McDonnell unveils plan to sell Va.’s state-owned liquor stores

RICHMOND, Va. (AP) — Gov. Bob McDonnell wants nearly $500 million from selling Virginia’s state-owned liquor stores to provide loans and grants for local highway congestion relief projects.

In a proposal released Wednesday, McDonnell calls for up to 1,000 licenses for private retail stores compared with 332 state-run stores now. The state would also sell its central warehouse in Richmond and its wholesale operation.

The plan, which was still being revised well into Tuesday evening, was presented to the Governor’s Commission on Government Reform and Restructuring, chiefly by the governor’s chief policy adviser, Eric Finkbeiner.

It reserves 600 licenses for major corporate retailers such as grocery and discount stores. It reserves 250 for small mom-and-pop shops and another 150 for small-scale sales in pharmacies.

At each level, licenses would be auctioned to the highest bidders, with prices varying by market size.

In a scenario presented to members, bids could range from nearly $478,000 for a corporate chain license in a major market such as Virginia Beach to $102,000 for a family-owned store license in a rural area such as Page County.

While the plan triples the number of outlets statewide, it increases the number of Alcoholic Beverage Control agents to police them by only one-fourth.

Not in the plan was a 4 percent tax on mixed drinks sold in bars and restaurants reported by some news outlets over the past week.

The proposal would scrap the current excise tax and profit margins on ABC liquor sales. In its place would be an excise tax of $17.50 per gallon that would yield about $175 million annually.

Eating establishments that want the convenience of buying their liquor from a wholesaler instead of a retail store would have the option of paying a 2.5 percent convenience fee, which would yield $19.4 million. The new plan anticipates an additional $700,000 a year in wine taxes and $14 million more in retail sales taxes. And all the increased sales, McDonnell projects, will yield nearly $6 million more in business income taxes.

As a candidate last year, McDonnell promised to put the state’s 76-year-old monopoly on liquor wholesaling, retailing and distribution in private hands to jump-start deferred highway maintenance work.

Now, the Republican governor faces a struggle overcoming doubts about the project in both a Democratic-controlled Senate and a Republican-run House of Delegates.

McDonnell intends to summon legislators into special session after the Nov. 2 election to consider the privatization plan and several other government reform and streamlining initiatives as varied as a four-day, 10-hour work week for some state employees to disposal of surplus state property.

Democrats and even some Republicans are skeptical that privatizing the stores will yield the approximately $260 million a year that the Department of Alcoholic Beverage Control stores now generate.

Sen. Mary Margaret Whipple of Arlington, a senior Democrat, said she finds the whole proposal hard to swallow.

“A thousand stores sounds like a lot of stores to me,” she said. “The whole notion that we should drink more that we can drive more just really bothers me.”

Now McDonnell turns his focus to winning over reluctant legislators.

“Some legislators will oppose it because they’re not really concerned about transportation. There are some legislators who will oppose it because they don’t want to see my administration succeed. Some in the Democratic Party, they’ve essentially represented that to me,” McDonnell said.

McDonnell is also meeting with opposition to his privatization plan from the state’s restaurants, the wine and beer industry. Conservative churches are attacking it from the pulpits, wary that the proliferation of stores will foster more alcoholism.

Virginia’s wine wholesalers oppose the move and beer wholesalers “have concerns about it,” said Jim Babb, a spokesman for the industries.

Jack Knapp, a minister and lobbyist for the Virginia Assembly of Independent Baptists, said he opposes all alcohol, “but if you’re going to have it, let’s stay with what we have. Right now, you have control. Sell off the ABC stores and you sell them to someone whose primary motivation is to make money, as it should be.”

He also noted that Finkbeiner left open the prospect of asking the General Assembly in a few years to increase the number of liquor stores beyond 1,000.

But it has admirers. Major grocery chains support it. And the Virginia Retail Merchants Association applauds it even though license costs can be daunting, particularly for small businesses.

“Because it’s a lifetime license they’re selling, I think it’s going to be easier for them to make that investment,” said Laurie Peterson Aldrich, the VRMA’s president.

A few of Finkbeiner’s comments left some on the panel and in a crowded Capitol Square meeting room incredulous.

He said that despite the threefold increase in liquor outlets, there would be fewer actual stores selling alcohol. With heads nodding and eyes rolling throughout the room, he reasoned that many of the new liquor licensees would operate in existing shops that already sell beer and wine.

“Now you’re going to have 1,000 licenses; 850 to 950 of those are going to go into the existing 6,600 wine and beer license shops,” he said.

Asked what the state would do about 313 leases on space now used for ABC stores, Finkbeiner said the government had “no legal or financial obligation to maintain the leases.”

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