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In what’s been called a “drinking town with a football problem,” the only place in Blacksburg to get anything stronger than a beer is the local ABC store.
But ABC stores may soon become a memory, with Gov. Bob McDonnell planning to get Virginia out of the business by privatizing the sale of liquor.
Virginia’s 76-year-old monopoly on the wholesale and retail of liquor dates back to the days of prohibition. It is one of only 19 states in the nation in which the state government directly controls sale and distribution of liquor.
Essentially, McDonnell’s plan for privatizing would create 1,000 retail liquor licenses the state would auction off to the highest bidding businesses. Liquor would be regulated similarly to how beer and wine are currently regulated.
McDonnell was unable to garner the necessary support to justify calling a special session of the General Assembly this November, and must now wait until January’s regular session to try to get the privatization plan passed.
The main argument against the plan has been ABC revenue — almost $50 million — that the state would lose each year if it privatized, a number that’s especially hard for legislators to swallow in the current economy.
“When he first came forward with the idea during his campaign, it was with the promise that there would be no lost revenue. And right now, it stands at a little bit more than $50 million of lost revenue per year,” said Jim Shuler, state delegate for the 12th District. “The ABC is one of the few agencies that makes a profit, which is huge. If it’s not broke, why sell it?”
Blacksburg’s ABC store on South Main Street grossed more than $1.6 million in profits last year, according to the 2009 ABC annual report — money which went into the state’s general fund.
For consumers, privatization could increase the availability of liquor by increasing the number of outlets where it can be sold.
There are currently 332 ABC stores in the state, so McDonnell’s plan would increase the number of locations that sell liquor about threefold.
Privatization could cause noticeable changes in Blacksburg, where the town’s sole ABC location does booming business despite Blacksburg’s relatively small size.
The store sold the sixth-highest number of gallons in the state last year, according to the ABC’s 2009 annual report, and was topped only by stores in major cities such as Fairfax, Arlington, Richmond and Virginia Beach.
“If it were privatized and opened up to the private business, you’d have a huge amount of interest locally of people that wanted to get into the business,” Shuler said. “You could potentially go from one liquor store in Blacksburg to — how many more? A lot more probably.”
Blacksburg mayor Ron Rordam said the town has already considered ways to control the expansion of liquor outlets.
“There’s always concern with a lot of alcohol consumption, and I think the way to cut down on some problems that could come about is through zoning,” Rordam said. “From a local perspective, that’s the thing we’d be most concerned about. That’s the main thing we really have control over.”
Steve Clarke, director of Virginia Tech’s Campus Alcohol Abuse Prevention Center, said increased accessibility could mean more alcohol-related problems among students.
“Right now we have one store; if this law passes we’ll probably have three,” Clarke said. “We’d definitely see a shift in drinking behavior — we’d see more consumption of liquor among students.”
He estimated about 77 percent of Tech students drink, regardless of age, and that the CAAPC currently sees about 1,000 people per year.
Clarke said he feared some of those new private stores would not be as strict to check IDs, noting that compliance rates in privatized states are lower than in control states.
If ABCs were privatized, Clarke said he would try to work with local liquor stores to make sure what they were selling was appropriate, noting that private liquor stores in other states can sell Jello-shots and even aerolyzed alcohol — items prohibited by the ABC.
Despite the concerns, recent research has suggested a minimal impact in a move to private ownership.
A version of this article appeared in the Dec 8 issue of the Collegiate Times.
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Claire-
Congrats on a well thought out and well-researched article.
After being critical of several other articles the CT has published recently, I think its only right to applaud someone who is still doing things the right way!
Keep it up.
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Wine is actually the hardest drink outside the ABC store, but we can let that one go.
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But really, when was the last time an article in the CT was both relevant and well written?
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So, what is the projected profit from selling the lisences? This article still shows a slant against privitization by assuming a 100% revinue loss, revinue of $50 mill and loss of $50 mill? We may even gain money because there are less operating costs, but I do not know the projected price of the lisences so that is one of the two possibilities. Thanks for writing a fiscally one sided article. I would say socially too, but your last paragraph has one opposing view.
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No, it doesn't. The gross revenue in 2009 was $665 million. The article states in both instances that a $50 million revenue loss would be incurred. However, the question is what happens to the state's profit. Revenue = gross sales. Of course it's going to decline, by more than $50 million I would think. But net profit (revenue - costs) may actually rise since the $322 million needed for the stores to buy their alcohol and the $80 million of store expenses will be replaced by hopefully smaller expenses associated with private licensing administration. The net profit from sales was $153 million. If the state plans to auction off 1000 licenses to the highest bidders, it would still have to sell them at a fairly steep rate compared to some other states to make this much profit, so we'll have to see how it works out.
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hey hey hey....cool your jets
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It does not appear likely that privatization will pass in either the VA House or Senate. They are still skeptical of the windfall and longer term proceeds meeting expectations.
They are also concerned about the potential increase in binge and underage drinking and other social ills.
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The second point is moot. The government shouldn't use it as justification to monopolize alcohol sales. Also note that all these new businesses will be paying taxes and renewing licenses each year. That means that the state will be able to tack on tax revenue in addition to the licensing fees. I'm assuming ABC stores, since they're operated by the government, were not subject to corporate taxes.
