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Update on the Nighttime Economy Task Force

To be competitive for creative-class workers as well as empty-nesters, Montgomery County must be able to offer the new urban quality of life that those residents are seeking. To advance this issue, I requested the County Executive to establish the Nighttime Economy Task Force, which examined policies, resources and amenities that impact Montgomery County’s nightlife offerings. The task force led to the passage of numerous pieces of legislation in the Maryland state legislature as well as the County Council, all of which make it easier for restaurant and entertainment-oriented businesses to thrive in Montgomery County. I think it has been a success.

Please see the most recent implementation report below (PDF), as prepared by the County Executive’s team.

Nighttime Economy Task Force Implementation Summary May, 2015

Task Force Recommendations

County Executive Ike Leggett appointed the Montgomery County Nighttime Economy Task Force in May 2013 to explore ways of improving nightlife offerings at Montgomery County’s urban centers to meet the changing needs of our community.

After five months of intense work, the Nighttime Economy Task Force delivered the report, “Destination Montgomery,” to the County Executive with 32 recommendations for improving options and quality nightlife in Montgomery County. These recommendations covered the following six areas:

  1. Arts and Entertainment,
  2. Business Engagement,
  3. Public Space and Amenities,
  4. Quality of Life,
  5. Transportation, and
  6. Venue Operations and Public Safety.

Implementation Overview

A year and half after the report’s official release, the recommendations are at varying stages of implementation. A few have been implemented, some are actively being implemented, others are being further evaluated, and a few are no longer applicable or supported by the County government.

Recommendations successfully implemented

  1. Recommendation: Extend the hours of operation for venues with beer/wine/liquor licenses to 2 am on Sundays through Thursdays, and to 3 am on Fridays, Saturdays, and the Sundays before Monday federal holidays.
    Status: HB-463 and SB-657 were passed were passed in support of the recommendation.
  2. Recommendation: Expedite the creation of a social venue license, and modify the current alcohol to food ratio under the Class B beer/wine/liquor license from 50/50 to 60/40, to reflect the change in increased demand for higher quality, higher priced alcoholic beverages and to encourage establishment and operation of venues that host live music and other events.
    Status: HB-142 and SB-300 were passed in support of the recommendation.
  3. Recommendation: Develop an educational Patron Responsibility Program.
    Status: Montgomery County Department of Liquor Control (DLC) has partnered with Brown-Forman and a designated driver program called “Be My Designated Driver” (BeMyDD), to encourage people to plan their night out and ensure a safe ride home. These programs are being promoted by alcohol serving venues with a planned community education program with private sponsorship.
  4. Recommendations: Planning or Zoning Changes:
    1. Amend zoning standards to provide flexibility in meeting public use space and open space requirements.
    2. Support additional density in the County’s urban areas to foster a vibrant
      nighttime economy.
    3. Explore alternative, more attractive incentives for developers to include suitable, affordable performance spaces for small and emerging arts groups.

    Status: The Montgomery County National Park and Planning Commission finalized in 2014 the Zoning Rewrite for the county which ultimately, updated zoning codes and the zoning map that helped address the recommendations listed above. One remaining opportunity revolves around understanding the opportunities available under the Arts & Entertainment Districts. The Department of Economic Development is helping draft information both for the Planning Department and other entities on the Arts & Entertainment Districts but also other related tax incentives that exist for developers including Enterprise Zones, Façade Improvements, Green Building Codes, the Public Art amenity, just to name a few.

Recommendations being Implemented (in progress)

  1. Recommendation: Improve awareness of parking options.
    Status: All three urban districts are in agreement in utilizing and promoting the ParkMe application (www.parkme.com) for visitors and consumers, which is the preferred application by the Montgomery County Parking Lot District.
  2. Recommendation: Marketing County business resources and assets.
    1. Market A&E districts and county business resources to property owners.
    2. Create, develop, and implement a marketing program for the County.

