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McDonnell's staff inches toward privatizing liquor stores

Anita Kumar

Gov. Bob McDonnell's administration has been quietly meeting for months with members of the alcohol industry and others in the community who would be affected by his proposal to privatize liquor stores.

Eric Finkbeiner, the governor's senior advisor for policy, has been talking informally with representatives from the Restaurant and Hospitality Association, Diageo Beverages, Miller Coors, Associated Distributors, Retail Merchants Association of Virginia, Virginia Wine Wholesalers, Distilled Spirits Council of the United States, Beer Wholesalers Association, Total Wine, Virginia Wineries Association, Wine Institute, Sazerac (which owns Bowman Distilleries in Virginia), Virginia Retail Merchants Association, MADD, public safety organizations and faith-based groups.

McDonnell recently formed a commission on government reform and restructuring, which will consider, among other proposals how the state could sell the state's 350 liquor stores, which he pledged to do on the campaign trail last year.

Finkbeiner and his working group will bring possible ideas to the commission, which is charged with providing initial recommendations to McDonnell by July 16, and writing a final report by Dec. 1.

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McDonnell estimates the sale of the ABC stores could bring in as much as $500 million for much-needed road improvements, but his critics argue that any one-time proceeds would be offset by the permanent loss of $100 million in annual revenue that goes to other state services.

Last week, at a public forum focused to kick off the government reform effort, McDonnell said he would not support holding a referedum to decide whether the ABC stores should be privatized.

"For 70 years, we've distributed beer and wine in every 7-Eleven, every Food Lion. But we've controlled the distribution of spirits,'' he told the crowd of more than 100 people. "From a free market stand point, it doesn't make sense to continue to control only one part of the distribution."

McDonnell will call the General Assembly back to Richmond this fall for a special session to approve his recommendations if he can build support for some of them.

By Anita Kumar  |  May 17, 2010; 10:00 AM ET
Categories:  Anita Kumar , Robert F. McDonnell  | Tags: Bob McDonnell, Diageo, Distilled Spirits Council of the United States, Virginia, Virginia Retail Merchants Association  
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One of the nice things about living in Virginia, is not seeing big "LIQUOR" OR "CUT RATE LIQUOR" signs on every corner.

They might want to mitigate the propagation of liquor stores by allowing alcohol to be sold in grocery stores, like beer and wine already is.

Posted by: markdyer | May 17, 2010 11:33 AM | Report abuse

I agree with markdyer.

Virginia's ABC stores are clean, quiet, civilized, and a good neighbor on the block. I've never been in a commercial liquor store that wasn't ugly and dirty.

Posted by: dottie_b | May 17, 2010 11:46 AM | Report abuse

This is a short sited grab for money. 500 million now but loose 100 million a year. Idiot.

Posted by: fred35 | May 17, 2010 11:52 AM | Report abuse

Our governor behaves like a typical short-sighted CEO. Looking for a quick one-time payout over long term profits. Can't say we weren't warned...

Posted by: ecjmom | May 17, 2010 12:01 PM | Report abuse

This is the dumbest idea proposed by a governor since Gilmore's "end the car tax." People aren't clamoring for privately owned liquor stores in Virginia. In fact, to many of us, the well run, neat, and safe Virginia ABC stores are highly preferable to the seedy private liquor stores that you see in other states. The revenue from this sale will barely make a dent in the state's transportation needs and after five years, the state will be in the hole to the tune of $100 million/year! And who will make up for that revenue shortfall -- yeah, that's right -- the taxpaying citizens of Virginia. Only an idiot would think that's a good deal.

Posted by: Bob22003 | May 17, 2010 12:24 PM | Report abuse

There are a lot of things I don't like about McDonnell, but this is a good idea, as was reopening the rest areas. Now raise the interstate speed limit to 70!

Posted by: steve_k2 | May 17, 2010 12:27 PM | Report abuse

So in six years, we'd already be losing money on this plan. How again is this is a good idea?

Posted by: NoVAredsox | May 17, 2010 12:33 PM | Report abuse

this is a fantastic idea by McDonnell. It means Cuccinelli will have $100 million a year less to waste on frivilous lawsuits against the federal governmnet!

Posted by: MarilynManson | May 17, 2010 12:35 PM | Report abuse

ecjmom writes:
"Our governor behaves like a typical short-sighted CEO. Looking for a quick one-time payout over long term profits. Can't say we weren't warned...

As nice as the revenue stream is for VA, I am still really puzzled how states like ours ended up controlling liquor distribution in the first place - unless it's some weird holdover from the Prohibition era.

This should have been a private market issue from the get-go.