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cheap beer will always be the king of the campus
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It's about time! I don't see how any state government thinks it's ok to force a monopoly on a product in a supposedly free-market capitalist society. It's almost as ridiculous to limit the number of licenses (which leads to government corruption and generally shady business, just look at Prince Georges County MD in the news), but at least this is a move in the right direction. Not that it's even relevant at all, but privatizing liquor stores will have no effect on underage or excessive alcohol consumption. Sure, ID enforcement will probably be more lax, but we all have 21-year-old friends anyway. (and yes, congrats to Claire for a newsworthy and high-quality article)
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It's about time! I don't see how any state government thinks it's ok to force a monopoly on a product in a supposedly free-market capitalist society. It's almost as ridiculous to limit the number of licenses (which leads to government corruption and generally shady business, just look at Prince Georges County MD in the news), but at least this is a move in the right direction. Not that it's even relevant at all, but privatizing liquor stores will have no effect on underage or excessive alcohol consumption. Sure, ID enforcement will probably be more lax, but we all have 21-year-old friends anyway. (and yes, congrats to Claire for a newsworthy and high-quality article)
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It's about time! I don't see how any state government thinks it's ok to force a monopoly on a product in a supposedly free-market capitalist society. It's almost as ridiculous to limit the number of licenses (which leads to government corruption and generally shady business, just look at Prince Georges County MD in the news), but at least this is a move in the right direction. Not that it's even relevant at all, but privatizing liquor stores will have no effect on underage or excessive alcohol consumption. Sure, ID enforcement will probably be more lax, but we all have 21-year-old friends anyway. (and yes, congrats to Claire for a newsworthy and high-quality article)
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Good article. I have always thought prices were a bit high.
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“Right now we have one store; if this law passes we’ll probably have three,” Clarke said. “We’d definitely see a shift in drinking behavior — we’d see more consumption of liquor among students.”
I have a lot of respect for Steve Clarke, but how can he make this statement and actually believe it to be true. Where is the evidence that suggests drinking patterns among students will change simply because there is a second or even a third location in town from which to purchase liquor? Obviously these private stores will still be required to id their customers. Will simply having more stores to choose from change our drinking behaviors?
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Bottom Line: Government has no business being a business.
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The state should keep the liquor business. And in the future, when drugs are legal, apply the same business model. More $$$ for the state. It has worked for 75 years, why give it up?
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Because the state holds a monopoly on a legitimate business and it is overcharging residents to fatten the coffers?
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What the heck is "aerolyzed alcohol"? I can't find anything about it online. What is inappropriate about Jell-O shots?
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The point about collusion is also pretty suspect. Unless the state regulates the number of stores that can be present in a particular area, it seems to me that the success of the current ABC stores near Blacksburg would mean that more than a couple of private stores would open to capture that market. If collusion does occur, it will be a result of the government's regulations preventing a truely free market.
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The state should also take the lottery one step father and open up state run casinos. No more budget shortfalls for us when losers buy our highway repairs at a blackjack table.
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Are you serious? I agree with legalizing gambling, but why state-run casinos? Bring in private casinos and let the state rake in tax revenue, like they do with every other business.
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They should be state run because there is a looming 100 billion dollar highway repair expense in the near future. The state needs money fast.
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No. Enough! The state needs money for highways because it was either 1. not bringing in enough revenue to support basic government functions, or 2. bringing in enough revenue, but deciding to use it for other non-essential functions. If it's the latter, which I suspect, then it's their own fault that there isn't enough money and the citizens will suffer by increased taxes. Either way, states monopolizing industries to make money is deplorable.
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State run casinos = bad idea. Let private business handle it and tax them heavily. Private business produces a degree of accountability that does not really exist in government institutions. It's virtually impossible to get rid of someone working for the government, even if they are doing a very poor job. In private business, if you aren't doing your job well, you lose it.
Why waste taxpayer dollars running what will invariably be an inefficient operation, just like most branches of government?
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Where are you getting the $100 billion highway repair number? The state annual budget is around $38 billion. Are we going to pave the streets in gold? The Old Dominion Highway Contractors Association also reports that the number is in the billions per year, not hundreds of billions. http://www.odhca.com/downloads/files/2010LegislativePointPaper.pdf
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It's not this year it's going to be a few years don the road. Large sections of major interstates are going to need to be completely replaced. The reason this is a major problem is because the Federal Government isn't giving the State anywhere near the amount of money it used to. This is really a federal problem that's being passed to the state. That's why we need casinos.
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From the Federal Highway Administration, regarding the cost of the entire interstate system:
"The final estimate of the cost of the Interstate System was issued in 1991. It estimated that the total cost would be $128.9 billion, with a Federal share of $114.3 billion. This estimate covered only the mileage (42,795 miles) built under the Interstate Construction Program. It excluded turnpikes incorporated into the Interstate System within the mileage limitation and the mileage added as a logical addition or connection outside the limitation but financed without Interstate Construction funds.
In all, Federal-aid legislation authorized a total of $119 billion to pay the Federal share of the cost of Interstate construction. (Interstate Construction funds were authorized through Fiscal Year 1996.)"
Even in 2010 dollars, I doubt that the cost of highway repairs/construction in one state would be on the same order of magnitude as 43,000 miles of interstate across the country. Can you cite a source for your figure?
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