If you don't know, bailment is the term used by the PLCB where a product is shipped to and accepted by the PLCB's warehouse, but the ownership of the product doesn't transfer from the supplier to the wholesaler (the PLCB) until that product is actually ordered by a retailer (the PLCB again). It is used to save the wholesaler money because they are not responsible for maintaining inventory, the supplier is. The claim is that bailment reduced costs enough that the PLCB didn't have to borrow $110 million (interest free) from the General Fund to kick start their fiscal year, as they have in the past. Is that what's actually happened?
It's pretty simple to check: if you don't have to borrow and pay back $110 million, you should have $110 million more to spend or save or invest at the end of the year. So where is it?
We know it isn't being spent on inventory, since 85% of volume is in bailment, according to testimony given just last week by the Board. And we know that the amount turned into the General Fund hasn't increased by $110 million. It was $80 million in 2008 and it was $80 million in 2014. And we know that "Operating Income" hasn't increased by $110 million.
So where did that $110 million go? Operating income was $130 million in FY 2008 and only $17 million more (13%) in FY 2014 (even though gross sales were up 26% in the same time period, meaning 'profits' dropped significantly...but that's for another post). Operating expenses didn't eat it up either, the $64 million increase wouldn't account for it even if Gross Revenue didn't increase at all, which it did by $82 million. Net assets were $77 million in FY 2014 and $105 million in FY 2008 so it isn't squirreled away in assets either.
So I'm asking. Assume I'm a member of the public, your boss, supposedly — explain to me just where that $110 million went exactly? I won't think any worse of you if you say you just blew it on tasting rooms and such — it would be hard to think worse of you, honestly — but where'd the $110 million disappear to? Show me the money!
37 comments:
The answer is in your second paragraph. To simplify; if you lend met ten bucks and I pay you beck 11 I'm out a dollar. If I don't borrow I save a dollar, not 11. You're working from a fallacy again. But you know that.
Well, no. You're missing the point, which is this: I've been loaning you ten bucks every week because you can't make ends meet, you need that ten bucks to get through the week, and you've been paying back $11. But suddenly you make changes to your finances -- you stop buying crystal meth, something like that -- and you don't need the loan anymore. Your finances should show that. But they don't.
The PLCB would borrow 180 million in advance to buy alcohol. They would repay the same amount that they borrowed at some later point in time. Under bailment they no longer need to borrow 180 million but they still need to spend 180 million (+/-) to purchase alcohol under the new system. It is a wash.
The 80 million transfer is a completely different issue.
"they no longer need to borrow the 180 million but they still need to spend 180 million"
When the liquor leaves the warehouse, the PLCB has to pay the companies for it. Right? But they haven't sold it at retail yet. So they still don't have the money. So where does that money come from now, if they aren't taking the loan? Whether they pay when it arrives, or they pay when it comes out, they still have to pay before it's sold. So where's the money come from? More to the point, where does it go, if they don't need to borrow it anymore?
The state has not been paying its share of the pension and health care costs, hence the extra money and it probably goes to the new stores cost, plus oracle eats a lot of it. If you go to the fine wine and good spirits web site and find board meetings or agenda a lot of the cost of certain items come up, like shelving for the new stores or some of the old ones to, computer upgrades, wine events or chairmans tastings for the wine specialist and certain employees. I know a lot of the money went to the new upgrades for oracle and its systems, now they are trying a new system called the loop system for licensees for their orders, but as far as i know they are having problems with it now, but they are spending a lot on that.
I have no doubt that the PLCB tries to hold off making payments for pensions since that is a large sum of cash however I am not sure that the PEBTF would tolerate late payments for healthcare.
Regarding Lew's comments above I would suggest that the PLCB does not pay for alcohol at the time they take possession, but rather when they are invoiced for it which is probably 30 days out. Then if they delay payment for 45 days they can keep a float going to avoid financial problems. I would not be surprised if they are choking off payments as much as possible as well as cutting back staff to pay for stores and make ends meet.
I would be curious to know how many stores have been remodeled this year versus what had been projected?
The state does not pay for the liquor until it comes in from the back door and even then the merchandise is not payed for until it is sold. So the state waits until it is sold and pay their bills, but this will back fire on them because the profits keep shrinking.
Just to be accurate, the amount borrowed in recent years was $110 million. It used to be less than half of that if you go back to the 70's.
