The Biggest Little Department

“I like to refer to us as the biggest little department in state government,” said Lynn Walding, administrator of the Iowa Alcoholic Beverages Division.


The agency utilizes a lean staff, employing 29 people in the front office and an additional 31 in the warehouse and transportation operation. The Division generates over 2% of Iowa’s total annual revenue. In Fiscal Year 2008 that translated to more than $88 million for the state and topped $104 million in FY09. In fact, for the first time, the Division exceeded $200 million in sales in FY09.


The Division, headquartered in Ankeny, Iowa, is the sole wholesaler of spirits in the state. The agency licenses businesses that sell beverage alcohol and regulates both the sale and use of alcohol and tobacco. The Iowa ABD’s five-member commission serves as a policy-making and advisory body to the Iowa General Assembly.


Since the agency’s creation with the repeal of Prohibition, the Division has gone through great changes. For instance, in the 1980s, the Division’s warehouse and transportation functions were turned over to a private contractor.  But by 2004-2005, the Division bought back the contracts and began to run the operation itself, more than doubling its staff, while reducing costs in the process. Walding estimates that handling those two functions saves the state more than $1 million annually.

 

At the Iowa Alcoholic Beverages Division warehouse, key members of the Division, including, from left, Tonya Dusold, Information Specialist; Steve Kuzynowski, Facilities Engineer; Micky Truman, Warehouse Manager; Tina Norris, Warehouse Supervisor; Shannon Hagge (seated, in front), Executive Assistant; Lynn Walding (above, seated), Adminstrator; Nicole Watson, Operations Manager; Jim Kuhlman (seated), Operations Manager; Karen Freund, Lead Worker for Licensing Bureau; and Bruce Ireland, IT Specialist.


A leader in innovation, the Division was named one of six charter agencies in the mid-2000s by former Governor Tom Vilsack. Facing a budget crisis, charter agencies were granted greater flexibility in order to promote innovation resulting in a more effective operation.  The six charter agencies were allowed to operate like a business and, were held accountable for producing measurable improvements, including increased savings and revenues. In the first year, charter agencies were required to increase savings and revenues by a total of $15 million. Instead, the agencies collectively increased revenues by more than $22 million, with the Iowa ABD generating over half the total.


“Being a charter agency allowed the Division to free itself of red tape and run more like a business,” said Walding. “A perfect fit, given the role and nature of the Division’s operation.”


Although the charter agency program has ended, the Division continues to innovate.


Looking To Innovate


Over the next year, the Division will revamp its warehouse and inventory management system.  “Modernizing the state’s liquor distribution infrastructure is critical to success moving forward,” said Nicole Watson, an Operations Manager with the agency.  “The Division is currently operating off a legacy system dating back to 1987.”  Once the new system is implemented, the agency will have a state-of-the-art warehousing and inventory management application. “The new system will lean up the state’s liquor operation and drastically improve service to the Division’s customers,” said Watson.


The Iowa ABD has taken great strides forward, upon taking over the warehousing and transportation functions, to modernize both the facility and business processes.  According to Watson, “The previous interface between Division staff and a private service provider had created a dual management structure, resulting in dysfunction, unnecessary steps and artificially long lag times for customers.”  Leaning up the operation through a Kaizen process improvement event has resulted in advanced operational efficiency, organizational transparency and quality of customer service.


An example is the Division’s response to the expanding high proof beer category in the marketplace.  Under Iowa statue, the Iowa ABD is solely responsible for trafficking beer with an alcohol content of over 5% alcohol by weight.  After identifying a market demand for high proof beer in the Iowa marketplace, the Division expanded the state’s high proof beer portfolio from a mere 4 product codes to over 50 in a six-month period. Watson said, “The Division had to rethink the way we did business in order to take a structure geared towards the distilled spirits industry and institute policies and processes that work for brewers.”


Warehouse Renovation Going Well


The big news on the warehouse and distribution side is the completion of the first phase of the renovation and redesign of the Division’s warehouse. The $3 million project was started in 2008 and took four months.


