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HomeMy WebLinkAboutAgenda - 03-07-2017 - 4-a - Alcoholic Beverage Control (ABC) Board Update Presentation 1 ORANGE COUNTY BOARD OF COMMISSIONERS ACTION AGENDA ITEM ABSTRACT Meeting Date: March 7, 2017 Action Agenda Item No. 4-a SUBJECT: Alcoholic Beverage Control (ABC) Board Update Presentation DEPARTMENT: Board of Commissioners ATTACHMENT(S): INFORMATION CONTACT: March 1, 2017 Update from ABC General Clerk's Office, 245-2130 Manager Tony Dubois Travis Myren, 245-2300 ABC Board Information Sheet Gary Donaldson, 245-2450 January 31, 2017 and October 14, 2016 Petition Follow-up Memos from Staff Alcoholic Beverage Control Board — Benchmarking — June 30, 2015 PURPOSE: To receive a brief presentation from representatives of the Orange County Alcoholic Beverage Control (ABC) Board and to provide any feedback or questions. BACKGROUND: The ABC Board provides an annual update to the Board of Commissioners at the beginning of each calendar year. Gregg Jarvies, Chair of the Orange County Alcoholic Beverage Control (ABC) Board, and Ron McCoy, Orange County ABC Finance Officer, will provide a brief presentation on ABC Board activities and operations and will respond to any questions. A petition was filed in the fall of 2016 that asked staff to evaluate the level of the ABC Board's annual contribution to the County. Under North Carolina General Statute 18B-701, the ABC Board is required to distribute its entire net income after deducting amounts required for law enforcement and education and retaining proper working capital, to the General Fund of the County, which represents a financial benefit to the County. The Finance and Administrative Services Department issued a response to the petition in January indicating that the current contribution to the County was lower than the contributions in surrounding counties. As a result, the County has requested an increase to its annual payment. County staff have had several discussions with ABC Board staff regarding the level at which an increase could be sustained. The ABC Board will be considering this request during its retreat on March 21, 2017. FINANCIAL IMPACT: There is no financial impact associated with receiving the presentation. SOCIAL JUSTICE IMPACT: There is no Orange County Social Justice impact associated with receiving this presentation. RECOMMENDATION(S): The Manager recommends that the Board receive the presentation and provide any questions or comments. 2 COUNTY OF ORANGE ALCOHOLIC It EVERAGE CONTROL It OARD 601 VALLEY FORGE RD EIILLSBOROT7GEI,NORTH CAROLINA 27278 919-732-3432 FAX: 919-732-5829 ocabc @mindspring.com GREGG JARVIES,Chair Board Members KEITH BAGBY,Vice Chair JANE COUSINS TONY DUBOIS,General Manager JAMEZETTA BEDFORD MIKE LASSITER March 1, 2017 Orange County Board of County Commissioners In the current fiscal year a distribution of$400,000 is being made to the Orange County General fund. The board also set aside $ 48,333 to contribute to the Board Retiree Health Care Plan. The board funded local Alcohol Law Enforcement agencies $149,000 which is triple the statutory minimum. The board also increased the amount available for community Alcohol Education and Rehabilitation grants for schools and local community organizations to $209,150 which is also triple the statutory minimum. The distributions from the board for fiscal year 2016-17 total $806,483. The board is currently working on the following projects. • Adjusting Living wage to match the county's increase in 2017 • Moving our Village Plaza store to a new location in Ram's Plaza in June • Upgrading all of our point of Sale cash register equipment • Purchasing a piece of property in Hillsborough for a future store relocation • A Complete remodel and temporary relocation of the Carrboro store in 2018 Sincerely, Tony DuBois Orange County ABC General Manager ocabc @mindspring.com 3 THE ORANGE COUNTY ABC BOARD • The Orange County ABC Board is a local, independent political subdivision of the state operating under the auspices and oversight of the North Carolina Alcoholic Beverage Control Commission. It transacts business as a corporate body and is not considered a public authority under G.S. 159- 7(b)(10). ♦ The Orange County ABC Board operates eight retail stores (six properties owned, two leased) and has a total of forty-seven employees. • The ABC system in Orange County receives no County funding. All operations are fully funded by annual revenues of its retail stores. • Orange County ABC employees are not county employees. Their employment is managed by the ABC general manager. Employee compensation is funded totally through local ABC revenues. Employee benefits, including medical, dental and disability insurance, local government retirement contributions and matches to 401-K programs are established by the Orange County ABC Board of Directors and funded totally through ABC revenues. • Unlike private retail businesses local ABC boards cannot increase operating revenues or profits through independent strategies. Liquor prices are established by the state ABC Commission and are consistent throughout all ABC stores in the state. ABC systems cannot advertise, offer items for sale or in any way promote their business to the public. • Construction of new stores, improvements to existing stores, capital purchases, technological upgrades, and employee salaries, benefits and training must all be paid for through existing store revenues. ♦ In FY 2015-16 the ABC Board of Directors adopted a living wage of$12.76 for all employees and indicated its commitment to continued adherence to the Orange County living wage standards. • The ABC Board is required by statute to annually contribute to local law enforcement five percent (5%) of gross receipts after primary distributions. In the past five years that benchmark would have resulted in a total distribution to law enforcement of $282,984. However, in that same five-year period the Board has actually contributed an average of 12.3% to local law enforcement agencies for a total distribution of$665,000. • The ABC Board is required by statute to annually contribute to local alcohol rehabilitation and education programs seven percent (7%) of gross receipts after primary distributions. In the past five years that benchmark would have resulted in a total distribution to such programs of $368,197. However, in that same five-year period the Board has actually contributed an average of 12.3%for a total distribution of$680,644. • In the past five years the ABC Board has contributed$2.25 million to Orange County. • Contributions to the County and to Orange County ABC partners in the past five years total$3.59 million. 