During the 2009 gubernatorial campaign, Bob McDonnell said he wanted to investigate selling Virginia’s state liquor stores to private owners. Many of us went nuclear at the time but figured he would move on past that bad idea. Apparently we thought wrong. In fact, an article in the Washington Post slipped right past me on May 17.
From the WaPo, in its entirety:
Gov. Bob McDonnell’s administration has been quietly meeting for months with members of the alcohol industry and others in the community who would be affected by his proposal to privatize liquor stores.
Eric Finkbeiner, the governor’s senior advisor for policy, has been talking informally with representatives from the Restaurant and Hospitality Association, Diageo Beverages, Miller Coors, Associated Distributors, Retail Merchants Association of Virginia, Virginia Wine Wholesalers, Distilled Spirits Council of the United States, Beer Wholesalers Association, Total Wine, Virginia Wineries Association, Wine Institute, Sazerac (which owns Bowman Distilleries in Virginia), Virginia Retail Merchants Association, MADD, public safety organizations and faith-based groups.
McDonnell recently formed a commission on government reform and restructuring, which will consider, among other proposals how the state could sell the state’s 350 liquor stores, which he pledged to do on the campaign trail last year.
Finkbeiner and his working group will bring possible ideas to the commission, which is charged with providing initial recommendations to McDonnell by July 16, and writing a final report by Dec. 1.
McDonnell estimates the sale of the ABC stores could bring in as much as $500 million for much-needed road improvements, but his critics argue that any one-time proceeds would be offset by the permanent loss of $100 million in annual revenue that goes to other state services.
Last week, at a public forum focused to kick off the government reform effort, McDonnell said he would not support holding a referedum to decide whether the ABC stores should be privatized.
“For 70 years, we’ve distributed beer and wine in every 7-Eleven, every Food Lion. But we’ve controlled the distribution of spirits,” he told the crowd of more than 100 people. “From a free market stand point, it doesn’t make sense to continue to control only one part of the distribution.”
McDonnell will call the General Assembly back to Richmond this fall for a special session to approve his recommendations if he can build support for some of them. <
Virginia has a long history of having state stores that dates back to the end of prohibition in 1933. The history and accompanying pictures can be found at the following link on the ABC website.
Additionally, Virginia makes money off the state stores–lots of money and that money goes in to other programs. See the 2009 annual report. Download here. (pdf)
What is McDonnell’s obsession with privatizing our state ABC stores? Any private industry will have one objective–making money. Virginia regulates the use of alcohol and its primary objective is not financial. McDonnell will run in to a big fight if he continues with this tradition-breaking stupidity.
Honestly, I don’t see what the issue with privately owned liquor stores is. Virtually every other state has privately owned liquor stores and I don’t see any significant difference (other than more expensive booze here in VA.) Privatizing the stores does not mean that the state will not regulate alcohol sales. The state will continue to play a regulatory role, just like it does for beer and wine already.
We have privately owned hospitals, schools, roads, assisted living centers, and prisons. Surely liquor stores are less important to society than any of those, yet they are privately owned and operated.
What do you fear will happen with privatized ABC stores?
History is more in play here than state revenues or access control. Beer and wine went directly to private sales after prohibition. Spirits were to be controlled by the state to prevent, reduce and facilitate state “erradication” of its prospering shine industry (which has its own traditions in VA). Now it is more about public employees and their pensions. Whats the down side again – more stores, private employment, reduced state pension liabilities, expanded inventories and access to specialized brands, reduced gov. overhead ??? In 2010 is the ABC stores cannot be privatized, is there any industry that should not be government-ized.
You obviously aren’t a Virginian, FA. In the first place, the ABC stores are tradition. Money from them supports various state issues. They bring in millions. Last year ABC revenues turned over $111 plus million.
It is a short term gain and a long term loss. Once they are sold, they are sold.
Additionally, no private owner would be in business for any reason other than to make a profit. Virginia currently plays a dual role of providing booze and encouraging responsible driniking habits.
Fewer than half the employees are considered full time and therefore eligible for VRS.
I hope this isn’t all about pensions. That becomes a pay me now or pay me later deal also.
