Friday, May 29, 2015

How can there be "public ownership" when the public has no say?

The continuing fiasco in Clinton County.
How the PLCB looks at the citizens

At their April 8th meeting, the PLCB decided to move the State Store which has been at 137 Main Street in Lock Haven for decades to a shopping center outside of town. They didn't ask anybody in local government, or any local businesses or any of the know, those people who supposedly they work for. This has led to the Lock Haven City Council, along with Rep. Mike Hanna, the Clinton County commissioners, and Downtown Lock Haven Inc. having to fight the PLCB over who knows what is better for the community - the people that live and work there or the bureaucrats in Harrisburg.

Clinton County used to have two liquor stores, one in Lock Haven and one in Renovo. Two stores to service 900 square miles of Clinton County, until the Renovo store closed five years ago. Fear not, citizens! The PLCB has said they are "actively looking"  for a replacement spot in Renovo! So far, they've been actively looking four years, and counting. As one citizen said "If the Commonwealth of Pennsylvania wants to run the liquor business in this state, then it's the Commonwealth's responsibility to provide convenient locations for citizens to shop for liquor..."

I'm going to do my civic duty and let the PLCB know that there is an 8,100 sq. ft. property with 40 spots for parking at 112 St. Clair Street and Third St, Renovo, for lease. It was already a retail business and has a loading dock.  Explain to the citizens why you can't use it and why after all this time you haven't found out about it already.

Looking for 4 years, eh? FOUND IT!
Apparently the 75 mile round trip to the nearest state store from the outlaying areas of Clinton county fits the PLCB definition of "convenient"  Modernization won't fix that problem in Clinton county, or in Adams, Cameron, Fulton, Juniata, Mifflin, Montour, Perry, Snyder, Sullivan and Wyoming - other counties with just one store.

One of the cries of the people who for one reason or another want to keep this backward system is that in West Virginia some counties don't even have one store anymore. While that may be true, nobody in West Virginia has to drive as far as some people in Pennsylvania do - NOBODY.

The PLCB is obligated to serve all citizens of Pennsylvania. and the PLCB has failed the citizens of western Clinton County in this respect and continues to fail citizens across the state. Ask the people in Mountaintop if they were satisfied that it took two years to move a store 50 feet. Ask the citizens of Chester, a town of 45,000, if they are satisfied with their one state store. Ask the people that spend hundreds of millions out of state if they are satisfied, and ask the citizens who have consistently shown over four decades in every scientific poll that they want what most of the country thinks is a normal system over a state run system.

For 80 years the PLCB has only been concerned with itself, deciding what people should be allowed to buy, where to put stores, how many stores to have (there were over 750 at one point, there are 605 now), and when they should be open: like some overbearing, deaf deity bestowing its grace upon the unwashed masses.

The masses are getting sick and tired of it. Sick of a system that should have been done away with decades ago, sick of being told what they will be allowed to purchase by largely unknowing and incompetent overseers, sick of not having the convenience they see in other states, sick of the case law, sick of "interpretation," sick of graft and corruption, and sick of being treated like children.

The Pinchot legacy is alive and well in Pennsylvania - To make the purchase of alcohol as difficult and expensive as possible.

We are not safer, we are not better served and we are not satisfied and never will be with a state run system.


Tuesday, May 26, 2015

More fun with math and myths

"Modernization"  math
The Math:
Is there something in the water or air in this state that causes people to not be able to read and do simple arithmetic when it comes to talking about PLCB numbers? How many times have I proven Wendell W. "Haircut 100" Young IV wrong, or the PA Whine and Spiteful Council wrong, or the notoriously un-mathematical state store supporters wrong? Even Representatives like DiGirolamo and Ferlo couldn't escape. Representative Sonney, now it's your turn.

The "Save the PLCB" universe was all atwitter when a Republican (actually two, counting DiGirolamo) announced a direct shipping bill or supported the idea of a direct shipping bill. Here was the proof that modernization was what the people wanted (provided you were one of the people who got campaign contributions) and a great way to show that the PLCB was at the forefront of almost — but not quite — being consumer oriented. 