“It was really a year’s worth of work done in four months,” said Steve Kuzynowski, who, as the Iowa ABD’s facility engineer, designed and implemented the project. Kuzynowski carefully mapped and scheduled every day of work on the renovation. “The operations people and I knew just where the contractors needed to be on any given day,” he explained. Attention to detail allowed the warehouse to continue to operate throughout the renovation. “It was pretty hectic,” said Walding. “At one point, there were over 50 steamfitters working 26 feet above staff picking orders.”


The focus of the first phase was to repair and improve the building, which was in rough shape. For instance, the old heating system did not work at all and the warehouse had no air conditioning. “That meant, if it were 100 degrees outside in the summer, the temperature was 120 degrees with 100% humidity inside the warehouse, where people were working 10 to 12 days,” said Kuzynowski. “The Division wanted to give the staff a great place to work. The payback is high productivity and fewer workmen’s compensation claims.”


The warehouse’s new, automated, environmentally friendly mechanical systems now keep the air in the warehouse filtered and at a pleasant temperature with 30% to 35% humidity. And the system accomplishes this improvement while using 44% less electricity and natural gas than before. In fact, the climate in the whole warehouse is so much better that the Division can now list high proof beers.


The next phase for warehouse and distribution center improvements is to redesign how trucks use the facility. “The building is 30 years old and was designed when trucks were 30 to 40 percent smaller than they are currently. Plus three times as many trucks pass through the facility now on a daily basis,” said Kuzynowski.


21st Century Communications


The Division has also become a presence on “social media” sites, including Facebook and Twitter. Tonya Dusold, the Iowa ABD’s information specialist, said “Making connections through friends and followers on Facebook and Twitter is a more relaxed way to communicate with liquor licensees, the public and elected officials. The new platforms give the Division a feeling of approachability.”


Facebook has worked great for connecting less formally with licensees, but it is on Twitter that the Division has had its greatest networking success. Though the agency only started using Twitter five months ago, the Division now boasts over 550 followers.  As a result, each posting immediately reaches a broad audience.  “It is a great connection to have with the press, to keep reporters apprised of what we’re doing and to do so in a transparent manner,” said Dusold.


This is the way Twitter works for the Iowa ABD: 10 to 15 times a day, Dusold will post on Twitter. Each “tweet,” or Twitter post, can only be 140 characters long. That’s about one sentence. “For example, today four licensees settled administrative hearing complaints for violations of the Iowa Smokefree Air Act,” explained Dusold. “I posted a single sentence about the settlements and linked to our press release. Often, within minutes of posting, Administrator Walding will receive a call from a reporter.” That immediate connection with the press and the resulting coverage keeps licensees, legislators and the public aware of the Division’s constant enforcement efforts.


In March, Walding gave a presentation at the 16th Annual NABCA Legal Symposium, in Arlington, Virginia, entitled, You, Too, Can Be a YouTube Star! During the presentation, Walding explained social media and its potential uses for alcohol regulation and industry. “The Division has had good success with social media. The use of these networking sites has far exceeded expectations,” said Walding.


In addition, the Division’s website (IowaABD.com) is being redesigned with approachability in mind. “I want the new website to be a user-friendly, intuitive ‘answer headquarters,’ accessible to law enforcement, the public, press and especially licensees,” said Dusold.


The Division produces a dizzying array of publications, available in both online and printed form. The work ranges from a book about the Division’s art collection (see sidebar), to a quarterly magazine, Iowa Liquor Quarterly, to a monthly newsletter, to a weekly Legislative Update, to the Division’s online weekly e-News, which publishes as an email to subscribers, with links to national and local articles on beverage alcohol topics.


The Division’s Structure


The organization is comprised of two parts, each managed by an operations manager: Nicole Watson, who is responsible for liquor distribution and warehousing, products, building and grounds, human resources, accounting and information technology, and Jim Kuhlman, who is in charge of alcohol licensing, alcohol regulation and tobacco enforcement.


The Iowa ABD’s application process for a license has been entirely online since 2005. When a licensee goes online and fills out a renewal form, the insurance company is automatically notified to electronically send their certification that the licensee has the required dram shop coverage.


Before going electronic, “it had reached the point that the staff was pushed to keep up with all the paperwork,” said Kuhlman, “now licensing staff has time to perform other vital functions during their day.”


Developing an electronic licensing process took a grant from the state and about a year’s worth of effort, but, said Kuhlman, “It was well worth it.”