Virginia certainly takes suggestions for certain brands and speciality types. Also they bring in more of those part time people during rush hours and days. Their staffing is very economically responsible.
Reduce govt overhead and reduce that money made off of the revenues.
@Moon-howler
The profit motive is not an evil. Government dispacement and competition with the private sector – in a sector that does not require public control is.
A 75 year displacement is good enough for me. You obviously care nothing for Vriginia tradition either. Transplant?
I prefer the way things work now. I’m not sure what McDonnell is after.
Surely this isn’t about some abstract concept of free market.
MH said “You obviously aren’t a Virginian, FA. In the first place, the ABC stores are tradition.”
MH-you took the words out of my mouth. Clearly, tradition doesn’t mean much to some. Especially a Virginian tradition. Perhaps, they should try to ASSIMILATE.
BTW-Very disappointed I did NOT get this in an email!
•In 2009 ABC celebrated its 75th anniversary.
•ABC has contributed more than $1.5 billion to the commonwealth in the last five years.
•Since its inception, ABC has contributed more than $6 billion to Virginia’s General Fund.
First off, don’t go accusing me of not being a Virginian unless you are prepared to pay my PWC personal property tax, state income tax and county assessment on real estate. And don’t forget the stupid $29 ‘decal’ fee we pay even though the county doesn’t use decals anymore. My family pays close to $60k in combined state and county taxes every year for the privilege of living in the Commonwealth. The work we do can be done anywhere, but I have personally chosen not to outsource our work and hire people who live and work in NoVA. So don’t claim I’m not a Virginian just because I think that the government has no role in selling alcohol.
Second, I didn’t read the annual report in detail, but the $111 million in profit (not revenues) appears to leave out some expenses. They don’t have all the reporting obligations of a private company, so it’s very hard to tell but I don’t see anything that indicates they are funding their future pension obligations for the 900 or so full time employees. That would shave quite a bit off the $111 million depending on how many former employees
Personally, I hope the Governor doesn’t sell the ABC stores for $500 million. I think that’s a low valuation and it should go in a bidding process that could potentially raise the price to closer to $700 million. (A lot would depend on what pension obligations would transfer to the new owner. If the state maintains the pension obligation and made it a clean sale, the price should be more in the range of $800 million for an asset that produces a revenue stream of $100 or so million in profile.) But having a debate over the valuation of the stores is much different than accepting the premise that the ABC stores are Virginia’s equivalent of the Brezhnev Doctrine. You seem to be arguing that the stores shouldn’t be sold at all. Not over how much they are worth. Or am I incorrect?
Only 9 states (including Virginia) have state run retail alcohol sales. Somehow the other 41 states have managed to encourage responsible drinking habits without owning their equivalent of the ABC stores.
As for hiring more people when there is more demand, where do you think that practice came from? The CPG sector started that and it was only in the late 80s to mid 90s that the user fee areas of government started to catch on. Do you really think that customer service at an ABC store is better that Total Beverage? (Excepting the TB on 236 which has been going downhill lately.)
Lastly, this is twice I’ve been accused of misrepresenting myself for posting comments against the groupthink. First I was a Republican Operative, not I’m not a Virginian. Quite frankly, I am getting pretty sick of it. Stop accusing me of misrepresenting myself just because I have a different opinion than you.
Guess “native” Virginian would’ve been the better term.
Who cares how much FA pays in taxes. We all pay them. We ALL get totally ripped of with the county decal.
I will say I do find the state not having the burden of the pensions as a plus to privatization of the Va. ABC Package Stores. That’s the only one that has really gotten my attention.
So are we supposed to keep any Virginia tradition that has survived for 75 years? Great. Let’s allow smoking in restaurants and public buildings again. I mean isn’t tobacco a Virginia tradition? (Much more so than ABC stores.) How about our state’s wonderful traditions in the area of civil rights? It’ll take some time to get the plumbing installed but the separate bathrooms and drinking fountains were a Virginia tradition too. And the segregated schools. Speaking of schools, I guess morning prayers are back too. I don’t quite know how you would want to handle interracial marriage though. On the one hand, it’s a Virginia tradition that they should be outlawed. But another Viriginia tradition banned divorce, so I’m not sure how to square those too.
