Privatization: Not as simple as ABC

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By Bob Brink
Arlington
Sunday, August 15, 2010

It's 1934. Franklin Roosevelt is president, Prohibition has just been repealed, and Virginia (along with a number of other states) authorizes the sale of bottled liquor through a chain of state-owned and -operated retail outlets. They're called ABC stores (for Alcoholic Beverage Control), and the emphasis is on the "C."

Now, more than 75 years later, Gov. Robert F. McDonnell (R) is proposing to sell off the state ABC stores to private interests. He promises to use the proceeds of privatization to provide a one-time windfall for Virginia's cash-starved transportation system, and he has embarked on a series of town hall meetings across the commonwealth to promote the idea.

Privatization shouldn't be a tough sell. Nobody considers the sale of distilled spirits to be a "core function of government," and raising a little revenue for roads and transit (without having to make any of the tough decisions that a meaningful transportation solution would require) is especially appealing in the current economy.

But before many of my colleagues and I can sign onto ABC privatization, we need answers to a lot of questions. Here are a few of them:

1. Could privatization kill a cash cow? Every year, ABC pumps tens of millions of dollars into the state budget -- including $65 million earmarked for alcoholism treatment and prevention. We need ironclad assurances that this revenue will continue to flow into the treasury to help support Virginia's health care, schools and other vital services.

2. What will privatization do to our neighborhoods? Privatization is likely to bring a large increase in the number of stores -- from the current 332 to 800, 1,000 or more. Those new locations could have a severe impact on local communities, requiring greater expenditures on public safety and social services. In addition, the ABC stores operate under tight restrictions on advertising. If the new private enterprises are allowed to hawk their wares like other businesses, with bright lights and billboards, will this affect quality of life?

3. How would privatization affect existing ABC operations? On average, ABC employees are 47 years old and have worked for the state for almost 12 years. That means they're vested in the state retirement system and are starting to think about retirement not too far down the road. If they lose their jobs through privatization, we have an obligation to treat them fairly -- but that may cost millions of dollars. Further, all but a handful of ABC outlets are in storefronts leased by the state. The new license holders don't have to stay in those locations. If they decide to move, will privatization lead to even more empty retail space on Main Streets and in shopping centers?

4. Finally, is the payoff from privatization worth the price? Given the concerns about what we might lose by selling off the ABC stores, we need to look carefully at what we stand to gain. Nobody really knows how much Virginia would net by auctioning the right to sell bottled liquor.

The McDonnell administration has used a figure of $300 million to $800 million; his predecessor, Mark Warner, called that projection "wildly optimistic." But even if privatization is so successful that it raises $500 million, what will that "windfall" buy us?

Not much, it turns out: It would fund a single mega-interchange such as the one at Interstate 66 and Route 29 in Gainesville (the state is spending $435 million on the Gainesville improvements); widen a few miles of urban roads from four to six lanes (just 3.7 miles of Route 50 in Fairfax and Loudoun counties is costing us $75 million); or build about a third of the 55-mile Route 460 project downstate (it's estimated that the entire stretch will run $1.5 billion to $2 billion).

The Commonwealth Transportation Board's six-year improvement program identifies $7.8 billion in "essential" highway, rail and transit projects that are needed between now and 2016. At best, the ABC "windfall" would fund barely a tenth of them. It's a drop in the bucket.

The old English proverb cautions us that "there's many a slip 'twixt the cup and the lip." Before we can toast the privatization of liquor stores in Virginia, there's many a question to be answered.

The writer, a Democrat, represents the 48th District in the Virginia House of Delegates. He is a member of the Governor's Commission on Government Reform and Restructuring, which is considering the privatization issue.


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