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McDonnell unveils proposal to privatize state liquor system

Gov. Bob McDonnell's staff unveiled a proposal to nearly triple the number of establishments that sell hard liquor in the state -- to 1,000 -- though the majority of new licenses would go to establishments where Virginians can already buy beer and wine, such as grocery and convenience stores.

McDonnell's staff, now briefing members of his government reform commission, argue their plan raises money for state roads, almost fully replaces revenue Virginia now receives from its ABC stores, expands the shelf space devoted to distilled spirits in the state while avoiding a proliferation of new liquor stores and does not raise taxes.

That last point will be key for a Republican who ran for governor on a platform of improving roads without new taxes. McDonnell will have to persuade legislators new fees on parts of the industry involved with his complex proposal do not represent tax increases. That persuasion campaign began today.

"While the points of revenue collection will change as the state moves from a single government controlled wholesaler and retailer - there is no tax increase," reads a portion of the administration's presentation.

Under the proposal, licenses would be sold to the highest bidders: 600 big-box stores, such as grocery stores and Wal-Mart, 250 and convenience stores and drug stores and 150 package stores.

Minimum bids for wholesale and retail licenses would be based on a formula that takes into account the size of the proposed store and the current profitability of ABC stores in different geographic regions. For instance, the governor's office says the minimum bid for stores in rural Page County would range from $102,844 to $257,114, depending on the license tier. In more populated Virginia Beach, minimum bids would range from $191,072 to $477,681.

Based on the formulas, McDonnell's staff say their minimum bids ensures the state would receive no less than $458 million in upfront money from the sale to devote to transportation.

And he says this is possible without losing ABC's annual revenues. How?
A $17.50 per gallon excise tax would be imposed on distilled spirits. Wholesalers would pay a 1 percent tax on their gross receipts each year and restaurants would also pay a 2.5 percent tax on their annual collections, but only if they chose to buy liquor at discounted prices from wholesalers. The governor's staff says the tax is optional because restaurants that choose to continue paying retail prices for liquor--as they do under the state-run system--could avoid the levy.

Though multiple sources, including state Sen. Mary Margaret Whipple (D-Arlington) said they were briefed late yesterday on an additional 1.5 percent fee to be imposed both on restaurants and retail establishments, that fee appears to have dropped out of the governor's proposal and is not reflected in the presentation documents.

Additional forms of annual revenue will come annual license fees for new private liquor retailers, varying by the size of the store from $500 to $2,000 a year and the continuation of $13 million a year in existing fees on restaurants. Revenue will also come from $700,000 in new wine sales expected to occur after privatization, $14 million in new sales taxes from boosted liquor sales and $5.8 million in new business taxes.

McDonnell's staff proposes a quick transition to a private system. They say licenses could be auctioned in a year and new stores could start to stock their shelves in September, 2011.

Rosalind S. Helderman and Anita Kumar

By Anita Kumar  |  September 8, 2010; 2:00 PM ET
Categories:  Anita Kumar , General Assembly 2010 , House of Delegates , Liquor privatization , Robert F. McDonnell , Rosalind Helderman , State Senate  
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Next: McDonnell headlines fundraisers for Corbett of Pennsylvania

Comments

Love the GOP governor's double speak: We'll raise taxes and then say we didn't. I know the state voted for you but how stupid do you think Virginian's are?

Posted by: JustTheFacts11 | September 8, 2010 3:15 PM | Report abuse

(1) A $17.50-per-gallon excise TAX would be imposed on distilled spirits

(2) Wholesalers would pay a 1 percent TAX on their gross receipts each year

(3) Restaurants would pay a 2.5 percent TAX on their annual collections

(4)$14 million in new sales TAXES from boosted liquor sales

(5) $5.8 million in new business TAXES

Governor, that's a lot of TAXES. Would the counties and cities still get their cut as they do now? Who has the money these days to bid such high prices for licenses; especially in the rural areas?

