Privatizing liquor in Alexandria: healthy buzz or expensive hangover?

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Privatizing liquor in Alexandria: healthy buzz or expensive hangover?
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Alexandria restaurant owners are closely eyeing the blend of new fees and deregulation Gov. Bob McDonnell is mixing up in his plan to privatize liquor sales.

After two decades in the restaurant industry, Rick Boyd is wary of doing his business with private storeowners rather than the state. General manager at King Street Blues for the past 10 years, Boyd is comfortable dealing with the Virginia Department of Alcoholic Beverage Control.

The way its set up now and the way its state run: when they do have a price increase they tell you beforehand and you can plan accordingly and order extra before that price takes effect, he said. Thats normal almost across the board, but at a supermarket you dont know what chicken is going to cost from week to week. 

McDonnell revealed his proposal to end the states 76-year monopoly on spirits Wednesday. Privatization is projected to raise $500 million for transportation improvements, according to his plan. 

The state-owned stores bring in about $230 million annually. While supporters tout the plan as tax-free, wholesalers will pay a $17.50 per gallon tax on spirits, according to the plan. And restaurateurs opting for on-site purchases the current law requires a trip to the distributor would incur a 2.5 percent convenience fee. The new taxes will offset the anticipated loss of revenue as the Commonwealth exits the liquor business, according to officials.

At least one of Alexandrias state representatives, Del. Charniele Herring (D-46), says the current plan is untenable. Though she believes its doable in the long term, Herring worries about a void in the general fund from the switchover.

The numbers arent there, Herring said. I dont think [the governor] will even get Republican support for that. 

Its too soon to say whether that will mean higher prices at the bar for Shana McKillop, managing partner of King Streets La Tasca restaurant. 

The only thing that worries me about a privatized system is the cost that will be handed over to the consumer maybe will deter consumers from drinking in Virginia, she said. Im just going to watch whats going on and decide what is going to be better for our customers.

While McDonnells office wouldnt predict how much spirits will cost if and when privatization takes effect, spokesperson Stacey Johnson said the difference in the new excise tax and the states markup as much as 79 percent will be negligible. Competition also will drive prices down, she said.

Right now the Commonwealth is losing about 20 percent [of liquor sales] to Maryland and D.C., because its more convenient and easier there one stop shopping and when we have that same system here in Virginia, more Virginians will buy liquor in Virginia, Johnson said. [Prices] will be up to whomever is selling the liquor, but if theyre competing with someone down the street then it will be a free market type of competition.

The state has 322 ABC stores spread throughout the Commonwealth, nine in the immediate Alexandria area. Under the governors plan, the number of liquor outlets will grow. The state will auction off 1,000 new licenses, though many of those will be sold to existing stores, like supermarkets and beer and wine shops, officials said.

McKillop likes the idea of wholesalers delivering directly to her restaurant. She pays a courier about $280 a month to buy her supply. Despite the convenience fee, it may be a winning proposition, she said. 

Back at King Street Blues, Boyd worries deregulation could lead to shady business practices. State officials monitor alcohol sales to make sure local bars and restaurants arent topping off expensive alcohols with lower grade liquors. 

Weve gotten so accustomed to what the ABC board expects, Boyd said. It might tempt some places to find that competitive edge thats a possibility, but that would be crazy.

The plan now goes before the governors Commission on Government Reform and Restructuring. If approved there, privatization would still need a sign-off from the General Assembly next year.
     

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