Posted by: iamweaver | May 17, 2010 12:55 PM | Report abuse

500 million on the sale.. Before everyone sells the farm check on the revenue collected over the years... What happens when that money ends or when it doesn't become a reality.

Leave it to a republican to sell the farm for quick money-- what will we do next year?

Posted by: rog1 | May 17, 2010 12:55 PM | Report abuse

Although the ABC stores are very neat and clean and the staff is always very friendly, they are expensive. So, A LOT of people, including me, go to DC to shop for liquor. For example, a bottle of 1.75L Johnny Black in an ABC store costs $80 vs. $50 in DC. That's a bit much. So, now imagine all the folks spending their big liquor money in VA. That's a lot of taxes coming in. I think this plan will work and I'd like to get in on owning a store. Thanks, Bob.

Posted by: harbirsingh | May 17, 2010 12:58 PM | Report abuse

I agree with most of the comments posted. If it's not broke - don't fix it. All in all, the Virginia state store system works. While prices may not be as low as those in D.C., they still are competitve. Let's not sacrifice a system that works for a short term, one-time injection of cash.

Posted by: detroitred28 | May 17, 2010 1:03 PM | Report abuse

Agree that it is nice to have clean liquor stores and not ghetto liquor stores on every corner like in other states.

Posted by: rocotten | May 17, 2010 1:08 PM | Report abuse

There ought to be a requirement that before substantial state assets are sold off, there should be a vetting either in the state house and/or through a public referendum..

Like others have stated: What happens after year five?

Posted by: rog1 | May 17, 2010 1:09 PM | Report abuse

Say all you want about one time sale money vs. continuous revenue streams, but lets get more basic...why should the State be involved in the retail liquor sale business? This is a needless holdover from the depression era.

Posted by: thetan | May 17, 2010 1:09 PM | Report abuse

I moved from Mt. Rainier, MD were one of the biggest blights on the community was a liquor store. The noise, crime, and littering generated by its presence was appalling. And the local cops hired as off-duty guards were more interested in protecting the liquor store than the community. And things got worse on Sundays because Maryland's liquor stores are open while neighboring D.C.'s are not.

Virginia's ABC stores are clean, quiet operations compared to their Maryland counterparts.

And privatizing liquor stores just opens up more corporate funding to interfere in local politics. Greasing corrupt officials at the expense of the local communities.

Posted by: enemil | May 17, 2010 1:22 PM | Report abuse

Did anyone think that perhaps the privatization would lead to longer hours, and more locations that would in turn result in higher revenue generated from sales tax? Why anyone would want the state gov't running anything it doesn't have to is beyond me.

As for "seedy" liquor stores making Virgnia look bad - that is up to the zoning in whatever VA county these stores are located. If you have a "seedy" part of Manassas (for exaample) and someone wants to get a liquor license and open a retail location - it is up to the county to process and approve it. If someone opposes "seedy liquor stores" in their community, their local respresentative needs to hear from you.

If you sit on your ass and say nothing until AFTER it has happened, too bad for you. It's call civics and community involvement and it is your choice.

Posted by: cheekymonkey | May 17, 2010 1:24 PM | Report abuse

$100M in REVENUE does not = $100M in profits, folks.... The gov't run ABC stores are much more expensive to run than comparable retail stores, partially because the employees are state employees that receive state benefits (health, retirement, etc.). Thus Revenue - minus operating costs = much less $$ than you think. Finally, we'd be better off privatizing the stores and levying appropriate taxes. We'd probably come out ahead.

Posted by: saschadc | May 17, 2010 1:26 PM | Report abuse

I completely agree with those who point out that having the ABC stores selling liquor means I don't have to see billboards and signboards on every corner advertising cut-rate liquor. It's one of the nice things about Virginia.

Posted by: AHappyWarrior | May 17, 2010 1:31 PM | Report abuse

The state accounting office out to show the revenue collected from the liquor sales and beack it down by wholesale costs and retail sales before taxes and then show the taxes collected seperately.

We have the profit gained between the wholesale cost and retail that profit alone must out weigh the taxes collected and that is what we will be losing--every year.

Posted by: rog1 | May 17, 2010 1:38 PM | Report abuse

State governments should not be in the liquor sales business. But I can't help but not trust this clown to do the sell-off in a manner that will be good for the state. I want to see lots of oversight and transparency on this.

Posted by: annie7 | May 17, 2010 1:43 PM | Report abuse

I actually agree with this idea. I can't stand most of the Governor's agenda, but do believe it would be better to sell liquor in supermarkets and convenience stores. I agree with other here that we don't want privatized stores that only sell liquor - although I would not mind a total beverage version. The State will lose some of its revenue stream, but there will be State taxes on liquor, of course, and it is likely that less liquor will be bought out of State and more in Virginia.

