Senate Majority Leader Goodall Introduces LD 644, An Act to Strengthen Maine’s Wholesale Liquor Business (Video; Text)

Posted on March 12, 2013. Filed under: Uncategorized | Tags: , , , , , , |

Yesterday Senate Majority Leader Seth Goodall (D-Richmond) introduced before the Veterans and Legal Affairs Committee public hearing his bill, LD 644, “An Act to Strengthen Maine’s Wholesale Liquor Business”. The following summary of the bill was provided to media by the Senate Majority office.

    In addition to paying back the hospitals, the specifics of Senator Goodall’s liquor plan, LD 644, is as follows:
    IMG_2940

  • It retains the business within the private sector–eliminating all financial risk to the state and without adding any additional costs to state government.
  • It stipulates a strict timeline for issuing the RFP, including an award date by July 15, 2013.
  • It mandates an open and transparent RFP bidding process to ensure the best value bidder is qualified with necessary financial, technical, management, operational, and marketing capacity.
  • It provides two options on how to bid: either through one upfront payment or multiple upfront payments but both with additional annual payments growing over the length of the ten year contract plus profit sharing with the state as the business grows. Specifically, the bidder could choose between an initial payment of $200 million to be paid no later than June 30, 2014 or payments totaling $200 million to be paid within the biennial budget with at least $100 million being paid before June 30, 2014.
  • The bill corrects the longstanding inequity with the state’s retail partner, the agency liquor stores, in terms of price and return of products. It will raise an additional $6.1 million for the state’s 480 liquor agents.
  • The bill prevents a disruption of service to the state, consumers and liquor stores if for some reason the state is unable to properly administer the RFP process by allowing the existing contract to be extended for one year for not less than $34 million.
  • The bill appropriates $100,000 annually to the Department of Substance Abuse to help reduce underage drinking by funding the Enforcing the Underage Drinking Laws Program.

Here is Senator Goodall’s testimony as prepared:

        Testimony of State Senator Seth Goodall

      LD 644 – An Act to Strengthen Maine’s Wholesale Liquor Business

    Chairman Tuttle, Chairman Luchini and members of the Joint Standing Committee on Veterans and Legal Affairs, I am State Senator Seth Goodall and I am here today to introduce LD 644 – An Act to Strengthen Maine’s Wholesale Liquor Business.

    Beginning today, your committee will consider two options for operating the State’s $400 million liquor business. Governor LePage has put forth his plan and I am now introducing mine. We may disagree on our approaches, but let me be very clear – I agree with the Governor, we must pay our bills and pay back our hospitals.

    IMG_2944I also agree with the Governor’s urgency. Now is the time to pay our hospitals and our liquor business provides us the funds to do just that. But we must get the liquor contract right. We cannot rush to judgment as was done in 2003. By getting the liquor contract right, we will ensure timely payment to our hospitals.

    Prior to 2003, the State operated the liquor business and by all accounts it was underperforming. The complaints about service, delivery, and product-selection were endless. When the contract went out to bid, the value of the business was not well known. It was negotiated under pressure to fill a budgetary hole and as a result we did not capture the appropriate value for our asset, an asset owned by the people of Maine.

    Since then, the business has significantly increased in value, the number of agency stores has nearly doubled and complaints are nearly non-existent. To be clear, as a Democrat, I believe strongly that there are many things that state government does better than the private sector, but in this instance, history proves otherwise.

    My proposal unequivocally keeps the management and operation of the state’s wholesale liquor business in the private sector, with the experts. It eliminates all financial risk for the taxpayer and incentivizes the private sector to partner with the state to grow the business.

    The Governor’s plan takes back operation of the liquor business, including the financial risk, while retaining the right to issue service contracts to administrate the business.

    The differences are stark, the goals are hopefully the same and it is now up to you to get the job done.

    The specifics of the proposal:

    First, it retains the business within the private sector, eliminating all financial risk to the state and without adding any additional costs or positions to state government by issuing a new RFP on a strict timeline to have a contract awarded by July 15, 2013 and as a result repaying the hospitals by September 30th of this year.

    Second, it mandates an open and transparent RFP bidding process that will ensure that the “best value” bidder is qualified with the necessary financial, technical, management, operational and marketing capacity, amongst other qualifications. The qualifications required ensure service optimization and provides security to the State and its taxpayers because they will know that their asset, a $400 million business, will be run with the experience and knowledge and the wherewithal to perform.

    This is a very common bidding process accepted by the business community. Today, my brother runs the company that he and I started as teenagers. When he goes out and bids on municipal snowplow contracts, towns have similar, rigorous requirements, in order to insure that the contractor can perform. In fact, they often require site visits to inspect his equipment and financial assurances to minimize risk. Trust me, he is not bidding on $400 million contracts, but I would hate to think that the bidding qualifications to plow snow would be more rigorous than those for our State wholesale liquor business.

