Sen. Mark R. Warner said Wednesday that Gov. Bob McDonnell's claim that selling state-run liquor stores could bring in $500 million in profits is a "wild optimistic" estimate.
Warner, a Democrat and former Virginia governor, studied privatizing liquor stores when he was in the executive mansion in Richmond and actually backed the idea. But he said that McDonnell's administration is inflating the price tag for the state's 332 stores, which has the potential to hamper debate and get folks expecting a windfall for state transportation projects that might never materialize.
"If we were starting from scratch, most of us would agree that the state shouldn't be in the liquor business," Warner said at the tail end of a conference call touting Wall Street Reform. But "how are you going to replace that revenue stream?"
Warner said the philosophical debate is not the problem, it's the fiscal side where everything gets tricky. According to the most recent financial data from the Virginia Department of Alcoholic Beverage Control the 332-state run stores brought in $665.6 million in fiscal year 2009. That translated into $332 million in taxes and profit.
Boil that down even further and the state sits on $112 million in pure profit from liquor sales. (Click on that link and you can look through the state books on ABC stores - there's some pretty interesting data about the top sellers in the state - and which are on the way up and others that are on the way down.)
"That's a very valuable revenue stream," Warner said noting that funding is crucial to Virginia especially because the state's $220 million surplus was aided by more than $1 billion in federal stimulus money over the past 18-months.
Warner noted that when Ohio privatized liquor stores the state - which has a population of about 11.5 million got about $200 million upfront. By comparison, Virginia's population sits at 7.8 million according to the U.S Census Bureau.
"Most of the revenue numbers that the governor's commission has bandied about have been wildly optimistic," Warner said.
UPDATE: Couldn't get good numbers and data from Ohio tonight - they're working on it. But I found this snippet in Lexis Nexis research story from the Blue Ridge Business Journal.
It speaks to the idea that Ohio didn't go through a full privatization - but it also shows that Ohio's ABC stores still aren't making the kind of profit and tax windfall that Virginia's pull down now.
"Ohio and West Virginia went for a form of privatization in the early to mid-1990s. Matt Mullins, a spokesman for the Ohio Division of Liquor Control, said the conversion "absolutely" helped save money for the state. There, the state pays licensed retailers a commission for selling state liquor: 4 percent for wholesale and 6 percent for retail. Mullins said the change saved the state $21.4 million in 1997, when the conversion of stores was complete, reflecting the elimination of costs associated with thousands of state employees, rent and other overhead costs. Fiscal 2009 profits hit record levels at $729.9 million with roughly 442 stores in operation across the state. Of that total revenue, $163 million was transferred to state coffers. Mullins added that Ohio could probably handle double the amount of stores currently operating but that the change didn't generate "a liquor store on every corner, which I think was one of the fears."
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