Posted by: pointpetre | May 17, 2010 1:51 PM | Report abuse

So would the state just sell the stores, or license as many commercial stores as the market and zoning will bear? Also, I can think of towns in Virginia that would be unlikely to zone for a commercial liquor store. Close the ABC and folks will go to Maryland.

Posted by: dottie_b | May 17, 2010 1:52 PM | Report abuse

A one-time $500 million windfall? Very short sighted. The current system has been working very well.

Posted by: jckdoors | May 17, 2010 2:09 PM | Report abuse

I really don't drink any hard liquor so i have no personal take on it, but it was quite a bizzare feeling wandering through a grocery stor in Chicago and walking right into a huge vodka diplay, right next to the bread, it was quite odd.

Posted by: schnauzer21 | May 17, 2010 2:36 PM | Report abuse

Folks, liquor is a *product*. A commercially-produced product. The government shouldn't be the sole distributor of a product.

Posted by: iamweaver | May 17, 2010 2:47 PM | Report abuse

Liquor may be a "product" but this is not about a "product", it's about money for Virginia.
This decision should be left up to the voters of Virginia not the Governor or a commission.

Posted by: mcdonalsherry | May 17, 2010 6:18 PM | Report abuse

This is a bad idea on so many levels. Not only is he planning to cut off an existing revenue stream for short-term gain; but unless it is handled very carefully, privatization could turn into a glorious mess. Do we really want 7-Eleven's and grocery stores selling hard liquor? Liquor is not just any product; it is a product that is already far too easily abused.

Posted by: tistyen | May 17, 2010 7:58 PM | Report abuse

The ABC system in VA works well. Why are we questioning the logic that has been in place for 70 years with hardly any complaints? The free market argument is not logical. Why not sell hard alcohol to 10 year olds? Why not allow murder? Why have speed limits or public schools? Why not allow cats to marry chimpanzees. Why can't a woman to marry a shoe? It is a free market after all.

Posted by: good1 | May 17, 2010 8:49 PM | Report abuse

Everyone who thinks this is a terrible idea needs to write in to McDonnell's office. Stop just saying it here.

This is a terrible idea. Not only does it take away a constant source of revenue for the Commonwealth (that I believe is used for education), but it doesn't solve the problem of transportation funding. So the $500m will buy a few interchanges. Then what? What revenue is going to maintain those roads, bridges, etc. Bob just had built? Virginia can't even afford to maintain the roads it has now.

McDonnell needs to face the facts. The only fix for Virginia's transportation needs is identifying a constant source of revenue. Either cut something else and find it in the current budget, or raise the gas tax or something similar to pay for new roads and maintain old ones.

This short sighted BS is what will destroy the budget for future governors and generations. Not to mention the fact I actually enjoy ABC stores. While I miss the selection I used to find at independently owned stores back in NY, no ABC store is as scummy as some of those liquor stores were.

Posted by: BurtReynolds | May 17, 2010 9:12 PM | Report abuse

The question of $500M now vs. $100M per year seems easy and I guess we laugh a bit at the dumb governor who can't do math.

But count in taxes on the newly privatized operations, just standard state business tax and it is not nearly as easy a question, now, is it?

Posted by: Nemo24601 | May 17, 2010 9:48 PM | Report abuse

C'mon small government teabaggers! Let's make some noise. You wouldn't tolerate state-owned gun shops would you? You oppose "government-run" health care right? Well, this is no different.

I can't stand McDonnell and his evangelical underlings but I totally support this effort. The state ABC stores are an expensive joke. I buy most of my liquor in DC (hey Calvert-Woodley!)

Complete the danged bill!

Posted by: Froomkin_fan | May 18, 2010 7:40 AM | Report abuse

First of all let me say I am a proud drug and alcohol free evangelical christian. That being said, I also think that this view that "deregulation," "trickle down economics" and "small government" will change the world into some form of utopia is lunatic speech.

So here is my perspective; if it weren't for the fact that my wife doesn't want to leave due to the fact that her father is sick, I'd move out of the state immediately. I don't want to live in a state where drunks surround me when I'm out doing everyday things like getting gas or groceries. At least with liquir stores those individuals are out of sight and out of mind. Thanks Bob Mcdonnoll for shoving your southern confederate irish culture of booze and hard liquir down my throat.

Posted by: DavidFrost | May 22, 2010 5:26 PM | Report abuse

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