My point here is that societies change over time. You keep traditions that make sense and adapt or abandon ones that don’t. But keeping something static purely because “that’s the way it’s always been” is foolish. ABC stores may have made sense at one time, but they are a business (albeit a state owned one) and their future should be treated as a business decision.
I can’t wait to see what I’m going to be accused of being for this post.
@Formerly Anonymous
I agree. Why can’t we run to Joe’s “Packie” on Friday at 3 a.m.? Used to do it in my hometown.
Not that I drank, of course. It was for all the other delinquents.
@Lafayette
What?? We pay pensions for employees at liquor stores? How bizarre is that???
@Posting as Pinko
They are state employees.
@Lafayette
That’s gotta be costly and cumbersome. And I still think it’s bizarre. Can you imagine if VA paid pensions for Wal-mart employees?
@PWC Taxpayer
The ABC system has 2,682 employees. Some 1,700 are part-time employees who receive no benefits whatsoever other than a periodic paycheck. I suspect most of the balance are involved in licensing and enforcement plus 300+ store managers. The sale price for the stores is expected to be around $500 million or 5 years worth of profit. Whiule it is true there could be more stores, depending on how many the state is willing to license but there may well be more than 1,700 people who won’t be drawing a paycheck unless the new liquor stores hire them. If it goes like it did when Maine privatized their Greenfront Stores, already established businesses simply expanded their beer and wine departments to include “hard” liquor. So I say the governor is looking at short term gain and long term loss–penny wise, pound foolish. If there is a need for more stores and more variety, the perhaps the state should expand the number of stores. It is perhaps one of the few profittable enterprises the state owns.
Dear God, what planet am I on?
Why are pensions all of a sudden some sort of leprosy? Why is contributing towards a pension for someone any different than making a 401k contribution? The part time employees at the ABC stores aren’t getting pensions paid, furthermore.
If people don’t have pensions or 401Ks, it is going to get awfully expensive helping them out in their old age. Pay me now or pay me later….
This new conservative anti pension thing is really pretty ugly. I think it is jealousy actually.
Many of the ABC store employees who are part time are moonlighting. They have other jobs.
George, doesn’t most of the millions made off of the ABC stores go to education in the long run?
If you don’t see the problem with defined benefit pensions, then you haven’t grasped the essence of all my posts on the sovereign debt crisis.
Pensions aren’t leprosy. They are great, and I’d love to have one. The problem is that while defined benefit pensions are great for the recipient, decades of evidence now shows that defined benefit pensions are unaffordable because future costs are always grossly underestimated. Defined benefit pensions, particularly in the government sector, are the classic case of making promises that you can’t keep, and the results of that are becoming clearer every day.
I’d love for everyone to have a defined benefit pension. I’d love my employer to give me a pony too, but they can’t afford either one. Neither can most governments.
If you really think that current government pension levels are sustainable, you are going to be very angry and frustrated over the next 5-10 years. Five to ten years from now, the concept of pensions and retirement, especially for public sector employees, will be radically different. (Think working much longer for much less of a pension, which will be a defined contribution pension, not defined benefit.)
Gov. McDonnell’s revenue ideas deserve to be studied and given a
hearing, but also questioned.
1) Will local governments be made whole from the loss of the annual
ABC contributions to schools and public safety? How?
2) Does anyone think that I-95 in Virginia becoming a toll road won’t
quickly lead to tolls in other states on I-95?
3) Off-shore drilling? Will we be consulting with the top-flight BP folks?
Wait, no — its the principle of the thing – the economics are secondary – though significant – benefits to the taxpayer that result from the privitization.
Why in the world is the State of Virginia prohibiting competition for a consumner good like booze in a bottle. Just because the government can do it does not mean it should do it. We need to eliminate this last vestige of the progressive socialist State in Virginia!!!
If necessary, I might not be opposed to a full – independent – accounting of the true cost of the ABC system and then simply allow private sector competition to see where the business goes.
@PWC Taxpayer
“Transplant” “Not a Virginian.” “Not interested in tradition” Call be a “carpet bagger” and meet me at the IHOP!
