Thursday, September 9, 2010

McDonnell Announces ABC Privatization Plan

Senior members of Governor Bob McDonnell's staff today unveiled the official staff recommendation for ABC privatization in the Commonwealth at a meeting of the Simplification and Operations Committee of the Governor's Commission on Government Reform and Restructuring in Richmond. The Committee heard the recommendation today, and will vote at a meeting later this month to send the proposal to the full Reform Commission.
Here are the main points:
• Privatization is expected to provide $500 million in new funding for transportation
• The money realized from privatization will be placed in a Virginia Transportation Infrastructure Bank
• This Bank will loan and grant funds to localities for transportation projects based on congestion relief and economic development
• 1,000 retail licenses will be auctioned off to the highest bidders
• The licenses will be broken into three categories: 600 licenses for large establishments such as grocery stores; 150 for smaller establishments such as package stores and wine and beer shops; 250 for convenience stores/retail pharmacies
• No one company will be allowed more than 25% of licenses within each level
• 1,000 licenses will still give Virginia 1.8 outlets per 10,000 adults, far below the private state average of 3.8 per 10,000 adults
• Majority of new license holders will be existing stores; Virginians will primarily see new shelves in retail establishments, not new establishments.
• 332 licenses will be guaranteed for areas currently served by an existing ABC outlet
• The additional 668 licenses will be granted based on population density
• The wholesale side will also be privatized, allowing the Commonwealth to completely focus on law enforcement and regulation of distilled spirits
• The FY 2011 budget projects $324.2 million to the General Fund from the sale of alcohol in the Commonwealth
• The staff privatization proposal keeps ongoing revenue to the state equivalent to this figure
• There is no tax increase in the privatization proposal
• The Commonwealth will also make an additional $33 million on the sale of the ABC warehouse in Richmond and 19 state owned outlets
• The number of ABC enforcement agents will be increased by 25%
• The Commonwealth, through the ABC board, will maintain health, safety, law enforcement and marketing regulatory authority over private distilled spirit sales and distribution
Governor McDonnell said of his plan,
"This is an opportunity to put half a billion dollars into transportation simply by eliminating an outdated government monopoly. $500 million for roads and rail will mean congestion relief for our citizens. By privatizing ABC, Virginia will join the majority of states in the nation that have long recognized alcohol distribution is not a core function of government. Transportation, on the other hand, is a core function and this plan will deliver immediate results for Virginians frustrated by long commutes and stalled construction sites. ABC privatization is one part of the overall solution to our transportation challenges. I look forward to working with Republicans and Democrats to privatize ABC, make government more efficient and improve our transportation system."

I hope McDonnell is successful in this effort.


Evan said...

This is a TERRIBLE plan. While I'm no fan of gov't keeping its silly monopoly on liquor sales, these are going business concerns and should be priced as such. We currently make nearly several hundred million per year on ABC sales and taxes.

The general rule of thumb is that you sell businesses for 5-7 years worth of operating profits; we shouldn't sell our ABC stores for less than 1.2 billion.

Virginia Gentleman said...

Hey Evan,
Thanks for the comment. You may be right about some of the numbers, but in principle I don't believe the state government should be in the business of selling liquor. I appreciate your comment and checking my site.

J. Tyler Ballance said...

"1,000 retail licenses will be auctioned off to the highest bidders"

What happened to the Republicans who were supposed to be the champion for small business?

This should be structured to create thousands of new, independently owned, small businesses. Only an individual proprietor should get a license, none for corporations, and certainly none for McDonnell's fat-cat multinational backers.

Each license should be awarded by lottery so that the winners would be permitted to hold a license to operate a single store, as a sole proprietorship, and that owner could not own any other stores. If five thousand licenses were awarded, each of those stores would generate about five, wage-grade jobs.

The stores alone would create 25,000 new jobs. Not included would be the additional route salesmen and related vendor jobs that would be created, along with the increase in construction/renovation that a lottery-award licensing program would provide.

INSTEAD: McD plans to had over the lion's share to whoever can fork over the big bucks in each of the three categories. Who is McDonnell going to bat for? NOT YOU, Virginia! McDonnell is paving the way for the corporate multinationals to get even fatter.