Wednesday, September 08, 2010
McDonnell unveils plan to sell state liquor stores
RICHMOND – Gov. Bob McDonnell’s plan to privatize liquor sales in Virginia would triple the number of establishments where distilled spirits can be purchased in the state and produce nearly the same amount of tax revenue that the state-run monopoly now generates, administration officials said today.
The still-evolving proposal would generate about $500 million in one-time revenue from the auctioning of licenses, according to administration estimates released today at a meeting involving members of McDonnell’s government reform commission. Those proceeds will go to a “transportation infrastructure bank” to help finance transportation projects, with an emphasis on congestion relief and economic development, the administration said.
The plan also would produce ongoing general fund revenue nearly equivalent to the $324.2 million the state expects to generate this year in taxes and profits at its state-run liquor stores, the administration said. If McDonnell is to win legislative support for his proposal, he likely will have to convince lawmakers that privatizing liquor sales can produce at least as much ongoing revenue as the state-controlled system.
Under the privatization plan, excise taxes and markups charged at state stores no longer would be collected. To replace that revenue, the state would levy an excise tax of $17.50 per gallon that would be applied at the wholesale level. The state also would impose a 2.5 percent “convenience fee” on licensed restaurants and bars that have liquor delivered to their sites. McDonnell’s administration contends the proposal is not a tax increase, noting that those businesses will benefit from wholesale prices and delivery.
Under McDonnell’s plan, the state would auction 1,000 licenses, with 600 going to large retailers, 150 to package stores and 250 to convenience stores. No single company will be allowed to hold more than 25 percent of the licenses at any one level. Virginia now has 332 state-run liquor stores.
The state will set minimum bids for licenses, with the amounts varying based on the population of each locality. Minimum bids for licenses in rural areas would be set lower than those in highly populated areas.
Some critics of the McDonnell’s privatization push have raised concerns about a proliferation of liquor stores, but McDonnell’s administration contends that most of the license-holders would be existing retail stores. The state would guarantee 332 licenses to areas now served by a state liquor store. The remainder would be allocated based on population density.
Administration officials noted that beer and wine is sold at 6,657 outlets statewide and said the privatization plan likely would lead to a net reduction in the number of outlets selling alcohol.
The still-evolving proposal would generate about $500 million in one-time revenue from the auctioning of licenses, according to administration estimates released today at a meeting involving members of McDonnell’s government reform commission. Those proceeds will go to a “transportation infrastructure bank” to help finance transportation projects, with an emphasis on congestion relief and economic development, the administration said.
The plan also would produce ongoing general fund revenue nearly equivalent to the $324.2 million the state expects to generate this year in taxes and profits at its state-run liquor stores, the administration said. If McDonnell is to win legislative support for his proposal, he likely will have to convince lawmakers that privatizing liquor sales can produce at least as much ongoing revenue as the state-controlled system.
Under the privatization plan, excise taxes and markups charged at state stores no longer would be collected. To replace that revenue, the state would levy an excise tax of $17.50 per gallon that would be applied at the wholesale level. The state also would impose a 2.5 percent “convenience fee” on licensed restaurants and bars that have liquor delivered to their sites. McDonnell’s administration contends the proposal is not a tax increase, noting that those businesses will benefit from wholesale prices and delivery.
Under McDonnell’s plan, the state would auction 1,000 licenses, with 600 going to large retailers, 150 to package stores and 250 to convenience stores. No single company will be allowed to hold more than 25 percent of the licenses at any one level. Virginia now has 332 state-run liquor stores.
The state will set minimum bids for licenses, with the amounts varying based on the population of each locality. Minimum bids for licenses in rural areas would be set lower than those in highly populated areas.
Some critics of the McDonnell’s privatization push have raised concerns about a proliferation of liquor stores, but McDonnell’s administration contends that most of the license-holders would be existing retail stores. The state would guarantee 332 licenses to areas now served by a state liquor store. The remainder would be allocated based on population density.
Administration officials noted that beer and wine is sold at 6,657 outlets statewide and said the privatization plan likely would lead to a net reduction in the number of outlets selling alcohol.
