McDonnell wants to show Virginia the way out of liquor business

McDonnell (Jacquelyn Martin - AP)
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By Anita Kumar
Washington Post Staff Writer
Sunday, July 18, 2010

RICHMOND -- For months, aides to Virginia Gov. Robert F. McDonnell have been meeting behind closed doors with alcohol retailers and wholesalers, public safety officials and faith-based groups to come up with a way to fulfill one of the governor's most notable campaign promises: privatizing the state's liquor stores.

The consequences of what they come up with are potentially enormous and would amount to one of the most noticeable changes in the relationship between Virginians and their government in years, if not decades.

For the drinking-age public, a privatized system could mean many more liquor stores, a much wider variety of libations and lower prices. Like beer and wine, liquor could be sold in grocery stores, big-box stores such as Wal-Mart or anywhere else a licensed dealer chooses to locate.

For the state's ailing transportation network, it would mean a jolt of fresh cash that McDonnell (R) urgently needs as part of his plan to fix roads. Two of McDonnell's other primary sources of new money for transportation -- drilling offshore and tolling interstate highways -- are highly unlikely to generate any money anytime soon.

And for McDonnell, who opposes government-run liquor stores on free-market principles, bringing Democrats and Republicans together on a major issue would show that he can deliver on his promises and be the kind of bipartisan leader he has pledged to be.

Del. David B. Albo (R-Fairfax), who supports privatization, said changing the way Virginia sells alcohol after 76 years would be a huge victory for McDonnell, the General Assembly and Virginia. "It's going to be a big deal if it happens," Albo said. "We've been doing it the same way since Prohibition."

But making it happen will be anything but easy. Alcohol sales bring in about $220 million a year, and many lawmakers -- particularly the Democrats who hold a majority in the state Senate -- are unwilling to support privatization unless it generates much more than that. Many others, including some religious conservatives in McDonnell's party, are fearful that privatizing alcohol sales will lead to a glut of liquor stores and a rise in drunken driving and other alcohol-related problems.

It will also be a tough sell. Although many may support the idea in principle, there is no great push from the public or either party to privatize liquor stores. Two recent governors have raised the idea, only to see it go nowhere. Also, the money generated by alcohol sales goes toward schools, public safety and other core services, and many Virginians are likely to balk at the idea of taking money away from those areas to fund transportation projects.

McDonnell's staff will unveil proposals in the first week of August. His government reform commission is likely to approve one of them Aug. 26, after which McDonnell expects to call legislators back to Richmond for a special session on privatization and other cost-cutting issues.

Staff members are considering four approaches, all of which have serious downsides, according to sources familiar with the process. The options are: selling all of the state's alcohol assets to a single outfit; offering licenses to the 3,000 businesses that sell beer and wine; having firms take over the state's 332 existing stores; and auctioning an undetermined number of licenses to the highest bidder.

Many of those who have attended recent meetings at the governor's office say the plan to auction licenses has received the most support. The proposal would probably come with an increase in the number of stores, perhaps to as many as 800. Companies would be limited in the number of licenses they could buy, and some would be set aside for small, women-owned or minority-owned businesses.

That would mean Virginians could be able to shop for liquor at grocery and convenience stores, as well as big outlets such as Costco.

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