Va. Gubernatorial Candidate Robert F. McDonnell Proposes Private Liquor Stores

By James Hohmann
Washington Post Staff Writer
Wednesday, July 22, 2009; B01

Robert F. McDonnell, the Republican candidate for governor of Virginia, proposed Tuesday handing over about 330 state-run liquor stores to private operators to pay for road improvements -- a novel way to fund fixes but one that confronts many of the same obstacles that have stalled previous efforts.

Standing on a parking deck in Arlington County overlooking Interstate 66, McDonnell announced a lengthy plan to pay for Virginia's growing list of traffic woes without raising taxes, including adding tolls on Interstates 85 and 95 and setting aside a portion of sales tax collections in Northern Virginia to pay for regional road projects. McDonnell said his proposal would generate about $1.5 billion a year over 10 years.

"The current administration has been too slow and made too many excuses for why we can't get things done," McDonnell said.

But the plan was notable for what it lacked: a permanent new source of money big enough to pay for the state's mounting transportation needs. McDonnell said his proposal is "outside the box" because Virginians aren't warm to the idea of a tax increase during such troubling economic times.

Much of that money represents existing state revenue that currently pays for other services. For example, privatization of the liquor stores would generate at least $500 million in one-time payments to the state, plus income and property taxes over time, according to McDonnell. But about $100 million in annual earnings generated by the stores that goes to the state's general fund would be lost.

Similarly, McDonnell's proposal to divert a fraction of sales tax receipts collected in Northern Virginia to regional road projects would leave a $105 million annual hole in the state's budget that pays for schools, public safety and other core services.

"We're not going to take money from public schools and higher education and human services to build roads," said Democrat Richard L. Saslaw (Fairfax), the majority leader of the state Senate. "A 6-year-old kid could have come up with that plan. That's no plan. That's just simply taking money from the general fund."

Few dispute the need for more road money. Two years ago, the state had programmed almost $9 billion in highway construction spending over a six-year period, but because of declining state revenue, that figure has dropped to $5.5 billion. The state is spending less than $1 billion a year on construction, and, by some measures, the need exceeds $3 billion annually for lane widening, bridge replacements, new roads and other major projects.

R. Creigh Deeds, McDonnell's Democratic opponent, has yet to release a detailed transportation plan, saying Monday that he would pass a "creative transportation proposal" within his first year as governor.

The Deeds campaign said the Democrat is not necessarily opposed to privatizing ABC, saying it could be a piece of the puzzle to raise revenue. "It's an option that should be on the table," Deeds campaign spokesman Jared Leopold said. "But one option that should not be on the table is cutting education."

McDonnell said he would also widen I-66 inside and outside the Beltway and partner with private companies on the state's biggest-ticket transportation projects, such as a new bridge or tunnel in Hampton Roads. To help pay for such initiatives, he would borrow $4 billion over the next 10 years.

Robert Chase, executive director of the Northern Virginia Transportation Alliance, praised McDonnell for recognizing that transportation investments should be based on what will do the most to reduce congestion, improve mobility and promote growth. But he said every major funding source he proposed requires the approval of either the General Assembly or Congress, either of which would be difficult to gain.

"Some of the dollar amounts assigned to these are downright speculative," he said. "Bob McDonnell has laid out an extensive menu, but you have to look at all the entrees and wonder how much of that money is achievable in the next four years or 10 years."

The centerpiece of McDonnell's 24-page plan is the privatization of the state's ABC stores. A commission to study government efficiency that was chartered by then-Gov. Mark R. Warner (D) and chaired by former governor L. Douglas Wilder recommended in 2002 that the state explore such a move. But it hasn't gone anywhere in the General Assembly -- in January, a state Senate committee voted down a privatization proposal, 13 to 2.

Virginia is one of 18 states that restrict or forbid the private retail sale of spirits. In 1987, Iowa turned over its liquor stores to private companies but maintained control of its wholesale operation. In 1991, West Virginia received $26.5 million after selling its liquor stores through public bidding.

In 2005, both major party candidates opposed privatization. Gov. Timothy M. Kaine (D) said then that he wasn't convinced that it would generate increased tax revenue for the state relative to the increased costs of enforcing regulations at privately-owned locations.

Former state senator H. Russell Potts Jr., a Republican running as an independent then, strongly opposed privatization. He said Tuesday that he is adamantly opposed to McDonnell's plan. The board that oversees ABC has a long history of being filled with good appointees from both parties, he added, and private industry would invariably try to build stores near parks and residential areas.

"It would be a redux of a situation like in Maryland, where you can have a liquor store, for God's sake, on every corner," he said. "All you have to do is ride down Route 1 headed toward College Park and you'll see a perfect example of that."

Sen. Mark D. Obenshain (R-Harrisonburg), the failed 2009 bill's author, said McDonnell's plan, which he helped devise, will place appropriate restrictions on private industry when issuing licenses to avoid such a scenario.

"I know we're a tradition-bound state," he said, "but it's about time we ought to be able to walk out of the post-Prohibition era."

Staff writers Rosalind S. Helderman and Amy Gardner and staff researcher Meg Smith contributed to this report.

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