Feel free to download their annual reports. FA, Virginians are very protective of their traditions. The state ABC store is one of those things most of us generational Virginians cherish. Many others like our traditions.
Nothing is wrong with our system. NOTHING. We make money which goes to support education, safety, etc.
Perhaps as a Virginian, there are just some things I am more conservative about than you are. You are right, we do have some ‘traditions’ that are negative. I would chose to consider them part of our history that we share with other states. Also part of that tradition is, if something ain’t broken, don’t fix it. Privatizing the state stores is a quick fix and long term stupidity.
VRS has been very solvent for years. Any difficulties it has is from jurisdictions not paying in as they are supposed to and the state sticking their greedy hands in for a loan and then saying they have a balanced budget. They are balancing their budget on the backs of the employees.
Personally, I think its a great idea for the Commonwealth to divest itself of the liquor stores. Given the cost of the administrative layer, advertising, pensions, rent, upkeep, etc., etc., etc. I suspect the “profits” are likely overstated. Moreover, its not like the state instantaneously loses all that revenue as the taxes on the bottles sold (a majority of the “profits”) will still be collected by the state and dispersed to those programs everyone seems to be concerned about. On a more selfish note, I really want them privatized so I don’t have to risk life and limb in the district to satisfy my requirement for Vecchia Romagna brandy or 18yr old single malts the ABC stores don’t sell. I spend significantly more in Mr. Fenty’s stores than the Guv’s stores on an annual basis and really hate putting anymore money than I have to into the District’s coffers.
TP, huh? I asked you if you were a transplant. What’s at IHOP?
@Moon-howler
I wonder if IHOP is a code word, that we should know. 😉
That’s what I was wondering, Lafayette.
What’s at IHOP?
One legged waitresses.
So I’m still not a Virginian in your eyes, huh?
You know you are starting to sound a lot like Sen. Allen in his macaca speak when he was talking about “real Virginia”. I sure hope most people in “your” Virginia don’t have that attitude. In “my” Virginia, we welcome people who contribute to the state and society by owning a home, raising a family in Prince William County and providing jobs to Virginians. “My” Virginia encourages people to move to the state from around the country or around the world in hopes of helping to build the state’s economy. In “my” Virginia, if someone lives here and is helping to make Virginia a better place, they are a Virginian. I don’t have some arbitrary list of traditions that you must treat as sacrosanct to be considered a Virginian. And to be quite frank, I find it offensive that despite living here for more than 20 years, I’m not considered a Virginian by some. How about if I can find an ancestor of mine that once lived in Virginia? Would “One Drop” (another fine Virginia tradition) be enough?
As for where the profits from ABC stores go, it’s in the annual report you linked to. About half go to state mental health programs targets to alcoholics. The rest goes into the general fund.
FA, there is a difference in living in Virginia and being a generational Virginian. I thought Lafayette cleared up the native Virginian statement. She handled well and once should be enough.
You know I was speaking from an historical perspective. People are welcome to move to my Virginia. One of my parents did that. However, he didn’t come here thinking he knew better than the natives. He didn’t attempt to change time honored traditions when there was nothing wrong with the old ones.
Where is the study that shows how much this privatization is going to save us? Show me the money. Let’s compare side by side. I believe this gesture by the Governor is to appease his conservative base. I haven’t decided if it is predicated on the state not being in the business of selling booze or if it is about ‘free markets.’
Virginia’s Rest Areas will be up next for privatization. Another idea I’m not in favor of as native Virginian.
@Moon-howler
I am not anti-pension at all. Wish I had one, in fact. I think it’s weird, though, that liquor store employees are state employees. But maybe it is a better investment to keep the state in charge than sell it. I don’t know.
@Lafayette
Why don’t you like that idea? I bet the stores will be better if the stops are privatized.
@Mom
Hee hee. Not politically correct, but funny anyway.
FA, actually you are pretty good at digging up our dirty little secrets. Do you think Virginia was unique in regards to all the negatives you listed?
Some of those general funds have been allocated. That is my question. George can probably ferret out the info, I believe some is earmarked for education.