    I have met all of the bidders that are public to date. In my opinion, they are all qualified to bid and run the business. They all know the value of the current business, almost all the data is public. And because of this pencils will be sharpened, bids should be close and as a result, the state will receive the right and best value for its business.

    Third, my proposal provides two options on how to bid, either through one upfront payment or multiple upfront payments, but both with additional annual payments growing over the length of the 10-year contract, along with sharing revenue with the State as the business grows.

    Specifically, my amendment allows a bidder to choose between an initial payment of either $200,000,000 to be paid no later than June 30, 2014; or payments totaling $200,000,000 to be paid no later than June 30, 2015 with $100,000,000 being paid before June 30, 2014. Bidders will still be required to specify the amount of the guaranteed fixed annual payment, the formula for sharing revenue with the State during the life of the contract and the minimum profit margin the entity would need to be guaranteed to make its bid feasible.

    Fourth, and much to misunderstanding of many, this proposal allows prices to be lowered in order to compete with New Hampshire, but they must be lowered with respect to structure of the contract awarded to the private business. Maine is a control state. We set the prices. We should not be allowed to lower prices below a level that undermines the terms of the deal for which we just signed on the dotted line.

    Fifth, this bill corrects the longstanding inequity with our retail partners – the agency liquor stores both in terms of price and return of products. For too many years, agency liquor stores have received an inequitable return for their role as our partner. Floor space in stores is valuable, return on investment is important. Just like with lottery sales, our partners do not receive fair compensation and in turn the system lacks the proper incentive to help our overall business grow. And my bill makes this much needed course correction.

    My proposal will raise an additional $6.1 million for our 480 liquor agents. It is not a promise, nor a commitment to fix in rule making. It will be the law. If adopted, it is a statutory and immediate legal commitment of the State. The Governor’s proposal guarantees no return but his administration promises to address it through rule making. I have served on this committee before; I have heard the requests from agents for too long. I have visited their stores. It is time to fix this inequity and we shouldn’t trust rulemaking to get it right, now is the time.

    Sixth, this bill creates a contingency for our State, liquor stores and consumers. Too often our State has failed at properly administering RFP processes and as a result potentially jeopardized service and millions of dollars, as is currently the case with the lottery services contract which is costing the state millions and millions due to the challenges. If the State is unable to get a new contract in place by July 1, 2014 then after a public hearing the existing contract may only be extended for one year and only after they have received a value of not less than $34 million. A newspaper recently called this “scary,” I call it prudent planning.

    Seventh, my bill as amended appropriates $100,000 annually to the Department of Substance Abuse to help reduce underage drinking by funding the Enforcing the Underage Drinking Laws Program (EUDL). This program will provide grants to agencies to lower underage drinking and increase enforcement to help eliminate the sale of alcohol to minors. I did not include language in my bill to further address enforcement; however, this committee needs to take this issue on and now is the time, and that also applies to tackling substance abuse.

    The sale of liquor and substance abuse are directly connected and as a control state we must also acknowledge the impacts pricing may have on consumption. In fact, our Director, Gerry Reid, acknowledged this fact in a recent presentation before you, and I quote: “control jurisdictions are able to serve their citizens with a broader and more flexible range of policy options for promoting moderation in the consumption of alcohol beverages and minimizing incentives for predatory pricing that can, and have led to alcohol abuse.”

    Lastly, we must use the upfront revenue we receive from the liquor contract to repay the hospitals. If you as a committee and we as a Legislature do this right, our outstanding bills to Maine’s hospitals will be repaid by September 30th of this year, under the watch of this Legislature and this Governor. Now is the time.

    We must put this debt behind us, so that we can work together with the hospitals on reform focused on improving and lower the cost of health care for our citizens.

    This proposal guarantees payment to the hospitals without borrowing debt to pay off another debt, it avoids any constitutional uncertainty, it makes payment no later than September 30th this year and, as a result saves the state $5 million.

    It is a straightforward plan with zero risk to the taxpayer, no borrowing from Wall Street. It is fiscally responsible and a sure way to pay back the hospitals.

    The Governor’s plan is risky, constitutional questions remain unanswered, there is no timeline and it costs nearly $45 million more than our plan as a result of interest and fees for borrowing and not paying off the debt before October 1st of this year.

    The proposal that I am proposing today gets the job done without question and with certainty.

    Lastly, I would encourage this committee to think long and hard about funding other priorities in this state with the annual payments that will still be available after any upfront payment. I support Senator Flood’s long-term efforts to fund water and sewer and roads and bridges. I personally believe that these need to be funded. But we also have to consider other priorities such as education and health care. After we pay the hospitals, I believe we have the opportunity to support Senator Flood’s efforts, along with making investments in education and health care.

    This opportunity comes around once every ten years and we must get the liquor contract right so that we can pay and make investments in our future. This isn’t about one party or one campaign, it’s about getting it right and doing our job.

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