Opinion: Wicomico liquor stores -- not again, please

During my years – make that decades – living in Wicomico County, the absence of private liquor stores has been a pleasant feature, having been raised and formerly resided across the Bay where booze vendors are commonplace.

I thought that the effort by a small group of would-be vendors had ended when it was discussed and discarded a few years back, but that is not so. It has raised its head again, aided and abetted by the new County Executive and a would-be County Executive.

Besides limiting outlets for liquor sales, our current dispensary system provides a very significant public benefit -- currently about 1 million or more dollars per year in revenue for the county’s general fund.

For this reason alone, it is mind-boggling that any county official would even consider, much less propose anything that would diminish this revenue stream. Her proposal would certainly do that, and it could have a much larger impact on the county’s revenue.

Reducing this revenue stream could have an adverse effect on the county’s annual “Disparity Grant” from the state. Wicomico is one of 10 or so counties that receive such funding, which is unrestricted as to its use – in the current fiscal year, the grant will be about $11 million (7 percent of the general fund budgeted revenue).

Because the financial statement for FY 2022 is, once again, overdue, the latest results are not available yet. However, the total disparity grant revenue that the county has received during the past five or so years exceeds the general fund balance in FY 2021. Thus, but for its disparity grant revenue, the county would have a deficit unless it had either reduced its expenditures or raised its taxes during that period.

• Members of the county’s delegation in the General Assembly have on several occasions pointed out the concern in that body whether Wicomico County really needs as much, if any, disparity funding because:
• It has a significant property tax revenue “cap” and, on a per capita basis, almost the lowest property tax revenue – $677 per person (as budgeted this year) or 23rd of the 24 jurisdictions. The statewide average is about $1,534 per person; some examples (as budgeted in FY 2022) are: Cecil – $1,229 (17th), Harford – $1,289 (15th), St. Mary’s – $1,037 (18th), Washington – $891 (20th).
• Wicomico is the only county that receives disparity funding, besides Somerset, which does not have a local real estate transfer tax. 19 of the 24 jurisdictions have this tax; here is the revenue in certain counties in FY 2020: Cecil -- $2,733,686, Dorchester – $1,116,533, Garrett – $2,244,771, Queen Anne’s – $2,401,347, Washington – $2,960,473.
• Wicomico has a “low-end” recordation tax rate (a tax applied to certain mortgages/deeds of trust as well as deeds)  – - 0.7 on $100,000 ($700) or $3.30 per $500. Cecil: $4.10 per $500 – 0.82 percent ($820); Caroline and Dorchester: $5 per $500 – 1.0 per ($1,000); Talbot: $6 per $500 – 1.2 percent ($1,200). Thus, for example, by raising the rate to the same as in Caroline and Dorchester counties, about 43 percent more recordation tax revenue could be generated – that’s $300 on a $100,000 sale, or in FY 2021 about $2.2 million more.
• The county has begun to grant massive property tax waivers for developers – “The Ross” project being the poster child. In that case, once the initial developer got its gift subsidy from the county, it sold part of its interest in the project for much or all of its investment to purchase the project site.

 The Bigger Picture

 State officials may also be or become aware of the fact that, on a per capita basis, Wicomico County is one of the major recipients of state aid, which funds a much larger portion of the county’s total revenue (including agencies that are not part of the general government structure such as the Board of Education, Sheriff, State’s Attorney, etc.) than in many other counties.

In most years, the largest sources of total county revenues are (1) the property, income and other county taxes and (2) state grants.

Statewide data compiled by the Department of Legislative Services shows that 50 percent of the total revenues in the counties was funded significantly (50 percent) by local (county) taxes, and to a lesser extent (26 percent) by state grants in FY 2021. In Wicomico County, however, it was the opposite – 29 percent funded by county taxes and 49 percent by state grants. The effect of the property tax revenue Is particularly significant -- statewide, property tax revenue funded 25 percent of total revenue, whereas in Wicomico County just 15 percent (the lowest in the state).

This disparity is particularly extreme in funding the county’s Board of Education. Statewide, the average funding of the county boards is in almost equal shares (about 45 percent each) by the two major funding sources, which are by the counties and by the state.

But in Wicomico County most (67 percent) of the funding is from the state and just 21 percent by the county government. Thus, Wicomico is among the jurisdictions that are most dependent upon state funding of the education system – data compiled by DLS shows that the statewide average per pupil funding by the state in this fiscal year is $9,183, and much more, $13,824 per pupil, in Wicomico County, which is the fourth-highest in the state (only Somerset, Baltimore City and Caroline are higher).

 This scenario, together with the county’s lack of fiscal discipline (tax revenue “cap,” no transfer tax, etc.), is very likely to result in reduction of state aid, not just the “disparity grant” if the county pushes its luck by changing how liquor sales will occur in Wicomico County in the future.

 What Are the General Effects?

 The notion that having private liquor stores will result in lower prices due to “competition” is fool’s gold. Prices in the liquor dispensaries system are competitive in Maryland – the reality is that state taxes are lower in Delaware, which can’t be changed by this council and won’t be.

Thus, some folks will continue to go to liquor stores just over the county and state line in or near Gumboro and Delmar. The only effect will be to reduce the portion of in-county sales made by the dispensary system and the resulting general fund revenue. Potentially, this could result in closure of the system.

Things would be exacerbated if the county restaurants and bars do not have to purchase liquor through the dispensary system. And the cost to customers of a shot or more of booze by the glass would not change significantly if at all.

In short, there is no public benefit from allowing liquor sales by vendors other than the dispensary system.

A Final Word

Please note that I am not opposed to the consumption of alcoholic beverages, in which I engage.

Robert B. Taylor is a former legal counsel for the Wicomico County Council. He was in private legal practice for many years, during which a significant part involved local governments in counties and towns on the Lower Eastern Shore.