Mississippi Revenue Commissioner Chris Graham told the Legislature’s Alcoholic Beverage Control Task Force Tuesday that while the spirits warehouse has made progress with filling its backlog of orders, the holiday season will likely set those efforts back.
Graham said that the backlog was originally about 160,000 cases, but it had been reduced through added hours at the warehouse and lower demand in October to 97,000 cases. This represents about five or six days of cases to be shipped.
He also said the state is on pace to ship 4.1 million cases of wine and spirits from the warehouse in 2020 after shipping 3.5 million in 2019.
His comments were made as the Legislature gathers information about a solution to the problems with the state-owned ABC warehouse in Gluckstadt, which distributes all of the spirits and wine sold in the state.
Associate DOR commissioner Meg Bartlett said that the agency had implemented several measures to keep larger retailers from gaming the system and crowding out smaller outlets from receiving popular products, such as removing the edit function from the online order portal and limiting the number of cases available to each retailer for the first 24 hours after the ABC receives the product.
Another measure taken to keep retailers from gaming the system was to randomly select retailers and ship their entire order all at once, which would require them to pay upon delivery. Bartlett said this led to some orders being cancelled and other outlets to stop placing orders.
Mississippi is one of 17 states nationwide that are known as control states, which means government has a monopoly on wholesale distribution of at least one of the three categories of alcoholic beverages (beer, wine and spirits) and even retail, like Alabama.
Bartlett laid out the DOR’s financial analysis of the options before the Legislature.
As for upgrading the existing 220,000 square foot warehouse, Bartlett said the cost for taxpayers be $14 million for the first phase with a recurring annual cost of $2 million. This first phase would add climate control to the warehouse (limited now only to the 25,000 square foot wine room) and new package management equipment.
A second phase would cost between $20 million and $300 million for a 100,000 square foot addition to the existing warehouse.
A new warehouse would cost between $150 to $250 per square foot and a 320,000 square foot facility would cost the state between $48 million and $80 million to construct.
Outsourcing management to a concessionaire via a request for procurement would cost between $3 to $5 per case, costing taxpayer between $12 million and $20 million annually. This would come out of the $89 million in income the state receives from alcohol distribution that goes to the general fund. Another $9 million annually goes to the state Department of Mental Health.
The flip side of a concessionaire would be a savings of $4.8 million annually due to a reduction in staff. The ABC’s budget is $6 million which covers enforcement of state liquor laws and management of the warehouse.
Reducing the state’s distribution to only spirits would cost $12 million initially and $2 million annually but result in a $1.5 million in savings. Privatizing the distribution of wine would cost the state $32 million annually in revenue.
For the fiscal year that ended June 30, the DOR transferred $88.62 million in ABC collections to the general fund. That represents an increase of 9 percent compared with fiscal 2019, when $81.3 million was transferred to the general fund.
For the upcoming fiscal year (2022), the DOR is requesting $535,000 to fund operations at the warehouse.
The Legislature voted to spend $4 million in 2019 in warehouse improvements, but the bonds were never authorized. In 2013 and 2014, $1 million was appropriated for repairs and renovation at the warehouse. The last expansion was 2003, when a climate-controlled wine room was added.