Lawmakers cool to ABC privatizing plan

RICHMOND

A complex plan to privatize state liquor operations that Gov. Bob McDonnell unveiled Wednesday could make it easier to find a place to buy a bottle of booze; deliver hundreds of millions for road needs; and end Virginia's hand in selling distilled spirits.

But there's at least one thing even its biggest boosters acknowledge it wouldn't do: provide Virginia with the same amount of alcohol-related revenue it presently realizes.

And that could make the plan a tough sell for the governor in a tough economic climate with lackluster state revenue collections.

The estimated $304 million the state would receive annually from alcohol sales under the privatization plan is less than the projected $324 million it expects to take in this year, McDonnell conceded.

"I think we've got a meritorious proposal," the governor said. "Now, I will discuss this over the next 30 days-plus with leaders in both parties, in both houses, so that I can take away whatever objections that they might have."

The governor has said he'll call the General Assembly to Richmond for a special session after the November elections to weigh his plan and other government efficiency proposals.

The current plan calls for the auctioning of 1,000 licenses in three categories - for large and small retailers and specialty stores - priced on a sliding scale that would consider current state Alcoholic Beverage Control store profits in a given area and other factors.

Virginia operates 332 liquor stores, which the plan envisions would be replaced by private retailers.

Those concerned about an explosion of stores needn't be, said McDonnell, who predicts that many of the auctioned licenses would be bought by stores that already sell beer and wine.

"We're not talking about new stores, generally," he said. "We're talking about new shelf space."

And localities would retain the ability to regulate through zoning where stores could be, administration officials have said.

As presently formulated, the minimum bid for the least expensive license in Virginia Beach would be just over $191,000; bidding on the most pricey license would start at nearly $488,000. In less-populated localities, the starting bids would be lower.

Licenses would be granted in perpetuity, though owners would have the ability to transfer them if granted state approval.

The governor predicts that money raised from the auctioning of retail licenses would bring in a minimum of $265 million. Combined with the sales of wholesale licenses and other state ABC assets, the one-time haul would be $458 million.

Proceeds from an auction would be deposited into a state infrastructure bank, a revolving loan fund to help support transportation projects the state otherwise lacks the financial resources to fund outright.

The promise of more money for roads wasn't enough to convince some skeptics, however.

"The whole notion that we can drink more so we can drive more bothers me," said Arlington Democratic state Sen. Mary Margaret Whipple, a member of McDonnell's reform panel that will weigh the privatization plan.

Virginia currently purchases liquor from manufacturers and then adds a government markup, a handling fee and a state excise tax before bottles reach store shelves.

The state wouldn't be able to charge the markup or excise tax in a privatized system, though taxes on beer and wine would be unaltered.

Instead, McDonnell's model calls for an excise tax at the wholesale level.

Also brewed into the plan is an optional 2.5 percent convenience fee that restaurants could pay, allowing them to buy discounted distilled spirits from wholesalers and receive on-site delivery.

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

Read the governor's proposal