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HomeMy WebLinkAboutAgenda - 04-09-1997 - 2a 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: April 9, 1997 Action Agenda Item No. ate, SUBJECT: Report from Orange County Alcoholic Beverage Control (ABC) Board DEPARTMENT: ABC Board PUBLIC HEARING: Y/N BUDGET AMENDMENT: (Y/N) ATTACHMENT(S): INFORMATION CONTACT: Operational and Fiscal Report Howard Pearson, General Manager Guidelines for ABC Board Members 732-3432 NC Association of ABC Boards Bulletin TELEPHONE NUMBERS: Hillsborough 732-8181 Chapel Hill 968-4501 Durham 688-7331 Mebane 227-2031 PURPOSE: To receive an overview of how the ABC system works and its fiscal accountability. BACKGROUND: See attached. Also, several copies of the Orange County ABC Board's six month financial statements have been received and are available in the office of the Clerk to the Board of Commissioners., RECOMMENDATION(S): Receive as information. Operational and Fiscal Report Orange County ABC Board The Orange County ABC Board operates as a self-supporting government unit at the discretion of the Orange County Commission. The monies generated by the system according to state law, are to be disbursed to pay all operational costs, a preset percentage for law enforcement and alcohol education/rehabilitation. The balance of the profits are to be paid to the appointing authority as long as working capital requirements are met. In Orange County, five retail stores, a central warehouse and the administrative office comprise the ABC system. The system began operation in 1959 and currently generates gross revenue in excess of six million dollars annually. The profits generated during the last two years were distributed as follows: 1996 1995 Law Enforcement - Orange Co. Sheriff' s Dept. $ 79, 300 $ 63, 300 Alcohol Ed & Rehab - Orange Co. Schools 45, 000 40, 000 Chapel Hill/Carrboro Schools Orange County - General Revenue Fund 439, 817 463, 758 Total Distributions $564, 117 $567, 058 Many changes have occurred in the liquor industry since 1959. The most significant of these changes coming in the last ten years. Such things as P-0-S promotions, in store displays, additional payment methods for .purchases and new shelf management and marketing techniques have helped keep away the ever present threat of privatization of the liquor industry in North Carolina. During the past three years, the Orange County Board has focused upon modernizing the system in an effort to retain the money spent by Orange County citizens for liquor purchases within the county. These efforts have included: ( 1 ) relocation of the Chapel Hill store ( 2) complete remodeling of Carrboro, Mebane and Hillsborough stores - creating a more customer friendly environment ( 3) remodeling and conversion of the Eno store to self service ( 4) acceptance of VISA/Mastercard & checks as an additional method of payment ( 5) in store displays, P-O-S promotions as approved by the State ABC Commission ( 6) inter-store transfers and centralized purchasing ( 7) new computer software inventory enhancements which enable us to be more efficient in ordering, shipping and tracking inventory The ABC Board members meet monthly to discuss and review financial matters, policies, personnel matters and any other concerns requiring Board action. The following information is provided to highlight the procedures used in operating the business. SALES: All sales which occur in the retail operations are polled via modem and computer to the central office nightly. This provides the stores and the office with a perpetual inventory daily. Monies from these sales are deposited daily with the exception of the Chapel Hill store - their deposits are made twice daily. PURCHASING/SHIPMENTS/TRANSFERS: In the past two years, the purchasing of liquor from the state warehouse in Raleigh, the shipments to retail stores from our warehouse and the transfer of liquor between our store has been moved to the administrative office under the control of a Purchasing/Warehouse Manager and the General Manager. Liquor sales representatives are only allowed to make sales calls to the administrative office. Any display work done by sales representatives in the stores must have either the General Manager, the Assistant General Manager or the Purchasing Agent accompany him. The retail store managers are not allowed to order or commit to order any alcoholic beverages from sales reps. INVENTORY: Inventories are maintained at a level to provide supplies to the stores for a one month period. This means that inventory levels vary from $500, 000. 