HomeMy WebLinkAboutAgenda - 10-17-2006-7cORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: October 17, 2006
Action Agenda
Item No. ']-~
SUBJECT: ABC Board Report
DEPARTMENT: County Commissioners & PUBLIC HEARING: (Y/N) No
County Manager
ATTACHMENT (S): INFORMATION CONTACT:
Rod Visser, 245-2130
1012/06 Letter to ABC General Manager
Information Provided by ABC General
Manager
PURPOSE: To receive a report on ABC operations in Orange County from Dan Sykes, the
General Manager for ABC in Orange County, and to provide any comments or questions to Mr.
Sykes.
__BACKGROUND: Based on a request by the Board, a letter (attached) was sent to Orange
County ABC General Manager Dan Sykes with an invitation to attend the Board of
Commissioners' regular meeting on October 17, 2006 to provide a presentation and general
.update on ABC operations in Orange County. The letter noted that the Board was interested in
information regarding ABC's total gross sales, total profits, and total disbursements. The
Board's interest in learning, about ABC's use of technology and any efforts to determine the
general residence location of ABC customers, possibly via their zip code, was also included.
Mr. Sykes has responded favorably to the County's invitation to attend the meeting and will
provide a brief presentation on ABC Board activities and operations and respond to any
questions. In preparation for the meeting, Mr. Sykes has also provided background materials
which are attached.
FINANCIAL IMPACT: NONE
RECOMMENDATION(S): The Manager recommends that the Board receive the presentation
and to provide any questions or comments to Mr. Sykes. ,
Orange County
Hillsborough
North Carolina
.Manager's Office
October 2, 2006
Mr. Daniel W. Sykes, General Manager
Orange County ABC Board
122 Highway 70 East
Hillsborough; NC 27278
Dear Mr. Sykes:
Established 1752
At the request of the Orange County Board of Commissioners, I am writing to extend an
invitation to you to attend the Board of Commissioners' regular meeting on October 17, 2006
to provide a presentation and general update on ABG operations in Orange County.
Areas of specific interest that have been noted by Board members include ABC's tatal gross
sales, total profits, and total disbursements. Comsnissianers have also expressed an interest
in learning about ABC's use of technology and any efforts to determine the general residence
location of ABC customers, possibly via their.zip code.
The Board's October 17`h meeting is at the Southern Human Services Center at 2501
Homestead Road 9n Chapel Hill. Please let me know if this date is convenient with your
schedule. If so, it would also be helpful if you could provide any supporting materials for
your presentation by Monday, October 9, 2006 so that we can distribute them to the Board
ahead of the meeting. -
Please feel free to contact me if you have any questions.
Sincerely,
~~
Rod Visser
Interim County Manager
cc: Tom Heffner,.ABC Board Chair
200 S Cameron Street ~ PO Box 8181 ~ Hillsborough, North Carolina 27278
Phone: (919) 245-2300
- Fax: (919) 644-3004
Agenda Item ~'G -Special Presentations
ORANGE COUNTY BOARD OF COUNTY COMMISSIONERS' MEETING
Orange County ABC Board Presentation
Presenter: Dan Sykes, General Manager of the Orange County ABC Board
7:30 PM, Tuesday, October 17, 2006
Location: Courthouse, Southern Human Services Center, 2501 Homestead Road, Chapel Hill
• Overview:
o The five-member Alcoholic Beverage Control Board is appointed by the
BOCC.
o The ABC Board's specific responsibilities and regulations regarding
operation of the ABC System are mandated by NC General Statutes and
rules of the North Carolina ABC Commission.
o My job, as the General Manager, is primarily to oversee the day-to-day
operations of the ABC System.
® Operations:
o Facilities:
^ ABC stores: seven retail stores and one "Liquor-by-the-Drink"
(LBD) store; which services ABC permittees such as restaurants,
hotels, bars, etc.
^ Warehouse/Main Office Complex (Hillsborough).
o Personnel Head-count:
^ Full-time employees - 28 (an increase of two since March, 2005).
