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June 23, 2010
UPDATE….Liquor returns to empty shelves at Ocracoke ABC stores
By CATHERINE KOZAK
 Not
only have many of the favorite liquors been restored to the shelves at
the Ocracoke ABC store, but its dismal décor has been dolled up.
Four months after the North Carolina Alcohol Beverage Control
Commission suspended supplies to Hyde County, delivery of liquor to the
island resumed first thing this morning, and it couldn’t be a moment
too soon.
Pickings at the tiny store on the east edge of the village had gotten
“very slim,” said Charlotte Smith, manager of the Hyde County ABC
stores.
Hyde County was cut off by the state after it had accrued about
$100,000 in unpaid bills to distillers. Stock at the county’s two
ABC stores ----there’s also one in Swan Quarter on the mainland --- had
been depleted down to mostly sweet liqueurs and pricey
brandies.
But with the first delivery, much-in-demand vodka, gin, Crown Royal,
and Jim Beam arrived. Hours are back to the summer schedule, 12 p.m. to
8 p.m. Monday through Saturday. And now the store does not look quite
as shabby as before.
“We’ve done a lot of work to it,” Smith said. “Valances are on the
windows. Shelves have been moved. We’ve rearranged the stock so that
it’s easily replaceable.”
An eyesore evident on a window behind the cash register, a torn white
plastic shade that had been held together with big pieces of cellophane
tape, has been replaced, she said.
Smith said that the Ocracoke store was down to about $9,000 worth of
stock, but nearly all of it was what nobody wanted to drink. The Swan
Quarter store, which had sent all its vodka and gin to Ocracoke, where
the tourist season had kicked in, had only about $5,000 in booze left
before its shipment arrived on Tuesday.
The state has agreed to ship twice a month to Hyde --- previously,
shipments were once a month ---- but supplies of some liquor may be
limited.
“All the popular brands are coming back, and it will take a while for
the niche products to come back,” Mike Herring, chief administrator for
the state ABC said Tuesday.
Smirnoff vodka is the No. 1 selling liquor overall in the 19 ABC
states, he said. But in North Carolina, it comes in second behind the
lower priced Aristocrat vodka.
The deal struck months ago with Dare County ABC Board to sell its
supplies to Ocracoke’s restaurants and bars with mixed beverage permits
will continue for the time being, Herring said, but the goal is for the
island establishments to eventually purchase all its liquor from
Hyde.
The Hyde ABC Board had managed to pare its debt down to about $60,000
by selling some liquor inventory to Dare and Beaufort counties. Earlier
this month, the county Board of Commissioners agreed to purchase the
Swan Quarter ABC store and its 1-acre lot for $75,000 and lease it back
to the ABC Board.
The money from the sale will be divided between a reserve fund and
inventory and to pay down the liquor debt, which is expected to be paid
off by August, 2011, said Jay Etheridge, chairman of the Hyde County
ABC Board.
On June 7, the ABC Board presented a business plan to the state, which approved it on June 16, he said.
Etheridge said that the plan projects that the county’s ABC system will
be able to make a profit of about $27,000 after one year. With an
estimated increase of 5 percent annually in revenue and expenses, he
said it is projected to have about $30,000 in profits after three years.
“The biggest difference in whether we make a profit or not is management of expenses,” he said.
By tweaking hours and staffing, expenses have been sliced to the bone,
Etheridge said, so the only other variable in the profit margin is the
volume purchased by consumers ---a matter out of the control of the
county.
“The bottom line is, we’ve got to make this work,” he said.
The Swan Quarter property, valued at about $44,000, closed on June 17,
Hyde County Interim Manager David Smitherman said. The county is
leasing it back to the ABC Board for $250 a month, he said.
Etheridge said that an evaluation by a local Realtor determined that the 1-year, $250-a-month lease is market value.
Although Herring had initially expressed doubts about Hyde’s ability to
turn around the liquor operation, he now said he believes that the ABC
Board has a reasonable plan in place and is committed to managing the
stores properly. The state will also be monitoring the operation
weekly.
