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Mitchell: Renegotiate Maine's liquor lease

Revamping the deal signed in 2004 could greatly boost education funding, she says.

By Susan M. Cover scover@mainetoday.com
MaineToday Media State House Writer

AUGUSTA - Democratic gubernatorial candidate Libby Mitchell will announce an education plan today that includes details of her proposal to renegotiate the state's liquor distribution agreement early to free up money for scholarship programs and other initiatives.

Mitchell, the Senate president and a longtime lawmaker, is expected to go into more detail about an idea she has floated in speeches to Rotary clubs and in other forums. She has said the state should renegotiate its 10-year lease with Maine Beverage Co. early -- it's due to expire in 2014 -- and use the money for education.

Her announcement, to be made at Southern Maine Community College in South Portland, will also cover her plan for expanding early childhood education, removing cost barriers to higher education and raising achievement in the K-12 system, according to the campaign.

Campaign spokesman David Loughran said Wednesday that he couldn't release any additional details about the idea to renegotiate the lease, saying Mitchell will provide that information today.

The state leased the liquor business to Maine Beverage in 2004 as a way to help close a $1.2 billion budget deficit.

The state gave up profits that it would have earned over the life of the lease in exchange for an upfront payment of $125 million.

The deal includes annual supplemental payments based on a profit sharing agreement. So far, the state has received $25 million in supplemental payments, according to the state Bureau of Alcoholic Beverages and Lottery Operations. That money goes into the state's general fund, said Administrative and Financial Services Commissioner Ellen Schneiter.

Schneiter said Maine Beverage initiated discussions late last year with the hope of extending the contract. The talks, which spanned several months, did not produce any change, she said.

"It is a very valuable asset and it's an asset that continues to appreciate," she said.

The fair market value of the business as of Jan. 1, 2009, was $378 million, according to a study of the agreement done by the accounting firm Deloitte & Touche in March 2009.

In 2004, Gov. John Baldacci proposed leasing the liquor distribution business as a way to balance the budget.

At the time, the state Bureau of Alcoholic Beverages and Lottery Operations ran the system.

Maine is one of 19 liquor-control states, which means the state sets wholesale prices for liquor and approves any new spirits for sale in the state. Maine also approves promotions and product introductions.

The state first awarded the contract for liquor distribution to Martignetti Cos. of Massachusetts in January 2004.

Maine-based companies, however, threatened lawsuits and a new partnership was formed by Martignetti, Pine State Trading Co. of Augusta and Lindsay Goldberg, a New York financial group that holds majority interest.

Kay Rand, a consultant for Maine Beverage Co., said it is interested in renegotiating the contract with the next governor and the next Legislature, but she did not want to comment on specific terms.

MaineToday Media State House Reporter Susan Cover can be contacted at 620-7015 or at:

scover@centralmaine.com