Last week, Governor McDonnell proposed to privatize Virginia’s Alcohol, Beverage Control (ABC) stores and is expected to call a special session of the state legislature on this issue. Senator Puller and I are hosting a town meeting on Monday, Sept. 27, 7-8:30 p.m. to hear constituents’ views and suggestions. Here is some preliminary information to think about before the meeting.Governor McDonnell has unveiled his proposal to privatize the state's ABC stores. The Governor's Plan can be found on his Government Reform Commission Website here:
Every drop of hard liquor sold in Virginia, including liquor sold at restaurants, must be sold through a Virginia (ABC) store. ABC stores currently generate about $324 million in taxes and profits for taxpayers, funds that go into the state treasury for providing state services.
Four of Virginia’s 332 ABC stores are in or near my district: Penn Daw, Belleview, Engleside and Hybla Valley. The Governor proposes to close the current 332 stores and create 1,000 new distribution points by auctioning licenses to 600 big box and grocery stores, 150 small liquor stores and 250 convenience or retail stores.
I have several questions for which I am seeking answers. I’m sure you do too.
First, the plan will generate recurring revenues primarily with new taxes – a $17.50 per gallon of alcohol and a 2.5% "convenience fee" for on-premises sales including beer and wine. Beer and wine will cost more due to the tax. It is not clear whether a bottle of liquor will cost less after all the fees and taxes. Should people pay new alcohol taxes solely to help large retailers gain new profits, funds that formerly went to taxpayers?
Second, this plan is projected to net taxpayers at least $20 million less per year to pay for schools, mental health and prisons and other services. Is this cut acceptable or what is the Governor’s plan to make up for these lost revenues? We need better data to more thoroughly analyze the Governor’s revenue models, assumptions, and understand the true impact on the state budget and state services.
Third, how will license distribution work? U.S. 1 currently has 14 7-11’s, almost two Walmarts, a Target, perhaps a Costco coming, dozens of grocery stores, and over a dozen drug stores. That’s at least 40 possible new distribution points between Alexandria and Woodlawn. There appears to be no proposed restrictions on the number of licenses that could be concentrated in a specific area of a county. Are more liquor stores or sales on U. S. 1 desirable or an effective way to upgrade and help revitalize the corridor?
Fourth, the Governor says this plan is part of his solution to our transportation problems, but his calculations predict a $450 million one-time payment. The state only owns 19 retail locations and a warehouse to sell, and several, such as U.S. Sen. Mark Warner, caution that those numbers are overly optimistic. The bulk of the projected transportation money would come from license auctions.
If this is one answer to our short-changed transportation system, the Governor should acknowledge that $450 million is only enough to pay for about one-half mile of Metro or to widen U.S. 1 from Woodlawn to around the old Multiplex theater. Is this how we want to fund transportation needs?
Fifth, ABC Stores have contributed $1.5 billion to the state treasury’s general fund in the last five years. Should something generating $114 million of annual profits be sold for $450 million?
Sixth, what are the regulatory and enforcement costs of opening up 1,000 private alcohol sales outlets? Regulating needs for the existing 332 state stores is minimal. The Governor’s projections contemplate some increased enforcement costs, but are they accurate and are taxpayers are better served by increasing regulatory needs and swapping ABC agents for retail employees?
Finally, there’s the issue of priorities. When I talk to voters, most are worried about the economy and jobs, our inadequate transportation network and improving our public schools. I have not had a single constituent complain about the quality, selection, convenience or pricing of alcohol in Virginia. Is this our most pressing issue?
Senator Puller and I are having a town hall meeting on Monday, Sept. 27 from 7-8:30 p.m. at the Mount Vernon Government Center, 2511 Parker’s Lane. We would appreciate your feedback at the meeting or by a call, letter or e-mail. My contact information is on my website at http://www.scottsurovell.org/.
The Governor's presentations and summaries of the plan can be found under the September 8, 2010 commission meeting.