North Carolina could close its ABC stores and privatize liquor sales, but Mecklenburg County isn’t on board

The proposal, House Bill 971, is a bipartisan measure sponsored by state representative Chuck McGrady, a Republican from Henderson. The bill effectively would overhaul the state’s Alcoholic Beverage Control (ABC) system, making the sale and distribution of liquor resemble more closely that of beer and wine. 

The measure would do away with the 170 ABC boards across North Carolina, and the 433 ABC stores they operate would go dark. They’d likely be replaced by small businesses, such as mom and pop liquor stores.

The proposal also could allow liquor sales in grocery stores and convenience stores. Imagine a bottle of Woodford Reserve at Publix.

This would be a massive shift in North Carolina, a Bible Belt state whose alcohol regulations have been in place for over 80 years.

“Government shouldn’t be about selling and distributing distilled spirits,” McGrady told the Agenda. “No other state does it the way we do.”

A growing number of restaurant/bar operators are lining up in support of HB971.

Stefan Huebner, owner of the Park Road Shopping Center speakeasy Dot Dot Dot, estimates he spends at least 10 hours a week procuring alcohol and navigating the statewide alcohol regulatory system. “Clunky,” he says of the process. 

By law, every bottle of liquor that’s made in North Carolina or that comes into the state to be sold here must be processed in a central warehouse in Raleigh before it’s distributed to a local ABC store. 

When bar operators such as Huebner place an order on the state’s ABC site, they’re assigned an ABC store where it’s available. They can’t just walk into any ABC store or local distillery if the retailer closest to them don’t have the bottle they’re looking for. Going around the state is illegal.

“There are days I have to go (anywhere) from Waverly to Cornelius to pick up a bottle of alcohol,” Huebner said.

On Wednesday night, Mecklenburg County Board of Commissioners voted 7-2 on a symbolic resolution opposing efforts to revamp the state’s ABC system.

Commissioners on the all-Democrat board cited a number of reasons, including losing tens of millions in tax revenue from alcohol sales.

The state collected $39.6 million in taxes from alcohol sales in Mecklenburg County last year, according to the 2018 annual report from the state’s ABC Commission. The commission distributed $19.7 million to the county in 2018.

Commissioner Mark Jerrell from District 4 said that privatizing the sale of liquor could lead to unfettered growth of liquor stores that may disproportionately affect low-income communities and neighborhoods of color.

“Privatization would be a disaster,” Jerrell said. “Essentially what we’d be looking at would be greater amounts of consumption and an explosion of (liquor) outlets.”

Susan Harden, a first-term commissioner from District 5, said she has received “zero requests from constituents” asking for a privatized alcohol system. She said she’s worried about the “easy access to alcohol” a new system might provide.

Pat Cotham, though, opposed the resolution. She cited reporting from the Raleigh News & Observer about an audit last year that found that the state’s ABC commission wasted millions in taxpayer dollars through years of poor management.

Cotham said she couldn’t support the current system in light of the state’s “egregious overspending.”

Ella Scarborough was the other dissenting voice, saying it’s not up to the government to dictate alcohol consumption.

“We’re getting into people’s homes,” Scarborough said. “We have to stay out of people’s homes.”

To be sure, HB971 would not eliminate all regulation of liquor sales and distribution.

The state would maintain a central ABC commission in Raleigh to oversee processes such as licensing, permitting, and disciplining. (Currently, North Carolina is the only state where local government controls retail liquor sales. Most states have one central liquor regulating board; North Carolina has 170.)

The bill would create density stipulations, ensuring there wouldn’t be a liquor store on every corner, supporters say.

Private ABC permittees could take over the existing ABC stores and determine their own selection (a specialty liquor store could specialize in whiskies, for instance) and prices.

Meanwhile, supporters say, local officials could determine their own taxes on liquor sales and decide themselves how that money is allocated.

Currently, non-elected officials in the state’s ABC system determine how taxpayer dollars are spent, said Lynn Minges, president and CEO of the North Carolina Restaurant & Lodging Association.

“We believe this function could be carried out by county commissions or city council members, whom the public does elect. They’re accountable to the public they serve,” Minges said.

Opponents of the measure say it would lead to higher liquor prices.

Redoing the state’s ABC system would lead to an estimated 15.7% increase in the retail price of liquor, and a 13.5% increase in the price of mixed liquor drinks, said Mecklenburg County ABC Board CEO Jason Hughes, citing a PED (Program Evaluation Division) study presented to lawmakers this year. Prices would rise, opponents of HB971 say, because they’d no longer be controlled by the state, but rather private businesses.

“Our ABC System works well,” Hughes said.

HB971 supporters predict liquor prices would actually fall, and that private businesses could compete on price much like Frugal Macdoogal does at its location just over the state line.

Clark Barlowe sources everything at his restaurant Heirloom locally, from the salt on the table to the soap in the bathroom. Barlowe said a new ABC system would free up the resources he spends procuring local spirits.

He described the state’s current system as “an unnecessary burden,” with “two businesses working together with the state acting like a middle man.”

McGrady’s bill is the latest in a flurry of measures in the legislature to relax the state’s alcohol regulations for business owners such as Barlowe, and for consumers.

In 2017, the so-called Brunch Bill was passed, allowing for the sale of alcohol on Sundays before noon.

Governor Roy Cooper signed a bill into law last month that allows distilleries to sell an unlimited number of bottles to consumers annually; previously, state law capped that number at five per year.

That bill also benefitted breweries by allowing dogs back into taprooms as long as food isn’t prepared on site.

The measure goes into effect Sept. 1.

McGrady’s bill isn’t the first time there’s been talk of overhauling the state’s ABC system.

Pat McCrory made privatizing the state’s alcohol-sale system part of his platform in 2010 when he was running for governor. Staffers later said the effort would have been a priority during McCrory’s second term as governor, which he did not have.

“It’s time for North Carolina get out of the liquor business and immediately sell existing assets to the private sector,” McCrory said in a 2010 statement, calling North Carolina’s current system “clearly outdated.”

“Government should have teachers on the payroll, not clerks to sell booze.”

According to the PED study, North Carolina spent $16.9 million on the state ABC Commission and warehouse operations in 2016-2017, plus another $171.1 million for local ABC boards’ operating expenses and working capital.

Still, even supporters of McGrady’s bill know that it leaves holes to fill. For instance, what happens to the hundreds of people employed by the state’s ABC boards and local stores?

The Mecklenburg County ABC Board employs a total of 307 people, 130 of whom are full-time, according to the local board.

So yes, it’s still early. Last month was the first time an ABC reform bill was heard and debated in North Carolina — the same state where more than a half-century ago, moonshine bootleggers like Junior Johnson formed NASCAR while racing to transport illegal liquor and outrun the law.

“That in and of itself was a momentous event,” Minges said of the first conversation.