BERLIN — With the clock ticking on the sunset provision for Worcester County liquor license holders to explore the opportunity to purchase directly from private wholesalers, about a third of the licensees have notified the Department of Liquor Control (DLC) of their intentions, but it appears at least in some cases the often antagonistic relationship has not waned.
Starting July 1, the roughly 200 or so liquor license holders in Worcester County will have the option of buying spirits directly from private sector wholesalers or continue to deal with the county’s DLC or in many cases a hybrid of both. The change was affected when the old Liquor Control Board (LCB) was disbanded in 2011 amid much controversy and a county-run DLC was created by the state legislature to take its place.
The legislation that broke up the old LCB, which for decades had often been at odds with the local business community, created the new DLC run by Worcester County. The bill included language that allowed licensees to eventually opt out of purchasing alcohol exclusively from the county by 2016. However, as part of a concession of a separate bill introduced last year in the General Assembly, the sunset provision for the opt-out was moved up to July 1, 2014. That bill was related to increased hours for alcohol sales at the Casino at Ocean Downs and the licensees successfully argued for an earlier opt-out date as a concession to the bill allowing the gaming facility in Berlin to serve alcohol later than its private sector competitors.
With the new sunset date coming up in a little over two months, the licensees in Worcester are now in the process of sending letters to the DLC announcing their intention of exploring the private sector wholesale option. Licensees have to notify the DLC at least 60 days in advance of their opt-out intentions, which is now in the window for the July 1 sunset provision.
Some of the licensees will deal exclusively with the wholesalers, while many others will maintain their ongoing business relationship with the DLC and buy exclusively from the county. However, most will likely use a hybrid of both, buying some high-volume items directly from the wholesalers while supplementing their stock with other products from the county.
DLC Director Robert Cowger said this week with the sunset date now just a little over two months away, roughly one third of the licensees in the county have expressed an interest in opting out to some degree in the form of a letter exchange spelled out in the legislation. For tax purposes and other reasons, the licensees choosing to buy directly from wholesalers are required to post a letter from the DLC acknowledging the change next to their liquor licenses.
“The legislation requires every licensee who picks the option to explore purchasing from private wholesalers to send a letter at least 60 days prior of the effective date to let us know their intentions,” he said. “We will then send a letter back to them acknowledging we now know their intentions and that letter has to be displayed next to their license. So far, we’ve received about 60 or 70 letters out of the 200-plus licensees. A lot of the smaller businesses are not even taking the option.”
Cowger said the DLC is encouraging county business owners to explore their options and make decisions on their purchases that best suit their respective needs. He said the DLC’s purchasing power and a recent opinion handed down by the Maryland Attorney General’s Office defining the DLC as a wholesaler will allow the county agency to be competitive with its private sector counterparts.
The county is expecting to take a financial hit of around 25 percent because of the change, but DLC officials are convinced most licensees will continue to do business with the county agency. During a budget session this week with the County Commissioners, Cowger said between the expected loss of revenue from wholesale operations and slight increase from retail, the total revenue variance for FY15 is anticipated to be 15.8-percent less than FY14. Revenue for FY14 was $15,662,100 between retail and wholesale with $13,190,000 projected in FY15. The total budget requested by the DLC for FY15 is $3,401,580, a decrease of about $250,000, or 7 percent from FY14, according to Cowger.
“We don’t want to give up our business, and frankly we’re fairly sure we can do it better than the private wholesalers,” he said. “We had to buy in and we’ve been able to get some great discounts for our licensees. They’ll find we’re going to be very competitive and will be able to provide better service.”
While most licensees will have the option of using both the DLC and the private wholesalers to fill their needs, at least one local business was informed last month it will not have that recourse.
The Purple Moose in Ocean City sent a letter to the DLC confirming its intention to utilize the private sector wholesalers and the DLC has responded, essentially telling the landmark Boardwalk tavern it’s welcome to do so, but will no longer be able to do business with the county.
“This is to confirm receipt of your letter dated March 14, 2014 and that you are electing to purchase wine or liquor from a licensed Maryland wholesaler,” the letter reads. “Effective July 1, 2014, the Worcester County DLC will no longer be servicing your account through our wholesale department or at any of our satellite locations. State requirement is that you post this letter of confirmation conspicuously next to your license.”
Only one business in Worcester County got the letter stating it will no longer be able to purchase from the county, and it’s no secret the letter is some attempt at retaliation. The Purple Moose management has been vocal over the years about dissatisfaction with the old LCB and it appears on the surface the new DLC is singling the business out for its opposition. Purple Moose management did not respond to requests for comment on the matter. Cowger, for his part, would not elaborate on the DLC’s decision, which representatives of the local liquor industry have stated off the record is unfair discrimination.
Senator Jim Mathias, who crafted the legislation affecting the changes and creating the new DLC, said this week he had not seen the letter or heard any complaints, but hoped it did not signal another trip down the same road for the licensees and the county agency.
“We worked in good faith to come up with language in this legislation that is amenable to all parties involved,” he said. “From the beginning, it has been understood that the licensees will be able to utilize private sector wholesalers or the county DLC or a hybrid of both, which I expect most will do. The intent was to be comprehensive in the bill and we want to be comprehensive in how the bill is enforced.”
Mathias said he hoped the legislation that created the new DLC and the later bill that moved up the sunset provision had put all of the bad blood in the past, but it appears, at least in one case, that the old wounds are still fresh.
“This has been a burning issue in our county for a long time,” he said. “We were able to go to the General Assembly and find a mutually agreeable remedy, and in that same spirit, I hope that remedy will work out for all involved. Having not seen the letter or heard the complaint, I hope they will sit down and have a productive conversation to get this resolved.”