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Malloy: Out-Of-State Liquor Stores 'Eating Our Lunch'

The governor wants Connecticut liquor stores to better compete with surrounding states, both for the sake of consumers and Connecticut's tax revenues. Not everyone is on board.

Flanked by cases of Budweiser, Four Loko and even Arizona Iced Tea, Gov. Dannel P. Malloy toured the sprawling headquarters in Orange.

The company serves more than 3,000 bars and stores in Fairfield, New Haven and Middlesex counties, and it's no coincidence that Malloy stopped by on Tuesday. 

In an attempt to update Connecticut's liquor laws and remove restrictions imposed by state government, Malloy talked up his plan to have Connecticut compete with surrounding states.

"They're eating our lunch," said Malloy, referencing the money lost to out-of-state alcohol sales. "They're literally eating our lunch."

Connecticut's regulation of alcohol sales would make most free-market enthusiasts shudder. Price controls make it illegal to sell alcohol below a certain price. The blue laws make it illegal for business owners to sell alcohol on Sunday except at a bar or restaurant. Other laws forbid package stores from selling snacks -- even peanuts. Currently, it’s even forbidden for one person to own more than two package stories.

Malloy wants to change all that -- and more. 

LIQUID REVENUE

Malloy's plan would allow the free market to play out (with one key exception) more than the laws currently allow. He describes the modernization plan as a good thing for consumers, with prices for a case of beer projected to drop $2-$5 and wine bottles from $2-$7. Malloy also sees the law changes as a panacea for some of the state's fiscal woes.

With Connecticut facing a $145 million deficit in 2012, alcohol sales are seen as a way to help close that gap. Officials hope to raise $8 million a year in additional revenue through the proposed law changes. A study cited by Malloy estimates that Connecticut is losing $570 million in sales.

Edward Crowley, who oversees 215 employees as president of Dichello Distrbutors, agrees with Malloy.

"The state of Connecticut wins because we keep tax revenue within our borders from sales, keeping them from our neighboring states," he said at a press conference after the tour.

MEDALLIONS NOT JUST FOR OLYMPIANS

While most of Malloy's proposed changes favor opening the market up, a medallion system that would cap the amount of alcohol sellers in the state has a different intention.

Malloy said, "As we modernize, and as we become far more pro-consumer in pricing, how do we retain value for a set of current license holders?"

His solution is a system that rewards existing liquor store owners with a medallion that provides financial incentives while potentially limiting competition. If someone else would like to open a store, they would have to purchase the medallion from someone else at a market price or else they won't be able to start the new business.

The maximum number of medallions -- which are essentially permits -- is up to the legislature to decide if they adopt the laws. As past examples in history show, there could be unintended consequences if the cap is set below the demand of consumers.

In New York City, a medallion system has been in place since the 1930s. In 2011, scarcity forced the price of a taxi medallion up to $1 million. In Washington, DC, there's an ongoing debate as to whether medallions should be issued to taxis. This is what DC's chief fiscal officer determined in a study:

There is broad consensus among economists that such restrictions allow a small group of private citizens -- those who are among the first round of recipients of medallions -- to earn windfall profits at the expense of consumers and drivers without medallions. Evidence from other jurisdictions suggests that limiting entry into a taxicab market leads to a decline in overall service.

When asked about the possibility of exhorbitantly expensive medallions, Malloy doesn't see similar issues arising in Connecticut.  He said liquor stores per capita are the highest in the country already.

"How many more liquors store do we want to have per capita than every other state?" Malloy said.

OPPOSITION FROM SMALL STORES

While Malloy's plan has the support of beer wholesalers in the state, the Connecticut Package Store Association opposes allowing liquor sales on Sunday.

"The overhead of adding hours and days increases costs to retailers making it worthless to open," the association wrote on their website. "Any revenue gain would best be described as blood money, as the public and personal unintended consequences of this proposal become known. Stores sell six days a week, 72 hours a week. If a person cannot obtain alcohol in this time, availability is not the problem."

Grocery stores, which are already open on Sundays, would be given the advantage since selling alcohol that day comes at no additional cost to them.

The organization also doubts the state's project revenue increases. To make $5 million more in taxes, the group says there would have to be an additional consumption of 5 million more gallons of beer, 300,000 bottles of wine, 100,000 bottles of spirits or a "combination of these" to generate that much revenue.

What do you think of the proposed law changes? Tell us in the comments.

