Study shows $16 million annually being siphoned out of Ontario revenues by privately-operated stores
Toronto (01 April 2007) - The Ontario government is losing more than $73 million a year in sales and $16 million in profits by allowing private “agency stores” to sell alcohol in small and mid-sized Ontario communities, according to an independent consultant’s report.
The loss amounts to a privatization subsidy by taxpayers for private businessmen, paid for by funds that would otherwise go to the provincial treasury and be used for public programs such as health and education.
The study was released last week by the Ontario Public Service Employees Union (OPSEU/NUPGE), which represents more than 6,000 unionized LCBO employees.
The report calculates that replacing 60 to 90 private agency stores with publicly-owned LCBO outlets would mean an additional $250 million to $340 million in net provincial government revenue over the next 10 years.
“The agency store program was started in the 1960s to serve small northern communities that couldn’t support a real LCBO outlet,” says OPSEU president Leah Casselman.
“But in the last four years the government and the LCBO have doubled the number of agency stores. About two-thirds of the 199 agency stores are now located in southern Ontario and almost half are in communities that could easily support a profitable LCBO store.”
Shortchanging local communities
Agency stores are private businesses licenced to sell alcohol in grocery stores, convenience stores and other retail outlets in communities approved by the provincial government. In May 2006, the McGuinty government announced plans to open another 20 agency stores, all in southern Ontario.
There are 89 agency stores with annual sales between $575,000 and $3.3 million that could each be replaced with real LCBO outlets while generating increased public revenue, the study found.
“In addition to costing the province millions in lost revenue each year, these private agency stores are short-changing local communities,” says Jo Ann Fisher, chair of OPSEU’s Liquor Board Employees Division. “Real LCBO stores provide better service and selection. They reduce the risk of illegal sales to minors and intoxicated customers. They also provide a bigger boost to the local economy.”
Opening new LCBO outlets would inject an average of $142,000 a year into the local economy of each community in wages, rent, property taxes and other expenditures, plus another $280,000 to $420,000 in spin-off economic activity, according to the report.
The study LCBO Agency Store Repatriation: A Financial Analysis was prepared by independent business consultant Russ Christianson based on agency stores sales data provided by the LCBO. NUPGE