    Status: These above recommendations are being advanced by multiple partners. The three A&E districts are exploring Placemaking options to enhance urban vitality and an inviting atmosphere that include both daytime and nighttime hours. The Office of the County Executive is taking a lead on developing a comprehensive economic strategy that will include better alignment of place-based economic development and program- based economic development. It is also in the middle of a multi-year marketing and branding project with several short-term projects to be delivered in spring 2015.

  3. Recommendation: Develop and implement a busker program to provide entertainment in urban areas.
    Status: The Silver Spring Regional Center and the Montgomery County Innovation Program has been developing the idea of a busker program to be piloted with the Silver Spring Arts & Entertainment Advisory Committee, the Silver Spring Citizens Advisory Board and Silver Spring Urban District Advisory Committee. This group has been working on several areas including Identifying Potential Busking Areas, Developing the Specific Parameters for Busking, Enforcement, and Promotions and Marketing.
  4. Recommendation: Enhance pedestrian and bicycle access.
    Status: Bethesda, Silver Spring, and Wheaton are all moving forward to achieve this goal based on their unique needs. Bethesda has made a top priority improving lighting. Silver Spring and Wheaton have made has made pedestrian walkability a top priority through lighting, walking and biking accessibility.
  5. Recommendation: Create Urban Parks Guidelines to activate public space through design elements, enhance the greater community, and foster multiple uses to appeal to a range of demographics at different times.
    Status: The Department of Parks is working with Planning on efforts to activate spaces such as in Silver Spring, especially in areas that are not public parks but are public properties or quasi-public such as WMATA, while developing guidelines for new development particularly within urban areas to help define and develop spaces that can foster activity both during the day and evening.

Recommendations being further evaluated

  1. Recommendations: Developing transportation options.
    1. Expand the “Safe Ride” program to all weekends (Friday evening through early
      Sunday morning).
    2. Increase the number of taxi stands.

    Status: Due to the changing market and new players like Uber that are challenging existing regulations and established players like taxis, the Council is working on addressing taxi regulations that will help address the recommendations moving forward.

  2. Recommendations: Business Services Tailored to the Small Business Community.
    1. Create a concierge service that promotes positive customer service, assists with streamlining the planning and permitting process, and facilitates working relationships with multiple departments for the business consumer.
      Status: Several departments provide concierge service to small businesses including the Department of Economic Development, the Department of Liquor Control, and the Department of Permitting Services.
    2. Recommendation: Simplify and streamline the process businesses must go through in order to open an arts and entertainment venue or hold an arts and entertainment event.
      Status: The County Council has just approved a new Ombudsman in the Office of the County Executive for commercial and residential development projects who will report directly to the Chief Administrative Officer. DPS has consolidated the permitting process to support new and existing restaurants through its “Recipes for Success Packet” to explain the process of opening a restaurant in Montgomery County.
  3. Recommendation: Develop a targeted strategic plan for attracting new companies to the County, fostering entrepreneurship, and growing our existing businesses based upon the target markets.
    Status: The Comprehensive Economic Strategy underway will address the above issues and serve as a comprehensive blueprint for Montgomery County’s future economic success, including how retail and placemaking can support an overall economic vision and vitality. Achieving this recommendation would require further research into the retail inventory in the county’s urban centers ultimately leading to the creation of a retail plan for the county. This would help show gaps in retail, especially with those that are and/or can become retail destinations. That information would then lead to the strategic and targeted company attraction referenced by the task force.
  4. Planning and Development
    1. Recommendation: Reduce opportunity for crime in urban areas by incorporating Crime Prevention through Environmental Design (CPTED) techniques.
      Status: This is a shared responsibility between a cluster of departments including Maryland National Capital Park and Planning Commission, General Services and the urban districts in creative placemaking to eliminate dead spots and create an inviting atmosphere at the urban centers.
    2. Recommendation: Encourage more housing options.
      Status: Two issues related to housing options need to be addressed–the size of dwelling units and the parking standards for these developments that need to be further explored.
  5. Transportation Options at Night
    Recommendations:

    1. Improve/expand the circulator service in focus areas.
    2. Expand the frequency and reach of late-night transit service.

    Status: All three urban districts would encourage WMATA to extend hours on weekends to 3am, especially with the extension of hours to 3am in FY15. Additional bus service should be considered if demand increases over time.