00 to $700, 000.00 depending upon the time of year. Physical inventory counts are conducted monthly at all retail outlets as well as the central warehouse. A reconciliation process is then conducted to compare actual count with the perpetual inventory on the computer system which gives us insight into shoplifting problems and mistakes in transfers. These procedures enable us to keep product shortages to a minimum. ACCOUNTING: Other than the daily sales reports, all accounting functions are conducted by the administrative office. The accounting duties are shared by a staff of four employees. Highlights of Staff Duties: (A) Accounts Payable/Office Clerk - serves as receptionist, generates all checks for payment of liquor and other payables, maintenance of store receipts, bank statement reconciliation, correspondence and typing requirements. (B) Purchasing/Warehouse Manager - performs the liquor ordering for all retail outlets and central warehouse. Assists with and oversees the shipments of product to the stores. Fills orders for liquor by the drink establishments for the northside of the county. Conducts monthly physical inventory count at warehouse. (C) Assistant General Manager - performs the general ledger accounting, generates monthly financial statements, performs payroll duties, responsible for record keeping of distressed merchandise and calculates tax liabilities. Administers employee health insurance program. Secretary to the Board. (D) General Manager - oversees all of the above performances, assists in determining policy, prepares budgets, attends Board meetings, responsible for personnel matters, and many other responsibilities. AUDITING. - An independent auditing firm is contracted to perform semi-annual audits of financial statements and inventory verifications. BOARD MEETINGS - Monthly meetings are held at the ABC office for the purpose of discussing financial matters, policy requirements, budgeting, personnel matters and other relevant business. We believe that in the past two years, Orange County ABC has positioned itself for the expected growth of the county. We also believe that the long standing decision by the Orange County Commission to have a five member ABC Board consisting of diverse elements of the general public has served the citizens of Orange County well. These factors, as well as others, have contributed to the Orange County ABC system being fiscally responsible in the past and will continue to do so in the future. The biggest threat to the ABC system is the ever present threat to privatize the system. For the .past five years there has been considerable thought by some legislators to get the state out of the liquor business. In most cases, those making such proposals do not understand how the system works or how it is structured. Most think that the state owns all of the existing assets and that all employees are employees of the state. We feel that should privatization become a reality, the state would probably not suffer any loss of revenue. The legislators could see to it that tax structures to the private sector could generate as much revenue as under the current system. However, we believe the local government entities will be hurt the most. Quite possibly, local governments would have to find ways to replace lost revenues to schools, police departments and county or municipal governments. Finally, the projection for this fiscal year looks to be about the same as last year which was in the $425, 00.00 to $450, 000.00 range. The bulk of the costs for upgrading the system over the past two years have been capitalized, however, with any remodeling project there is always some associated expenses. We believe we will have the major upgrading completed by May 1997 and we will be in a position to accommodate future growth. SUGGESTED GUIDELINES FOR ABC BOARD MEMBERS The following suggested guidelines for local ABC board members has been prepared in response to inquiries from board members who have asked "What information should we expect and what procedures should we adopt in order to properly do our job as ABC board members?". This is not an exhaustive listing, but it will cover the most important items. . 1. The local ABC board should meet in official session once a month. Local ABC board meetings are subject to the Open Meetings statutes, so the public and the press may attend. 2. The local ABC board should require complete financial statements each month, detailing the board's sales, accounts receivables, taxes paid, bottles sold, invoices paid, inventory analyses, and breakage/shortage reports. 3. The local ABC board should require the supervisor/general manager to prepare and recommend a personnel manual for adoption by the board. The personnel manual should include job descriptions for all positions. The State ABC Commission has many personnel manuals on file, copies of which can be obtained and reviewed for guidance in preparing a manual for your board. You should have your board's attorney review the proposed manual before it is adopted by the board. After the personnel manual is adopted by the board, a.copy should be sent to the State ABC Commission for its approval. 