AUGUSTA, Maine — Gov. Paul LePage’s plan to reap hundreds of millions of dollars in new revenue from the distribution and sale of liquor took another major step forward Thursday when the state opened the bidding process for a new 10-year liquor contract.
Though the impetus for the new contract has been to pay off old Medicaid debt to hospitals, much of the money will flow to transportation and clean water projects, as well as the state’s rainy day fund, which is used to cover budget shortfalls created by seesawing revenues.
The state will earn an estimated $451.5 million from the new contract between July of next year and June 2024, according to Gerry Reid, director of the Bureau of Alcoholic Beverages and Lottery Operations. That’s more than double what the state has earned since the current contract with Maine Beverage Co. was sold in 2004 for $125 million.
Because the current contract guarantees that the company can keep about 37 percent of gross revenues, Maine received approximately $8.7 million in revenue from the current contract in 2012 out of total liquor sales of more than $45 million.
In 2015, the first year under the new contract, Reid expects state government to garner more than $46 million. That sum is projected to increase to more than $66 million in 2024.
“The current contract has cost Maine hundreds of millions in lost revenues,” LePage said in a written statement. “These new contracts will allow the state of Maine to take back the significant revenue created by the spirits business and provide a better deal for Mainers.”
The first priority for the extra revenue will be paying down a $220 million bond sold last month to pay $183.5 million to Maine hospitals, which represents the state’s share of some $490 million in outstanding Medicaid debt. The rest of the revenue, according to the legislation enacted earlier this year, will flow to transportation and clean water projects, as well as the state’s rainy day fund.
The request for proposals is for two contracts, one for warehousing and distribution and the other for marketing.
Tim Poulin, deputy director of the Bureau of Alcoholic Beverages and Lottery Operations, said Friday that the intent of the two requests for proposals issued Thursday was to determine who will handle liquor distribution and marketing, respectively, and how much they’ll be paid.
“The RFP will establish a fee for services,” said Poulin. “We want [the bidders] to tell us how much it’s going to cost us to pay them to do it. They’re still doing all the work, but we’re going to run the business.”
The new contract won’t benefit only state government. Consumers and businesses stand to benefit because the contract includes provisions to reduce the price of liquor products in Maine while increasing profit margins for retailers.
Poulin said there are at least a handful of entities interested in bidding on the contract, including Maine Beverage Co., which holds the current contract, and companies called Dirigo Spirit Co. and All Maine Spirits. He said some beer distributors operating in Maine may also bid for the contracts, along with companies from outside the state.
Ford Reich, president of Dirigo Spirit Co., said in a written statement Thursday that his company intends to bid, ending what he called “a famously bad deal for the state of Maine” under the current contract.
“It is rare for a small state like ours to find such dramatic benefits and financial gains without making sacrifices or imposing new taxes,” he said. “This is going to be a large and long overdue windfall for Maine.”
Poulin and Reid said they couldn’t answer many specific questions about Thursday’s request for proposals from the BDN or anyone else because of fairness clauses in the open bid process, but an opportunity for questions is scheduled for 1 p.m. Oct. 16, at Augusta Civic Center.
Proposals are due by 2 p.m. Nov. 14. Poulin said he was unsure of a timeline for awarding the contract, though he said it would be well in advance of July 1, 2014, which is the target date for a new agreement to take effect.
Each bidder is required to pay a $500,000 deposit to the state just to apply. The unsuccessful bidders will be refunded.
If the winning bidder fails to implement the promised services on July 1, 2014, they will be charged $68,000 per day until the problems are solved. Poulin said those safeguards are designed to protect the flow of product to the more than 470 agency liquor stores in Maine and to weed out bidders who might not be capable of the work.
“Anyone can bid as long as they meet the requirements of the RFP,” said Poulin. “We’re looking for serious bidders only.”