Allison February 15, 2012 at 04:34 PM
So let me get this straight....prices for beer and wine will drop anywhere from $2-$7 , but he expects to make more money off the sale of liquor? Are we really that naive? I also find it hard to believe that people are spending $570 MILLION dollars a year crossing over to New York to buy booze.Thats almost $11 million a week (or on any given Sunday) The bigger stores in Connecticut on a Saturday maybe make $50,000. I wish he would cite where he gets his "studies" from....totally absurd. This is will pass, and then he will place a higher tax on all alcohol sold in the state.
Dom DeCicco February 15, 2012 at 04:43 PM
Get ready for the “Turn” folks! Get ready because the part in this movie is going to happen so fast, you might just miss it! Break out the popcorn and chips, pour the wife a glass of wine and even slide a beer for yourself if you’d like; but whatever you do, don’t take your eyes off the act because the “Turn” is coming. I’m so excited! This could be the part where something cute happens like a proposal piece that suggests that additional revenue from Sunday sales could even be used for an education fund or something.
John Ace February 15, 2012 at 05:13 PM
This is a smoke job from Malloy...This is for the big chain stores to come in and take over...Remember hardware stores, clothing stores, video stores, all gone. If the states really needs your money that bad then allow the package stores to sell peanuts. Hartford has to trim the fat up their.When malloy says, "Eating our lunch" does that mean his?
Jason Bagley (Editor) February 15, 2012 at 05:50 PM
Here are a couple comments from the Stratford Patch Facebook page: Sharron Danforth: "Six days of liquor sales seems adequate to me. If you want to drink on the weekend, take enough responsibility to purchase your booze on Friday or Saturday. A large majority of liquor store owners do not believe that the amount of revenue raised by the state from Sunday sales will justify staying open, keeping owners and employees from enjoying a full day off to spend with their families, and participating in the usual Sunday activities...church, family dinners, visits with family & friends...and just plain relaxation! "Years ago, people survived just fine when almost all stores and shops were closed on Sundays. I feel Sunday sales is catering to the few people who do not want to take any responsibility for planning ahead or to the problem drinkers in our society. I believe Gov Malloy is "off" on this issue." Chris Catalano: "Do it why loose money to NY or mass" http://www.facebook.com/StratfordPatch
Rusty Nail2 February 15, 2012 at 07:55 PM
The numbers in this article being referenced by Malloy make no financial sense at all. He makes it sound like if we sell booze on Sundays we are going to fix our budget problem? Why should this be any different when his budget numbers also make no sense and he has failed to balance the budget with the largest tax increase in state history? When does he say, this is not working? Anyone who needs any volume of liquor drives to NH for it. Need it for a party, wedding, holiday or six months of wine, get in your car. I would bet if we lowered taxes on booze below MA and NY we would bring in more revenue. The same thing can be said for diesel fuel. What trucker fills up in CT? This is just basic economics that Malloy and Democrats cannot understand. They are desperate for revenue to balance the budget and keep coming up with failed solutions like this.
Jason Bagley (Editor) February 15, 2012 at 10:14 PM
A few more Edward Goodrich: "Stop and think for a moment. Would 7 days a week drive many Liquir Stores out of business. Mobile Gas Stations tried to do 24hour service and they all left town. (Hards Corner and Paradise Green). offer something more creative, like home deliveries. That would cook their goose. Not far fetched. I understand Florida has Beer DriveThu's! Chris Lemos: "Just about every other state in the country (I think there is only one other that bans Sunday sales) seems to do just fine with allowing people to by booze on Sunday. They didnt all go out of business. We seem to do just fine allowing virtually every other consumer product made to be purchased on Sunday, all those stores didnt go out of business. "This is a left over religious law, not doing business on the Sabbath, and has no place in a society that is supposed to treat all religions or no religion equally." http://www.facebook.com/StratfordPatch
Jeffrey Melaragno February 15, 2012 at 10:59 PM
You're right on--the taxes are the issue here, not the fact that sales aren't allowed on Sundays. I don't know of anybody that doesn't buy alcohol because they can't buy it on a Sunday. I also don't know anyone who makes trips over the border to buy on a Sunday. The last time I even heard this mentioned was while in college. I do however, know some people who will purchase large amounts of alcohol on trips through New Hampshire to save money because the taxes are so much lower there. Reduce the taxes and overall revenues will increase...
Joe M February 15, 2012 at 11:00 PM
