to be a solution for that. I haven’t seen the revenue piece yet.”

From the licensees’ standpoint, the findings of the comptroller’s investigation and the subsequent agreement on the $16,000 fine only confirm the LCB’s days in Worcester County should be numbered, according to WCLBA President Doug Buxbaum.

“That’s still very much the goal, but we think this could be a fair and equitable solution,” he said. “The numbers show they made a half a million dollars on the retail side while losing $400,000 on the wholesale side [in 2009]. This solution allows the LCB to keep the retail side, keep some of the jobs and keep the revenue stream open. It seems like a win-win for everybody. It seems the most equitable. There was some talk about increasing the license fees to make up the revenue, but I don’t think that’s necessarily the responsibility of the licensees. As long as everybody can buy wholesale, everything will work out.”

Buxbaum said following through on the proposal would require the support of all involved.

“Whatever we do is going to take legislative action,” he said. “That’s going to require the assistance of [Senator-elect] Jim Mathias and [Delegate-elect] Mike McDermott, but we’re also going to need the concurrence of the County Commissioners. I think, based on what’s happened, they’ll be receptive to it if we can show the revenue will still be there.”

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