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PLCB Privatization Discussions PAWineTalk Forum / PLCB Privatization Discussions /

The continuing saga...

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Author dontime
Contributor
#1  Posted: Jul 13, 2011 15:32  

More on the proposal to rid us of the state monopoly stores.

http://www.post-gazette.com/pg/11194/1160145-100-0.stm
Author Mark
Contributor
#2  Posted: Jul 13, 2011 21:12  

Wow 1250 stores, that's a considerable increase from both the current number as well as Turzai's own previous proposal. I wonder if offering so many licenses would dilute the value of each one. Would they find that many bidders?
Author dontime
Contributor
#3  Posted: Jul 14, 2011 07:44 | Edited by: dontime  

Another article.

http://www.post-gazette.com/pg/11195/1160364-454.stm

I found this most interesting:

"Auditor General Jack Wagner's report found that board oversight is lacking, that inventory controls are inadequate, that employees aren't trained well enough, that managers of state stores did not receive needed merchandise and that liquor was sometimes stored in trailers where temperatures reached 100 degrees."
Author phillywinefinder
Registered User
#4  Posted: Jul 14, 2011 09:34  

I know there are folks on here who have been drinking wine in PA longer and drink more of it than I do, but I'm surprised that so many opinions on here are pro-privatization, given that the system as it exists now makes possible the bargains that we find through the CS wines and facilitated by all the people who contribute their tasting notes to PAWineTalk.

In NJ, there is no statewide searchable web site for all the available wine, and there is no online statewide wine drinking community. I visit the NJ stores regularly, they have their pros and cons, but it is no wine utopia by any means.

If privatization does happen, I will miss the Chairman's Selections and PAWineTalk. :(
Author jlburd
Contributor
#5  Posted: Jul 14, 2011 11:30  

I'm impressed that Turzai has modified as much as he has from his earlier ideas. Sounds like he may have done his research with retailers etc. Don't know what this means for someone like Dreadnought - if they fit into the equation, get grandfathered, etc.

Agree with phillyfinder about the upside of the current situation but I have a hard time ignoring my capitalist instincts that free markets will work better overall. Either way, the need for PAWinetalk remains!!
Author p440rp1
Registered User
#6  Posted: Jul 14, 2011 13:20  

Over the years, the PLCB has come a long way and realistically, we don't have it too bad in SE PA considering it to be a monoploy. That doesn't mean that I don't venture to Total now and again for more variety or that there isn't room in the marketplace for hand sold wines from stores like Moore Brothers.

Pluses and minuses on all sides, but the fundemental question is should the State be in the retail (or wholesale) business. If the answer is yes, why are guns sold at retail in PA?
Author ecola
Registered User
#7  Posted: Jul 14, 2011 16:34  

I don't care about privitization, I just want to be able to buy from who I want and get it shipped to my door.
Author Mark
Contributor
#8  Posted: Jul 14, 2011 16:35 | Edited by: Mark  

@p440rp1, is "the fundamental question" of privatization a philosophical one or a practical one? Those for privatization tend to look at it philosophically ("the government shouldn't be in the retail business") while those against tend to see it from the practical side (privatization would result in a reduction of revenue, loss of jobs, loss of PA buying power, etc.).

I find it interesting that people from each side tend to soft-step answers to questions posed by those on the other side. For example, Turzai talks in general terms about recapturing sales currently lost to "border bleed" but gives no figures; he touts elimination of Johnstown flood tax and PLCB markup but doesn't seem to have provided many details on his proposed replacement taxes (or at least it wasn't covered in the article above). Aside from the one-time windfall, he hasn't stated whether he believes his plan will bring an ongoing yearly net loss of revenue, a net gain, or be net neutral. Further, he hasn't provided any firm revenue figures that I've seen; even the estimate for auction of licenses seems like a wild guess.

From what I know of his plan it really seems like a one-time pop and then a yearly net loss vs. the revenue stream today. I'm eager to see details that would make me believe otherwise.

