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THE RACE FOR GOVERNOR

Mitchell: Fund education with liquor profits

Democrat plans to give proposal's details today

By Susan M. Cover scover@mainetoday.com
MaineToday Media State House Writer

AUGUSTA -- Democratic gubernatorial candidate Libby Mitchell expects to announce today her education plan, which includes details of her proposal to renegotiate the state's liquor distribution agreement early to free up money for scholarship programs and other initiatives.

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Libby Mitchell

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Mitchell, the Senate president and a longtime lawmaker, is expected to go into more detail about an idea she's floated in speeches to Rotary clubs and in other forums. She has said the state should renegotiate the 10-year lease with Maine Beverage Co. early -- it's not due to expire until 2014 -- and use the money for education.

The announcement, to be held at Southern Maine Community College, also will cover her plan for expanding early childhood education, removing cost barriers to higher education and raising achievement in the K-12 system, according to the campaign.

Campaign spokesman David Loughran said he could not release any additional details about the idea to renegotiate the lease, saying Mitchell would provide that information today.

The state leased the liquor business to Maine Beverage in 2004 as a way to help balance what was then a $1.2 billion budget deficit. The state gave up profits it would have earned over the life of the lease in exchange for an upfront payment of $125 million.

The deal also includes annual supplemental payments based on a profit-sharing agreement. So far, the state has received $25 million in supplemental payments, according to the state Bureau of Alcoholic Beverages & Lottery Operations. That money goes into the state General Fund, said Department of Administrative and Financial Services Commissioner Ellen Schneiter.

Schneiter said Maine Beverage initiated discussions late last year with the hope of extending the contract. The talks, which spanned several months, did not result in any change, she said.

"It is a very valuable asset, and it's an asset that continues to appreciate," she said. "What was foremost in our minds was protecting the asset for the Maine taxpayer."

The fair market value of the business as of Jan. 1, 2009 was $378 million, according to a study of the agreement completed by the accounting firm Deloitte & Touche in March 2009.

Back in 2004, Gov. John Baldacci proposed leasing the liquor distribution business as a way to balance the budget.

At the time, the state Bureau of Alcoholic Beverages & Lottery Operations ran the system. Maine is one of 19 liquor-control states in the country, which means the state sets prices for wholesale liquor and must approve any new spirits to be sold in the state.

In Maine, the state also approves all promotions and new product introductions.

The state first awarded the contract for the distribution of liquor to Martignetti Cos. of Massachusetts in January 2004, but Maine-based companies threatened lawsuits that resulted in a new partnership among Martignetti; Pine State Trading Co., of Augusta and Lindsay Goldberg, a New York financial group that holds majority interest.

Kay Rand, a consultant for Maine Beverage Co., said the partnership is interested in renegotiating the contract with the next governor and next Legislature but did not want to comment on specific terms.

Susan Cover -- 620-7015

scover@mainetoday.com