The last 10 years have been rough for some products. Beepers. Movie rental chains. Compact discs. Even some long-prosperous newspapers found it difficult to adjust to the 21st century.
But it is clear that one industry is moving forward without a hitch. No doubt about it, Maine’s liquor business is booming.
Now the trick is to figure out how it can help the rest of the state.
It’s been nine years since Maine Beverage Co. agreed to pay the cash-strapped state $125 million upfront and another $65 million or so in profit sharing for the right to be Maine’s sole source of wholesale hard liquor for 10 years. In that deal, the state left a lot on the table. Since then, according to a recent letter from the company to Gov. Paul LePage, the number of liquor agents has grown from 260 to more than 480, and revenue and cash flow have increased 55 and 65 percent, respectively. In January, the Sun Journal reported that Maine Beverage took in more than $36 million from liquor distribution in 2011, at a cost of only $7 million. The next 10-year contract would likely also lower the price of some popular brands to better compete with New Hampshire, and capture some of the $30 million lost each year to out-of-state liquor sales.
Maine Beverage sees the contract for what it is – a cash cow. Last month, Dean Williams, the company’s CEO and president, offered LePage $32 million a year, plus the potential for another $4 million to $6 million annually, to renew the contract.
“We understand that the business has grown significantly, and we understand that it’s going to cost a lot more money for us to continue our relationship,” Williams told MPBN in January.
As part of the offer, the company said it could help pay off the state’s $186 million portion of the Medicaid debt owed to hospitals – one of LePage’s pet projects – in lieu of the bond proposal being floated by the governor.
“That upfront cash paid to the State is not a future liability as is a revenue bond,” Williams wrote. “The State is not required to repay us. If the wholesale liquor business fails to perform the risk is ours.”
Maine Beverage can take that risk, because Maine Beverage knows the Atlantic will dry up before the liquor business, as does Ford Reiche of Dirigo Spirit Co., a likely bidder for the contract who called the proposal “not at all a generous offer.” Gov. LePage knows this, as well, and he wisely rejected Maine Beverage’s early offer in favor of bidding process for the next 10-year contract later this year.
LePage’s plan is to use the proceeds – he’s reportedly aiming for $36 million annually plus another $8 million a year in profit sharing – to pay off the hospital debt, bringing in a $298 million federal match. Future liquor earnings would go toward revolving loan funds for drinking water systems and wastewater treatment, the construction of highways and bridges, and to the state’s budget stabilization fund, according to LD 239, which has the governor’s support.
LePage also has said he will release funds for voter-authorized bonds once the hospital debt is paid. He would also go ahead with his $100 million plan to rebuild the Maine Correctional Center in Windham.
The governor says his plan would inject $700 million into the state’s economy at a time it is sorely needed. What LePage fails to mention is that he could authorize $205 million of that injection whenever he wants, just by signing the bonds already approved by voters.
And while he is right that Maine should pay its hospital debt – and secure the federal matching funds – the state has other pressing obligations, as well. The governor’s budget as proposed would cut school funding and health services while raising property taxes, all to the detriment of low- and middle-income Mainers.
LePage should focus his well-worn reluctance to compromise on the liquor contract, and get the good deal Maine should have gotten 10 years ago. He should then use that money to blunt the impact of the next biennial budget, by spreading it around to those who need it most: schools, the health safety net, and, yes, hospitals.
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