  6. Urban Districts Support and Development
    Recommendations:

    1. Support dedicated public safety resources for the nighttime economy in high density
      urban centers.
    2. Increase funding for Business Improvement Districts and Urban Districts.
    3. Professionally manage and maintain public spaces through the private sector or
      through public-private partnerships (similar to the Bethesda Urban Partnership). Urban District would like to increase coordination with MNCPPC as Optional Method Developments (OMDs) come on board within the districts to activate public and private spaces.

    Status: These are long-term, broad-based recommendations, most of which will be supported as demand for services increases over time, especially for police and the urban districts services in each area. To sustain this enforcement would certainly require identifying the related departments and future funding sources, especially as it pertains to the urban districts. How this is achieved depends heavily on the types of services to be delivered in each urban district or new ones identified over time.

  7. Urban Noise Areas
    Recommendation: Amend the County’s noise ordinance to allow for the establishment of Urban Noise Areas around appropriate locations (e.g., Rockville’s Town Square, Silver Spring’s Veteran’s Plaza and downtown); increase the allowable noise levels for qualifying arts and entertainment activities in these areas to 85 dBA (measured at 100 feet from stage, PA, or other center of the performance); increase the time allowed for these levels to midnight; and ensure that nearby residents are informed prior to moving in of the possibility of event-related noise.
    Status: There are some policy considerations about the recommendation of the NETF, which is a “one-size fits all” approach that proposes a noise standard that could allow much higher noise at receiving properties than currently permitted under Chapter 31B. The recommendation also proposes a different approach to regulating noise than the current noise law by regulating the level of noise a source is permitted to produce rather than the level of noise heard by a receptor. This ignores the reality that different locations have different characteristics, and that what is reasonable at one location may be unreasonable at another. For these reasons, DEP believes it would be prudent to establish specific parameters for each UNA depending on the characteristics of the site. Some policy guidance would have to be provided regarding the balance between those entities creating the noise and those affected by it.

Recommendations no longer applicable or supported
The below recommendations are not being actively supported by the County government at this point for various reasons.

  1. Recommendation: Allow food trucks to operate after 10pm.
    Status: Montgomery County government is exploring options for mobile vending for all hours, not limited to nighttime hours.
  2. Recommendation: Artist tax that would incentivize venues that pay musicians to performance.
    Status: This recommendation is deemed a low-impact measure and thus not supported at this time.
  3. Recommendation: Development of Large-Scale Nighttime Events.
    Status: All three urban areas are concerned about large scale events that may compete with surrounding businesses.

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Montgomery County Greenlights New Policy To Encourage More Craft Distilleries

I am pleased to announce that the County, at my request, has adopted a new policy that makes it easier to open craft distilleries in our urban nodes.

Please see the press release below:


Montgomery County Greenlights New Policy To Encourage More Craft Distilleries

September 6, 2016


ROCKVILLE, MD — County Executive Isiah Leggett and Councilmember Hans Riemer today announced a new County policy to encourage the location of emerging and growing craft distilleries.

The policy, based on the recently adopted Zoning Rewrite, allows the annual production of up to 50,000 gallons of distilled liquor in certain commercial/residential mixed-use zones. For companies that grow or are at greater levels of production, of between 50,000 and 100,000 gallons of distilled liquor will be allowed in light industrial zones. More than 100,000 gallons of distilled liquor are allowed in heavy manufacturing zones.

“Applying the new artisan zone to distilleries makes clear to artisans, craftspeople and small businesses that Montgomery County welcomes and supports their spirit of innovation and entrepreneurship and has the places for them to locate, create, market and grow,” said County Executive Leggett. “County residents spend hundreds of millions of dollars per year on beer, wine and spirits and this will help encourage ‘home-grown’ products.”

“Since joining the Council, I have worked to strengthen our ability to offer an urban lifestyle,” said Councilmember Riemer. “We need to create communities where younger workers and families as well as empty nesters want to be. When the creative, high-value workforce wants to live in a community, the companies and jobs follow. Breweries have been adding new life to many communities in Montgomery County, and we hope to build on that by clearing hurdles for distilleries.”

