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.

11 Comments

  1. […] The number of stores will likely increase under privatization, although the cautious McDonnell has promised “a limit placed on the number of authorized retail outlets to reflect community […]

  2. Running some quick numbers a value for VABC could be anywhere from $1.6 to 2.3 billion depending on investor expectations. But let’s not be so quick to get greedy; a potential proliferation of liquor stores could bring the decline of neighborhoods we have worked so hard to build up! If you go to certain neighborhoods in DC you’ll see a liquor store every other block! No one can say with certainty whether or not this will lead to the proliferation of liquor stores because all it takes is a new governor for laws to change!

  3. If anyone is interested, Va ABC already generates over 500 million dollars a year profit. We are required to check ID’s to ensure age requirements, refuse customers if necessary and deal with the general public in a courteous and respectful manner. Why would ANYONE try to “fix it , if it ain’t broke”. Leave us alone !! We provide excellent service to our customers and community with set hours and control of sales . If you want to save monies for the state, start at the top of Va Abc and clean that bunch of coffee drinking, donut eating bums out . The non classified worker of Va ABC are the backbone of the states income anyway. Management does the desk work and your P14’s ( 40 hours a week with no benefits) do the hard, physical work in the stores. WAKE UP AND GIVE THESE WORKERS SOMETHING EXCEPT WALKING PAPERS !!!! We give you our all… you give us NOTHING !!! Bob McDonald, I voted for you, I trust you to do the right thing, stand by me and protect my job, such as it is. Waiting, G, Newcomb

  4. And I continue to wait ……

  5. what about the 2700 abc board employees ? smaller government means less workers.

  6. P14’s 40 hrs a weeks no benefits work holidays except Christmas, New Year and Thanksgiving. This alone should have save the state money
    Privatizing could lead to getting someone who cares about there employees and would offer benefits to part time empolyees.

  7. Yeah… right… I got 44 acres of land for sale too.. You got the money to buy it ??? Privitizing ABC will bring you more drunks on the road, more deaths by alcohol,prostitution and gambling problems. ABC is the only state owned organization to turn a profit….Who can afford to bid on a store, pay extreme yearly fees to have it, let ABC tell you how to sell it,pay a 25% index fee for the product, pay your taxes on it and make a profit to feed your family??? Where are our leaders with ANY common sense??? IS WALMART PUSHING THIS ????

  8. As a person who has been working in the food and wine industry for over a decade now I think that privatizing is long overdue. Virginia is a hospitality and tourist market State and the way our ABC system is currently set up restricts a professional approach to marketing alcohol. In the wine business we focus on educating our clients to purchase better quality which results in a natural moderation of consumption. You go into any ABC store in Virginia and the shelves are stocked with the cheapest and biggest brands focused on a heavy consumption clientele. Having a private, professional approach to alcohol is a move in the right direction. Virginia is quickly growing as a culinary cultural center with strong movements in small Farms, private restaurants, wineries and now Cider houses and distilleries. As a person who is proud of the distilled and fermented beverage history in Virginia and who views alcohol as a prominent cultural attribute the world over I am tired of being relegated to a Government approach to salesmanship and representation. I applaud Mr McDonnell in this initiative. I think it is an error when any cultural entity is Government run. I understand that this move will shake things up for those currently working for the ABC but as a strong supporter of small business I do not believe any hard working individual out there has anything to worry about as small business owners are always desperate for good employees.

  9. lets also consider that a majority of the money from ABC currently goes to mental health and substance abuse programs. McDonnell would be comfortable cutting all that funding to “fix” the roads? If we are gonna have more drunks out there we should at least have programs to help

  10. This is the worst piece of legislation ever. Plus name the other states who actualy recognized this so call windfall. No to privatization !

  11. All of VA ABC’s expenses: salaries, leases, overhead, etc are all paid out of what VA ABC makes in sales. So that point is moot.

    And if you think VA ABC stores cater to low quality high quantity stuff, you are sadly mistaken. If liquor is privatized here you will have nowhere near the same selection because it will be 100% profit driven. I’ve seen it in other states with my own eyes.

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