4. The local ABC board should adopt a travel policy for its staff and board members. (The State ABC Commission can provide copies of these as well, or you can obtain a copy of your appointing authority's travel policy as a guide.) Travel expenses for spouses, family members, guests, etc., should not be paid the ABC board. It is the responsibility of the appointing authority to establish compensation for board members, so when in doubt regarding expenditures, get written approval from the appointing authority. 5. The local ABC board should have an annual budget prepared, showing the expected receipts and expenditures for the year. The board budget should be prepared, reviewed and adopted each year prior to the commencement of the board's fiscal year. 6. According to State ABC Commission's rules, the supervisor/general manager is also the board's chief financial officer. The supervisor/general manager my designate an assistant to help perform these duties; however, the board members and supervisor/general manager are ultimately responsible for the financial operations of the board. Attention to the above items will go a long way toward making you a knowledgeable board member and will contribute to the successful operation of your local ABC board. BULL -ET-I -N -.­- NORTH CAROLINA ASSOCIATION OF ABC BOARDS TELEPHONE `919' 828.2501 225 H14LSBOROUGH ST.,SUITE 200 P. O. BOX 2021 RALEIGH, NORTH CAROLINA 27602 Bulletin No.313 17 March 1997 I. PRIVATIZATION BILL UNDER CONSIDERATION. We have learned from a very reliable source that certain legislators are actively considering and discussing the possibility of introducing a bill in the General Assembly within the next few weeks that, if enacted, would privatize North Carolina's ABC system. The names of the legislators are being kept secret, and we have been unable to identify them as yet. Please contact your legislative representatives and tell them that North Carolina's control system should be retained. Yes, there are areas in which the system needs to perform more efficiently, but destroying the system would not be in the best interests of the citizens of the State of North Carolina. It is important that you talk with your legislative representatives before the supporters of privatization do. See page 3 for more information on our opposition to privatization. U. 1997 WINTER MEETING HELD IN PINEHURST. Approximately 450 board members, supervisors, and industry representatives attended the 1997 Winter Meeting at the Pinehurst Hotel on March 2-4, 1997. Sunday's activities began with the Jones Management Services' Open House, and the Board of Directors Meeting. On Monday morning, the supervisors met, followed by the Association's General Session where North Carolina's Secretary of State, Elaine Marshall, addressed the attendees. Jim Sgueo, Executive Director of NABCA, gave attendees a status report on privatization efforts in the various Control States. State ABC .Commission Chairman George Bason and Commission Administrator Mike Herring closed out the General Session with their comments to the group. During the Closed Business Meeting that..followed, John Jordan gave a legislative report, and other matters of general interest were discussed. Also, the members voted to amend. the Association's.Bylaws to.permit Supervisor members of the Board of Directors to run for re-election to the Board after their initial three-year term. The Monday afternoon session included a discussion of 401(k) plans; information on the similarities and differences between our ABC system and the ABC system in our neighbor to the north (Virginia); and information on the Mecklenburg County ABC Board's resolution that excludes 18 - 20 year olds from its ABC stores. M. REMIlVDER'REGARDING PROHIBITED ACTIVITIES. ' r•+4sj :r ; ABG►_Comml sion regulations provide that: (a) Distillerreps may not contact ABC store personnel for the purpose of promoting their merchandise. . "Store personnel" means any local ABC store employee who is in a subordinate •position to the buyer or general manager. Distiller reps shall not converse with store personnel in order to influence the sale of particular brands of liquor, the location of particular brands, or the location of authorized point-of-sale merchandising or display spaces (unless a particular employee has been designated as the person to deal with reps regarding POS matters) (b) Distiller reps may not give liquor or anything of value to store personnel. This prohibition includes advertising novelties such as caps, hats, pens, t-shirts, and the like. Store personnel shall be equally as guilty as the rep if they ask for or accept advertising novelties or any other thing of value. (c) N.C.Gen. Stat. 18B-1116(a)(3) prohibits a manufacturer of alcoholic beverages, or an affiliate of such manufacturer, from lending to or giving to any alcoholic beverage retailer in this State (and that includes local ABC boards), or to its employees, or to the owner of property on which an alcoholic beverage retailer does business, any money, service, equipment, furniture, fixtures or any other, thing of value. According to ABC Commission Memo No. 2499, for the purposes of the statute, a "thing of value or gift" includes any gratuity, favor, discount, entertainment, hospitality, loan, tickets or other items having monetary' value. It includes services as well as gifts of training, transportation, local travel, lodging, entertainment fees and meals. Advertising novelties will not be construed to be a "thing of value" pursuant to G.S. 18B-1116(a)(3) as it pertains to local ABC board members and buyers. As an additional exception to 18B- 1116(aa)(3), the Commission will allow modest hospitality provided by an industry member, organization or association to all attendees as an integral part of a North Carolina Association of ABC Boards meeting, or in conjunction with an NABCA conference. Memo No. 2499 states that the receipt of unsolicited"meals has, in the, past, been deemed an accepted business practice, but it cautions that "it is never inappropriate," and frequently prudent, to decline any gift offered by an industry member"_ since the acceptance -of-meals; may tie perceived by the`public`As'improper. .. '� .�.. i 4� ``a.t l - '..� •.._ j 7 i Yj, ♦t � v�lf tiff's IJ" `'� a;t�T.. {'�'+ Memo No,2499 contains a request that each board,..:"seta.,policy for`then buyers`and other board approved personnel regarding the receipt of-unsoliciied'meals and gift's from industry," and that the policy be submitted to the ABC. Commission .office. 2 IV. SUPPORT THE ASSOCIATION'S PROPERTY & CASUALTYINS. PROGRAM. The Association-sponsored property &casualty insurance plan is administered by the Robbins & Weill Agency. The Association receives a portion of the insurance commission that;would otherwise be-paid to.the insurance agent (and if an agent is I involved he or she Will receive a portion'of the commission). 1 These funds help fudd'.the Association's budget. Because -of these commissions, the Association's membership dues are the,same in.1996-97 as they were in 1972! It is important that Association members continue to support the Association's property & casualty insurance dam. Tell your local agent that you want your board insured with USG&G, and for bim or ber to telephone Robins & Weill (1-800- 632-0419) and ask for Meredith Tysor or Sandy Meredith. You can continue to use your local agent, and he or she will repave a cowuf=hxk and the Association will benefit as well. V. KCAL ABC BOARDS ARE QfP! TO PRIVATIZATION. From the Carolinas to Califormb, 'pion' is a popular buzzword that comes op with some regularity in discussions about law to reduce expenditures at the state and local governmental levels. Shrinking rem and slow economic growth have caused some localities. to look with, renewed inttere a at Me possibility of contracting out some governmenal -services to„private eaterpdse_ nm6ntal,, bodies. in a few areas have �Ic:cted with private,enterp`se,to.operate :and water.treatment, plants, to provide custodial a�vices, and to take over fle =gpmnWbsMy,for.garbage collection'and recycling. Results base been mixed. Phoenix cow private garbage collection services in three of its Em..districts in the .late 1970s- fim it has upgraded its public ,collection deft and can now do ft job in aK fin acts less expensively than.it;can contract for the services. Some other go u Un enjoyed somewhat better.results from their efforts to contract for sus. Sanme individuals in Nor& Carolina Um suggested that state's ABC system be prmoatized. Sim their azgun►erds usually rewul a serious Lack of understanding about how the ABC system operates in North Carofina, &is kgwtant that you and the other citizens nf the state 1[now the facts so ttt- everyow rem decide for themselves what kind of ABC sy m beset serves the needs of the c== cad Harth Carolina. .When the. public is aware of dx Casts;,they will,we believe, agree dug Vat&Carolina's current ABC system serves the state wet. The..mvenue stream produced by the.local ABC boards and paid over to the state treasury and local governments is Tibe Ire.fact, during fiscal year;1991-92 the local ABC boards paid over$78 million into t so te`treasary.'In'addition,'-the boards spent almost $9 million for local ABC law enforce and alcohol education and rehabilitation, and contributed, over $30'million to finance`focal governmental ;operations Some individuals have suggested that 'the State 'sell the 395 or" so'ABC stores .'and thereby obtain a one-time windfall of revenue. - In fact, North Carolina does not own a single ABC store. The stores are owned or leased by the ABC boards themselves,'not the State. If the stores are sold, such sales will not generate.one:cent for the State of North Carolina. 3