Task force weighs pros and cons of lottery-liquor merger

State officials explained Friday how a merger of the Vermont Lottery Commission with the Department of Liquor Control could work.

A task force studying the merger took testimony on Friday. The six-member group was formed after lawmakers in April rejected Gov. Phil Scott’s executive order, which would have forced the merger of the two state entities. Scott has said a combined Liquor Control and Lottery Department could save money.

Sabina Haskell, chair of the Vermont Lottery Commission, said the legislative mandate for the merger is clear.

“It’s not if, it’s how,” Haskell said.

The six-member task force must draft legislation for the merger by Jan. 15. The new Department of Liquor and Lottery would be formed by July 1. The lottery commission has been without an executive director since last October when former Director Greg Smith moved to Chicago. Gov. Scott announced last month that the state’s top FBI agent Daniel Racheck, would take Smith’s place on Nov. 14.

The Lottery Commission and Department of Liquor Control are similar in some ways: both retail operations have warehouses, marketing needs and distribution models. They both raise money for the state.

The combined department would gross more than $200 million a year, with a return of about 25 percent net profit for the state. The Lottery Commission currently returns about $22.5 million a year to the state’s education fund while the Department of Liquor Control contributes $23.5 million to the general fund. The Department of Liquor Control has 55 employees, while the Lottery Commission has 21. No job losses are anticipated as a result of the merger, according to Matt Krauss, chair of the task force.

The business models for the two entities are somewhat different, according to Department of Liquor Control Commissioner Patrick Delaney, and merging the two entities creates a number of challenges, he said.

It’s unclear how much savings there would be from the merger.

The state would need to build a new warehouse to combine the two operations. Mike Ferrant, the security director for Lottery Commission, said the lottery owns a 5,000-square-foot warehouse. The facility now operates at 70 percent to 90 percent capacity, depending on the time of year, he said.

The Department of Liquor Control’s 30,000-square-foot warehouse is operating at 95 percent capacity now, said Delaney, and he expects it to grow.

“I was hired by the state of Vermont to come run the department like a business,” said Delaney, who became commissioner of the Department of Liquor Control in February 2016. “My objective is to continue growing the business.”

A combined sales system is also under consideration.

The Lottery Commission distributes lottery tickets to 650 stores while Liquor Control distributes alcohol to 80 retail outlets. Liquor Control has its own trucks delivering products while the lottery uses private carriers, like UPS.

To continue selling some of the state’s most popular lottery tickets, the Lottery Commission is required to have its own sales system, said Ferrant.

Lottery tickets can only be purchased with cash, while liquor can be purchased with cash or credit card.

Maine and Idaho are only the other states that have combined liquor and lottery agencies. The Maine Bureau of Alcoholic Beverages and Lottery Operations, established in 1992, now works with third-party contractors to run portions of both its liquor and lottery operations, including inventory management, marketing, and warehousing, said Maine Bureau of Alcoholic Beverages and Lottery Operations Director Greg Mineo, in a telephone interview Friday.

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