Virginia distilleries ask Gov. Terry McAuliffe to pull back on plan to raise liquor prices

Economic Indicators Associated Press

More than a dozen Virginia distilleries are asking Gov. Terry McAuliffe to nix a plan to raise prices at state-owned liquor stores.

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Earlier this month, McAuliffe directed the Department of Alcoholic Beverage Control to increase liquor prices as part of a move to close a $2.4 billion budget gap, garnering concerns from consumers and industry alike.

While the $92.4 million package to address the shortfall also includes state worker layoffs and targeted budget cuts, the liquor price hike — yielding an estimated $2.5 million in the current fiscal year — may be the part that touches a broad swath of state residents most directly. The move to increase prices comes as Virginia saw record alcohol sales of $801 million in the latest fiscal year.

In a letter sent to McAuliffe on Thursday, the state's distillers said prices at the 350 state-run stores are already exorbitant. Because sales are controlled by the state, alcohol is already costly, averaging a price markup of about 69 percent. The agency said the last markup increase of 4 percent on distilled spirits occurred in February 2008.

The distillers — which include larger manufacturers like Catoctin Creek in Purcellville and A. Smith Bowman in Fredericksburg, as well as smaller distilleries such as Belle Isle Craft Spirits in Richmond — called the plan to raise prices shortsighted and a blow to the state's growing distilling industry. They also noted their products are only available in a fraction of places beer and wine are sold, and there have been 10 markups on spirits and none on beer or wine since 1980.

"We are not looking for special treatment, but we do expect fair treatment," the distillers wrote. "We simply cannot abide being singled out yet again for another tax increase."

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Virginia would be much better served by looking at expanding the number of retail outlets in which distilled spirits are available, the letter suggested.

McAuliffe spokesman Brian Coy did not immediately comment on the letter.

The agency has not yet decided how or when it will raise prices. It sought comment from vendors, suppliers and industry representatives earlier this month on several revenue-generating proposals, including increasing the fee for handling cases of liquor, raising the prices on miniature bottles and an across-the-board markup on all distilled spirits.

The Distilled Spirits Council, an alcohol industry group, has called the plan a "stealth tax on consumers" in a state with the third-highest liquor tax in the nation. And the Virginia Hospitality and Travel Association also voiced concerns over the plan, which would raise costs at the state's eating and drinking establishments.

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Michael Felberbaum can be reached at http://www.twitter.com/MLFelberbaum.