AUGUSTA, Maine — The Democratic leader in the Maine Senate on Thursday put forth a liquor contract proposal of his own as a legislative committee prepares to take up a competing bill from Gov. Paul LePage to renegotiate the state’s wholesale liquor contract and use the proceeds to pay off a $484 million debt the state owes to hospitals.
Republicans immediately slammed the proposal from Sen. Seth Goodall, D-Richmond, and accused Democrats of stalling on the hospital debt repayment. A newly formed company that plans to bid on the state’s wholesale liquor contract also slammed the proposal.
Goodall’s legislation sets out an alternative for putting the state’s wholesale liquor business out to bid. The legislation, however, doesn’t attach the wholesale liquor contract to a plan for paying off the hospital debt.
“That discussion needs to be separate from making sure we have a process in place to make sure we get the best value for the state of Maine,” Goodall said, echoing comments earlier this month from Democratic leaders.
Goodall’s bill, LD 644, would require a company vying to operate the state’s wholesale liquor business to pay the state either $20 million or $200 million up front at the start of the 10-year contract. The legislation also would require a fixed annual payment from the company and a slice of annual profits based on the size of the initial payment.
In addition, Goodall’s bill would require that any company competing for the wholesale liquor contract pay a nonrefundable $25,000 application fee. And if the state can’t find a new wholesale liquor contractor in time for the current contract’s July 1, 2014, expiration, Goodall’s bill would allow the state to extend the current contract — held by Maine Beverage Co. — for another year in exchange for at least $34 million from the company.
Goodall said his plan would guarantee that a private sector company with adequate financial and operational wherewithal would end up with the contract.
“We need to make sure they have experience in the industry, that they have the knowledge, that they have the warehousing and delivery capacity,” he said. “This is a contract that’s worth hundreds of millions of dollars, and it requires significant service.”
Goodall said the LePage administration hasn’t laid out sufficient detail about its plans for bidding out the contract.
“My focus is to make sure that we get the best value for the liquor contract, and I believe that should be from a bidding process from the private sector that is based on the recognition that the private sector, Maine Beverage, has significantly increased the service and the value of the contract,” Goodall said. “The state had previously performed poorly prior to them taking it over.”
LePage spokeswoman Adrienne Bennett said the administration plans to follow state contracting processes that govern purchasing services from the private sector.
“We believe the governor’s approach presents the best financial return on the state’s investment,” she said. “It appears the Democrats’ goal is to continue to let a private company take all the upside from this business. The governor wants to make sure the state receives the best deal and ultimately make good on an old debt to our hospitals.”
Maine is one of 17 states that control the distribution of hard liquor within their borders. The state’s Bureau of Alcoholic Beverages and Lottery Operations sets liquor prices and is the only entity allowed to bring hard liquor into the state for sale.
In 2004, the state privatized its wholesale liquor business by leasing it for 10 years to Maine Beverage Co. in exchange for a $125 million upfront payment and an annual cut of sales revenue. The upfront payment helped plug a gap in the state budget.
Republicans and some Democrats have said that deal deprived the state of a significant portion of wholesale liquor profits in the ensuing decade. The state earned about $8.6 million under its profit-sharing arrangement in 2012, according to Gerry Reid, director of Maine’s Bureau of Alcoholic Beverages and Lottery Operations. If the state, rather than Maine Beverage Co., operated the liquor business in 2012, it would have taken in $45.9 million in profits, Reid has said.
“Fortunately, we have a chance to get it right this time,” House Republican Leader Ken Fredette of Newport said in a news release criticizing the Democrats’ proposal to separate repayment of the hospital debt repayment from the liquor contract renegotiation. “History has shown that the Legislature under Democrats can’t help itself from using every last drop of revenue to fund government expansion. We must do something responsible with this state asset and use it to pay our debts and put Mainers to work.”
Fredette also criticized Democrats for sitting on LePage’s hospital debt proposal and not scheduling a public hearing. Goodall said he expected public hearings for his and LePage’s bills would take place in the coming weeks.
Ford Reiche, who formed Dirigo Spirit Co. earlier this year to bid on the liquor contract, called Goodall’s proposal “just another thinly veiled attempt to undermine” the “fair and open selection process” the LePage administration is proposing.
“Maine taxpayers won’t be well served by repeating the 2004 political process that brought Maine Beverage Co. to our state,” Reiche said in a statement.
LePage announced his plans last month to put the state’s wholesale liquor business out to bid before the end of the current 10-year contract, negotiate a deal for the state that guarantees it a larger share of liquor profits, and use the proceeds to pay down the state’s hospital debt, which dates back to 2009 for services hospitals provided under the state’s Medicaid program, but for which they weren’t fully reimbursed.
The state’s portion of the debt is $186 million, and it would trigger a $298 million match from the federal government. LePage has proposed taking out a revenue bond to pay back the debt immediately and using the liquor proceeds to pay off the bond.