June 23, 2010

UPDATE….Liquor returns to empty shelves at Ocracoke ABC stores


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


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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