Posted by: rmg4369 | September 8, 2010 3:22 PM | Report abuse

(1) A $17.50-per-gallon excise TAX would be imposed on distilled spirits

(2) Wholesalers would pay a 1 percent TAX on their gross receipts each year

(3) Restaurants would pay a 2.5 percent TAX on their annual collections

(4)$14 million in new sales TAXES from boosted liquor sales

(5) $5.8 million in new business TAXES

Governor, that's a lot of TAXES. Would the counties and cities still get their cut as they do now? Who has the money these days to bid such high prices for licenses; especially in the rural areas?

Posted by: rmg4369 | September 8, 2010 3:23 PM | Report abuse

Great, another GOP boon to the big box stores...why not make the license affordable and available to existing independent wine retailers and small grocers who already struggle to compete against the Walmarts and Total Wines of the world? And it is curious: "expands shelf space" for booze, but not the number of retail outlets? I guess McDonnell wants to sell more booze, not help small business.

Posted by: richardblue | September 8, 2010 3:28 PM | Report abuse

Sounds like taxes to me. The GOP only talks about small-business during campaigns, then it's all big-business once is office. But as a one-term state, McDonnell doesn't have to answer for anything.

Posted by: jckdoors | September 8, 2010 3:43 PM | Report abuse

how can they claim there is no tax increase when the plan is loaded with tax increases?

this plan is an insult to the intelligence of the citizens of virginia with its blantant lies.

No wonder they want to enact this flim-flam plan as fast as they can.

Wal-mart can't wait to start selling hard liquor at discount prices to drive out more small businesses while the resturants and their customers pay most of the new added taxes.

No mention of who gets the wholesaler license and which of ronald mcdonnell's connected friends gets one.

Posted by: MarilynManson | September 8, 2010 3:53 PM | Report abuse

Rubbish. Pure and total rubbish.

Posted by: gmart68b | September 8, 2010 4:23 PM | Report abuse

Whether you call them taxes, fees, or fines, costs are going to go up. I wish one of two things would happen:

1. Politicians stop playing politics and simply admit that they need to raise taxes so governments (state, local, federal - take your pick) can actually perform the services they've promised.

2. Taxpayers will stop being selfish and admit that politicians need to raise taxes so governments (state, local, federal - take your pick) can actually perform the services that we enjoy.

Posted by: damascuspride04 | September 8, 2010 4:25 PM | Report abuse

"A $17.50-per-gallon excise tax would be imposed on distilled spirits. Wholesalers would pay a 1 percent tax on their gross receipts each year, and restaurants would pay a 2.5 percent tax on their annual collections"

McDonnell is raising taxes!

What do the Tea-baggers have to say about this?

Posted by: wiz_fan | September 8, 2010 4:37 PM | Report abuse

Oh yeah, love those new taxes. Also, if I can buy liquor at a 'big box' store, then why in the world would I go to a package store? And who in their right mind would bid for a license to run a package store when I can go to Walmart? Doesnt the Gov know that Walmart kills small business' or is he that out of touch?

Posted by: BMSOZZY | September 8, 2010 4:45 PM | Report abuse

It's good to know that those little grubby ace rural stores want be selling hard liquor to a bunch of hillbillies. Only the big boys need apply for these licenses If you can't make it to the closest Walmart you shouldn't drink anyway. Small businesses are the backbone of the economy according to the republicans why are they excluded from this windfall the state is giving away. Anybody can see what the plan is now turn the liquor stores over to the same businesses that own this country and dang a bunch of crybaby taxpayers

Posted by: vw52 | September 8, 2010 5:28 PM | Report abuse

It's about time. The state has business selling and impeding the sale of alcohol.

Posted by: SaysEye | September 8, 2010 6:06 PM | Report abuse

really? GOP doesn't take long to remind us.

Posted by: flecks22 | September 8, 2010 6:33 PM | Report abuse

600 licenses for big-box stores, 250 for grocery and drug stores, and 150 for package stores? Going by other comments, I don't think I'm the only one who sees an odd proportion here.

I also don't see what McDonnell proposes would replace the funding for other state and local programs that now comes from ABC profits. His proposal wouldn't just mean a new source of state income, directed to highways; it would mean the end of an existing source that helps to fund existing needs.

Posted by: CherieOK | September 10, 2010 10:15 AM | Report abuse

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