We already know how well one-time windfalls work out for the budget...whatever happened to the casino license revenue? It's ancient history and we still have a huge budget hole.

On the other hand, UFCW Local 1776 president Wendell Young talks about job and tax losses if privatization were to occur, but seems to think his members are entitled to lifetime jobs at the PLCB with defined-benefit pensions. He says prices would not go down and selection would not increase, but provides no evidence to back up those statements. He never mentions anything about the current lack of store diversity, why wine is regularly shipped without regard to weather conditions, etc. BTW if you want to know his detailed stance on privatization issues take a look at this, it's pretty interesting (and he comes across much better than in various interviews):
http://www.ufcw1776.org/content/sworn-testimony-plcb-privatization-wendell-w-young-iv -president-ufcw-local-1776-april-14-201

@phillywinefinder, I think of us as living in a walled garden with respect to buying wine and spirits. For about 60 years it was a walled dump but then they slowly started cleaning it up and expanding. And yes we have some nice things in our garden, but we're still stuck inside. If the walls come down some of our garden will get overrun, but we'll also be able to venture outward and find new things. PAWineTalk would probably still be around but its purpose would need to change at least somewhat. But would people still use it or would everyone just use CT?
Author Mark
Contributor
#9  Posted: Jul 14, 2011 16:36  

ecola:
I don't care about privitization, I just want to be able to buy from who I want and get it shipped to my door.

Amen brother!

http://www.stop1161.org/
Author MackzdOut
Registered User
#10  Posted: Jul 14, 2011 18:58 | Edited by: MackzdOut  

Second Amen!
Author jlburd
Contributor
#11  Posted: Jul 14, 2011 21:46 | Edited by: jlburd  

Nate Lutchansky does a pretty good analysis of the HB11 at his blog [url=http://www.plcbusersgroup.org][/url]
The most salient point made is the barriers to competition that the new law raises to operating wholesale business with the new tax stream that replaces the Johnstown tax etc. By his calculation the surcharges are 38% higher than current - not a great attraction for potential licencess. That's good for the state if the same volumes are sold but likely bad for everyone in that distributors would shift to stock that sells big volumes. As selection dwindles so goes the protection against border bleed. The interesting thing for this group is that the new basis (tax by volume & alcohol content) actually lowers the tax for better wines. In Lutchansky's example the tax on a bottle of Arbor Mist & Stags Leap would be the same $1.63 even though Stags Leap is 10X the cost. Curiously, a 5L box of Franzia would be taxed over $10 - another reason to avoid it. HB11 also requires existing licencees - like Dreadnought I think - to fork over 42% of their revenue to acquire a license to sell what they have already been selling.

PAWinetalk is a community - virtual and otherwise. Regardless of how the wine gets distributed we'll still be a bunch of wine geeks looking for reasons to buy & drink.
Author phillywinefinder
Registered User
#12  Posted: Jul 15, 2011 06:29  

@Mark - I've been outside of the garden and those stores are fine but the heavens don't open up when you walk in. The prices aren't always better, and the stock is not constantly moving as it does with the chairman's selections. Many of the stores also have warm temperatures and unknowledgeable clerks. There's no statewide database of wine and they don't ship from store to store. You think it's hard to find a wine in PA? Try using winesearcher and then driving half way around the state.

@ecola and others - They could do privatization and still not allow shipping. It is theoretically possible to keep the current monopoly system and also allow shipping. Also, I've heard it is possible to get around the shipping ban.
Author Mark
Contributor
#13  Posted: Jul 15, 2011 08:55  

phillywinefinder:
They could do privatization and still not allow shipping. It is theoretically possible to keep the current monopoly system and also allow shipping.

Right you are. That's one reason it's import to stop US house bill 1161, see link above.
Author dontime
Contributor
#14  Posted: Jul 17, 2011 14:37  

jlburd:
PAWinetalk is a community - virtual and otherwise. Regardless of how the wine gets distributed we'll still be a bunch of wine geeks looking for reasons to buy & drink.

