Thursday, April 24, 2014
By MICHAEL PETERS
This story was updated at 1:12 p.m. on 2/23/13 to correct the author's name
AUGUSTA - The 2003 decision to lease Maine's liquor business was both bold and smart.
Today, that debate is raging again. Some politicians suggest the decision was unwise and ask whether we should do it again. It is obvious to me that today's criticisms of this decision and the company holding the liquor contract are unfair.
Prior to 2003, the state's liquor business was a mess with an uncertain future.
Projections of future revenue, based upon past performance, did not look good. Agency stores complained about lack of deliveries, shortages and poor selection. Although the business was bringing in about $26 million per year, it was underperforming and growing slowly.
In 2003, Gov. John Baldacci took office facing a nationwide recession and a $1.3 billion budget deficit. Baldacci was committed to balancing our budget without raising broad-based taxes, while avoiding taking an ax to necessary services.
To do this, he moved to enact a long-discussed idea -- lease the state liquor business for 10 years.
His decision, made with the blessing of the Legislature, not only provided needed money quickly, but it also allowed the state to maintain ownership of the asset. The competitive bidding process that followed was hard-fought between four companies with significant resources.
After an exhaustive vetting process, the state awarded the bid to Martignetti Cos., a company with a 70-year history in the liquor business, because it offered the best deal for Maine taxpayers.
That deal -- which required Martignetti to pay $125 million up front -- also had the most lucrative revenue-sharing offer of all the competitors, splitting annual revenues with the state for each year of the contract.
This has turned out to be a good deal for Maine. It has helped grow state revenue and avoid tax increases and cuts to important programs while modernizing the liquor business.
Today, there are folks, looking to win the next contract or seeking political gain, who are saying this was a bad deal. They're wrong.
Since it was privatized in 2003, Maine's liquor business has grown rapidly, far outpacing original projections. The number of agency stores has grown from 260 to more than 480. The number of deliveries has grown by 85 percent. The number of cases sold is up nearly 25 percent to 940,000 per year, and the annual revenue-sharing payment to the state has grown from $1.2 million to approaching $9 million.
The reason is straightforward. Martignetti, which formed the Maine Beverage Co. to run the state liquor business in partnership with some of its initial competitors, is a skilled corporate partner that provides quality private-sector jobs for more than 150 Mainers while bringing a new level of customer service and expertise to work for Maine.
We should be celebrating the success of this public-private partnership, not attacking it.
Experience counts. The company has made the state's asset more valuable for whoever runs it for the next 10 years.
Here is the bottom line. I've served on the Maine Liquor and Lottery Commission for the past seven years. From a front-row seat, I've seen not only this transformation, but also the professional way the company has managed our state's business and its own affairs. The misleading political attacks on Maine Beverage are disappointing and an attempt to gain an unfair advantage.
In considering this contract, the Legislature should recall the clause that allows for a renewal negotiation, a result of the competitive and transparent original request-for-proposal process.
Our Legislature should also consider requiring an up-front payment of at least $20 million, while requiring that any bidder have 20 years of superior and demonstrable performance in the liquor business.
No one can truly know what would have happened to the state's liquor business had it not been leased. Today's critics suggest that the state would have somehow miraculously become good at the liquor business. Not without Maine Beverage.
The 2003 decision gave the state the financial options it needed. And today the state is on the verge of capitalizing on the enhanced value of its asset, to bring in needed revenue to address our budget challenges. That's a record we can be proud of.
Michael Peters is the former chairman of the Maine Liquor and Lottery Commission.
- Special to the Press Herald