“We’re glad for the tourists and the citizens down there that we’re
able to work something out with Hyde County,” he said. “We’re
hopeful that it will be a new and improved system.”
(Catherine
Kozak, a former reporter for The Virginian-Pilot in the Nags Head
office, is now a freelance writer for The Island Free Press and other
publications.)
June 4, 2010
Where has all the liquor gone? The shelves are empty in Ocracoke’s ABC store
By CATHERINE KOZAK
Will that be blueberry schnapps or a nice stiff anisette?
It won’t be long before that’s about all customers at Ocracoke’s only
liquor store will be able to choose from, at least until the Hyde
County ABC Board is able to pay its overdue booze bill.
Shelves at the ABC store, located by the Variety Store on the outskirts
of the village, are nearly bare. Whatever stock remains is mostly what
people don’t want: expensive brandies, whiskies, flavored rums and
syrupy liqueurs. What they do want --- Crown Royal, gin, fifths
and half-gallons of vodka --- is long gone.
“A lot of the tourists are upset about it,” said Charlotte Smith, manager of Hyde County ABC stores.
More than three months after the state cut off liquor shipments to the
county, the Hyde County Board of Commissioners agreed this week to
purchase the Swan Quarter ABC store and its 1-acre lot for $75,000,
interim county manager David Smitherman said Thursday. The county will
then lease the property, which has a tax value of $44,000, back to the
ABC Board for market value, about $500 a month.
Smitherman said that the sale will allow the ABC board to pay off its
remaining $60,000 debt to distillers and eventually start getting new
liquor supplies.
“As soon as the property transaction closes, I assume the system will
have enough cash flow to resume product orders and to satisfy
outstanding obligations,” he said.
Meanwhile, the state Alcohol Law Enforcement is investigating why Hyde
County’s two ABC stores were more than $100,000 in the red when a new
supervisor took the reins in February.
“We need to know if there were any improprieties,” Smitherman said.
According to Jay Etheridge, the chairman of the Hyde County ABC Board,
the current woes happened during the tenure of former supervisor Sandra
Gibbs, who retired at the end of January after 20 years.
Etheridge said that in Gibbs’ last report to the ABC board, she told
them that there was $40,000 in bills owed and that there was $18,000 in
the bank. As it turned out, the two stores were in deep fiscal
trouble, but the board did not learn that until Smith took over, saw
the books, and reviewed the inventory.
“Nobody goes to the bank and checked on her unless we had reason to,”
Etheridge said about Gibbs. “And by the time we had reason, she was
gone.”
But Etheridge said it does not appear that there was embezzlement or
theft of inventory. More likely, he said, it was mismanagement.
Money was not missing, he added, but inventory, record-keeping, and
staffing were poorly managed.
“Now whether there’s criminal activity in misstating that,
or she didn’t know what she was doing, I don’t know,” he said. “In
hindsight, I am kind of embarrassed that it happened, because I feel
like I could’ve fixed those problems if I had been aware that there was
a problem.”
But Gibbs said that during her two decades in the job, the ABC Board
never expressed dissatisfaction with her work. She also said that she
was unaware of any problems that came up after she left and that the
ALE has not contacted her.
Gibbs attributed inaccurate information about the financial situation to a former bookkeeper.
“I always had a good relationship with the board,” she said. “Why would they let me stay there if I was mismanaging anything?”
Hyde County lent the ABC Board $20,000 in 2006, but the money was never
repaid, former County Manager Carl Classen reported to the Hyde County
Board of Commissioners in April. Classen has since been fired for
unstated reasons, but he was one of a string of county managers who
have left Hyde in recent years under mysterious circumstances.
Mike Herring, chief administrator for the North Carolina Alcohol
Beverage Control Commission, said that the state had informed the
county that the stores were going to be shut down on June 1 because of
the unpaid bills. Under federal, state and ABC laws, he said,
distillers are supposed to be paid within 30 days of shipment.
Now with the pending sale of the store, Herring said that he is
waiting to see a new business plan, financial plan and balance
statement from the ABC Board before agreeing to resume shipments to the
stores. In the meantime, a deal has been worked out with the Dare
County ABC store in Buxton to provide liquor for mixed beverage sales
at restaurants and pubs on Ocracoke.
