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Warner calls McDonnell's figures on ABC privatization 'wildly optimistic'

Anita Kumar

U.S. Sen. Mark Warner called Republican Gov. Bob McDonnell's $300 million to $800 million estimate for privatizing the state's 332 liquor stores "wildly optimistic."

"I think some of the numbers that I've heard bandied around are wildly optimistic and would provide unrealistic expectations, particularly for folks who are hoping this might help deal with our transportation woes,'' Warner said on a conference call with reporters Wednesday afternoon.

Warner, a former Democratic governor who considered privatizing the liquor stores, said he still supports the concept but does not know if the numbers will work.

McDonnell's staff publicly unveiled the four possible ways they could sell off the stores on Monday. Some Democratic legislators are concerned that the proposals will cost the state the $220 million in taxes and profits ABC stores contribute annually to the general fund.

"I also think that any plan has to include how we are going to replace that $220 million the ABC stores now provide on a consistent annual basis that goes to our schools, that goes to law enforcement, that goes to the general operations of state government, particularly public education,'' Warner said. "If you're going to sell these stores how are you going to replace that revenue stream?"

Many of those affected by privatization have said they prefer a proposal that allows companies to buy licenses, which would be sold to the highest bidder. That proposal would probably come with an increase in the number of stores, between 400 and 1,000. They would be sold by auction in three tiers to big-box stores, such as grocery stores and Wal-Mart, traditional package stores and convenience stores or drug stores.

"To my mind this is less about a kind of orthodoxy in terms of where the ABC stores should be and what kind of oversight they should have but really is a financial question,'' Warner said. "I have no problem with the idea of privatizing the ABC stores as long as the financial numbers still work -- as long as Virginia doesn't lose that very important, valuable revenue stream."

McDonnell's government reform commission is likely to approve one of the proposals at its next meeting Aug. 26, after which McDonnell expects to call legislators back to Richmond for a special session on privatization and other cost-cutting issues.

By Anita Kumar  |  July 22, 2010; 11:21 AM ET
Categories:  Anita Kumar , Mark Warner , Robert F. McDonnell  
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It seemed to me, during the campaign, like a strange idea to eliminate a long-term revenue stream in order to make short-term money to deal with long-term infrastructure issues.

So yeah, maybe you can use that upfront money to pay for some of what's needed, but transportation infrastructure needs to be maintained over an indefinite time period. It amounts to taking a lesser-paying job because there's a big signing bonus, and then using the bonus money to put a down payment on a more expensive house. Sure, you get a better house, but how are you going to pay for it down the line when you're making less money?

Posted by: KBfromNC | July 22, 2010 11:49 AM | Report abuse

I support the Governor's privatization plans for a few reasons. First, the government should not be in the retail business, period. Second, Virginia's ABC stores are dull, lack a decent selection and don't competitively price to compete with privately run stores in DC or Maryland. As a fan of good Scotch, I find the single malt selection at my local ABC store to be depressing.

I get Warner's fear that legislators don't see how the recurring revenue will be made up after the money is made from the initial sell-off and license sales. But has anyone done a comparative marketing study with other states that have privatized their liquor stores of how sales (therefore sales tax collections) will rise as a result of making liquor purchases in the Commonwealth more convenient, attractive and affordable?

This is not a zero-sum game.

Posted by: joeduffus | July 22, 2010 12:23 PM | Report abuse

That's a good one. Wasn't Mark Warner the governor who predicted we had a huge budget deficit that required the largest tax increase in Virginia history, after which it was revealed that we in reality had a significant surplus in exactly the amount that he raised taxes?

Posted by: JTR555 | July 22, 2010 1:47 PM | Report abuse

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