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McDonnell hires outside consultant to study ABC privatization

By Anita Kumar
Anita Kumar

As he continues to revamp his ABC privatization proposal, Virginia Gov. Bob McDonnell (R) has hired an outside vendor to study the state's 76-year-old liquor system, according to a source familar with the consultant.

The PFM Group began work Tuesday. It bills itself as the nation's "leading provider of independent financial and investment advisory services,'' according to its Web site.

McDonnell spokesman Tucker Martin confirmed on Friday that the company had been hired, but said he could not say how much it will be paid because the contract had not yet been signed.

In recent weeks, some legislators and lobbyists say they have been talking to the governor's office about whether the state should give up only the retail stores while maintaining its monopoly on liquor wholesaling and distribution.

Martin declined to discuss details of the work PFM is doing other than to say the purpose of its study is to provide a "financial analysis regarding potential approaches to ABC privatization in the Commonwealth."

A spokesman for the Alcoholic Beverage Control referred questions to the governor's office.

PFM has done work for the state before and currently has a contract with the Virginia Port Authority, Martin said.

McDonnell unveiled a plan in September calling for the complete privatization of all aspects of the state system, which would produce a one-time windfall of at least $458 million for transportation. But he faces considerable opposition in both the Democratic-led Senate and GOP-controlled House of Delegates in part because the plan would bring in $47 million less each year to the state.

He abandoned plans to hold a special legislative session on the proposal this month after failing to garner enough votes, but will pursue it when lawmakers return to Richmond for their regular session in January. The 46-day legislative session begins Jan. 12.

McDonnell has two months to modify his proposal. House Speaker Bill Howell (R-Stafford) has recommended that McDonnell form a working group of legislators, wholesalers, distillers, retailers and others to hash out a compromise.

Del. David B. Albo (R-Fairfax) said a small legislative working group is considering looking at whether the state should give up only the retail stores while maintaining its monopoly on liquor wholesaling and distribution.

As we reported in September, Iowa and West Virginia, the only two states that have fully privatized their retail stores in the last two decades, each made less than $20 million upfront when they privatized. Officials in those states said the change helped them become more efficient and saved overhead costs, but never produced the anticipated windfall.

Other states have partially privatized stores. See a full list of 18 control states and what systems they use now.

By Anita Kumar  | November 8, 2010; 7:00 AM ET
Categories:  Anita Kumar, Liquor privatization, Robert F. McDonnell  
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The most important factor is impact on public health and safety, and this seems to be underappreciated.

A "financial analysis" should include societal costs of harm from abuse/misuse of liquor...underage drinking, unintended pregnancy, fetal alcohol syndrome, DUI, domestic violence, crime, cancer... And if there's a "working group of legislators, wholesalers, distillers, retailers and others to hash out a compromise," the "others" ought to include those who can speak knowledgeably about social impact.

This could be reps from the VCU Institute of Drug and Alcohol Studies (see privatization reports on their website). Also someone like a former regulator. See the website See the Sept. 2010 newsletter and the document there on the failed Washington state privatization ballot initiatives.

But of course here we are going through more costly time and analysis when the smart move would be to simply leave the good ol' Va. ABC store system humming along -- an engine for effective control and impressive, reliable state revenue.

Posted by: anonymousid | November 8, 2010 11:54 AM | Report abuse

Gov. McDonnell deserves credit for his commitment to reforming Virginia's antiquated state-owned ABC system, and for his careful approach to gathering legislative support.

It's clear that consumers would benefit from a private competitive marketplace. The state would recapture tax revenue that is now lost by diversion of sales to D.C.'s private stores. The sale of stores and licenses would also provide much-needed funding for transportation projects.

And of course, there's no good reason for state government to be involved in retail sales in the first place.

It is unfortunate that some partisan legislators are trying to block ABC reform in Virginia. But it's good to know that Gov. McDonnell is on the public's side -- and that he's working in a smart, thoughtful way to get the job done.

Posted by: jrmil | November 8, 2010 3:54 PM | Report abuse

If it ain't broke, don't fix it... Gov McBob is an IDIOT !!! ABC is the only "money generator" the state has. I say get HIM out of office ASAP !!!

Posted by: nwcmbrg57 | November 10, 2010 12:37 AM | Report abuse

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