OCEAN CITY — County Commission President Bud Church addressed the Ocean City Economic Development Committee (EDC) this week and briefed members on what the post-Liquor Control Board (LCB) landscape might look like in the county and offered a bleak prediction on the economy.
The Maryland General Assembly this spring passed legislation to abolish the decades-old LCB and replace it with a similar agency run by the county. The legislation was introduced after a state audit conducted last summer and early fall proved allegations of price tampering and other improprieties.
Church told the EDC on Wednesday the County Commissioners started hearing rumblings from the licensees about the mark-ups and other fishy practices by the LCB last summer. For example, he said the average mark-up is expected to be around 15-20, but the licensees were reporting mark-ups of 30, 40 and even 60 percent.
“We started to document the complaints and at first we didn’t understand the enormity of the problem,” he said. “We asked for an audit and improprieties were uncovered. We’re talking about major improprieties.”
Church told the EDC the first option was abandoning the LCB altogether and allowing the free market to take over the sale and distribution of liquor in the county. However, the issue became more complex when the assets and liabilities of the agency were studied further.
“We looked into it and found the LCB owns buildings, has mortgages, has millions of dollars in inventory on hand,” he said. “We didn’t want to take it over. It was the only option we had. We didn’t want to be in the liquor business, but we have a five-year opt out plan in place. That gives us the time to sell the buildings and clear up the debt. We needed the five years.”
Senator Jim Mathias (D-38), who authored the bill on the Senate side to abolish the existing LCB and turn the operation over to the county, said the success of the legislation was due in large part to the cooperation of the agencies. Mathias vowed last summer to sponsor legislation to abolish the agency if the investigation proved the allegations, and while the end result is what many wanted, or expected, to path to a completely free market system is open.
“It was challenging, but I gave this community my word I would abolish the LCB if the improprieties were proven,” he said. “We got half-way home. We found out there was a lot of real world in there in terms of lines of credit and mortgages.”
Church said the liquor landscape in the county could change in five years if the county is successful in running an efficient liquor distribution operation.
“Our hope is we’ll be able to do it right and most of the licensees will want to stick with us,” he said. “We hope 95 percent of the licensees will stay with us at the end of five years. That’s the goal.”
Church said the county is the process of wading through the LCB’s past practices and has found the task more daunting than anticipated.
“We had our first briefing yesterday and the problem is greater than we anticipated,” he said. “It’s not anything we can’t overcome. We’ll get through it.”
When asked if the county expected a major changeover in personnel, Church said the county intends to retain just about all of the rank-and-file employees. He did say there are some duplicated services to contend with. For example, both the county and the existing LCB have their own human relations departments.
“The same staff is there today and our intention is to keep 95 percent of them,” he said. “Ninety-five percent did and are doing an excellent job. The warehouse guys, the drivers, the people doing the ordering, the people who work in the stores — all of those people did a great job.”
Mathias said the end result should satisfy the business community and the citizens of the county.
“Come July 1, there’s going to be more transparency and more accountability,” he said. “That was the goal here. If you don’t like how it’s being run, there’s a public forum down there in Snow Hill two times a month. If they don’t listen, you’ve always got an election day coming up.”
On an unrelated topic, Church told EDC members there will be no tax increase in Worcester this week, retaining the county’s second lowest property tax rate and lowest personal income tax rate.
“The good news is, the commissioners got the message and there will be no tax increase this year,” he said. “We are living within our means and we’re not spending more than we have. We’ve been very aggressive in not hiring new employees and very aggressive in not giving raises.”
Church said, unfortunately, that might not be the case next year.
“The future is not looking as bright,” he said. “Next year is shaping up as a perfect storm. Ocean City is going to be reassessed and we anticipate losing about $1 billion. On top of that, we’re probably going to get part of the teacher pension fund dropped in our laps. It’s not looking good for 2013.”
Church said it came to light during recent budget talks just how tough it is getting for many in the county.
“We were shocked to hear 45 percent of our students now qualify for a free lunch,” he said. “When a lot of people think about Worcester County, they think about Ocean City and not about other places like Snow Hill and Pocomoke. We have a lot of people hurting out there.”