Spot on. PAWT leverages the monopoly store's data base and makes it useful, but is in no way tied to the PLCB or their existence. I would just add "to buy and drink and get together to share."
Author jlburd
Contributor
#15  Posted: Jul 17, 2011 15:19  

Indeed. Which brings us to the next tasting. See new thread.....
Author dontime
Contributor
#16  Posted: Jul 19, 2011 20:15  

Here is another Flash Wine Sale page. There must be 20. Not sure we couldn't quickly replace the Chairman's Selections with all of these...

www.letspour.com/deals

ps - yes and they don't ship to PA. But if the state got out of it....(maybe).
Author krim25
Registered User
#17  Posted: Jul 22, 2011 19:42  

Before everyone jumps on the privatization band wagon I think people should realize the FACTS of the bill. The facts are that the bill, as it's written now would tax the hell out the vendors, suppliers, wholesalers and the customers. When this happens. retail prices go up and selection decreases. The real problem here isn't the LCB, its the restrictions the state itself puts on them. Ultimately, the customer suffers. This planned is very GREEDY. READ THE FACTS.
Author Mark
Contributor
#18  Posted: Jul 23, 2011 11:12  

krim25, I agree with you 100% that the problem is not the LCB but the handcuffs put on them by our antiquated laws. But I don't see how you conclude that taxes would go up and selection would decrease.

I believe that the proposed bill eliminates the 18% state tax (Johnstown flood tax) and the mandatory 30% markup, and replaces it with a gallonage tax that would result in lower taxes on many wines (and BTW would not rise with prices, so revenue wouldn't keep pace with inflation, but that's a whole other ball of wax).

Generally speaking, competition brings increased selection and lower prices, that's sort of the point of a free market. Granted, if the government raises taxes then prices go up, but again I'd like to see the specifics of how Turzai's proposal would "tax the hell out the vendors, suppliers, wholesalers and the customers" and cause retail prices to go up.
Author burchfield
Registered User
#19  Posted: Jul 23, 2011 16:19  

I got this today...

HARRISBURG -- Plans to privatize the state-run liquor stores hit a major roadblock today, with a top state Senate Republican saying that the state first should "take the handcuffs off" the current system.

Talking to reporters this afternoon, Senate President Pro Tem Joe Scarnati was critical of the current plan from House Majority Leader Mike Turzai to auction off licenses for the stores.

Mr. Scarnati, of Jefferson, questioned whether the state would be getting the most profit possible in that sale, given what he sees as constraints on the profitability of those stores.

"I don't think that we have allowed the Liquor Control Board to run like a business," he said. "We're the ones with the handcuffs on them, and then we're out there saying, 'Well, this is an archaic, terrible system and doesn't work.' Well, take the handcuffs off of them, get the bottom line better, and you'll get a better price."

He suggested allowing those stores more flexibility in pricing, based on the product and geography, as initial reforms.

Privatization of the state stores is a top fall priority for Mr. Turzai, a Bradford Woods Republican. He introduced a measure last week that would auction off 1,250 licenses to private retailers, replacing the current 621 state stores.

Mr. Turzai and Gov. Tom Corbett both have said repeatedly that they do not think the state should be in the business of alcohol sales and should instead focus on regulating those businesses.
Author dontime
Contributor
#20  Posted: Jul 23, 2011 22:28 | Edited by: dontime  

Not sure there is any positive outcome (to the consumer) in taking the handcuffs off a monopoly. What incentive do they have to make anything better? Just raise the prices and make more money the residents of PA have no other choice. Mr. Scarnati strikes me as someone who missed his basic economics class.

