News: CJ Exclusives

Bill to establish private liquor stores gets committee hearing but no vote

Rep. Chuck McGrady, R-Henderson. (CJ file photo)
Rep. Chuck McGrady, R-Henderson. (CJ file photo)

Rep. Chuck McGrady, R-Henderson, won’t seek re-election when his term expires next year, but he’s far from finished.

House Bill 971, which McGrady sponsored, has stalled in the legislature. Still, McGrady got a hearing for a proposed committee substitute in the House’s Alcoholic Beverage Control Committee on Tuesday, July 23. He co-chairs the committee.

The Modern Licensure Model for Alcohol Control, originally filed April 25, basically clears a path for private liquor stores in North Carolina. S.B. 971 would eliminate the state-run alcohol warehouses in Raleigh and phase out the local ABC boards and stores.

McGrady, serving his fifth term in the General Assembly, is the unofficial House leader in efforts to reform the archaic N.C. Alcoholic Beverage Control Commission. He has shepherded several alcohol-reform bills through the General Assembly, including House Bill 536, ABC Omnibus Regulatory Reform, which was blended into Senate Bill 290. That measure passed the legislature, and Gov. Roy Cooper is expected to sign it. McGrady was also a strong proponent of House Bill 363, the Craft Beer Distribution and Modernization Act, which Cooper signed June 3.

Other primary sponsors of H.B. 971 are Rep. Jon Hardister, R-Guilford; Rep. Jason Saine, R-Lincoln; and Rep. Pricey Harrison, D-Guilford.

McGrady says he wants to reform government management of the wholesale and retail sale of distilled spirits while also increasing revenue to the state and to local governments. He says he’s committed to ensuring the flow of revenue to local entities and the state remains steady and will get even stronger.

The bipartisan bill, a release by McGrady’s office says, replaces the state’s monopoly on the sale of liquor with a system of permitting and taxation modeled on wine and beer sales. North Carolina is one of 17 alcohol control states but the only one that uses a system of local control, through 170 independent and politically entrenched boards.

Loosely operating under the auspices of N.C. ABC, the political boards oversee the distribution, sale, and revenue from alcohol in cities and counties throughout the state. These boards distribute some money from alcohol sales to another set of politicians in respective communities, though there’s really no clear formula for that distribution or uniform targets for the money.

McGrady characterized North Carolina’s system of governing alcohol as one of the least efficient in the country, at one point citing an ill-conceived lottery for rare spirits held on a Friday afternoon in Wendell.

People wanting to buy hard-to-get whiskey had to be in the ABC store when to the lottery took place or they had no chance to get it. Customers lined up outside the store for their chance to get the rare spirits.

“We’ve already proved that there is a sensible path forward in replacing this inefficient state monopoly with a licensure model that already works for beer and wine,” said McGrady. “We can ensure public safety and streamline operations — all while enabling private sector investment and increasing revenue to local communities, for important priorities like education.”

Since filing the bill in April, McGrady, the release says, has done considerable work on the plan to address the concerns of some legislators reluctant to change a system that has been in place since 1937, when the state repealed Prohibition.

“This is one of the most complex pieces of legislation I’ve ever worked on — it remains a work in progress, but I wholeheartedly believe we can get there,” McGrady said.

The N.C. Alcoholic Beverage Control Commission, several lawmakers, and groups such as the Christian Action League have consistently opposed most attempts at reform. Legislation that became S.B. 290 originally, for instance, included a provision for a local option allowing Sunday sales of spirits. Opposition led sponsors to remove that provision from the bill, as well as a move to allow online sales and alcohol sales on trains and ferries.

McGrady’s news release pointed to a February report by the General Assembly’s nonpartisan Program Evaluation Division that showed many ABC boards oversee inefficient operations that result in little or no money left over after expenses are paid.

“The licensure model put forth in H.B. 971 eliminates this waste and returns more dollars to state and local governments.

“It’s about time to turn the page on this antiquated, inefficient system,” said McGrady. “I think our citizens and businesses are more than ready to be treated like we live in the 21st century.”

A fiscal report on the bill shows revenue for state and local use would remain static, about $384 million, in fiscal 2019-20. By 2023-24, however, that revenue, under the plan, would increase to $714.5 million, in addition to doubling the amount that goes toward substance abuse research and education — from $14.5 million to almost $30 million.

Under the bill, liquor would be taxed per gallon, as opposed to applying the tax as a percentage of the cost. The bill would impose an excise tax of $28 per gallon on the sale of spirituous liquor. Under current law, that excise tax is 30%. In effect, pricier liquor, because of the tax structure, would become less expensive. Cheaper spirits would, conversely, cost more.

Opponents of reform Tuesday expressed the usual doubts and concerns. They worried about the loss of jobs, about where private stores would go, and about what would happen with the current stores. McGrady said those are all points to consider, and no one has whisked them from the table. The bill, he said, is far from finished, as many details, including enforcement issues and revenue distribution, would have to be refined and clarified.

The bill, as it stands, has little chance of moving in the foreseeable future, yet McGrady, who admits as much, is undeterred.

“I want to get it out there,” McGrady told Carolina Journal, “so people can see it, and put out a fiscal note that shows you that you can get out of the (liquor) business, and you can still generate money for local government that the current system does. It’s not that hard.”

“You have to start the conversation and the education somewhere,” he said Tuesday.

In addition to the aforementioned bills, Cooper on June 26 signed two alcohol-related measures into law, House Bill House Bill 389 and Senate Bill 11.

H.B. 389 opens the way for universities to sell beer and wine at college sporting events. S.B. 11 strengthens permitting rules for selling alcohol and the ability of law enforcement to crack down on violators.

Sen. Andy Wells, R-Catawba, introduced S.B. 11, in large part because of a spate of shootings and killings outside three Catawba County bars between April 2017 and April 2018.

H.B. 389 brings N.C. public universities in line with private schools — such as Wake Forest, Elon and Duke — that are already selling alcohol at athletic games, a news release from sponsor Rep. John Bell, R-Wayne, says.

The N.C. Restaurant and Lodging Association and N.C. Retail Merchants Association on Tuesday reiterated their joint support of an improved version of H.B. 971.

“North Carolina remains an anomaly in how we operate the sale and distribution of distilled spirits – there is no other product that the state both regulates and sells. We want to modernize the ABC system to address the inefficiencies of our current government-operated monopoly, streamlining operations, fostering competition, and improving the marketplace for the consumer,” said NCRMA General Counsel Andy Ellen. “We support the approach in HB971 that takes a responsible path, one that will uphold public safety and tax collection while continuing support for existing programs and increasing local revenue opportunities.”

“The government must continue to play an important role in the oversight of our ABC system, but we also have a need for a more efficient and modern system,” said NCRLA President and CEO Lynn Minges. “The new version of the bill shows that we can indeed transition to a better sales and distribution model that will still allow the ABC Commission to focus in on regulatory control while also benefiting North Carolina businesses and consumers.”