As for regulation, the Division does it a bit differently than other control states. For one thing, the agency is not directly involved in enforcement. “We don’t beat the bushes looking for violations. That’s reserved for Iowa’s law enforcement officials,” explained Kuhlman, “Instead, the Division takes care of the administrative end of it.”


This year the Division launched e-Regulation. The online database allows users to search the system for tobacco and alcohol related violations and view court documents and hearing dates. Users can sign up for electronic notification of updates by docket number or entire counties. “E-Regulation has quickly become a valuable tool for our staff, the public, press and local authorities,” said Kuhlman.


Where There’s Smoke


Kuhlman is also in charge of the state’s retail tobacco enforcement, an area of responsibility the Division began overseeing in 2000. In addition, the agency administers enforcement of the laws regarding underage smoking and the Iowa Smokefree Air Act, which went into effect July 1, 2008.


With underage tobacco sales, “when the Division first started in 2001, the state’s compliance rate was a dismal 50%,” said Kuhlman. “In fact, the state was in danger of losing a significant portion of its federal substance abuse money.” When the agency began tobacco enforcement and started doing compliance checks, “the compliance rate went up to 80% almost immediately,” said Kuhlman, “and for the last two years, our compliance rate has been 92%, which is one of the best rates in the country.”


 The Division employs four tobacco field agents and contracts with more than 200 local law-enforcement agencies. “These local police departments do a minimum of two compliance checks a year at every tobacco retailer,” said Kuhlman.


“We’ve also trained over 12,000 retail clerks on the responsible sale of tobacco,” said Walding. The tobacco education program, which began in 2005, is voluntary, but there is an incentive. If a clerk is certified as having completed the course, and then is caught selling tobacco to an underage customer, “the establishment gets a one-time ‘get out of jail free’ pass,” said Walding.


The Division’s 200 local law enforcement partners teach the two-hour classes. “Training gives the clerks some exposure to the laws and covers topics like identifying fake IDs and how to handle tough situations,” said Kuhlman. Once a clerk passes an online quiz, he or she can print out a certificate “that they can take with them if they move to a different job,” he continued. The certificate is valid for two years.


The Division enforces the Iowa Smokefree Air Act, which restricts where people can smoke in public places. The law bans smoking in bars, restaurants, stadiums and any place of employment. “The smoking ban is widely popular with the majority of Iowans, however, some bar owners haven’t shared that view,” concedes Walding. “The Division has played a pivotal role in assuring the success of the new law.”


When the agency first started enforcing the Iowa Smokefree Air Act, there was confusion among bar and restaurant owners about what the law meant. “A lot of establishments thought a violation would be a $100 fine and decided that would just be a cost of doing business,” said Walding. In fact, if a licensee is found in violation twice, the first penalty they can be hit with is a $1,000 fine and a seven-day suspension. Ultimately, said Walding, “the violators could end up losing their liquor license.”


The Commission’s Mission


The Iowa ABD’s Commission is comprised of five members, appointed by the Governor, serving staggered five-year terms. “Traditionally, we’ve tried to keep a gender balance and a balance of members’ politics,” said Jim Clayton, current commission chairperson. “Beyond that, there is always someone on the commission who is in the alcohol business.” Currently, that would be the newest commission member, who started in May 2008, Greg Nashleanas, owner of Northwest Iowa Beer Distribution.


There is also, typically, at least one commissioner who is active in the area of the prevention of alcohol related problems. Clayton is the chairperson of the Stepping Up Coalition, a campus/community organization trying to reduce problem drinking among students at the University of Iowa. “I think it’s important to have that voice at the table,” said Clayton. “If the total focus of the enterprise is simply to sell alcohol, that’s not good. We should always look downstream and keep reminding ourselves that the sale of alcohol is not without consequences – and not all of those consequences are good.” 


Clayton’s knowledge of issues, such as the problem of nuisance bars, often comes in handy when the commission holds forums. The commission chooses a topic to investigate after considering input from the Division, law enforcement, the business community and the general public. Then public forums are scheduled around the state to hear discussion about the issue and how laws and policies could be adjusted to better handle the topic. The commission then formulates recommendations, which are given to the state legislature.


