Perdue moves to privatize ABC system to close deficit

The state of North Carolina is evaluating all options when it comes to confronting its budget deficit—even the way alcoholic beverages are sold has come under scrutiny.

The Joint Study Committee on Alcoholic Beverage Control met Wednesday to discuss the possible privatization of the state-run North Carolina Alcoholic Beverage Control system, which was proposed by Gov. Bev Perdue to help the state cope with the economic downturn. The committee decided early this month to hire a Chicago-based consultant to analyze the potential increase in revenue that could be generated by selling its wholesale and retail businesses to vendors for up to 10 years.

North Carolina is one of 18 “control” states in which the government regulates liquor sales, purchases, transportation, manufacture, consumption and possession, and the N.C. ABC Commission oversees the $5 billion market. It is the only state in which spirits are sold exclusively by local ABC boards.

The 28-member committee was formed Feb. 18 by Senate President Pro Tempore Marc Basnight, D-Beaufort and Rep. Joe Hackney, D-Chapel Hill, speaker of the N.C. House. Each founder appointed 14 members to the committee. The committee and consultant’s findings are slated to be released in April.

In a Feb. 26 letter to members of the North Carolina General Assembly, Perdue noted that the privatization of the industry is a “multi-faceted issue” and could involve the sale of all or only part of the system. Should the state pursue it as an option, it should do so through “the sale of a concession for a limited period of time,” so that North Carolina can remain a control state, she said. Perdue will decide whether to recommend privatization based on the study findings.

“We had a lot of proponents and opponents of the idea of privatizing, most of them opposed,” said Rep. Jim Crawford, D-Granville, a member of the committee.

Andy Ellen, general counsel for the North Carolina Retail Merchants Association, said there should be other ways for counties and cities to obtain the profits they gain from alcohol sales, like increasing the permit fees for selling alcohol.

“We’re allowed to sell firearms, lottery tickets, over-the-counter drugs, tobacco—all those products that have additional scrutiny we sell in a grocery. We can certainly do the same for spirits,” Ellen said.

He added that 32 states, including North Carolina’s neighbors like Georgia and South Carolina, already allow privatization.

“There are so many potential variables,” Agnes Stevens, state ABC commission spokesperson, wrote in an e-mail. “When you look at the way other states have implemented their versions of privatization that it is not possible to forecast how policymakers might choose to shape what privatization might mean in North Carolina.”

Even though the 410 local ABC stores in North Carolina, run by independent boards, account for just 2 percent of alcohol sales in the state, they represent a large portion of income for the cities and counties they operate in.

According to the Durham ABC commission’s 2009 fiscal report, the local ABC board provided Durham County with more than $1 million and contributed more than $112,000 to the city of Durham.

“[The board] works in a very good environment in terms of how we do things, the manner in which we serve customers and try to support the community, so we are observers of what’s going on,” said Randy Mills, general manager of the Durham County ABC board. “I don’t think we’d get involved with one outcome versus another except that we feel that control is important. It’s up to the legislature to make these decisions.”

In her February letter, Perdue said that if local ABC boards continue selling liquor, she would like to enforce stricter ethical and operational standards. Any revenue collected by the state as a part of this system must fund long-term investment for the state, not short-term budget deficits, she wrote.

“If the ABC distribution and sales system remains unchanged, more needs to be done for local ABC boards and stores to regain the public’s trust,” Perdue said. “I will ask for tighter controls and stronger oversight and restrictions on operations.”


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