Thursday, June 2, 2011

The never-ending story of liquor sales

Privatization of the state’s liquor operations is not a new debate. Washington is one of 18 “control” states that has a monopoly over some aspect of the distribution and sales of liquor, and debates about whether the state should be in the liquor business is one of those issues that rears its head nearly every year. It’s a complicated issue. Arguments that privatization will save the state money are often iffy at best (stores actually returned about $370 million last year to state and local governments) and concerns about enforcement and minors having an easier time accessing liquor are difficult to resolve (Washington’s state-run stores have a compliance record that beats privately-run stores). Last November, voters rejected two competing initiatives that sought to privatize the system.

But the conversation was revived when House Ways & Means Chair Ross Hunter unveiled his budget proposal in early April. There was immediate interest in a relatively small line item that assumed $300 million of revenue from a still-fuzzy proposal to contract out the distribution and warehousing of liquor in Washington.

The idea then was that the state would receive an upfront payment of about $300 million as a kind of down payment from a not-yet-determined private entity that would manage liquor warehouse and distribution operations currently run by the state. All retail operations at both state-run and contract stores would have remained the same. But the move to a privately-run warehousing and distribution system was thought to be one way to find efficiencies and make the retail-side more responsive to customer needs. For example, restaurants could order single bottles instead of entire cases, allowing them greater flexibility to offer more brands and sizes.

Ultimately the numbers just didn’t pan out and the idea fizzled.

And then we learned that no idea ever REALLY fizzles in Olympia. In the final days of the special session, members started working on a new-ish approach. This time, it passed. The idea looks very similar to the one proposed by Hunter - the state would remain in charge of liquor sales, and the warehousing and distribution would be privatized. The difference is in process and timeline - the governor’s budget office and Liquor Control Board will work together over 120 days to conduct a competitive process to evaluate and select a private sector entity and, based on the proposals received, will be able to decide whether to accept such liquor distribution privatization deal and enter into a long-term contract. The bill details numerous requirements related to cost, efficiency and performance.

So that’s where we stand now. The process begins as soon as the Governor signs the bill. With another privatization initiative already filed that would privatize the entire system, a lot of folks will be keeping an eye on how this chapter ends and whether we can expect another sequel in November.