The most recent forum topic was nuisance bars. Last year’s topic was Iowa’s native wineries and how the state could help the industry to grow while not dismantling the three-tier system. “The commissioners want to make it easier to do business in Iowa, while at the same time, not bend the rules,” said Clayton.


The Iowa ABD, the biggest little department in state government, continues to chug along, improving its operations and handling unforeseen crises, such as the recent flooding in the state – all while realizing an 8% increase in sales revenue in FY09. “That is just one more welcome challenge and opportunity,” Walding concluded.


And It Looks Good, Too


At its headquarters in Ankeny, the Iowa ABD has on display a collection of 24 pieces of fine art by a range of 18 different Iowa artists. The display is part of Iowa’s Art in State Buildings Program. Iowa law requires construction projects in state buildings to spend one-half of one percent of their total budget on the acquisition, preparation and installation of fine art from artists with connections to the state. The artists represented in the Division’s collection range from art professors to a former photographer for Surfing magazine.


 


Who’s Who at the Iowa ABD


Lynn Walding, Administrator


Walding became Administrator in 2000. Before that, he had been an assistant attorney general in the Iowa Department of Justice for 19 years. He is also an adjunct professor of public administration at Iowa State University.


Jim Clayton, Chairperson of the Iowa Alcoholic Beverages Commission


Clayton was appointed to the commission in 2005. He is active in the Stepping Up Coalition, an organization looking to reduce the risks of alcohol consumption among college students at the University of Iowa.


Nicole Watson, Operations Manager


Watson manages the Division’s warehouse, distribution, products, information technology, accounting, human resources and facility maintenance. Watson is the Division’s liaison to the Iowa General Assembly, Department of Management and the Governor’s Office. She started with the agency in 2000 as an intern.


Jim Kuhlman, Operations Manager


Kuhlman oversees alcohol licensing and regulation, as well as tobacco enforcement at the Division. He started with the state as a state-store manager in 1980.


Tonya Dusold, Information Specialist II


Dusold has experience in online and print media as well as advertising. Formerly with the Des Moines Register and Juice Magazine, Dusold has been with the Division since the end of 2007.


Steve Kuzynowski, Facilities Engineer


Formerly with the Architecture & Engineering Division of the Department of Administrative Services, Kuzynowski joined the Iowa ABD’s staff during the first phase of the renovation of its warehouse. Before working for the state, Kuzynowski was a contract engineer for the General Mills Company.


 


A History of the Iowa ABD


June 1934


The newly formed Iowa Liquor Control Commission opens its first five stores.


July 1963


A new license is created, allowing the sale of alcohol by the drink for consumption on-premise.


January 1972


The state’s liquor enforcement agents are moved to the state’s Department of Public Safety.


January 1981


The Division moves its offices into its new liquor distribution center, with its warehouse operation following a few months later.


July 1984


The agency opens six new “mini stores,” bringing the total number of state stores to 220.


July 1985


Private wholesaling of wine is allowed.


July 1986


The agency is renamed the Alcoholic Beverages Division and becomes a part of the newly created Department of Commerce. The wholesaling of wine becomes entirely privatized. Iowa’s legal drinking age is raised to 21.


March 1987


Iowa’s 207 state stores are closed and replaced by privately owned and operated stores.


July 1989


A new license is created to allow brew pubs, restaurants that make their own beer.


July 1993


The Division disbands its three-member hearing board and institutes a new hearing process.


May 2000


The agency begins handling the state’s tobacco enforcement efforts.


2004-2005


The Iowa ABD buys back contracts from private companies and begins handling its warehouse and distribution operations itself.


2005


The Division is named a charter agency by Governor Tom Vilsack.


May 2005


The agency’s cumulative revenues (from 1987 when the state stores were closed) pass the $1 billion mark. The Division estimated at that time that its cumulative revenue total would hit $2 billion by 2013.


March 2008


Administrator Lynn Walding gives a presentation, You, Too, Can Be A YouTube Star, to members of NABCA.


Spring 2008


The Division embarks on a total renovation of its warehouse.


April 2008


The state of Iowa passes the Smokefree Air Act. Beginning July 1, 2008, smoking is no longer allowed in public places, including bars and restaurants.


FY 2008


The Iowa ABD generates $88 million for the state for the year.


January 2009


The Division launches its presence on the social networking sites Twitter and Facebook.

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