Leggett and Riemer worked together to create the Night Time Economy Task Force in 2013, which recommended a policy of self-distribution for breweries, as proposed by the Department of Liquor Control. The subsequent state legislative change resulted in a significant number of breweries launching in the County over the past few years, leading one successful entrepreneur in the brewery sector to call Montgomery County “the best place in the DMV” to start a brewery. New breweries in the County include Denizens, Seven Locks, Waredaca, and Brookville Beer Farm, joining Gordon Biersch, Growlers, and Rock Bottom.

Distilleries, like breweries and wineries, are manufacturing businesses and retailers. They are part of the innovation economy culture that is taking root in Montgomery County. Communities with locally produced beverages benefit from both a vibrant social scene for residents and export-based jobs, as breweries and distilleries sell their spirits to consumers around the country and globally. Breweries are sprouting because of new laws allowing them to sell directly to restaurants without going through a distributor, as well as supportive financing from the State and County. State law
regarding self-distribution has also been applied to distillers, clearing a separate hurdle to innovation and entrepreneurship.

At the request of Councilmember Riemer, the new policy was crafted by the County’s Department of Permitting Services, in close cooperation with Montgomery County Park & Planning.

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DLC vs. Private Sector: A Wholesale Price Comparison

Throughout discussions on the Department of Liquor Control (DLC), there have been many assertions about DLC’s prices. Some claim they are too high, others claim they are lower than private competitors, but so far all of these claims have been anecdotal. Fortunately, this is an empirical question that can be tested. To provide all of us with an objective answer to this question, I asked my staff to undertake such a study. Through much painstaking work, Tommy Heyboer on my staff has completed a wholesale price study comparing the prices DLC charges Montgomery County licensees with the prices of the same products charged by private wholesalers elsewhere in Maryland. We compared DLC prices to private sector prices for 771 randomly selected products, enough to state the average price differences with 95% confidence.

The study finds that DLC’s wholesale prices on stock products are essentially equal with private sector prices elsewhere in Maryland, while DLC wholesale prices on special order products are about 10% more expensive than those products would be elsewhere in Maryland.

The Council’s Office of Legislative Oversight and staff from the County Executive’s office, CountyStat, and DLC have reviewed the study and provided extensive feedback. I want to thank them for their numerous comments, which greatly strengthened the narrative and conclusions.


DLC vs. Private Sector: A Wholesale Price Comparison1

Summary
Based on a careful analysis of Department of Liquor Control (DLC) and private sector pricing data, DLC’s wholesale stock prices are roughly equivalent to private sector prices in Maryland while DLC’s wholesale special order prices are about 10% more expensive than private sector prices. This empirical analysis a) confirms anecdotal evidence from restauranteurs and retailers and b) follows logically from the fact that DLC is layering an additional markup to special orders when purchasing them from other distributors while DLC buys most stock items directly from manufacturers. The Council’s Office of Legislative Oversight (OLO), CountyStat, and DLC reviewed this analysis and provided comments that were incorporated into the study.

Results
The following tables summarize the results.2 3

Wholesale Special Order Price Difference: DLC vs. Private Sector
Count May 2015
Price Difference
Post Markup Reduction
Price Difference
Special Order Beer 47 21.53% 12.15%
Special Order Keg 18 39.02% 39.02%
Special Order Liquor 36 -1.99% -1.99%
Special Order Wine 315 8.73% 8.73%
Total / Avg 416 10.56% 9.50%
Note: The individual product categories (special order beer, kegs etc..) price differences are not statistically valid in themselves because they do not have sufficient N. They are shown only to provide context.
Wholesale Stock Price Difference: DLC vs. Private Sector
Count May 2015
Price Difference
Stock Beer 89 -5.11%
Stock Keg 28 -7.41%
Stock Liquor 76 -0.69%
Stock Wine 162 4.51%
Total / Avg 355 0.04%
Note: The individual product categories (stock beer, kegs etc..) price differences are not statistically valid in themselves because they do not have sufficient N. They are shown only to provide context.

