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
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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