^ Part-time employees -varies by season from 9 -11.
o Prices are uniformly established statewide by NC ABC Commission.
Statement of ABC Board's Mission
The Orange County ABC Board is an independent political subdivision of the
State of North Carolina that purchases, distributes, controls and sells spirituous
beverages to the eligible citizens of, and visitors to, this County. This is
accomplished consistently with the applicable laws of North Carolina and rules of
the NC ABC Commission. Our united goal is to achieve a balance in four
important areas:
o providing the highest level of customer service,
o maintaining a dedicated workforce,
o contributing net profits to designated Orange County systems, and,
o maintaining sufficient working capital for expansion and improvements.
BOCC Meeting 10/17/2006 Page 1 of 7 pages
Agenda Item -Special Presentations
® Accomplishments in the last 12 months
o The Board's single most important accomplishment in the last 12 months
was up-fitting and opening an additional ABC store in Meadowmont
Village on August 4, 2006.
o Other important accomplishments were:
^ Distributing net profits of over $568k last fiscal year (FY05/06).
[$90k to the City and County schools' systems, $78k to the
Sheriff's Department and the Chapel Hill Police Department, and
$400k to the Orange County General Fund.]
^ The School distribution is prorated based on the number of
projected students as determined by the respective school
system.
School System Projected Students $ Per Student $ Distribution
Chapel HiIllCarrboro 10,824 $ 5.06 54,769
Orange 7,013 $ 5.06 35,486
Total 17,837 $ 90,255
® Required Distribution = 7% ($57k) or $ 3.19 per student
^ For Law Enforcement, the minimum distribution requirement was
5% (or $44.Sk). The actual distribution was $78k or (8.8%).
^ General Fund: In addition to the $400k paid to the General Fund an
additional $43k was paid for retired employee health insurance
benefits.
^ Collecting and paying-out over $2.4 million in total taxes which
were related to gross sales in last fiscal year.
^ State Excise and sales taxes $2.000k
^ Mixed Beverage $ 362k
^ Rehabilitation $ 38k
Total taxes based on gross sales $2,400k
Budgeting distributions of net profits for the current fiscal year
(FY06/07) to be over: $589k. [$96k for the public school systems,
and $93k for law enforcement and $400k for the Orange County
General Fund,].
® School distribution is prorated based on the number of
projected students as projected by the respective school
system.
BOCC Meeting 10/17/2006 Page 2 of 7 pages
Agenda Item -Special Presentations
School System Projected Students $ Per Student $ Distribution
Chapel HiIIlCarrboro 11,200 $ 5.31 59,472
Orange 6,806 $ 5.31 36,140
Total 18,006 $ 95,612
Required Distribution & actual distributions will not be computed until the
actual results financial are known after year-end.
® Law Enforcement: Sheriff's Department $84k and Chapel
Hill Police Department $9k for a total of $93k. Minimum
requirement, 5% (or approx $41k).
o General Fund: $400k plus $491c in retired employee health
insurance benefits.
^ The Board established a policy in August 2005 to provide
education and rehabilitation distributions solely to Orange County
Public School Systems.
In cooperation with the "Coalition for Drug-and-Alcohol-Free
Teenagers", the Board printed the following message on a year's
supply of paper bags used in the retail stores:
YOU Can STOP Underage Drinking
* Don't Allow Underage Drinking in Your Home.
* Report Underage Drinking to Law Enforcement.
Surveyed Mixed Beverage Permittees (Restaurants/HotelsBars) to
ensure they are receiving the services they expect and to determine
means for improvements. Survey results revealed that customer
satisfaction was well above average. Also, as a result of the survey,
the hours of operation of the Carrboro distribution center were
extended an additional two hours in the afternoon to allow later
pick-ups.
Created an employee training program for retail employees:
primary objective was comprehensive training. This is now and
ongoing procedure.
