Democrats' liquor proposal a 2004 retread

If you think Gov. John Baldacci negotiated a bad deal for Maine's liquor business in 2004, then you will recognize the Democratic leadership's plan for the next 10 years as more of the same.

The similarities are eerie, and the Democrats' legislation looks as if it was drafted by the current contract holder, a Massachusetts liquor wholesaler bent on eliminating competition for this contract.

Why would Democrat leaders want to do this again? For the same reason we have done so many things over the past 10 years — to help plug an ongoing structural budget gap with a one-time windfall.

In 2003, the Democratic Legislature faced a $1.2 billion budget gap. Baldacci had to act fast, and in haste he and the Legislature signed away a big part of an annual revenue stream for a one-time $125 million payment.

That solved a short-term problem but it fixed nothing. The same deficit problems have haunted the state ever since.

But Wall Street investors, represented by Maine super-lobbyist Severin Beliveau, have benefited handsomely over the past 10 years.

That's due to a 36.8 percent annual profit guaranteed by the original contract. Why did we guarantee them so much money? Well, desperate people do desperate things.

But it quickly became clear that the state would pay dearly for the one-time money.

The Wall Street hedge fund that put up the original money and the large Massachusetts liquor wholesaler, Martignetti Corp., will have made about $118 million over the 10-year contract, nearly doubling their initial investment.

Gov. Paul LePage has proposed an openly competitive process to award the next contract. The state will ask for three separate requests for proposals from each vendor: administration, marketing and distribution. It can accept or reject any or them, and Martignetti is free to bid.

The actual cost of distributing liquor in Maine is about $6 million a year, that's because running a warehouse and delivering liquor twice a week is really not a large or complicated business.

Two Maine firms with logistics and transportation experience have indicated they will bid on the governor's RFP request.

Democrats, however, have presented a bill designed to eliminate that competition.

As we have seen, this is not a big business and it is almost entirely contracted out to another firm, Pine State Trading Co.

Yet Democrats want bidders to show they can make a large "minimum initial payment" of $200 million.

Why? This is only a $6 million business, and nearly all of it is contracted out to Pine State Vending Co., which is forbidden from bidding by its contract with Martignetti.

Democratic leaders want $200 million up front to pour into this budget gap. Again, that's just what Baldacci did, used a one-time windfall to fix an ongoing, structural problem.

This is like getting a pay-day loan to pay this month's bills and knowing the same bills will come due next month.

Instead, Gov. LePage would obtain about $200 million in revenue anticipation notes and immediately clear $186 million off the state's books and draw down roughly $300 million from the federal government.

The money would guarantee our hospitals repayment and provide an immediate economic boost to Maine's economy.

The governor's plan would also reduce costs to Maine consumers and help claw back money lost to New Hampshire by becoming more competitive. Right now Maine consumers pump about $20 million a year into New Hampshire's economy rather than their own.

The Democratic leadership would ask for a minimum annual payment of $34 million. But evidence strongly suggests this business is worth $45 million a year, and very likely more over the next 10 years.

Democrats also claim the governor wants to "take back" the liquor business while they favor free enterprise.

This is untruthful and Democratic leaders know it.  The governor wants to "take back" the revenue stream, and Maine's director of liquor and gambling has repeatedly said the state will not be in the distribution business.

The Democratic leaders would require bidders to be "qualified to operate the wholesale liquor business."

Maine Beverage doesn't even do that. It runs a warehouse and delivery service in Maine, but it operates as a liquor wholesaler in other states.

Again, this is a requirement intended to disqualify any Maine-based bidders based upon irrelevant criteria.

The governor is asking for bids on marketing since our growth with Maine Beverage has under-performed similar states, particularly New Hampshire.

Maine Beverage simply has no incentive to do that since it would mean competing with its far larger customer, the State of New Hampshire.

Here's our prediction:

Take the Democratic leadership's plan and we will be talking about another big budget gap in two years, and the hospitals will still be waiting on their money 10 years from now.

Take LePage's approach and we pay the hospitals and keep far more liquor money in consumers' pockets and state coffers.

Take your choice.

rrhoades@sunjournal.com

The opinions expressed in this column reflect the views of the ownership and the editorial board.

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Comments

PAUL ST JEAN's picture

Don't you hate no-brainers?

Don't you hate no-brainers? They always require more brains to figure out than anyone has.

Gerald Weinand's picture

Correct me if I'm wrong, but

Correct me if I'm wrong, but doesn't Gov. LePage want to renew the liquor contract in order to gain a one-time lump sum to be used to pay off a budget deficit, in this case, the debt the state still owes the hospitals?

Jason Theriault's picture

The Democratic plan sounds dumb.

The Democratic plan sounds dumb. LePage's plan sounds far better.

Oh God, I must be having a stroke, that last sentence made no sense.

PAUL ST JEAN's picture

The parrot sez it's about

The parrot sez it's about time you get something right, and as you know; he's a liberal.

ERNEST LABBE's picture

Jason

Jason there is hope for you yet.

GARY SAVARD's picture

Very well stated, Rex.

Very well stated, Rex.

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