If the Connecticut Package Store Association does not want to open on Sundays let them stay closed but why should they want a law preventing other stores from opening on Sundays. Sounds more like a restriction on free trade. And why can I buy beer in Stop & Shop but not wine? July 4th fell on a Monday last year. Two days back to back on a holiday weekend I could not buy a beer from a package store or large store. Give me a break, we are so far behind other states this change is long over due.
Anthony Musto February 16, 2012 at 01:36 AM
RN2: Regarding fuel sales - this is a good example of an issue being more complex than at first blush. Connecticut and all US states (other than Hawaii) and Mexico and much of Canada are part of the International Fuel Tax Association (IFTA). All commercial truckers are required to pay taxes to the state in which they USE fuel regardless of where they buy it. So, if someone fills up in NY and drives to RI, turns around and drives back to NY, they pay the tax to CT and RI for the miles they drove there and get a refund of tax they paid in NY at the pump. The fact that they don't actually fill up in CT or RI is irrelevant. I'll discuss the liquor issues below, but please understand that many issues are complex and require additional facts before they can be easilly dismissed as bad ideas. Anthony Musto
Allison February 16, 2012 at 01:45 AM
Yet again ,you are falling into Malloy's trap....He wants everyone to get all excited for Sunday sales (Yes, lets pass that !!) but no-one seems to understand that allowing Sunday sales is the tip of the iceberg. Actually sit down and read his entire proposal that he is trying to pass. This isnt about Sundays. He is using that as a cover for his full agenda...by the time all his "changes" are implemented, we will all be driving to NY to buy our beer....
Anthony Musto February 16, 2012 at 01:58 AM
The Sunday Sales issue is problematic. The law is unquestionably antiquated. Most people can plan ahead to get beer for the Superbowl or Memorial Day. I voted against Sunday Sales last year to give the independent store owners (read "small family businesses") time to plan, and because there were still myriad restrictions on them that had to be abated before making them work an extra day and spending more money for employees and utilities. (I know, no one is "making" them open Sundays, but reality dictates being open when customers are buying.) Prohibitions on selling, for example, lemons to put in a Corona are more ridiculous than banning Sunday sales. I requested lifting such restrictions, and Malloy's bill does that. Nonetheless, I think the bill does not attack the real problem with prices: that is, it leaves the distributors largely untouched. For example, I don't see any change to the patently anti-competitive system of beer territory division. If we really want to get to the root of the problem and lower prices, we need to make the distributors compete. Further, it gives larger stores an advantage over mom&pops, and I can't sacrifice so many small businesses to the hope of increased state revenues. We need to protect, at least for the short term during a recession, small stores from being run out of business by BJs and Stop & Shop. In short, the bill does more than allow Sunday sales, but I still don't think it fixes our problems. Anthony Musto
Hal Baird February 16, 2012 at 11:59 AM
Here's another plan to drive the small businessman out of business. Does anyone really believe the mom and pop stores would be able to compete (with discounted prices) with the big supermarkets? And who in his right mind wants to increase the work week from 54 to 63 hours with no days off? This plan would lose hundreds of small liquor stores. So the revenue gains for the state would be off set by the loss of business and the subsequent unemployment benefits that the state would have to pay. In fact I see the state losing money with this plan. Governor Malloy, I hope whoever taught you math in school is no longer in the educational system because he/she did a terrible job teaching you.
Robert Chambers February 16, 2012 at 02:14 PM
If I'm anywhere near NH I'll gladly purchase what I want from their stores, the prices of their liquor is way below anything I can purchase it in CT for. Yes you have to plan ahead and no it's not worth the trip just for that but with a little forethought you can save $5 or more per BOTTLE by shopping there. Same with gas purchases. My travels take me to Mass or NJ and both places the gas is cheaper so I'll fill up to the very neck so as to avoid buying gas in CT which is among the most taxed in the nation. I'll keep every penny I can out of Malloy's hands.. the more he brings in the more he wants to spend. Cut the fat in Hartford and there's plenty of it. Get back to the business of governing without all the frilly crap that is bleeding the state coffers dry. Either you do it voluntarily or have it forced upon you when nobody will lend you money anymore. Live within your means doesn't mean tax more.. if I can't live within my means I can't go to my employer and say "I need to buy more stuff, so I need a raise" it doesn't work that way.

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