State Liquor Deal Expires in 2 Years, Renewal Decision Due in July

A liquor distribution contract negotiated eight years ago by then Governor John Baldacci with a private company is up for renewal in two years, but lawmakers on both sides of the isle are already scrutinizing efforts to extend it. The agreement with Maine Beverage Company was crafted back in 2004 as a budget-balancing mechanism that raised $125 million dollars up front in exchange for a 10-year commitment. Some lawmakers say the state wound up on the losing end of the deal.

State Representative Diane Russell, a Portland Democrat, is among those legislators who want a better deal on liquor distribution than the one signed by Gov. John Baldacci in 2004. Some say that the contract may have cost the state more than $100 million in lost revenue since then. Russell and other members of the Veterans and Legal Affairs Committee received a report from state liquor officials on the status of the contract, but Russell said she doesn’t need charts and graphs to gauge how her constituents feel about the issue.

“You go out and talk to people in the general public,” Russell said. “They are not happy that we sold this off. People are really upset that we sold off our liquor, they feel like it was sold off at a fire sale and frankly it was — because we were broke.”

As one of 19 alcoholic beverage control states, Maine opted to sign an agreement with Maine Beverage at a time when the state needed to come up with more than a billion dollars to balance the budget. But a study conducted three years ago concluded that liquor sales in Maine have continued to appreciate and the fair market value of the liquor business in the state was pegged at $378 million dollars at that time. The agreement is set to expire in 2014, but because the LePage administration has booked $20 million in revenues into the current state budget from anticipated liquor sales the state faces July deadline to extend the agreement. Even with a lightly accelerated timetable, lawmakers and the administration said they’re are in much better bargaining position than they were eight years ago, when Maine Beverage took over the wholesale distribution of liquor to more than 360 agency stores. Gerry Reid, director of the Bureau of Alcoholic Beverages and Lottery Operations told members of the Veterans and Legal Affairs Committee that much more is known today about this privatized business model.

“When this deal was first struck, I think the parties could say there was significant uncertainty as to investor risks, so to speak,” reid said. “Today I would argue that there is very little uncertainty and relatively low risk,” said Reid.

Discussions are just beginning, but its unlikely that the state will be willing to settle for $125 million dollar deal extending FOR ten years. Assistant Senate Republican Leader Debra Plowman of Hampden said she wants to know more about the variables that can reduce the state’s potential share of liquor revenues under the contract.

“Some of us think that the contract is worth a lot more money, right now if the company doesn’t make a guaranteed profit then it costs the state money,” Plowman said. “That part was something that you probably won’t see again in the same form. There’s going to be some renegotiating.”

State Senator John Patrick, a Rumford Democrat, said he favors a competitive bidding process for the next contract, but he also said Maine Beverage has a lot of incentive to give the state the best deal possible.

“They’re still in the driver’s seat because they already have a business up and running versus someone coming in having to look at bringing the capitol to put in a new system,” Patrick said. “They’re in the driver’s seat no matter what, but I think the state of Maine is also one of the ones that have a fair shot at doing a lot better than we should. If we can’t do better than we did last time, there’s a problem.”

Members of the Veterans and Legal Affairs Committee will be update on the status of the contract later this year.