“We’re not going to ship liquor there until we’re sure they can properly manage the sale of liquor,” he said.
A separate proposal that Herring was working on that involved a
partnership between the Dare and Hyde ABC boards to run the Ocracoke
store was nixed by the Hyde County Board of Commissioners at a Tuesday
meeting.
But Herring said, in light of Hyde’s problems, he believes that would
be the best way to turn the operation around. Calling the plan to buy
the Swan Quarter store “throwing good money after bad,” he said that
even if investigators rule out embezzlement and theft as contributors
to the financial losses in Hyde, at the very least the operation has
been mismanaged.
“I’m not sure where the problem lies, but the ABC Board members are
responsible for oversight,” he said. “They’re public officials
appointed to manage public monies.”
The county should not be handing money to the ABC board, Herring said.
Instead, the ABC stores are supposed to be making money for the county
from tax revenue on liquor sales.
“I don't know what the citizens of Hyde County think about paying tax dollars for a mismanaged liquor system,” he added.
He said it is unusual for ABC stores to lose money, especially when
mixed beverages are sold at local restaurants and there is a monopoly
on sales. Retail liquor markup is typically 39 percent.
Swan Quarter is the only liquor store on mainland Hyde County, where
hunters and fishermen visit in droves during the cool months. And there
is also a single store on Ocracoke, a booming resort destination during
warm weather months.
Between July 1, 2008, and June 30, 2009, Herring said, Hyde County ABC
made $580,000. Dare County, one of the more profitable -- and
well-managed -- ABC boards in the state, he said, made $12.2 million in
that same period. Of that, $1.2 went to the county, $63,000 went
towards alcohol education, and $126,000 went to law enforcement.
“For the same three things in Hyde, it was zero,” Herring said.
“They’re a drain on the county tax dollars, the ABC Board is. And it’s
soon to be a drain of $75,000.”
Etheridge, however, said that he is certain that improvements in
oversight and management will put the ABC stores in the black, but the
operation will never have the profitability of neighboring Dare. With
the lesser volume in Hyde, he said, the profit margin is only 23
percent, and with 20 percent of that going to operating costs, that
leaves just 3 percent profit.
In fact, he said, the Hyde stores have never been consistently
profitable. Last year, the Ocracoke store had $7,400 in profits, while
the Swan Quarter store lost $24,000. But at the same time, nearly
$80,000 in inventory sat in the warehouse on the mainland.
After Smith took over, thousands of dollars worth of inventory was sold
to Dare and Beaufort counties, which helped pare down the $109,000 debt
due to distillers. She also moved much of the product from the Swan
Quarter store to Ocracoke, where demand has spiked with the onset of
the tourist season.
Still, shelves at the tiny Ocracoke store are nearly empty. Customers
squeeze past each other, scouring the sagging adjustable metal shelves
for something -- anything -- they can drink. Behind one shelf, a white
plastic shade covering a window is held together by big pieces of
cellophane tape.
“It’s just the smallest one I’ve ever seen --- I guess nobody ever
drinks here,” Charlie Svenson, a New Englander who is currently
living in Nags Head, said with a wry smile. “I walked in there
and looked around and I said, ‘There’s nothing in here!’”
Smith said that once shipments resume, improvements will be immediate.
“That’s a guarantee,” she said from behind the worn wood veneer
counter, a window air conditioner roaring in the background. “I won’t
get behind on bills. I won’t let that happen.”
Etheridge, the Hyde County ABC chairman, said that stricter
record-keeping and bookkeeping policies are expected to be implemented
by July 1. He hopes to get shipments resumed as soon as possible.
However, Herring, the state’s ABC administrator, said that it could
take as long as the end of the year for the state ABC to approve the
business plan and give the go-ahead for Hyde to order liquor again. It
also hinges on when Hyde secures the funds to pay off the distillers.
"I don't know," he said. "It appears right now that things don't look good for Ocracoke."
(Catherine Kozak, a former reporter for The Virginian-Pilot in the Nags
Head office, is now a freelance writer for The Island Free Press and other
publications.)
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