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45 state liquor stores lose money

| Wednesday, Aug. 10, 2011

HARRISBURG -- Sprinkled across small towns, many of them in Western Pennsylvania, 45 state-owned liquor stores lost money in the 2009-10 fiscal year, state records show.

They are part of Pennsylvania's monopoly on wholesale and retail alcohol stores -- 624 in all -- which brought in more than $1.8 billion in sales of wine and spirits last year, according to the state Liquor Control Board's records.

Opponents of a plan to privatize the system say consumers served by the unprofitable stores in towns from Irwin to Apollo and Perryopolis would miss out if the state closes all the outlets and auctions 1,250 private retail licenses to the highest bidders.

"For the pro state-store side, they can use the information to show that they are reaching populations where the private market might not seek to serve because of marginal profitability," said Christopher Borick, a political science professor at Muhlenberg College. "Of course, those in support of selling off the stores will argue that if the market can't support the stores by themselves, the state shouldn't be subsidizing those operations."

A hearing on Thursday in Hershey on a bill by House Majority Leader Mike Turzai to sell the stores and wholesale operations will focus on consumer issues such as price and selection.

"In the end, the best way to get products to consumers who want them is through the private sector," said Turzai, R-Bradford Woods.

The LCB data obtained by the Tribune-Review show that the losing stores weren't all rural: Two stores in Brighton Heights and Downtown and one in Philadelphia were unprofitable in 2009-10. Fifteen stores bounced back to report marginal profits in 2010-11.

Separate data the LCB provided show that the retail store with the highest sales last year was the Philadelphia store at Franklin Mills Circle, at $22.9 million. The fourth highest in retail sales statewide, $16.9 million, was on Penn Circle South in East Liberty.

In overall sales, a Philadelphia wholesale store was highest with $37.3 million. These stores sell to restaurants, bars and clubs. The Strip District wholesale store was fourth highest in all sales, at $17.6 million.

Sales at the state store in Brockway in Jefferson County -- in the district of Senate President Pro Tempore Joe Scarnati -- were significantly less. The Brockway store sold $256,500 of liquor and wine last year during 7,234 transactions.

The store lost $10,683 in 2009-10 and $12,203 in 2010-11, records show. It was one of 94 stores that sold less than $1 million of liquor and wine last year.

Scarnati, a Republican, is concerned that no one would bid on it in a private auction. He said it "might -- might -- fetch $5,000 to $10,000 as a license in the private sector."

"I base that on a restaurant liquor license in a rural area that would sell for about that as a stand-alone license," said Scarnati, a former restaurateur. "Of course, after buying the license, one would need to purchase inventory, equipment, (a) building and pay fixed overhead. Doing the math of 94 stores in that range ... not a lot of money ... assuming someone even wants to bid on them."

Under Turzai's bill, companies selling other products, from groceries to pharmaceuticals, could also sell liquor and wine.

Jay Ostrich, public affairs director for the Commonwealth Foundation, said taxpayers and consumers -- not government -- should determine the market.

"It's no surprise you see them trying to force the market where the market doesn't exist," Ostrich said. "It's a case of perpetual tone deafness."

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