Legislative Committee Discusses Alcohol Laws

Special Report - December 11, 2008
North Carolina’s Alcohol Beverage Control (ABC) System is outdated and needs modernization in three areas according to a legislative committee that met this week. The Joint Legislative Program Evaluation Oversight Committee, which met on December 10, heard a presentation by committee staff Carol Shaw, who led an evaluation of the ABC System.

North Carolina operates as a “local control” state, meaning that local counties and municipalities hold elections in order to decide whether to be wet or dry. If a county or municipality elects to authorize the sale of liquor, a local government owned and operated ABC board is established to distribute liquor. This type of system has been in place in North Carolina since at least the 1870s. However, the mission of these local boards is unclear, so it needs to be updated to emphasize efficiency, profitability, convenience, customer service, and appropriate control, according to Shaw.

The evaluation also found that a number of local ABC boards operate inefficient and unprofitable enterprises due to a lack of accountability, and the statewide ABC Commission does not possess the management tools necessary to properly oversee local boards. The evaluation team suggested authorizing the Commission to put performance standards, technical assistance, and financial incentives in place. The efficiency of the ABC System would also be helped by giving the Commission the authority to facilitate mergers of local boards and explore the use of agency stores to contract with the state to open liquor stores in rural areas. Liquor sales in fiscal year 06-07 were close to $700 million in the state with $248 million as revenue for state and local governments. Improved efficiency and profitability would mean increased revenue for local governments, which tend to use the monies to fund law enforcement and alcohol abuse rehab programs.

Finally, the evaluation recommended that statutes dealing with North Carolina’s ABC System need to be updated to reflect the changing demographics and proliferation of alcohol in the state. Currently, any municipality with 500 registered voters may hold an election for an ABC store. However, this low threshold allows for stores to be established in locations that are not financially feasible. The evaluation team recommended raising the registered voter threshold to 5,000. Municipalities that wish to hold mixed-beverage elections must also elect whether to have an ABC store. This is unnecessary, Shaw said, because 95 of North Carolina’s 100 counties have ABC stores. This level of statewide proliferation has made liquor available almost statewide, eliminating the need to have separate votes to authorize liquor by the drink and ABC stores.

North Carolina is one of 18 states nationwide with a control ABC system. All 18 of these states have been control states since the end of Prohibition in 1935. North Carolina is unique because of its commitment to the use of local control boards, in which the government regulates the sale of liquor by maintaining the authority of sole distributor. The evaluation team recommended that the state look at whether the current retail system, where the state owns and operates liquor stores, an agency system, where the state contracts with private liquor stores, a combination of the two, or a wholesale system, where the state controls the wholesale supply of liquor to private stores, is best suited to the changing landscape of North Carolina liquor proliferation.

The Legislative Committee, evaluation team, ABC Commission, and North Carolina Association of ABC Boards agree that the current local option system works well and is most appropriate for the state. Committee staff was directed to work with the ABC Commission to draft legislation including the three primary recommendations in the hopes of fine-tuning North Carolina’s unique ABC System.

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