Get ready to shell out more for your libations

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HARRISBURG -- Get ready to pay a little more for a bottle or glass of your favorite spirits.

For the first time in 17 years, the state Liquor Control Board has decided to increase its "handling fees'' starting Jan. 4, citing higher costs for shipping, storage, transportation and marketing of its products.

Price increases will vary from product to product, but could be about $1 to $1.50 per bottle (depending on the size) on the several thousand varieties of wine and spirits sold at the 620 state-owned liquor stores, as well as higher prices for drinks by the glass at your neighborhood watering hole.

LCB chief executive officer Joseph Conti, at a state Senate committee hearing in late September, said he sees the price changes more as "readjustments'' than "increases," and said they are "both reasonable and necessary."

He told the panel, which is chaired by Sen. John Pippy, R-Moon, that it's "critical to understand that the board has not increased the [handling fees] for 17 years, despite increased operational costs and continuing upward pressure on prices from the board's [liquor] suppliers."

But Kevin Joyce, owner of The Carlton restaurant Downtown and past president of the Pennsylvania Restaurant Association, is upset at the increases, which he said many bar and restaurant owners didn't learn about until August.

He said higher drink prices mean people in the hospitality industry must either absorb the increases or anger customers by raising prices.

"Wine and spirits are 'raw materials' to bar and restaurant owners, and we already pay more for these materials than we would if we were doing business anywhere else in the world," Mr. Joyce complained.

These cost hikes, he added, come on top of "an extraordinary array of taxes and fees on wines and spirits sold in [state] stores, driving up costs that impact both licensed restaurants and the consumer public."

A national group, the Distilled Spirits Council, called the price increases "a stealth tax that will cripple Pennsylvania's struggling industry and pick the pockets of unwitting consumers."

Council vice president Frank Coleman said the LCB's decision "to jack up fees on wine and spirits amounts to taxation without representation. We urge the PLCB to roll back this measure that will only further damage the hospitality industry during the worst economy since the Great Depression."

A price rollback isn't in sight, but there is some good news, Mr. Conti said. Handling fees for some purchases, called "special liquor orders" -- most of which are specialty wines that aren't stocked in state stores -- will be reduced. Special orders, made by taverns, restaurants or individuals, can vary from a single bottle to a case or several cases.

In August, the LCB notified the Senate's Law and Justice Committee, which oversees liquor issues, of the pending fee increases, and a hearing was held Sept. 22. Mr. Pippy said last week that he knows restaurant owners "have a concern that this is a bad time to be raising prices, given this economy. I think their concerns are significant."

Mr. Conti, who is a former Republican state senator from suburban Philadelphia, told the Senate panel the fee changes were originally mentioned to the board's wine and spirits suppliers in the spring. They'd been set to take effect Oct. 1 but due to concerns from the suppliers and retailers, the hikes have been delayed until Jan. 4.

Mr. Conti said the fee increases could generate as much as $87 million in additional annual revenue for the LCB.

Mr. Joyce said it's a concern that higher prices that generate so much additional revenue can be enacted "by an unelected agency" and "without any legislative oversight." He called it "a dangerous precedent," and said he's concerned additional fee increases could come in the future.

Mr. Conti said the state liquor code gives the board authority to set alcohol prices as long as they are justified, based on the board's cost of doing business.

In the past, there have been efforts to privatize the system of selling liquor in Pennsylvania, as is done in almost every other state. But such efforts, by Republican Govs. Dick Thornburgh in the 1980s and Tom Ridge in the 1990s, went nowhere.

One reason is that the LCB turns over a hefty chunk of money each year to the state general fund to help balance the budget. For the fiscal year ending June 30, it was nearly $482 million. Other factors in maintaining the current system -- which has been in use since Prohibition ended in 1933 -- include the political clout of the state store clerks union and concerns about sales to underage buyers possibly increasing if stores are in private hands.

The current GOP governor candidate, Tom Corbett, has said he might try again to privatize the system if he is elected Tuesday. A top House Republican, Rep. Mike Turzai of Bradford Woods, said if the state faces a $5 billion budget shortfall in 2011 -- which many analysts expect -- selling off the liquor control system to private owners could close that gap without the need for tax increases.

Mr. Pippy vowed his committee will take a close look at all aspects of liquor sales in Pennsylvania after the new General Assembly session opens in January.

"We do have an antiquated system," he said. "Joe Conti and Liquor Control Board have done things to improve customer service," but all aspects of the system, including potential privatization, "have to be on the table. We will look into all of it."


Bureau Chief Tom Barnes: tbarnes@post-gazette.com or 717-787-4254.


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