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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

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
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
summary cont
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
modification 1
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
modification 2
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 )
modification 3
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