^ Sponsored several training classes which were taught by NC ABC
Commission education instructors. One class was for ABC store
personnel and the other three classes were for ABC permittees
(restaurant employees).
BOCC Meeting 10/17/2006 Page 3 of 7 pages
Agenda Item -Special Presentations
A comprehensive review ofpoint-of--sale and inventory software &
hardware providers was performed by the staff. As a result,
updated software and hardware was purchased for all stores. Also,
DSL was installed in all stores to process credit cards faster and to
enhance computer communications. In addition, a Virtual Private
Network (VPN) will subsequently be developed to disseminate
information to all facilities.
^ Comprehensive review of the current banking situation. All banks
in the area were considered but in the end SunTrust was the
preferred banker.
^ Review of credit card processors; the primary objective was to
reduce bankcard expenses and this was accomplished.
® Threats: The threat of privatization of the sale of spirituous beverages appears to be
an ongoing concern. It seems that every two years or so a bill is presented to study the
current system's method of the sale of spirituous beverages. To deter privatization,
the Board plans to provide attractive and well-lighted stores in convenient locations,
provide excellent customer service, and also to provide the best selection of products
in the area.
• Activities in Progress:
o Completion of aster-friendly employee handbook: primary objective is to
facilitate its reading. (Completion was due earlier; the delay is because
new policies are pending.)
o Review facilities for compliance with the Americans with Disabilities Act.
Primary objective is to make facilities compliant. (Completion was due
earlier but was delayed pending a thorough review of modernization
required to certain stores.)
o Gift Card Program: Measures have been taken to make gift cards available
in ABC stores. Rollout is projected for mid-to-late November.
o The Government Accounting Standards Board (GASH) introduced a
standard which requires government entities to estimate and provide
funding for promises made for "Post-employment Benefit Plan other than
Pension Plans". The ABC Board is responsible for health insurance
benefits of employees retiring through the Local Government Employee
Retirement System (LGERS) with 15 or more years of service. Employee
data retiree data has been forwarded to an actuary for an estimate of the
net-present-value of the future liability. In theory, a trust (or similar) will
subsequently be established to provide assets to offset this un-funded
liability. The annual funding amount will be based on several variables so
BOCC Meeting 10/17/2006 Page 4 of 7 pages
Agenda Item -Special Presentations
the annual affect on net income is unavailable at this time.
o Internal controls are being analyzed to ensure policies and procedures are
in place to assure management and the NC ABC Commission that internal
controls are reasonably adequate. Several policies have been added
recently such as "Code of Business Ethics" and "Whistleblower" policies.
Additional policies are in the draft stages.
o A study of the Board pay and benefits is currently underway to determine
how the Board's compensation package compares to the County's and also
to other ABC Boards.
o Emerging issues that the Board has identified and are currently addressing:
o The Board recognizes the need to carefully monitor the locational and
functional issues regarding the Board's physical facilities.
o Major issues regarding the facilities are the age, location and method of
ownership (lease vs. ownership). This issue, as well as the possibility of
opening new locations, continues to be of primary interest.
o A warehouse & main office complex is needed to replace the current
facility. The current warehouse/office complex which was built in
1959 and has been expanded and renovated several times. Remaining
land is insufficient for additional expansion.
o The Board has leased its stores in Chapel Hill since its inception in
1959. One facility's lease expires in two years and the Board would
prefer to purchase land and build (or purchase a suitable building to
up-fit).
o New residential and commercial construction in the southern part of
Hillsborough indicates that an additional ABC store will soon be
needed to accommodate the added population.
o Several stores owned by the system (Hillsborough, Mebane, Eno) were
built in the seventies and require modernization.
® Activities to be Accomplished within the Next 18 Months:
o Complete activities in progress (above).
o Concentrate on real estate issues mentioned above.
o As a recurring Board items, the Board normally reviews the status of projects-
in-progress at the December Board meeting; then discusses and develops
additional goals/objectives, and sets priorities.
