ABC Transition and its Impact on Revenues

January 29, 2018

The Virginia Alcoholic Beverage Control Authority (ABC) Chief Executive Officer Travis Hill recently spoke to the Senate Finance Committee’s Public Safety Subcommittee about budget priorities. ABC started transitioning from a Department to an Authority in January 2018, and many of the requests relate to reinvesting in infrastructure and streamlining and modernizing ABC’s processes.

ABC employs 1,110 full-time and 2,684 part-time employees. The number of part-time employees increased by 556 since 2013 due to the 29-hour cap in the Affordable Care Act. ABC experienced a 50 percent annual turnover rate due to the hour cap and scheduling issues. To address turnover, ABC is converting part-time employees to full-time. The conversion is working with 4 resignations out of 50 positions created last biennium. For this budget cycle, ABC requested $1.5 million to convert 25 positions.

Since last year, store openings and sales increased 4.7 percent to 370 and $172.9 million. ABC contributed $2.4 billion in profit and taxes to the Commonwealth over six years. In 2017 alone, ABC had $171.2 million in profit transfers, $154.4 million in state taxes, $43.3 million in sales tax, $36.8 million in the wine liter tax, and $42.8 in the malt beverage tax. Through sales tax revenue, ABC contributed $111 million to the general fund. Localities directly receive a portion for education, and indirectly for certain infrastructure and services.

Currently, there is $1.9 million in the budget for enforcement, funded by license fee increases. Legislation has been introduced this session – SB 884 (McDougle) increases the retail license application fee by $135, the banquet special event and mixed beverage special event license application fee by $30, and both the wine and beer shippers license by $135. In 2019, the increase is expected to bring $839,752 in revenues.

With a sales forecast increase of 4.42 percent in 2018, ABC requested $20.1 million and $54.9 million. To replace the point of sale system and hardware, ABC requested $7.7 million in both years. Here, a cost savings proposal suggested extending the service contract for existing hardware, costing an additional $2.8 million and $2.5 million. CEO Hill’s plan is to phase-in the system over a three-year period. ABC requested $1.3 million to transition to Office 365, which will create long-term cost-savings. And, ABC intends to add 57 new positions at $8.5 million to staff new and high-volume stores over two years.

ABC has several large-scale capital requests for a new warehouse and central office, and is working with the Department of General Services (DGS) for a Request for Proposal. Another cost-savings discussion will be had in the future about these proposals.

To view CEO Hill’s presentation, please click here.

VACo Contact: Khaki LaRiviere

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