RALEIGH -- Like anybody contemplating selling off valuables, Gov. Bev Perdue wants to know how much the state's liquor system is worth.
Perdue and Jon Williams, the state's top liquor regulator, have asked a Chicago firm to determine the value of the state's Alcoholic Beverage Control warehouse in Raleigh and the 410 locally run liquor stores across the state. Valuation Research Corporation has eight weeks to deliver the report, for which the state will pay $175,000.
The company will study all aspects of liquor sales in North Carolina, including the real estate value of stores, revenues from the retail outlets and the state's distribution warehouse.
The firm's work will help inform the governor's Budget Reform Advisory Commission, which has been exploring ABC system changes that include privatization. The analysis will also likely be used by legislators when they convene in May. A special committee appointed by legislative leaders last month is also studying ways to reform the liquor system.
Even if the state continues to operate the system, Perdue wrote in a letter to legislators Monday, "more needs to be done for local ABC Boards and stores to regain the public's trust - and I will ask for tighter controls and stronger oversight and restrictions on operations."
The heightened attention follows embarrassing incidents in Mecklenburg County, where a liquor company paid for a lavish dinner for local ABC employees and the head of the county ABC board, and in New Hanover County, where the man who ran the system took home $280,000 a year before he retired.
North Carolina is one of 19 states that control alcohol sales; it is one of only four with no private retailer involvement. Perdue said in her letter that North Carolina should remain a "control" state and that any privatization could be done through a renewable contract with a concessionaire.
In addition to announcing the Valuation Research contract, she outlined guidelines she hopes the legislature will follow in examining reforms.
"Costs that must be evaluated are not simply financial," Perdue wrote in her letter. She said state officials have to consider whether a more open liquor system could mean an increase in alcohol consumption.
Valuation Research is expected to estimate a value for the state-run warehouse from which local ABC stores must buy their liquor, as well as a dollar figure for the system of locally run stores. The company also will offer values on other alternatives the state might consider, such as privatized retail sales, but state-run wholesaling and distribution or vice versa.
The company has never appraised a state liquor system, said Bill Hughes, co-CEO at the firm, but has evaluated liquor and beer distributors and retailers. For the project, Valuation Research will join with another Chicago company that has experience working with states on privatizing government operations.
Like layers of an onion
Rep. Pryor Gibson, an Anson County Democrat on the committee, wondered what would happen to the stores and hundreds of employees. He expressed skepticism about the wisdom of privatization but said the state's liquor policy has its share of problems. Having been assembled piecemeal over decades, he said, the system will take a long time to sort out.
"The ABC system in North Carolina is much like a great big ol' onion," Gibson said. "The more you peel, the more layers you get, and the more you cry."
Sen. Bob Rucho, a Charlotte Republican, said the system has outlived its usefulness. Competition among private retailers would drive down prices, he said.
"That's the free market," Rucho said. "That's not government's role to be involved in selling liquor."
The ABC system sold more than $716 million in liquor last year and turned over $259 million to the state and local governments. Supporters argue that the system, while in need of repair, fundamentally works as it should. The state's liquor revenue is among the highest in the country, while per capita consumption is among the lowest.
In her guidelines for looking at reform, Perdue said she wants to impose tighter ethical standards and use proceeds from privatization for long-term investments and not near-term budget shortfalls.
The state ABC Commission operates the warehouse and handles liquor law violation cases. The local liquor stores, though, are run by local ABC boards appointed by the county commissioners or city council.
Of the 163 ABC boards, 10 account for more than half of the state's liquor business. More than 100 operate only one store, raising questions about the efficiency of having so many boards. Many local boards are profitable, but 10 had a profit margin of less than 2 percent last year. Nine lost money.
"There's much more to it than, 'Let's get the state out of the alcohol business,'" Pearson said. "This needs careful and thoughtful consideration with the right information on the table so the decision that's best for North Carolina can be made."