Actually the problem is the monopoly. Take the handcufs off and open the state up to competition. Let the PLCB play on a level field and see who wins (hint - PA consumers).
Author phillywinefinder
Registered User
#21  Posted: Jul 24, 2011 10:42  

The fact is, PA uses the monopoly buying power to bring in lower prices on the CS wines. This is generally accepted. Dontime, do you dispute it? I have been checking the CS prices on WineSearcher.com and they are routinely the lowest available. Anyone who thinks the PA monopoly means higher prices I suggest you do the same.
Author dontime
Contributor
#22  Posted: Jul 24, 2011 11:15 | Edited by: dontime  

Yes, I do dispute the concept that PA wines are cheaper than anywhere else. You focus on the CS which is a small percentage of wines sold. You need to look elsewhere. When in Florida last week I picked up a bottle of 2009 Orwin Swift Prisoner at the local ABC store. Regular price = $29.99. Same bottle in at the monopoly store = $39.99. That's not a minor difference, that a big difference. Try the inexpensive Cupcake Char. Florida prices = $8.99 to $9.99 depending if you want the convenience of picking it up at the local grocery store. Monopoly store price = $12.99. Take the CS selections out of the mix and you'll find that PA consumer pay much more on the average than consumers with a choice.

I just did a winesearcher search for 2007 Opus One. Monopoly store price = $185. More than a dozen stores on winesearcher.com are less. Try it with a non CS selection Philly. Monopolies never result in better prices for consumers - its basic economics.
Author phillywinefinder
Registered User
#23  Posted: Jul 24, 2011 11:34  

dontime you have an odd understanding of the word "never." When I look it up in the dictionary it doesn't say, "except for Chairman's Selections."
Author jlburd
Contributor
#24  Posted: Jul 24, 2011 21:48  

Mark:
but again I'd like to see the specifics of how Turzai's proposal would "tax the hell out the vendors, suppliers, wholesalers and the customers"

See the analysis Lutchansky does at http://www.plcbusersgroup.org. It's very good for the higher end wines (and wine drinkers) but disproportionally high for value or bulk wines. In the end, that solution is great for my money but not necessarily for all or most consumers. Opening the market up to all comers means a big political risk for those in office when it comes to the lost revenue. In a totally free market (which is what I think dontime is advocating) PA might make out even better by taking a reasonable bite of the pie but as proposed it's not very feasible & not necessarily free.

phillywinefinder:
When I look it up in the dictionary it doesn't say, "except for Chairman's Selections."

Not sure what your point is but dontime was speaking of monopolies in the global economic sense. Monopolies on telephones, railroads, etc. were never good for the consumer & never resulted in better pricing. The fact that the PLCB has a great program that gives us access to hundreds of wines (some very good) at good prices doesn't change the fact that thousands more are offered at higher prices. And the lack of access to out-of-state wine only exacerbates the problem.

Privatizing will be very uncomfortable to accomplish & I'm not sure the inconvenience will offset whatever gains may come - at least in my drinking lifetime. But at the end of the day I want my state government fixing roads & doing as little as possible. It was a contortion of one of the worst pieces of governing ever done (prohibition) that got us into this situation. Perhaps it's time to get out.
Author phillywinefinder
Registered User
#25  Posted: Jul 25, 2011 08:37  

My point was that a person cannot logically claim "except for these prices, monopolies NEVER result in lower prices." Monopoly gives the seller the ability to set prices; they can be set higher or lower. Walmart, for example, is known for using its market power to lower prices.

I assume dontime probably meant that monopolies in general result in higher prices. Ok, and I agree that the non-CS wines are in general higher priced. I simply object to people claiming, as they often do, that ALL PLCB prices are higher, because it's just not true.

And it's important to realize and be aware that with privatization we would lose those lower prices on those wines. Whether or not privatization would be better overall *for wine* I don't know, but I'm pessimistic. Remember we will still have the 3 tier system. As a border dweller I'm frequently on the other side, and for every specialty shop there are a lot of stores with bad temperatures, bad prices and bad selection that *never changes.*

What the current debate in PA could use is a wine consumer advocacy group with a more nuanced position than the overly simplistic idea that if we just privatize then everything will be ok.
Author Mark
Contributor
#26  Posted: Jul 25, 2011 09:32  

Private sellers have regular sales and specials, too. Last Thanksgiving I was in Chicago saw Veuve Clicquot for was $34, $6 less than the special holiday price in PA. (Since then the price has gone up to I think $37.99, $9 less than here). That was just one of many other deals.

