Provincial treasury losing millions to LCBO agency store program, legislative committee told

Consultant Russ Christianson, OPSEU president Warren (Smokey) Thomas, and Liquor Board Employees Division chair Denise Davis present before the Standing Committee on Government Agencies in Trenton, Ontario on June 27, 2012.

TRENTON – At a time when the Ontario government insists that dwindling revenues have forced it to adopt austerity measures, an all-party legislative committee has been told that the LCBO could dramatically increase its dividend to the provincial treasury by repatriating privately-owned and operated agency stores.

Members of the legislative committee on government agencies learned today that Ontario could stand to gain more than $350 million over the next 10 years if the LCBO repatriated the most profitable agency stores when their contracts with the Crown agency expire.

“The numbers are staggering,” Ontario Public Service Employees Union president Warren (Smokey) Thomas told members of the committee meeting in Trenton. “From 2003 to 2007 alone, the LCBO permitted close to $1 billion in retail alcohol sales to be sold through private agency stores.

“This is nothing more that privatization through the back door. And successive Conservative and Liberal governments have gone along by giving this public money to private businesses.

Under terms of their contract with the LCBO, private owners of agency stores are paid a commission of 10 per cent on gross sales.

In its original mandate set in 1962 LCBO agency stores were designated for rural and remote communities in northern Ontario where opening an LCBO retail outlet was not feasible. The number of agency stores in this part of Ontario has remained constant over the years at about 80 locations.

Since 1996 and the failed effort by the Harris government to privatize the LCBO, however, the number of agency stores has rapidly expanded especially in southern Ontario where there are now more than 140 outlets, many bordering on large urban centres and in close proximity to existing government operated LCBO stores.

In a detailed financial analysis of agency stores presented to the legislative committee, figures show that the top 100 private outlets in southern Ontario each earn revenues of more than $700,000 annually, an amount that would easily qualify for opening a ‘real’ LCBO store featuring wide product selection, trained and professional staff and a commitment to promote social responsibility.

In 2009 these 100 privately owned-and-operated stores had combined sales of $161 million. If the LCBO brought these retail sales back to their own stand-alone outlets Ontario could benefit from an additional LCBO cash dividend of $340 to $370 million in the next decade, Thomas told the committee.

OPSEU, which represents more than 6,000 liquor board employees, has shared its financial findings on agency stores to the LCBO and they have not been challenged. The fiscal data used in the financial analysis comes from the LCBO’s own numbers.

“We hear a lot these days about austerity and about how our provincial government insists revenue streams have dried up,” said Thomas. “If this is true how is it that the Ontario government finds itself giving away millions of dollars in potential revenues instead of keeping it to pay for health care, education and other public services?”