McDonnell working to wean Virginia from liquor business

RICHMOND

Gov. Bob McDonnell's administration is exploring new ways to get Virginia at least partially out of the liquor business.

Under one approach being considered, the state would keep oversight of liquor sales but would contract with private businesses to operate retail stores.

The government would share some profits with retailers while continuing to set prices and standards, according to officials involved in the discussions.

That model represents a sort of partial privatization that could gradually move toward a fully privatized system.

Other ideas floated by the administration - including a plan to remove the state from the business by selling licenses to retailers willing to market spirits on their shelves - more closely resemble the kind of private enterprise McDonnell has publicly said he wants.

Virginia is one of 19 so-called "control states" that have a hand in the sale of spirits, according to the National Alcohol Beverage Control Association.

Dismantling the government monopoly on liquor while parceling permits to private businesses could generate new revenue for the upkeep of Virginia's road network, the governor contends.

Eric Finkbeiner, a McDonnell senior policy adviser, said the administration has three main goals: to develop a more free-market approach with greater private sector involvement; to maintain the revenue that the state receives from ABC sales; and to raise additional money for transportation projects.

McDonnell established a government reform commission charged with finding ways to streamline government, including examining privatization of liquor sales.

In the meantime, administration officials have been meeting with advocates for merchants, alcohol distributors and other interest groups tracking the privatization talks.

Any final proposal should place smaller merchants on "a level playing field" with larger retailers and investors who might also seek liquor licenses from the state under privatization, argued Margaret Ballard of the Hampton Roads-based Retail Alliance.

Whatever plan emerges from McDonnell's team is expected to be reviewed by the reform commission before it is considered by the legislature during a special General Assembly session the governor plans to call later this year.

Reform commission member Del. Glenn Oder, R-Newport News, said he isn't aware of the specific administration proposals but is confident they will receive a thorough "public vetting."

Regardless of the reception the final concept receives from the commission, getting a privatization bill out of the legislature could present a tough challenge for McDonnell.

Similar measures have been rejected previously, and some lawmakers doubt that selling off liquor stores will make more money for the state than the current model.

"Are we guaranteed our general fund revenues?" wondered state Sen. Mary Margaret Whipple, an Arlington County Democrat on McDonnell's reform commission.

"How will we make new profits and not jeopardize the profit that's been coming to the general fund?"

State alcohol sales during fiscal year 2009 produced revenues exceeding $322 million, including profits and tax collections, according to the state Alcoholic Beverage Control Department.

About $75 million of that sum is routed to the state mental health agency, while the rest is sent to the general fund.

Of the 332 stores it operates, Virginia ABC owns 18 stores plus its central office and warehouse, which have a combined assessed value of more than $33 million.

McDonnell has suggested those assets also could be sold as part of a privatization deal.

Julian Walker, (804) 697-1564, julian.walker@pilotonline.com