Two of the three confirmed potential bidders for the state’s liquor contract say the latest proposal gives an unfair advantage to the current contract holder and could cost the state millions in lost revenue.
The proposal comes in the form of LD 644, a bill submitted last week by state Senate Majority Leader Seth Goodall, D-Richmond, that outlines what the state should receive from the private company selected to run the state’s wholesale liquor business for the next 10 years.
The bill mandates all bidders to pay a $25,000 non-refundable deposit. The winning bidder would be required to pay the state $20 million or $200 million up front, a fixed payment every year thereafter and part of the annual profits — the amount of which will be based on the size of the upfront payment.
Goodall’s bill is very similar to the current contract, in which the state leased its wholesale liquor business to the Maine Beverage Company in exchange for $125 million upfront and a cut of the annual revenue. That contract was made in 2004 and will expire in 2014.
The Maine Bureau of Alcoholic Beverages and Lottery Operations knows of three confirmed potential bidders for a new contract: Maine Beverage Company, Dirigo Spirit Co. and All Maine Spirits.
Leaders for Dirigo Spirit Co. and All Maine Spirits believe Goodall’s proposal gives an unfair advantage to Maine Beverage because it calls for a company with experience, seeks a large deposit to bid and requires a high upfront payment that other bidders can’t afford.
“How many people in the state of Maine can write a check for $200 million?” asked Ford Reiche, president of Dirigo Spirit and area entrepreneur who founded Safe Handling in Auburn.
They also believe Maine will lose out on money under that proposal, just as state leaders say it has under the current contract because it sold its rights too cheaply and didn’t maintain control of rising profits.
“It’s worse than a bad deal,” said John Menario, vice chairman of the board for All Maine Spirits.
Goodall said his bill was designed to get the best deal for Maine, not to give Maine Beverage an advantage.
“I want the best value with the company that can form the best services, to be awarded the contract. I feel Mr. Reiche, as well as All Maine Spirits, are qualified and capable bidders,” he said. “No one should have an advantage.”
Maine Beverage is a joint venture of the Massachusetts-based Marginetti Cos., Pine State Trading Co. in Augusta and the New York-based financial group, Lindsay Goldberg. Its lobbyist, Josh Tardy, said Maine Beverage likes Goodall’s bill, though it didn’t ask him to submit it. He said Maine Beverage doesn’t have a problem with the experience, deposit or upfront cash stipulations, and it believes all of those requirements make sense.
“I think it’s important, whoever the vendor is, to have significant financial assurance to protect the state, as any risk is assumed by any vendor,” he said. “Certainly, Maine Beverage is not scared of proving its financial strength.”
Tardy said Maine Beverage also believes Goodall’s proposal, or something similar, would be in the state’s best financial interest.
“The private sector model eliminates many risks the state would have, because under the private sector model, the risk goes with the vendor, not the state,” he said.
Goodall’s bill is one of two dealing with the state’s liquor contract. The competing proposal, LD 239, Gov. Paul LePage’s bill, was submitted a couple of weeks ago by State Sen. Patrick Flood, R-Winthrop.
That bill also calls for a 10-year contract, but requires no upfront or annual payments by the winning bidder. Instead of leasing its wholesale liquor business to a private company in exchange for money back, the state would control the business and contract with the winner to provide warehousing and distribution services. The state would pay a fee for the work — based on the winner’s bid — and the winner would get a bonus if the business grows.
That bill also earmarks money to pay hospitals the money they’re owed by the state. Goodall’s bill does not.
Both bills are set for a hearing in front of the Veterans and Legal Affairs Committee on March 11.
No matter which proposal wins out, all three companies plan to bid.