Mid-week, Gov. Paul LePage received a written plea from Maine Beverage Company to negotiate only with that company — which holds Maine’s current liquor distribution contract — on a new 10-year public-private partnership deal.
LePage immediately declined, explaining that state government has an obligation to bid the deal to all interested vendors.
There’s a tremendous amount of money at stake in negotiating a new distribution deal, and if Maine moves ahead with the governor’s proposal to bond future liquor sale profits to pay outstanding hospital debt, we expect the LePage administration to capture every possible dime before inking a new contract.
In 2004, when Maine turned over liquor distribution to a private vendor, the deal with Maine Beverage was that Maine received an upfront $125 million payment and a share of the profits every year, equal to about $205 million total. That’s a lot of money, but state officials are certain a contract can be negotiated to yield more revenue for the public’s pocket – well more than $30 million per year in the next decade— in addition to whatever upfront payment is agreed to.
That’s a whole lot better than the current deal, a deal that netted Maine Beverage something close to $37 million last year alone, a profit more than five times the actual $7 million cost of running the operation.
Gov. LePage's desire to seek bids on the liquor distribution business is intended to capture a larger share of profit to benefit Maine taxpayers, creating a far more public-friendly distribution of proceeds than we see in the current deal.
As part of the deal, there is potential to reduce the cost of some brands of liquor sold here, which would benefit certain consumers. Although nice for large-volume purchasers, like bars and restaurants, that's not the principal reason to require an RFP. The reason is to chase the very real financial benefit for taxpayers to claim revenue that is now streaming out-of-state.
Since the moment Maine Beverage Company signed the 10-year deal to operate Maine’s wholesale liquor business in 2004, supplying liquor to hundreds of state agency stores, there have been questions about how quickly the Baldacci administration struck the deal and stronger questions about whether Maine’s taxpayers got the best deal possible.
As we approach the end of that contract term, it’s now clear Maine could have struck a better deal and state officials have an obligation now to do more than was done a decade ago to ensure a more reasonable distribution of profits.
Actually, state officials have more than an obligation. They have a duty to the public to open a competitive bid process for a public-private partnership that could move Maine's revenue share from $205 million to $350 million — or more — over the next decade.
In its plea for early negotiations to avoid the RFP process, Maine Beverage offered to guarantee $32 million in revenue sharing to Maine every year for the next 10 years. By jumping out early, that promise may very well have set the minimum expectation of any potential bidder to step forward.
Maine Beverage, which reported an operating income of $45.9 million in 2012, knows that's possible because — as the first private vendor to contract for Maine's liquor distribution business — it knows the ropes. Other potential vendors are starting fresh, and there will be additional requirements under the RFP, including sales and product data collection and more rigorous financial oversight by the state, all of which will add to current vendor costs that bidders will have to account for.
The experience Maine Beverage has gained in the past decade gives the company — a partnership of Massachusetts-based Martignetti Companies, New York-based Lindsay Goldberg investment house and Augusta-based Pine State Trading Company — a terrific advantage in the bid process, plus it can stand by its proven record of dependable service in making its pitch to maintain distribution.
Maine Beverage has an early edge, but that doesn't mean it's entitled to the only shot.
An open bid process to award what is a ridiculously profitable contract for Maine’s liquor distribution business is in the best interest of taxpayers.
It’s the only way to go.