The Alabama Alcoholic Beverage Control Board is seeking a contractor to design, build and lease the agency a warehouse that could be more than double the size of its current facility.
But at least one member of the three-person board is questioning the scope of the potential project he said could be more than $100 million.
Almost every bottle of liquor sold in Alabama flows through that Montgomery warehouse and according to the request for proposal posted on the board’s website last week, the agency’s operations have nearly doubled in the past ten years, outgrowing the 140,000-square foot warehouse space in Gunter Industrial Park.
The COVID-19 pandemic, in which alcohol sales spiked, accelerated conversations about the need for new space, said Michael Bedford, project manager on the RFP and an advisor to ABC Administrator Curtis Stewart.
“We’re to the point where we’re busting at the seams and we know that we won’t be able to supply and support the consumers in the state with this set up much longer,” Bedford told Alabama Daily News.
The current warehouse has become inefficient as sales have grown, Bedford said. For example, it only has three receiving doors for shipments.
“We have trucks backed up sometimes five or six deep down Gunter Park Drive West at 6 a.m.,” Bedford said. “It’s a safety hazard.”
State law says the ABC has to lease all its facilities. It’s been at the current warehouse and administration building site since 1982. That lease is up in 2025 and the RFP says there’s not sufficient room to grow there. The board pays $120,000 a month for the warehouse and administration building, as well as four smaller warehouse spaces it’s rented in the last decade as demand for space grew.
The RFP does not mention potential costs for a new turnkey site.
But board member John Knight told Alabama Daily News he’s been told the project could cost $80 million to $100 million to build, and he thinks it might be more, given rising construction costs.
The RFP went out Wednesday and Knight at a Thursday ABC board meeting raised concerns about it. The three-person appointed board didn’t approve the RFP, and it doesn’t need to according to state law, but Knight said more discussion is needed.
Knight is a former Democrat lawmaker from Montgomery and was once a General Fund budget chairman in the Alabama House.
“A major source of funding (to the General Fund) would be revenue from the ABC Board,” Knight said. “When you’re talking about a project that’s going to cost anywhere from $80 million to $100 million, I think you ought to take your time and make certain we’re going to be able to finance something like that.”
The mark-up on liquor in ABC stores is 35%. A $10 bottle would cost $22.33 after that mark-up, the state’s 56% liquor tax and state sales tax of 4% and a local sales tax of 2%.
That revenue supports the state’s General Fund and several other agencies, including mental health and law enforcement. In fiscal 2021, $353.8 million in profits and tax revenue, excluding sales tax revenue, was distributed from ABC to state coffers, according to the Legislative Services Agency.
Knight said his primary concern is what a more expensive lease would mean for that revenue.
“I don’t argue that we need to do some updating,” Knight said Friday afternoon. “But I’m arguing whether or not the timing is right on this based on the economic conditions that we face, based on the amount that it’s going to cost to construct this and all the entities that we fund out of (ABC), it’s based on revenue coming into the ABC board.”
The RFP says a new warehouse is needed to meet the demands of increases in alcohol consumption in the state. According to ABC, its business volume has almost doubled in the last 10 years and sales continue to grow at about 4% per year.
“This 4% annual average does not include the two-year covid average of a 10% increase in case sales in calendar years 2020 and 2021,” the RPF says.
The RFP calls for a 250,000-square-foot warehouse with expansion capabilities up to 325,000 square feet. Proposals are due Oct. 20. Bidders are required to have experience with at least five major construction projects of at least $100 million each.
The board wants to “review all options that meet criteria that support efficient and cost-effective operations. Further, the Board desires all operations of the Alabama ABC Board to be on one site.”
The board monitors more than 16,000 alcohol licenses, operates 168 ABC retail liquor stores around the state and supplies to about 700 independent liquor stores. It also conducts audits, collects taxes, and disburses tax revenue.
In fiscal 2022, ABC $520.4 million in expenditures, including $348.7 million on inventory for resale, about $50 million on employee salaries and benefits and $13.2 million on facility rentals, including stores, according to online state spending records.
The possibility of a new ABC site will likely revive questions in the Legislature about government’s role in alcohol sales. Sen. Arthur Orr, R-Decatur, said Friday that before the board enters into a long and costly lease, he’d like to see a thorough review of its retail and wholesale operations and whether private companies couldn’t handle them just as well.
Orr has previously brought legislation in multiple sessions to close ABC retail stores.
“I truly believe if we were designing state government today, we would not say, let’s get into the retail sale of alcohol and let’s compete against the private sector,” Orr said in 2021 when he had a bill to close the stores. It never got a Senate vote.
On Friday he said he wouldn’t want to change ABC’s role in enforcing laws — including preventing sales to minors — and doesn’t want to undo any of the taxes on alcohol, but he still questions why the government is the state’s liquor wholesaler.
“We’ve been doing the same model with everything coming through Montgomery since the 1950s,” he said.
Meanwhile, the number of privately owned liquor stores has grown from about 500 10 years ago to about 700 now.
“The private sector is flourishing taking care of alcohol sales,” Orr said. “Why is the state out there doing the same thing?”
Sen. Greg Albritton, R-Range, chairman of the Senate General Fund budget committee, said that when it comes to the privatization debate, he needs to be shown that altering ABC’s operations won’t hurt state revenues. So far, that hasn’t been proven, he said.
“But that doesn’t mean there’s a license to expand what we’re doing now,” he said.
Albritton also said Friday he’s getting weary of state agencies’ new construction plans. From schools and universities to new prisons and a new State House, a lot of buildings are planned.
“The idea of new capital projects is beginning to be a thorn on my side,” Albritton said. “… I’m not saying that they’re not needed, but my concern is the timing. Everyone wants to do it now.”
Albritton has been a loud voice warning that the post-COVID cash rush the state has enjoyed in recent years won’t last.
“We’re spending long-term dollars on the backside of a short-term euphoria,” Albritton said.