Now Rep. DiGirolamo said that his version of direct shipping would bring in an additional $25 million in use taxes (called 'profit' by the PLCB) based on additional sales of  $361 million at a 6.92% margin. These are his numbers, I just do the math.(1).

However, Rep. Sonney has a fiscal note attached to his bill with a chart right on top that shows the state will lose $13,750.000. The interesting thing is that if you read the fiscal note on page 2, Fiscal Impact, it says: "The PLCB projects that the reduction in the mark-up from 30% to 10% could reduce revenue by approximately $16,500,000 annually..."  It goes on to use completely different numbers from the chart on page one. I'm guessing that he doesn't even know this, but the point being made is that if nothing else changed but the reduction in mark-up, the state will make less.

The Myth:
But HB 189 does change other things.  Instead of 55 wineries signed up for the current system supposedly at least 300 more will join the party, which sounds like a lot...but is only about 5% of U.S. wineries. How much more direct-shipped wine will Pennsylvania citizens and businesses buy when there are 400 choices instead of 55? Rep. DiGirolamo says 5.4 times as much (2), he isn't saying where he came up with the figure.

Will the state still lose money if sales increase by over 5 times and the mark-up is only 10% on SLO's? This is the PLCB we are talking about, so nothing they do should surprise you. They shouldn't lose money, in my opinion, but never underestimate their incompetence.

So this is good for the state and the citizens, right?  Not really. It still places the PLCB as the roadblock for which items can be ordered. If the PLCB can get it, you have to order from them. As I pointed out, those 400 wineries that signed up only represent 5% of U.S. wineries. But will there really be 400 wineries that sign up? More importantly, don't expect to direct ship anything from outside the country — that isn't allowed.

HB 189:

1. Wants the wineries to pay $100 license fee.
2. Wants a list of all wines shipped to PA residents
3. Wants permission to audit the direct wine shippers' books.
4. Wants submission to the jurisdiction of the board, any other State agency and the courts of this Commonwealth for purposes of enforcement.
5. Wants to require proof of age of the recipient, in a manner or format approved by the board.
6. Wants all boxes labeled with the words "CONTAINS ALCOHOL:SIGNATURE OF PERSON 21 YEARS OF AGE OR OLDER REQUIRED FOR DELIVERY." (no other state requires this)

And it goes on. How many wineries will make special boxes just for PA? How many will submit to jurisdiction? How many residents want the government to know what and how much they ordered?  Is this really what you think of when you say direct shipment?

Will this bill change the tax code to determine what  the state uses as the definition of a nexus for tax purposes? Some companies will have no physical presence in the state and no third parties who act as agents or representatives of the remote seller who have a physical presence within the Commonwealth. This point was brought up to me by a lawyer who is sympathetic to privatization; it carries no legal weight, but is interesting to think about..

All in all, it's looking like another failed attempt to improve the consumer satisfaction when buying wine and spirits in the Commonwealth. Band-aids like Rep Sonney's HB 189 do little to fix the problem of a broken system that most think is insufficient to their needs and wants, and does nothing significant to  move the state forward to the free market system that all normal states use.


1.) $25 million divided by .0692 is $361,271,676.30
2.) Current SLO wine orders are $67 million, $361 million is 5.4 times as much

Tuesday, May 12, 2015

Revealed: How the PLCB is going to make that extra $185 million...

Well...they aren't. Nobody really believes that the "Consortium of Control States" is going to work; states just won't work together on booze sales. That puts a big hole in the total right off the bat.  Using the 6.92% profit margin for the PLCB that has been bandied about by some legislators -- which is optimistic, at best --  the state would have to sell over $1.3 Billion in additional product — an increase of over 50% — in the next two years to hit the revenue goals in "modernization." In other words, they want to take more money from you in increased sales, fees, and higher prices.(We break it down for you here.) Not exactly how most people think of "control."

The only way the PLCB "makes" more money is by taking it from YOU

Tell your legislators that is it time they did something FOR the people, and not TO the people. Free us from 80 years of incompetence, mismanagement, graft, idiocy, nepotism, and political payback by making Pennsylvania normal again. Let the state regulate, not retail. Or as some genius on the PennLive site recently commented: 

"End it, don't mend it."

