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Summary and Modifications to Proposed ABC Privatization Model

Summary and Modifications to Proposed ABC Privatization Model Staff Recommendation to Governor’s Commission on Government Reform & Restructuring September 30, 2010 Summary of ABC Privatization Proposal Privatization of the wholesale and retail operations of ABC

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Summary and Modifications to Proposed ABC Privatization Model

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  1. Summary and Modifications to Proposed ABC Privatization Model Staff Recommendation to Governor’s Commission on Government Reform & Restructuring September 30, 2010

  2. Summary of ABC Privatization Proposal • Privatization of the wholesale and retail operations of ABC • 3-Tier system is maintained • Upfront money dedicated to VA Transportation Infrastructure Bank • ABC maintains regulatory and law enforcement authority of health, safety and advertising/marketing matters

  3. Summary Cont. • Auction of 1,000 retail licenses to highest bidders based on 3 levels to generate a minimum of $265 million • Sale of wholesale licenses determined by 2.5 times the gross profit of distilled spirit brands distributed, to generate $160 million • Sale of ABC warehouse and stores to generate approximately $33 million • Annual renewal fees to pay for a 25% increase in ABC enforcement agents

  4. Modification #1 • Eliminate the annual wholesale license charge assessed at 1% of gross receipts on distilled spirits and the optional restaurant convenience fee at a rate of 2.5% (applied at the retail level) for on-premise sales • On-premise retailers will purchase distilled spirits from wholesalers, and will benefit from wholesale prices and delivery • The $17.50 per gallon fee will still be assessed

  5. Modification #2 • Create a 4th license level as a subset of the current 250 level three licenses: • 100 Level Four Licenses: less than 3,000 sq ft retail space, maximum 200 linear ft. shelf space for distilled spirits , and maximum 50 employees statewide • Minimum bid for level four license calculated by the same formula as the level three licenses • Will allow peers in the convenience level to compete against other peers, rather than national chain stores • 150 licenses will remain in the current level three category (less than 15,000 sq ft retail space and maximum 200 linear ft. shelf space for distilled spirits )

  6. Modification #3 • Allow winning bidders, in levels 2, 3, or 4, with less than 50 employees statewide to pay for the retail distilled spirits license over a period of 3-5 years • Will allow small businesses an opportunity to compete, yet will still maximize value for the Commonwealth • The Commonwealth will not loan money to any bidder • Failure to pay will result in loss of the license and it will be available for re-bidding

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