Pinko, trying to figure out why you think it is weird that a state owned store would have state employees.
IHOP = International House of Pancakes.
I just buy my liquor at the duty free stores at the local bases or when I’m visiting MD. Much cheaper.
I think they should be privatized due to the principle of the thing. Why is the state involved in selling drugs?
@Moon-howler
I believe so.
I think FA made a lot of good points that I can’t really top. The people mostly screaming about the sale are those that obviously stand to lose money on the deal – recipients within the general fund and mental health. When the business becomes privatized the state will only be able to collect on the tax and not the tax+ profit that they’ve been able to do now. So, while the annual income from liquor sales may not be 100M taxes collected will still provide some money to the state and with expanded coverage (gasoline stores selling MD 40 40 and a bottle of Hennesey or my fav Captain Morgans) the taxable portion of revenues will go up.
You’ll also have stores that expand or new stores that develop creating a small engine of economic motion, if you will.
As long as the state doens’t have to raise my taxes to move to a private liquor model – I’m ok with the move.
I just hope that a future privatized ABC will still maintain the ability to ask for drink recipes printed by the register. That is wicked cool. 🙂
@Poor Richard
The question was What’s at IHOP, not what’s IHOP. I don’t think anyone needed your clarifacation as to what the acronym was.
Was wrong about where the profit goes–here is what it says in the annual report.
“Prior to the statutory distribution of quarterly net profits to the General Fund, transfers required in the Appropriation Act for each fiscal year must be executed. In Fiscal Year 2009, approximately $67.6 million of the agency’s $111.8 million in net profits were transferred to other state agencies. The majority, $65.4 million, transfers to the Department of Mental Health, Mental Retardation and Substance Abuse Services incurred for care, treatment, study and rehabilitation of alcoholics. The remaining $46.4 million was distributed to the General Fund in accordance with the Code of Virginia.”
Thanks, you forced me to read the annual report and it seems to bolster my earlier position. Consider that at least 30+ million of the revenue that makes up the 111+ million profit will be unaffected by the demise of the ABC stores (share of wine liter tax, lottery sales, etc.). Of the 81+ million, remaining, 58+ million is eaten up by existing liablities, debt to the state (love how that isn’t figured into the net profit), etc., etc. leaving you with a paltry 23 million in profit that would probably be recovered in licensing fees, corporate taxes, etc. from simpply replacing the ABC stores with 332 private enterprises, likely more because 332 stores aren’t nearly enough to satisfy the Commonwealth’s desires. One of my problems with the state stores has always been that there are too few of them spread too far apart in too many crappy locations and their hours suck.
@Moon-howler
I guess I never thought about liquor store employees as being state employees. It’s would be like having a state-run 7-11. It just strikes me as bizarre.
@cargosquid
“Why is the state selling drugs?”
I know. It’s weird!
Does the state sell cigarettes?
What other personal use commodity from anti-perspriants to anti-biotics does the Government have a statutory monoply on to sell directly to the consumer. I cannot think of one. Pinko – its not just weird — its wrong!
I actually think the state has every right to be the fox in charge of the booze hen house. I have heard people moan and groan over the years over the hours of operation and the fact that for years you had to go to a counter to ask for your purchases. This made the little old ladies who wanted to sneak that pint in their purse uncomfortable. However, in more recent times, shoppers can go pick up their own purchases.
I see no advantage to privatizing at all. I don’t want Virginia to look like Maryland, with a liquor store on every corner.
To all the questions about what the state sells and doesn’t sell–there have been no other substances that have been prohibited, and then reinstated by Constitutional Amendment. That puts booze in a class of its very own.
And while we are at it, booze is very much an addictive drug. The state should be its keeper.
And if we approve medical marijuana, who gets to be the gate keeper there? Larry’s Tatoo shop?
Stick to those talking points Moon, the public employee unions are with ya.
Privitization of the ABC will or will not get rid of ABC officers? Or, will they simply change there name to Revenuer’s and chase those Duke boys around the county?
While I’m not fond of the idea of Liquor stores on every corner… A business is a business. We can’t seem to attract many in PWC so might as well bring on the Liquor stores.