Virginia Gov. Bob McDonnell plans to triple the number of stores selling liquor under his long-awaited plan to privatize the state’s liquor stores to raise money for transportation projects.
The plan, announced Wednesday, involves auctioning 1,000 retail licenses to the highest bidders — including 600 licenses for large, big-box stores, 150 for smaller, package or beer and wine stores, and 250 for convenience stores or pharmacies.
Virginia currently has 332 stores that sell hard liquor.
McDonnell would use the auctions and sales of licenses, as well as fees and taxes, to provide an estimated one-time windfall of at least $458 million and to keep nearly all of the current revenue from alcohol sales.
Wholesale licenses would be sold at 2.5 times the gross profit of the brand of liquor being distributed.
“This is an opportunity to put half a billion dollars into transportation simply by eliminating an outdated government monopoly,” McDonnell said. “ABC privatization is one part of the overall solution to our transportation challenges.”
The state would rake in a one-time windfall of at least $458 million by auctioning the retail licenses, selling the wholesale licenses, and selling the Alcoholic Beverage Control warehouse and 19 state-owned store buildings, according to staff estimates.
After the ABC stores privatize, the state would lose about $226 million annually from a markup tax the ABC places on distilled spirits and a 20 percent excise tax on the sales price.
To make up the lost revenue, the state would impose an excise tax on distilled spirits at a rate of $17.50 per gallon, and an optional 2.5 percent “convenience fee” on retailers if they choose to receive wholesale discounts and delivery. The state also would assess an annual wholesale license charge of 1 percent of gross receipts of distilled spirits.
There also would be an annual wholesale license charge of 1 percent of gross receipts on hard liquor, with the revenue going toward enforcement and regulation.
The state’s current taxes on alcohol — a $7.95-a-barrel excise tax on beer, a 40 cents-per-liter tax on wine, and the 5 percent retail sales tax — would not change.
Secretary of Finance Ric Brown said 94 percent of the revenue that currently goes into the general fund from liquor sales would be maintained through the proposal.
Still, McDonnell will have to convince lawmakers in both parties that the plan is fiscally sound.
State Sen. Mary Margaret Whipple, D-Arlington, said Wednesday that she has not heard from a single constituent who supports the plan, and that she was bothered by “just the whole notion that we should drink more so we can drive more.”
In response, Eric Finkbeiner, McDonnell’s senior policy adviser, said McDonnell administration officials assume Virginians will be drinking about the same amount — they’ll just be buying their spirits in Virginia rather than in the District or Maryland.