Wednesday, May 6, 2015

Why PA won't lose money privatizing

There are two conflicting arguments proponents of the State Stores use to say we shouldn't privatize. The first is the old "liquor store on every corner" lie, trying to scare us with images of urban decay, and the second is that prices will go up (because you know, like how competition always makes prices go up) and selection will go down. The selection part is just laughable, since we all know what the private sector can provide. If somebody wants it, the private sector will provide it: that is just how free markets work, as shown by everything else you purchase. If you don't believe it, think about how many different candy bars and single-serving drinks the average Sheetz offers.

That leaves "but we'll have too many stores," although nobody can define what the right amount of stores are except for the free market - stores that fill customer needs will survive, and if they don't, they won't. What does that mean for the state?  It means that it will collect more license fees, more business taxes, more sales taxes, and more excise tax and of course, more people will have to be working because all those stores don't exist since they can't all be current existing stores. So according to the pro-State Store folks, using their weak logic, amounts collected have to be greater than the current amount because more is being sold at a higher price.

We know sales will go up because they have elsewhere. PA isn't going to be special in that regard.  Will they go up 44% like the favorite CDC report the UFCW uses - doubtful since they haven't anywhere else. Will they eventually get up to the national norm? Probably, if they open more stores than the relatively small amount called for in HB 466 or Senator Wagner's proposed bill.

In the only recent example of privatization of a control state, total sales in Washington went up about 15%; 8-9% internally and 7% went out of the state, the increase in border bleed. Adding 27% in new fees probably had a lot to do with the increase in border bleed, so the lesson for PA is don't do that. Let's pick a reasonable number for how much prices may go up -- say 5% -- and let's stick with a 15% increase in sales. I think that will be a little low since we will be privatizing both wine and spirits while Washington only did spirits but I'll stick with it since it is a real number. That means the total sales will be about $465 million more than they were last year, or an increase of about $116 million in just tax revenue not counting all the other stuff, or pretty much a zero net in terms of liquor revenue but a larger gain in overall economic activity.

Border bleed will probably stay close to what is is because greater convenience will cause people to buy locally and the slight price increase won't change the buying habits of too many. But then you have all the new employees working, delivering to bars and restaurants, more distributors with new warehouses, new superstores being built where none exist today. All of that adds to the economy too, and all of that is something the PLCB won't provide; can't provide.

There's a sub-argument that private stores can't survive on the wholesale and retail markup of 30% like the state stores do. Bullshit. The PLCB doesn't survive on only 30%, they currently have an effective 45.2% markup (Gross Revenue From Sales divided by COGS), and they get there with all sorts of hidden fees and charges generally unknown to the buying public while all the while saying the markup is only 30%. They lie. The 5% increase I mentioned above would move that to just over 50% and lots of businesses would love to have that or even the 45.2% effective rate the PLCB has now.

Now let's say - horror of horrors - that prices actually decline. Lower prices increase demand which means more workers are required to fill that demand, which means more product is being sold which means that more sales tax is being collected.  The excise tax collection will go up too. Lower prices will decrease border bleed as competition and convenience cause more people to buy locally; as it will be is easier and/or cheaper or both. That causes sales to rise even more. There might even be an increase in out of state buyers that come into PA to buy.  So where do we end up?  Ahead of where we are now that's for sure. Ahead in jobs, ahead in tax collection, ahead in license fees, ahead in business taxes, ahead in income taxes, ahead in paying less future pension debt, ahead in convenience and ahead in consumer satisfaction.

Don't listen to him Tim and Skip - he's talking that crazy talk!
So if all the other states surrounding us have higher prices, as numerous state store people say, then if PA prices rise we'll be normal, if prices go down and get close to what most people believe are the better prices in New Jersey and Maryland, we'll be normal. And if we get the state out of the liquor business, we'll be normal like most states.

I vote for normality, not monopoly. Dump the system and move Pennsylvania back to normal.