4 ORANGH COUNTY NORTH....1 CAR . LI NA FINANCE and ADMINISTRATIVE SERVICES Gary Donaldson,CTP,Chief Financial Officer I gdonaldson @orangecountync.gov I 200 S.Cameron Street,Hillsborough,NC 27278 I 919.245.2453 Memorandum TO: Chairman Mark Dorosin FROM: Gary Donaldson, Chief Financial Officer DATE: January 31, 2017 RE: Petition Response for Increased Alcohol Beverage Control Board Funding to the County Please find enclosed my response to the petition you made on November 15, 2016 regarding a process to obtain increased ABC funding. Your petition was precipitated by a benchmarking analysis that indicated that the County is receiving ABC funding well below 15 other peer counties (see attachment). The benchmark analysis indicated that the County receives only 39% of ABC after profit distribution as compared to the peer North Carolina county average of 82%. On December 7, 2016, a follow-up meeting was held with the ABC General Manager and ABC Finance Director to determine a funding plan which would increase the County's share to the benchmark average of 82%. The County has requested additional funding of$150,000 for FY2017-18, and phased-in after profit distribution over the next four fiscal years of 50%, 60%, 70%, and 80%,respectively. The ABC General Manager will inform the ABC Board of this County funding request, and follow-up with the County on a decision no later than March-April 2017 to coincide with the FY 2017-18 Budget Development process. Below is a five year history of ABC distributions: 2012 2013 2014 2015 2016 Fiscal Year ABC Distributions Law Enforcement Expenses $120,000 $125,000 $155,000 $130,000 $135,000 Alcohol Education Expenses 105,000 130,000 145,000 156,550 144,094 Local 400,000 400,000 400,000 400,000 400,000 Total $ 625,000 $ 655,000 $700,000 $ 686,550 $ 679,094 Please let me know if you need any additional information. Thank you cc: Orange County Board of County Commissioners Orange County Grrverrrrrrerrt I www.orangecountync.gov 1 919.732.8181 5 NOR'1"I....1 CAROLINA NA FINANCE andADMINISTRATIVE SERVICES Gary Donaldson,CTP,Chief Financial Officer I gdonaldson @orangecountync.gov I 200 S.Cameron Street,Hillsborough,NC 27278 I 919.245.2453 Memorandum TO: Commissioner Mark Dorosin FROM: Gary Donaldson, Chief Financial Officer DATE: October 14, 2016 RE: Petition Response on ABC Board Funding to the County At the September 6, 2016 Board of County Commissioner meeting your petition request was for financial information pertaining to the Alcoholic Beverage Control(ABC)Board funding to the County's General Fund. This petition response is supported by two exhibits which illustrate a five year financial summary of the ABC Boards financial performance and ABC benchmarking with 15 other ABC Boards. Exhibit 1: Orange County ABC Board Five Year Statement of Revenues,Expenses and Changes in Net Position The last column on Exhibit 1 provides a five year average of revenues, expenses, and operating income performance; as noted Net Sales (Revenues)experienced an average annual growth rate of 5.9%while Operating Expenses experienced an average annual growth rate of 3.8% from fiscal years 2012 through 2016. Net income has experienced an average annual growth rate of 11.4%between fiscal years 2012 through 2016. The ABC strong financial performance has resulted in the net position increasing to $7,805,267 as of June 30, 2016. The ABC Board has utilized 64% of their net position to cash finance the majority of their capital projects including construction of a new store#3 this past fiscal year. The cash on hand remaining after these capital investments is $2,450,028 as of June 30, 2016. The ABC capital funding strategy indicated above was confirmed at a meeting with the ABC General Manager, ABC Finance Director,ABC Board Chair,myself, and Deputy County Manager Myren. Exhibit 2: Alcoholic Beverage Control Board Benchmarking among 16 Jurisdictions Exhibit 2 provides a comparison of the Orange County ABC distribution of income after accounting for net profits with 15 other jurisdictions. This benchmarking comparison is sourced to the fiscal year 2015 audited financial reports of the 16 benchmarked jurisdictions. As noted in Exhibit 2, the Orange County ABC Board distribution after profit to the County is 39% as compared to the benchmark average of 82%for the other 15 jurisdictions for fiscal year 2015. The Orange County ABC Distribution is as follows: Law Enforcement $130,000 Alcohol Education $156,550 Local $400,000 Total $686,550 Oranges County Government I www.orangecountync.gov 1 919.732.8181 6 In conclusion, the figure entitled Orange County Benchmark Average in Exhibit 2 is a normalized figure which represents the fiscal year 2015 profit before distribution multiplied by the other 15 jurisdictions average total distribution to their respective governments. All of the financial information in this petition is sourced to ABC audited financial reports. Please let me know if you need any additional information. 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