Don't get me wrong, I love the CS program, and I know that privatization would wipe it out and bring a lot of crappy wine stores and lots of crappy wine in grocery stores. But ignoring the rhetoric for a moment, but I haven't seen anything concrete to convince me that, on the whole, prices won't fall and selection won't expand with privatization. That said, I do fully agree with jlburd's comment "Privatizing will be very uncomfortable to accomplish & I'm not sure the inconvenience will offset whatever gains may come - at least in my drinking lifetime."

phillywinefinder:
What the current debate in PA could use is a wine consumer advocacy group with a more nuanced position than the overly simplistic idea that if we just privatize then everything will be ok.

I think perhaps that was at least part of the rationale behind the PLCB Wine Advisory Council.
Author bbgamer
Registered User
#27  Posted: Jul 25, 2011 10:01  

If it takes getting rid of the PLCB for me to have a chance to be able to buy wines directly from a small winery in Ca. then I'M all for it. I understand that that may still not be available to me but it at least opens up the possibility.. I just find it hard for a State to not allow me to buy wines from where I want if I pay taxes and the shipper only delivers to me if I show proof that I am over 21. If privatizing if the only possibility of that happening then I am all for it.
Author jlburd
Contributor
#28  Posted: Jul 25, 2011 12:12  

Mark:
I think perhaps that was at least part of the rationale behind the PLCB Wine Advisory Council.

That is correct, although nuanced isn't so much the goal as much as better-informed. Having some experience with the regional advisors I can tell you that the make-up of the group is varied & intelligent. None of that ensures that the SWAC (now renamed to include Spirits as well) will have any impact on legislation.

I feel for Mike Turzai, at least if his motive is as pure as he states. This is a tough time to take a stance on principle when any gaping revenue hole will be noticed. As I stated above my selfish preference is for the status quo. I get the wine I want here. My store has a great wine guy (at least until Sat). And more & more out-of-state establishments seem to have figured out shipping here. BUT, at the end of the day it is better for the state's residents & for the future of the whole damn country if the government does only what it is supposed to do. Selling booze just ain't on that list.
Author krim25
Registered User
#29  Posted: Jul 25, 2011 21:28  

Mark, please read plcb users group reaction to the bill. Every point I've mentioned is actually in that article.
I'm not saying I'm for against privitization. My feeling on the matter is the State Goverment is nothing but greedy. They are nothing but crooks. Look at what happened when they sold the rights to the casinos. Look at what happened when they tried to sell the turnpike. Hollywood couldn't make this stuff up. If they sell the Stores they will undoubtedly screw it up and according to the plcbusers group's reaction, it's taxed taxed and taxed.
Author Mark
Contributor
#30  Posted: Jul 26, 2011 09:07  

Thanks krim25, that's interesting.
(All, I believe the article being referenced is this one: http://plcbusersgroup.org/2011/07/a-first-look-at-hb11.html )

There's a lot of different ways to look at this. I am personally excited by the proposed 75% drop in taxes on a $43.99 bottle of wine, but there is clearly a problem with the corresponding six-fold tax increase (to a total of nearly a 100% tax) on a $12.49 5L box of wine. (Tax shift from the wealthy to the middle class?) I may not be a regular purchaser of the latter, but I do appreciate the monstrous inequity. What troubles me most however is the calculation of the one time fee to bring a new item to market. The example provided includes several assumptions, but they seem reasonable enough, with the end result being a one-time $420,000 fee just to introduce a new product. For lower-volume (niche) products it would be lower, although the way that it is calculated seems rather dubious and difficult to estimate at this point. I just don't see many distributors taking on something like that, which indeed is very troubling for the prospect of increased selection.
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