Here is the full text of McDonnell’s statement on privatization of liquor sales in Virginia that was included as a central element in his transportation plan.
Privatization of Alcoholic Beverage Control
As Governor, Bob McDonnell will evaluate other government assets that can be leveraged for additional revenue for the Commonwealth’s transportation needs. Privatizing the commercial operations of the Virginia Department of Alcohol Beverage Control is one such asset that can be used to help fund transportation infrastructure. Virginia ABC operates over 300 retail liquor stores throughout the Commonwealth, and is one of only 18 states that does not permit the private retail sale of alcoholic beverages within its borders. Beer and wine are already sold by private entities and the sale of other alcoholic beverages is also best handled by the free enterprise system.
Governor Mark Warner’s Commission on Efficiency and Effectiveness, chaired by former Governor L. Douglas Wilder, recommended to “acquire sound business assessments of the real value of a privatized ABC retail operation and develop an RFP process to realize this value and authorize legislation” The report went on to say that “privatization should be structured so as to provide at least as equal a revenue stream to the localities and to the state activities that are presently supported by ABC earned income.”
Bob McDonnell will propose legislation to privatize ABC operation and use revenue generated for transportation, with most of the money going to maintenance.
There are myriad ways to structure the deal and Bob McDonnell will have a team of experts work on specific proposals and estimates leading up to the 2010 General Assembly session. The focus of these efforts will be to ensure the highest cash to Virginia in the short term and no loss of revenue in the long run, and in fact, the overall generation of higher revenue in future years. The recent experiences of Iowa, West Virginia and Alberta, Canada show that privatization has generated significant immediate funds to these governments while increasing annual revenue.
Taxes on wine, beer, and spirits will continue to flow with privatization. Annual taxes are estimated to generate $179 million. There will be new revenue generated via the privatization of new/existing retail stores estimated to be $500 million or more.
Further, private establishments will also pay income and property taxes, representing new state and local revenue streams, which are not available under the current government monopoly system.
There are tens of millions of current liquor system dollars that would not be spent on state overhead, salaries, space, employee benefits, etc. (current state operating cost is $115 million).
Proponents of privatization also assert that a license system will be more profitable for the private venders thereby resulting in a broader tax base and a general increase in tax revenue for Virginia.
The Wilder Commission estimated that proposals to streamline and eliminate state agencies, including the privatization of ABC, could total more than $500 million. Looking at other states’ experience in privatizing the distribution and retail aspect of alcohol sales and ABC’s annual profits, we estimate that Virginia could receive at least $500 million in the near term. A study conducted by the Reason Foundation for divesting Pennsylvania’s Liquor Control Board found that privatizing could result in approximately $1.7 billion dollars from the initial divestiture proceeds.
Delegate Allen Louderback in 2005 and Senator Mark Obenshain in 2009 proposed different options of how such privatization could be structured. Bob McDonnell will utilize their expertise and research on this extensive issue, as well as national experts on privatization to propose legislation.
It should also be noted that there are numerous studies to show that privatization can be accomplished without increasing alcohol-related problems, including consumption, drinking and driving incidents, and underage drinking.
This legislation will also provide protections for current state workers in ABC stores, enhanced enforcement authority to ensure the laws of Virginia are upheld, and the promotion of programs that reduce underage drinking, alcohol related highway accidents and abuse. There will also be a limit placed on the number of authorized retail outlets to reflect community concern. As a legislator and attorney general, Bob McDonnell has been a consistent supporter of Virginia’s three-tier system for wine and beer distribution and sales. The privatization of ABC would be accomplished in a manner consistent with this time-honored system.