The data indicate that:

  • Stock prices are essentially equal between the DLC and the private sector
  • DLC special order prices are about 10% more expensive than the private sector
  • DLC stock and special order liquor prices are less than the private sector

Research Design and Methodology
DLC provided the wholesale prices for every product in its inventory. Private sector wholesale pricing data came from the Maryland Beverage Journal4 and directly from several distributors5. DLC’s inventory was separated into stock and special orders and then each list was randomized6 separately. To achieve a 95% confidence level with a 5% confidence interval, each sample had, at least, an N of 3557. Further, the samples’ split of wine, beer, and liquor closely aligns with the actual proportions of DLC’s inventory; if beer products comprised X% of the inventory, they comprised X% of the sample. This study uses frontline private sector prices from May 2015 and compares them to the DLC prices. To determine the overall price differences, this study used price differences in percentage terms of each item (where a positive percent indicates DLC being more expensive by that percent and a negative percent vice versa) and then averaged the differences for each sample.

It is important to note that DLC did decrease the markup on special order beer8 over the summer after the study was underway. To determine whether the markup reduction had a significant effect on the price difference, the study shows both the sample with May 2015 special order beer prices and the same sample with the markup-reduced prices on special order beer. The markup reduction on special order beer reduced the price difference from 21.53% to 12.15% on those products. However, it only reduced the overall special order price difference by 1%. Therefore, the markup reduction did not produce a significant effect on the overall analysis. The table above shows both results.

Since the table above shows that special order beer is between 12% or 21% more expensive and special order kegs are nearly 40% more expensive, one could argue those product types are driving the bulk of the overall price difference. While it is true that they are part of the sample, they do not “punch above their weight,” so to speak. First, special order beer and kegs comprise about 15% of the sample, which, not coincidentally, is the same percentage of special order beer and kegs in the entire inventory. Special order wine, however, comprises over 75% of the sample.

Previous Price Comparisons
While both OLO and CountyStat have performed separate price comparisons, these analyses lack the inferential power provided by a statistically significant sample. Rather, they focused on the most popular DLC products. Those analyses say some interesting things about price differences on these specific products. However, they cannot say whether the trends identified apply to moderately popular and less-popular products or more importantly, to stock and special order products more broadly. In other words, the real question, “are DLC prices more expensive?” was still largely unanswered.
Executive Branch staff asked whether the analysis should use weighted averages based on the volume of a product sold by DLC. This analysis does not follow this methodology, because it is designed to answer a very specific question: “are DLC wholesale prices higher or lower than the Maryland private sector?” A random sample of the entire DLC inventory captures the price differences over the full breadth of products.

CountyStat’s and OLO’s price analyses focused on the impact on licensees of the prices of the most popular, most high-volume items, which answers a slightly different question. It is best to view this analysis as supplementing the results of OLO and CountyStat.

If licensees are price-sensitive when making purchasing decisions (and they presumably are), relatively higher prices on special order products will likely depress sales of these products compared to lower-priced items. DLC’s sales numbers cannot reflect the absence of sales, so using weighted averages based on sales volume could skew the results. Testimony from licensees to the Ad Hoc Committee on Liquor Control supports the assertion that licensees take price into consideration when deciding which products to order.

Second and more importantly, this analysis calculates overall price difference by averaging the price differences of each individual product, not by simply averaging the average of each product category. Therefore, if one calculates the weighted average of each product category in the sample, they would find that it too equals 10.5%. That said, the price difference in each product category is not statistically significant, given the insufficient amount of N for each product category. Those numbers simply provide additional context.

It is important to note once again, that the price studies done by the Office of Legislative Oversight and CountyStat shed some insight on the question of, “What effect do price differences of the most popular items have on licensees?”. In discussions before the Ad Hoc Committee, representatives from the DLC and CountyStat sought to focus attention on price comparisons of popular items, such as the top 50 products sold in stock or special order. One key challenge for this methodology is that it does not allow us to draw strong conclusions because the sample sizes are small.