BOCC Meeting 10/17/2006 Page 5 of 7 pages
Agenda Item -Special Presentations
• Financial Standing:
o Available Cash and certificates of deposit (as of 6/30/2006 -does not include
reserve for retired employees health insurance) _ $1.4 million.
o Working capital as of 6/30/2006 was $1.86 million, which was above the
minimum requirement, but about 50% less than the maximum allowed by NC
ABC Commission Rule .0902. (Amount allowed was $3.7 million -See
Note 8 to F/S).
o Excess Cash: The reason for the accumulated cash is to fmance future
expansion, replacement of leased facilities, and modernization of certain
existing facilities as discussed above. Cash will start being disbursed shortly
after suitable real estate is located and purchase is approved.
o Income Statement Information:
^ Overview: Comparative Income Statements - FY02/03 through
FY06/07 -See Attachment "A" -Spreadsheet. This sheet provides
trend analysis information for afive-year period.
^ Sales - FY02/03 - FY06/07 - (Attachment "B" -Graph). This graph
depicts the types of sales and increases.
• Sales are normally broken down between retail customers and
ABC permittees (often referred to as "Mixed Beverage" or
"Liquor-By-The-Drink" customers.
• Sales have increased substantially for the period presented.
-- ^ Breakdown of Sales Dollars: Taxes, Cost-of--Sales & Gross Profit -
FY02/03 - FY06/07 (Attachment "C" -Graph). "Sales" minus
"Taxes &Cost-of-Sales" equals "Gross Profit". Gross profit refers to
the funds left, after paying for the product and related taxes,
• to pay bills,
• make distributions, and
• to re-invest in the enterprise (buy equipment, real estate, etc.).
The "Gross Profit %" has remained virtually constant over the last
several years.
^ Breakdown of Gross Profits: Gross Profits, Operating Expenses, and
Operating Income - FY02/03 through FY06/07 - (Attachment "D" -
Graph). "Gross Profits" less Operating Expenses equals Operating
Income.
^ Non-Operating Income (primarily interest income) is added to
Operating Income to provide "Net Income Before Distributions". This
is a one-line entry on Attachment "A". A graph is not provided.
BOCC Meeting 10/17/2006 Page 6 of 7 pages
Agenda Item -Special Presentations
Distributions - FY02/03 - FY06/07 - (Attachment "E" -Graph).
Although, distributions to the General Fund have remained constant
for several years, payments to other County-related beneficiaries have
increased substantially.
Distributions Plus Retiree Health Insurance Expenses - FY02/03 -
FY06/07 (Attachment "F" -Graph). In earlier years, the BOCC and
the ABC Board resolved to reduce the County's Distribution by
Retiree Health Insurance Expenses; however, this is not depicted as
such on the fmancial statements, because it is a non-cash transaction.
This graph includes Distributions Plus Retiree Health Insurance
Expenses.
Using computer technology to capture customers' zip code information.
o Currently, no customer information is collected. However, according to our
point-of--sale software supplier; this technology can be made available if
needed. However, according to the software supplier, there has been no
demand from other ABC Boards for this option.
o In the retail industry, customer's demographic information is captured to:
^ Target advertising information (such as mailers, radio ads, etc).
® Target geographical areas for future locations.
o Questions regarding obtaining customer information:
® Will customers be willing to provide information without being
irritated? Several ABC store managers that I discussed this with stated
that their customers are unwilling to provide personal information of
any type. Therefore, asking for a zip code may irritate some customers
to the point they will customers to shop in another county.
^ Will collection by zip codes yield useful information since there are so
few zip codes in the geographic area?
® Are there other methods already in-place to obtain reliable information
on retail purchases?
® Who will interpret the information and how will the data be used?
® Is the information needed on a continuous basis or can random
sampling be used on a periodic basis to produce similar inferences?
o Answers to these questions, will enable the ABC Board to determine the
importance of capturing the information; and if so, the answers will also assist
the Board in prioritizing the implementation.
BOCC Meeting 10/1'7/2006 Page 7 of 7 pages
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