Is urgency to privatize ABC stores necessary?

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He took his idea to the people with an eight-city “Exit the Liquor Business” tour. His team unveiled a formal plan, chock-full of financial projections and answers to concerns.

McDonnell’s privatization plan calls for the state to auction 1,000 retail liquor licenses to the highest bidding stores.

Yet even with all that bustle, Governor Bob McDonnell’s push to privatize liquor sales still faces bipartisan scrutiny—and it’s not because the proposal’s premise is outlandish. Philosophically, it’s hard to argue that selling liquor should be a function of government.

However, when eyed through a financial or social lens, the governor’s plan begins to lose its luster. State lawmakers might find the plan more credible with recent endorsements from Liberty University President Jerry Falwell Jr., the Virginia Fraternal Order of Police and the Virginia Wineries Association. But when the stumping ends and the squawking over conflicting studies is pushed aside, one truth remains: The governor and his policy team must convince lawmakers to abandon one of the state’s most profitable assets for an untested private model.

“People don’t like more uncertainty,” says Delegate David Toscano.

McDonnell’s detailed proposal, released September 8, attempts to eliminate that uncertainty. According to projections from the governor’s policy team, privatizing liquor sales would generate $229 million annually, and it would create $458 million in a one-time windfall that would be devoted to sorely underfunded state transportation projects.  

To generate that $229 million revenue stream, the proposal stipulates fees for wholesalers: a $17.50-per-gallon excise tax and a 1 percent tax on gross receipts. It also contains a 2.5 percent “convenience fee” on restaurants and bars that buy liquor directly from wholesalers instead of retailers. Whether those fees would trickle down to Average Joe Mojito Fan remains to be seen.

To boot, the state would auction 1,000 retail liquor licenses to the highest bidding stores, and the licenses would be divided into three unequal categories based on size and location: 600 to major retailers, such as Kroger and Wal-Mart; 250 to pharmacies and convenience stores; and 150 to mom-and-pop package stores. The state would set minimum bids based on the three categories, and winning bidders would hold licenses in perpetuity.

A weak spot within McDonnell’s privatization pitch has been addressing social implications. Critics have asked: Wouldn’t upping the state liquor store tally from 332 to 1,000 increase alcohol consumption, burden local law enforcement and open a Pandora’s box of social ills, such as increased underage access? 

The Virginia Interfaith Center is circulating a petition urging Virginians not to “trade your values for a few pieces of silver.”  According to the petition, privatization “will give our state a short-term financial high with a big long-term hangover.”

But the son of an iconic Christian leader doesn’t think so.

“Virginia’s private sector, its families, churches and businesses will be better served and protected by eliminating government-sanctioned monopolies,” Falwell Jr. said recently in support of the plan.

The proposal also drew backing from the state’s 8,000-member Fraternal Order of Police, which chose to focus on the projected $458 million that the plan would create for transportation projects, rather than on the potential social ills that would affect policing.

“The problem for the governor is that as more people examine the proposal in greater detail, they are becoming increasingly concerned about it,” said Toscano, who told C-VILLE he would not support privatization if the vote were today. “Originally, the thought was that the problem in getting this passed would be in the Senate, which is controlled by Democrats. But it now appears that a number of conservative members of his own party in the House also have concerns, and it is not clear how many votes he has in the House for the proposal.”

For a lawmaker such as Toscano, however, seeking a factual foundation from which to root a stance on the issue, conflicting studies are adding to the uncertainty. McDonnell & Co. cite a study from the Virginia Institute for Public Policy that shows little difference between rates of teen drinking, binge drinking and alcohol-related deaths among states that manage liquor sales versus states that have a privatized system.  

However, a recently released report from the VCU Institute for Drug and Alcohol Studies found that alcohol consumption does indeed increase with wider availability and marketing, as do rates of alcohol-related accidents and chronic disease.

Despite the lingering question marks, McDonnell and his team seem set on resolving the issue before the ball drops on 2011.

They have dismissed the idea of holding a voter referendum to give Virginians the final say. McDonnell’s 59 percent slice of the gubernatorial vote last year was privatization’s referendum, the governor’s point man on privatization, Eric Finkbeiner, said recently at a forum in Richmond.

The administration aims to call a special session of the General Assembly in November to send privatization to a vote. According to Toscano, the governor “would really like to convene a special session to pass this prior to January so he can move into the next General Assembly session with some momentum.”

According to a level-headed Roanoke Times editorial: “The Commonwealth has gotten along with a publicly controlled monopoly in liquor sales for 75 years. If it takes a year or two to undo it properly, so be it.”

 

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