The Tribune Democrat, Johnstown, PA

March 18, 2013

Panel OKs liquor bill overhaul

New plan would revise the cost of licenses

John Finnerty
CNHI Harrisburg Bureau

HARRISBURG — A liquor privatization plan approved by a House committee Monday would slash the amount that the state’s 1,200 beer distributors need to pay to obtain enhanced liquor licenses to become one-shop shops for beer, wire and liquor.

Gov. Tom Corbett’s plan announced in his budget address would have required that beer distributors pay $150,000 for the licenses, but the new fee schedule set in an amendment passed by the House liquor control committee set the cost of the licenses at between $37,500 and $97,500 depending on the location of the store.

“That’s a different ball game,” said Joe Sherry of Sherry Distributors in Meadville.

The new privatization plan would also give beer distributors a full year jump-start before other businesses are allowed to obtain wine and liquor retail licenses.

The revised cost of licenses was intended to treat existing beer distributors more fairly, said Rep. Kurt Masser, a Republican from Northumberland County, who serves on the liquor control committee. “This provides beer distributors with an opportunity to enhance their businesses” and potentially compete as the only locations that offer all three types of alcoholic beverages for sale.

But Democrats and beer distributors remain unconvinced that the new terms will do enough to allow small businesses to compete.

Matt Viens, at Keller’s Beer, said that the new measure might make it easier for businesses like his to acquire licenses, but he has real concerns about how well mom-and-pop beer distributors will be able to compete in the long term.

Viens just bought Keller’s Beer, a small beer distributorship in Selinsgrove, Snyder County, about five years ago. He employs five people, and Viens knows that competition is already coming, as a grocery store planned on the other side of town will sell beer through a restaurant license.

Privatization will only make things harder.

The amendment would allow beer distributors to add wine for between $7,500 and $37,500, and add spirits for another $30,000-$60,000.  If beer distributors do not claim all of the 1,200 licenses, then they would be sold to the general public.

In addition, the measure would allow as many as 820 grocery stores to begin selling wine. Fees for wine sales at grocery stores would range between $97,500 and $187,500 depending on the size of the county where the store is located.

Grocery stores have already been able to get into the beer retail business by picking up restaurant licenses and selling beer from in-store cafes.

“The devil is in the details,” Viens said. “I don’t think they want to hurt beer distributors, but we can’t enjoy the same economies of scale (as larger competitors). That’s a real concern.”

Rep. Frank Burns, D-East Taylor Township, who also serves on the liquor control committee, said that while the amended liquor plan removes any explicit provision for sales in big-box stores, it is not clear whether large discount stores that sell groceries would be allowed to obtain wine licenses intended for grocery stores. And there is no clear provision that would bar them from obtaining any of the liquor and wine licenses once they became available.

While reducing the amount of the fees paid by would-be retail outlets, the new plan would also provide about $200 million less than the $1 billion in the plan put forth by Corbett in his budget address, the chairman of the liquor control committee said.

Existing state stores would be phased out as the number of private competitors increased around them. Whenever private liquor stores outnumbered state stores by 2-to-1 in a county, the state stores would be closed. There are now 600 state stores. When the number of state stores dropped to 100, the entire state system would be shuttered.

Masser said that he has made no secret of the fact that he supports getting government out of the business of doing things that government has no business doing. As a county commissioner in Northumberland County, he supported an effort to sell off the county nursing home for the same reason, Masser said.

Burns said that if the state intends to dismantle its liquor monopoly, it would make more sense to reform the existing system first, by doing things such as renovating stores and adopting flexible pricing that would allow the system to mark up more expensive products at a greater rate than more inexpensive products.

“We are selling the liquor system while its revenue is under potential,” Burns said. “We have a responsibility to make as much money as possible.”

Democrats tried three times to postpone a decision on privatizing Pennsylvania’s liquor system, but each time the Republican majority shot down the effort.

In the end, the measure – which if approved would give beer distributors the first opportunity to expand into wine and liquor sales, while also allowing the stores to sell beer in six-packs – was approved by a straight party line vote 14-10.

“I’m very disappointed,” said Rep. Tina Davis, of Bucks County, who was one of several Democrats who complained that they did not receive a copy of the language in the amendment until last Friday. “This has been shoved down our throats in three days.”

“It’s been 80 years,” said John Taylor, R-Philadelphia, the chairman of the liquor control committee.

The full House is expected to take up the measure on Thursday.

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