In any case if you borrow money it is reflected in the accounting of total net assets since it is listed as a liability. If you no longer have that liability then net assets has to increase by the amount of the now gone liability. It isn't - so where did it go?
Internal generated Oracle programming is shown as an asset and so you would see the increase in assets listed on the financial pages. Store shelving would be shown in changes in Store, Warehouse, and Transportation Costs since shelving isn't a capital asset.
The question is how does the public, who supposedly are the owners, know where these changes in liabilities went. Any straight forward factual answer is what is required - one that can be shown using the financials provided. If you know then show it, if you don't then you really can't add to the discussion at hand.
Here is the page http://www.lcb.state.pa.us/cons/groups/externalaffairs/documents/form/002084.pdf give it your best shot.
I have a question that MAY have been addressed somewhere on this blog already, but probably hasn't been: why did it take until 2010 for the PLCB to agree on a consistent name, logo, and image for its stores? If you pay close attention to the pre-2010 PLCB stores (look at the stores with the "Wine & Spirits" name, NOT the newer "FINE Wine & GOOD Spirits" name), you'll find that there are many, many differences in their physical appearances and aesthetic design. There are dozens of logo designs they use, many slight variations on the name (some add "shoppe" to the name, some are "wine" but some are "wines", etc), many different sizes of walk-in chiller, many different neon sign arrangements for the interior walls, many different ceiling/lighting patterns, many variations from store to store in level of security, etc.
While your question has been mentioned before nobody has a real answer for the incongruities of the PLCB. The current change is not scheduled to be done to all stores so there will still be multiple names throughout the system anyway. The simple answer is that they, the PLCB, doesn't want the public to remember they are all state stores no matter what they are called.
Several times over the years, I have peeked into the back room at a number of state stores. This has created a mystery. I have a question: why are there shelves full of merchandise (as in bottles stacked on shelves just like they would be in the public part of the store) in the back room?
Also, why are there large quantities of merchandise stored under the checkout counters?
Getting a bit off topic but I think I can answer to your satisfaction. When the retail shelves are stocked a full case doesn't always fit so there are leftovers that are shelved in the back to await their turn to be put out on the retail side.
Items under the registers are usually the minis half pints and pints used to restock those items which are near the registers.
I'm sure an explanation to my question will be forthcoming shortly.
As soon as hell freezes over.
Surely you're kidding. I think the first anon answer was dead on. The hundred whatever whatever dollars the Plcb didn't need to borrow is still in the general fund. You are playing a shell game on the reader(s) implying I should show up in the LCB end of year financials. This is what happens when you find a funny video clip and try to build truth around an odd sense of humor. I thought you got it when you let the thread run off topic. I thought that and the subsequent meaningless posts were cover.
I think I think I thought I thought...
So apparently you don't know anything? Just another Anonymous smear job? Keep muddying the waters.
The money is still in the general fund. Paying to keep the states business running while the budget fiasco continues. It was never borrowed. What don't you get?
To use your analogy a meth head borrows ten bucks. He buy a bunch of meth, portions it out in small packages and sells them for $15, then pays you back. He is ahead $5. The meth wholesalers begin to give him him the product on consignment. He takes the $10 worth of product, sells it for $15, pays the wholesaler, and again nets $5. The only difference is $10 didn't temporarilly disappear from your pocket. At the start of the cycle (fiscal year) you have the $10. Not the dealer. Money you can use. That is where we are at. The reader(s) get(s) it. Maybe you can post a different Charlie Sheen clip. "Winning" anyone?
"At the start of the cycle (fiscal year) you have the $10. Not the dealer. Money you can use."
That's the money we're talking about. You have the $10; you no longer have a $10 loan on the books balancing it, a $10 loan you've been floating for years. Where's the $10 go?
You know I'm not going to let you just keep saying the same thing, right?
At the end of the fiscal year, tthe loan is paid. It all adds up to zero. You can't account for zero. Eliminating the need for the loan is also zero sum. The plus is in the general fund.
Funny how things tend to flip on this blog. No worries about me repeating myself. Feeding the troll when you just ate his lunch would be just plain stupid.
It isn't if the money is in the General Fund, it is where it went in the PLCB. $110 million in liabilities is no longer on their balance sheet but liabilities didn't decrease by $110 million. You have the official PLCB page show us where the money went. That is the question that you so far haven't been able to answer.
