Ken Plum: ABC for sale

In thinking about what makes Virginia special from her neighboring states, I would include on my list the fact that corner liquor stores with their barred windows and neon signs do not exist in Virginia. But that picture may change soon if the McDonnell administration has its way. As a candidate for that office, Gov. McDonnell included on his list of ways to raise money for transportation a plan to sell the Alcoholic Beverage Control operation. At least two other governors, Wilder and Warner, considered but rejected proposals to sell the ABC stores because of the economics involved.

Virginia is one of 18 states that continues to maintain state control of hard liquor sales growing out of the experiences of the aftermath of prohibition. Of the 332 state-run stores, fewer than ten percent are in buildings owned by the state. The remainder is in leased facilities that according the ABC 2009 annual report represent lease commitments through 2015 of $51,442,167 that would somehow need to be satisfied. But the real money is in the revenue that the system generates that goes directly to the state. For the last five years the ABC system has contributed more than $1.5 billion to the Commonwealth in the form of taxes and profit.

Under the proposal being floated as a trial balloon by the administration, the state would get out of the liquor business by closing its stores and auctioning off as many as 800 licenses to sell liquor. The state would continue to collect taxes on the liquor sold in these private establishments, but the state would lose the $112 million a year in profits it now realizes. If the license sales could generate as much as $500 million that the governor’s office guesses would be the case, the state would in less than five years be losing a valuable stream of revenue that funds programs in mental health, alcoholism treatment, and education. The plan to pick up these costs under the new scheme has not been made known.

A constituent wrote to me recently with his concerns about the bad deal the sale of the liquor stores would be for the people of Virginia. “If one wanted to receive an income of $112 million (amount of annual profit state receives) from an investment that yielded 3 percent a year, one would have to invest $3.7 billion. An annual income of $112 million equates to a 30-year income of $3.4 billion…These amounts, something in the neighborhood of $3 billion, are much more reasonable estimates of what the state should expect from the sale of liquor business. If no one were to pay such a sum up front the state would be better off holding on to the liquor business.”

Astonishingly, the governor’s staff is talking about giving away the business for $500 to $800 million. That’s a bad deal for taxpayers. The General Assembly may need to proclaim, “NO SALE.”
 
 

Ken Plum is a member of the Virginia House of Delegates.

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