RD459 - Virginia Alcoholic Beverage Control Central Office & Warehouse Property Study – November 1, 2017
• Virginia ABC has outgrown the existing location. Moving is the best solution from both an operational perspective as well as financial perspective.
• ABC and DGS issued RFPs for Central Office and Distribution Center
o Office requirements according to DGS standards
o Distribution Center requirements developed with logistics consultants
• RFP was for a “turnkey” solution – ready to operate on Day 1. Proposals required:
o Building Design and Construction
o Material Handling Equipment
o Warehouse Management System
• The RFP process provides greater confidence in the cost estimates for relocating the warehouse and central office. Initial cost estimates are lower than last year’s requested budget amount.
• The private sector demonstrated a significant interest and ability to provide relocation options that came in below the original report’s requested budget number.
• DGS review determined that the RFP process produced competitive proposals and found that the proposed project costs were more favorable than if ABC project was developed using conventional capital outlay process.
• 15 companies submitted proposals, 6 companies brought forward for interviews
• Various financing options considered – Lease then purchase is likely most favorable solution
• Remaining at the existing location, whether by renovation and expansion or use of a multi-DC approach, is not a cost effective solution over the long term.
• Other state owned land does not provide as competitive a solution as private proposals due to undesirable location or difficulties locating a distribution center on the specific parcels.
• Given that net revenues from ABC operations are anticipated to be sufficient to cover the related debt service on any VPBA bonds, the ABC could request the Debt Capacity Advisory Committee to exempt from inclusion in the debt capacity model any bonds issued for this purpose.
• Approval and funding to move forward in Spring 2018 would most likely result in building occupancy in Spring/Summer of 2021.
Based upon analysis completed as part of this report, Virginia ABC and DGS share the opinion that the best course of action for Virginia ABC operations is to pursue the private sector developer options currently under consideration to relocate the Virginia ABC central office and warehouse. This approach is the most cost effective from the standpoint of utilization of state financing to achieve a new facility that will allow for further revenue growth while also achieving operational efficiencies. Such a solution will provide for the continued growth and profitability of Virginia ABC for at least 20-30 years while other options explored do not provide as long of an operational time horizon while requiring sizeable investments to achieve results not in line with the level of expenditure.
The project scope, cost, and financing information provided in this report require refinement and more detail to make a final decision on selecting a solution to relocate ABC operations. In order to obtain the necessary level of detail, Virginia ABC and DGS will proceed with next steps in the private sector developer option process undertaken as described in this report, including engaging in negotiations with developers and further short-listing the developer options. Virginia ABC and DGS will move quickly, from the date of this report, to analyze and further understand key components of the proposals in order to have a final solution for consideration during the 2018 budget and legislative session.