Maybe I can make it easier for you. I'm not asking this because I don't know, I'm asking this as the average citizen who wants an explanation. If those in favor of the state stores can't easily explain where $110 million went....that says something doesn't it?
At the beginning of the 2011-12 fiscal year, the last year the loan appears on both sides of the ledger, to the most recent 2013-14report PLCB net assets have experienced a net change minus 32 million to a plus 77 million. Net gain of 109 million. Pretty amazing in just three years. Glad I dug deeper and found the good stuff, because you gave incomplete info. Bailment is still a work in progress with more vendors signing on.
Happy to hear you know the answer and are just stirring the pot. Keep up the good work. But you flatter yourself if you think anyone in Harrisburg reads this for more than laughs. With anonymous having so many personas you may have be deceiving yourself.
I don't really care if anyone in the state government or the PLCB OR the unions reads the blog. Really don't. They're not the audience, never have been. You don't get that, never have. But that's okay. It's not for you, either.
Glad to see you finally found where the money went. And it does show up, doesn't it? Even after you stamped your little feet and said it didn't. Keep on trolling, buddy.
It's obvious why this blog exists. It is an ineffective vehicle that attempts to spread disinformation. That's why this post was tagged under "cooking the books" when the author knew all along nothing was going on in the kitchen. Thanks for the entertainment, lotsa fun, hope you enjoyed getting a little attention.
Finally had to ask someone didn't you? Now both of you are wrong. However, the answer is on the page I linked, you don't have to go anywhere else. It doesn't matter if bailment is a work in progress (which it isn't at this point in time) all that matters is where the $110 million in liability went.
I didn't ask about bailment. You get to try again. Show us those math skills and why, if you can't answer this simple question, the citizens should believe anything you come up with that involves numbers and the PLCB.
You want to know something that is really amazing? Net assets were 35% higher 10 years ago in 2005.
You gotta love the folks who say 'no one reads this unimportant blog' and yet show up time and time again to comment on it.
Here's a hint: you still don't get it.
Yes the author knows what is going on while you are still looking in the window trying to figure it out - unsuccessfully. I would say I'm amazed you know so little about business but I'd be lying.
So who is right, you or Lew? This ought to be fun!
The header of the blog states it is "one mans opinion". Is that true?
You need to refresh your page, son: hasn't said "one man's opinion" for almost two years. Changed it when I stopped writing it in September 2013.
My post, my question, my answer. You really do have difficulty with the simplest of things but back to the question at hand. You have this big chance to give your own reasons why "cooking the books" might not be correct and have failed miserably. If the public had to rely on you they would never get an answer or never get one that made any sense. If you can't answer something that has already happened and published how are you going to handle questions about where that extra $185 million modernization is supposed to bring is coming from? How are you going to prove that and where are your going to get the numbers? Watching you jump around like a fish on a hook is the most amusing thing I've done recently. Keep up the poor work, I expect no less.
Regardless, the PLCB has a new 30,000 square foot store opening late this year in King of Prussia. Bye bye border bleed for me.
There's a sucker born every minute.
You're going to be really disappointed when the store turns out to be just a regular 10-12,000 sq ft one like all the other cookie cutter state stores. Certainly nothing special and nowhere hear the size you think. That's OK we are used to the state store supporters having problems with numbers. Happens all the time.
http://www.emarketplace.state.pa.us/FileDownload.aspx?file=94659/Solicitation_0.pdf
No, I'm sure it's 30,000 sq.ft.; it's PLCB policy to include the parking lot in the total.
I'll say it again: there's a sucker born every minute.
The Ardmore state store is 30,000 according to this document: http://palladinodevelopment.com/wp-content/uploads/2013/10/ARDMORE-PLAZA-BROCHURE-V2.pdf
Yet according to this PLCB press release, the store is only between 14,000 and 15,000: http://www.prnewswire.com/news-releases/pennsylvania-liquor-control-board-welcomes-former-philadelphia-phillies-pitcher-to-the-grand-opening-of-the-fine-wine--good-spirits-premium-collection-store-in-ardmore-300094286.html
What gives?
Retail space vs. retail+storage? Beats me.
I'd have to say that it is a misprint on the pdf. If you look at the space available in red it is clearly larger than the state store space and yet is listed at only 18K sq ft.
14K is probable closer to the truth especially since the PLCB claims its largest store is 17K sq ft.
Seems like a couple extra days didn't help since they STILL can't figure out the answer.
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