The goal was to go beyond this limited view of the pricing and draw stronger inferences on DLC pricing overall. As discussed above, this why a statistically significant sample is more appropriate.


Endnotes
1 Prepared by Tommy Heyboer, Deputy Chief of Staff to Councilmember Hans Riemer. Special thanks to the County Executive’s staff and the Council Office of Legislative Oversight for insightful comments and suggestions.
2 The average price differences of each product category (beer, kegs, liquor, and wine) are shown for context, but given the relatively small N for each individual product category, they do not constitute statistically significant results on their own.
3 Weighted averages must be used for the individual product category price differences to add up to the total average.
4 As of May 2015
5 Distributors include Bond Distributing, Legends Ltd., and the Country Vintner
6 Once separated into stock and special order lists, a random number (using the RAND() function) was assigned to each product and then the lists were ordered from small to large. The items included in each sample are, at least, the first 355 items with DLC and private sector prices.
7 An N of 355 for the sample is based on an inventory of ~4,700 stock products and ~27,000 special order products
8 The DLC reduced their special order beer markup by 28.5%. It went from 35% to 25%. See the August 2015 DLC Newslink here.

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Council backs historic liquor reforms

Since the end of prohibition in 1933, Montgomery County government has barred private restaurants and stores from purchasing alcohol from private distributors, requiring them to buy exclusively from the Department of Liquor Control warehouse.

As a result, Montgomery County has become known as a very difficult place to run great restaurants or beer and wine stores and a place where consumers cannot get the choices that are available in other communities.

This policy is the aspect of liquor control that I feel most needs to change, and I am pleased to share that today the County Council backed a resolution that will ask our state lawmakers to move forward with an historic reform: to liberate our 1,000 restaurants and stores to buy craft beer and fine wines directly from private distributors.

Throughout 2015, the County Council’s Ad-Hoc Committee on Liquor Control, which I chair and which also includes Council President George Leventhal and Councilmember Marc Elrich, has taken a deep look into the County’s liquor regulations and how they affect our community.

What we have found has been disheartening. Our restaurants and our beer and wine stores are having tremendous problems ordering from the DLC — all too often they are stuck with empty shelves and empty taps because their orders never arrive.

Problems at the DLC have become more significant partly because the consumer environment today is radically different from 80 years ago when our system was established, or even 20 years ago when the modern craft beer movement began. Today, to prosper, our restaurants and stores need an ever-expanding list of choices of specialty beer and wine — because that is what our residents want and can get elsewhere in the region.

Sales data, unfortunately shows that county residents are spending their money outside of the county — our per person in-county sales are about 1/3 less here than in Howard, Frederick and Prince George’s counties. What a loss of economic impact for our restaurants and stores and the families that depend on jobs in those industries.

The Council Committee’s solution is to allow restaurants and stores to buy “special order” products directly from private distributors. The DLC maintains a list of about 29,000 products that can be bought by restaurants and stores. About 4,500 are stocked in the warehouse for delivery, while about 24,500, largely craft beer and wine, are special order.

For restaurants and stores that want to showcase variety and choice with craft beer and wine, and the consumers who love those products, the committee’s proposed reforms are a game changer. Some restaurants and stores today have as high as 90% or even 100% of their beer/wine lists as special order.

The fiscal and employment impact on the county is manageable, particularly if the county does a better job running the department more profitably. Towards that goal, the committee has recommended expanding the number of county liquor stores. Montgomery County is the only retailer of spirits in the county, and operates 25 stores. Thanks to committee progress already embraced by the County Council and the DLC, the county will open 3 more stores in FY16 and more in subsequent years as part of a “retail modernization” plan. Each store averages about $750,000 in profits to the county while employing about 8 county workers. These new stores can absorb any workers who might be displaced by the change in distribution policy.

A second reform recommended by the committee is for the state to establish a small fee on distributors for the rights to sell into the county — a clean and simple way for the county to change how it claims revenue from alcohol sales.

The full Council’s actions today constitute a recommendation to the Montgomery County delegation in the state legislature, which has jurisdiction over liquor laws. We hope to advance legislation in the Spring 2016 session to take effect later in 2016.