Panel to analyze plan to privatize Va. liquor sales

RICHMOND

If Gov. Bob McDonnell is to succeed in ending Virginia's monopoly on state liquor sales, he has one heck of a sales job ahead.

The governor spent part of the summer on a barnstorming tour to make his case to the public. His pitch resumes Wednesday, when a proposal to auction liquor licenses to retailers will formally be presented to some members of his government reform commission.

The plan will be analyzed by the full commission before heading to the General Assembly for a legislative special session now tentatively set for sometime after the November elections.

McDonnell proposed the idea during last year's campaign, and the basics of the current plan remain similar to the framework his administration revealed over the summer.

As many as 1,000 distilled spirit licenses, divided into three tiers for large and small retailers and specialty shops, would be sold to the highest bidders. The governor predicts that this, combined with the sale of other state liquor assets, will yield a one-time infusion of about $500 million for road needs.

Some Democratic leaders in the state Senate already are forecasting the demise of McDonnell's plan, which has backing from a coalition of large retailers eager to purchase licenses but has drawn a more lukewarm response from other interests.

Among the concerns expressed by legislators from both parties is protecting the annual revenue Virginia presently realizes from selling spirits at state-run stores - last year, it totaled more than $258 million, according to the Department of Alcoholic Beverage Control.

"You're going through all this for a one-time shot and struggling to find the money to match what you make now, all to fulfill a campaign promise," said Senate Majority Leader Richard Saslaw, D-Fairfax.

There are enough votes in the 40-member Senate to quash the proposal, Saslaw suggested, adding that McDonnell has "a mess on his hands and doesn't know how to get out of it."

To make the numbers work, fees or taxes on spirits purchased from wholesalers could be charged to restaurants that serve alcohol. The Washington Post reported Friday that the administration is also considering adding a fee to alcoholic drinks sold in restaurants and bars.

McDonnell and an aide declined to discuss specific financial details of the plan. But the governor said it will produce approximately the same amount of money each year as the state makes under the current system.

Other critics worry that auctioning licenses will lead to an explosion of liquor retailers well beyond the current 332 state stores.

Not so, McDonnell said.

Many of those who bid on licenses "will be the same people that already have a license for beer and wine," he said. "You're talking about new shelf space, not new stores.

A more friendly reception might await the plan in the Republican-controlled House of Delegates, yet some members there have concerns.

"It's a clean system right now. There aren't any problems," said Virginia Beach Republican Del. Bob Tata, who said he fears that changing it could open "Pandora's box."

Removing the state from the liquor business makes sense as long as the state isn't shortchanged, said Del. John Cosgrove, a Chesapeake Republican, expressing a sentiment several legislators share.

"I'm not going to support it if we're going to be short even one dime," he said.

McDonnell's response to those who are skeptical is "wait and see" before you judge.

"Most of the things that I've heard people talking about with regard to public safety, or lost revenue, or competition in the private sector, et cetera, those things are all going to be addressed in the proposal," the governor said during a recent interview.

Besides, McDonnell observed, this isn't uncharted territory.

"I mean, 32 states already do it. Virginia's not leading the way on this," he said. "As far as government monopoly states go, we have a good system. I'm suggesting there's a far better system to get us out of the business of alcohol distribution and into the business of more revenue for transportation."

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