Maine officials aiming for cheaper liquor in contract renegotiation

AUGUSTA, Maine — Cheaper booze for residents and agency liquor stores and a chance for the state to recapture as much as $10 million in sales revenue lost to New Hampshire were among the details state lawmakers learned of Friday as they heard more on a plan to change the way the state manages its hard alcohol business.

State Finance Commissioner Sawin Millett and the director of the Maine Bureau of Alcoholic Beverages and Lottery Operations Gerry Reid briefed the Legislature’s Appropriations and Financial Affairs Committee on a process that could result in a $29 million annual windfall to state coffers.

“Our consumers in the state of Maine today do not get a good deal and that is costing us business,” Reid said. “I would like to try and fix that.”

Maine is one of only a handful of states that controls the importation and distribution of hard alcohol but, in 2003, leased those rights for 10 years to a private company for $125 million. The contract on that lease is coming due and will either be terminated or renegotiated by June 20, 2013.

A former industry executive, Reid said Friday he has realized for some time now the value of those rights were worth more and the expiring contract was an opportunity to reclaim some of that value for Maine residents, taxpayers and consumers.

Reid emphasized the state wasn’t looking at getting back into the business of selling alcohol at the retail level but may have a role to play in trade marketing and administration of the industry here.

He also said the plan could increase the state’s annual cash flow by about $41 million and its annual revenues by $29 million.

The plan is not intended to promote more consumption even though some of that new revenue would be used to help lower the wholesale and retail prices on alcohol and provide the state’s agency store partners with slightly larger profits as well.

Reid said the state simply wants to ensure that if alcohol is being consumed in Maine it is purchased here.

“We have adopted a mantra here, we just say if it’s consumed in Maine we want it purchased in Maine,” Reid said. “We don’t want anybody to drink any more than their current behavior but the sad and cruel reality is they are drinking a lot now here that they are purchasing elsewhere and that’s all this is.”

Currently Mainers pay retail prices that are between $2 and $7 per bottle more expensive than paid in New Hampshire.

Reid said the state would aim to reduce that difference but likely still wouldn’t match New Hampshire’s lower prices.

“We would close about two-thirds of the retail price premium, which would take away a tremendous amount of the incentive for people to buy across the border,” Reid said.

Of the new revenue coming in, Reid presented a plan that would spend about $12.5 million each year on consumer price reduction. About $1 million would go toward advertising Maine’s new lower prices. Another $1.75 million would go toward agency store price protection and increased wholesale discounts for them. An additional $500,000 would be set aside in a contingency fund, Reid said.

At a total of $13.25 million, that would leave the state with an estimated $25.75 million in new revenue, some of which would be used for clean water and drinking water programs and small bridge repair and reconstruction, Millett said.

The state would attempt to first bargain competitively with interested and qualified parties for the new distribution business, but would resort to a more traditional request for proposal system were that to fail. Reid said he was interested in getting those negotiations started within the next few weeks.

After the meeting Millett said the state would only attempt to bargain negotiate for a limited time because a final deal does need to be in place by June of next year. He said if the state could reach a deal by sometime in October, they would then likely go to the request for proposal method and seek bids for the work.

The current contract with the Maine Beverage Co. would remain in effect until June of 2014 regardless, Reid said. That company would likely be one of the companies trying for the new business but several lobbyists and lawyers for clients hoping to get in on the action were also in attendance Friday.

Largely complimentary of the work Millett and Reid have done in researching and preparing to renegotiate a 10-year contract, lawmakers said Friday the next battle would likely be over how the state will spend that new revenue.

The Maine State Hospital Association has said it has had discussions with Gov. Paul LePage’s office about using some of that new revenue to help pay down the state’s $150 million to $190 million Medicare debt.

But some lawmakers said Friday it would be premature to decide what to do with the money before any final deal was crafted. Any proposals would certainly come back before the Appropriations Committee, said state Rep. Peggy Rotundo, D-Lewiston. A ranking Democrat on the committee, Rotundo said she wouldn’t speculate on how to spend any new revenues.

“I think we need to wait until this whole process is done,” Rotundo said. “We are going to have a biennial budget in January and we are just going to have to wait to see how this whole thing plays out.”

Rotundo and other lawmakers also voiced reservations about decreasing the retail price on hard alcohol because of the ramifications it may have on teen drinking or alcohol abuse.

“I want to be certain that state does an adequate job of recognizing that the consumption of alcohol — there’s always the dark side of it, as well as the positive side,” said Rep. David Webster, D-Freeport. “We don’t necessarily do an adequate job of supporting the necessary prevention and substance abuse services.”

Webster said only a small portion of the retail price of alcohol, totaling between $1 million and $2 million a year, goes toward substance abuse prevention.

He also said the Legislature this year passed a Republican-majority budget that cut resources in those areas, particularly in the area of teen alcohol and substance abuse prevention.

“We need to deal with the consequences and, since we are negotiating this contract now, perhaps now is the time to recognize the direct link,” Webster said.

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