Liquor panel hears sides on price controls

AUGUSTA – With a request-for-proposals deadline looming, state officials were urged Thursday not to relinquish control over liquor pricing as they search for a private contractor to take over Maine’s liquor warehousing and distribution system.

The state will release on Nov. 7 the request for proposals, which will outline the state’s requirements and seek bids from private contractors wanting to buy or lease the state’s wholesale liquor operations. The RFP is likely to take the form of a 10-year lease for the right to warehouse and distribute liquor to large agency stores such as Shaw’s and Hannaford as well as to smaller agency liquor retailers, according to administration officials.

Under the anticipated contract, the state would forfeit profits it would have earned over the life of the lease in exchange for a minimum upfront payment of $125 million. Maine would continue to set prices and collect taxes on liquor sales under the plan, which was devised as a major budget-balancing component by Gov. John E. Baldacci.

Some critics of the privatization plan have asked the state to entertain the possibility of granting agency liquor stores more flexibility in setting retail prices.

During a meeting Thursday of the Legislature’s Committee to Study the Implementation of the Privatization of the State’s Wholesale Liquor Business, the pricing issue arose again. Rep. Pat Blanchette, D-Bangor and a Hannaford employee, told her fellow panelists that retailers should be entitled to more latitude in establishing prices at their stores.

“If you had to survive on what is earned from liquor sales alone, you’d be living on bread and milk most of the time,” she said.

Rebecca Wyke, commissioner of the Department of Administrative and Financial Services, countered that the state needed to set prices to ensure unit costs of alcohol remain consistent across Maine. It was, she added, a small precondition for a contract that will give the successful bidder a statewide monopoly on liquor warehousing and distribution.

That was welcome news to Ralph Pears, a lobbyist for the Distilled Spirits Council of the United States, a national trade organization representing a variety of manufacturers and marketers in the distilled spirits industry.

“Pricing decisions should remain under state control in Maine in order to avoid indiscriminate price changes or price increases simply for the sake of increasing profits …,” Pears told the panel.

With the state’s four remaining liquor stores scheduled to close their doors by the end of November, Tom Testa, who manages Bayside Liquors in Bar Harbor, told the panel that agency stores like his have been forced to assume the responsibilities once shouldered by the state. He asked the lawmakers to consider raising the agent’s average 9 percent share on a single unit sale to 15 percent in an effort to maintain fair wages and benefits for the additional employees needed to load, unload and shelve liquor at their stores.

“Do you want Hannaford’s and Shaw’s to be the only people who can afford to do this?” he asked. “Because to them, it’s like a loaf of bread. You grab it off the shelf and put it in the basket. For us, there’s a lot more involved.”

Testa warned that without building adequate safeguards into the state’s RFP, smaller communities north and east of Bangor could wind up becoming underserved. Small agency store operators may find that maintaining stocks of certain more expensive brands of liquor – that must be paid for within three days of delivery – would simply become cost-prohibitive. Even without the expense of maintaining high-end stock, Testa said that without proper language in the contract, small agency store operators could face longer waits between deliveries resulting in lost sales and income.

Rep. Joe Clark, D-Millinocket and a member of the panel, said he would address the concerns of small rural agency store operators in discussions with Wyke or through legislation next session that could be recommended by the committee.

“I’m very concerned about the distribution aspects of the RFP – especially in northern Maine – I want to make sure that people in all rural parts of the state are serviced as well as those in urban areas,” he said.