November 3, 2011 in City

Panel rejects liquor plans

Distribution center sale not profitable for state
By The Spokesman-Review
 

OLYMPIA – It’s apparently all in or all out for Washington state’s involvement in the liquor business.

After studying two proposals to take over the state’s liquor distribution system, the Office of Financial Management is calling for a pass on both. Voters could still order that system sold, and remove the state’s involvement in wholesale and retail liquor sales, by passing Initiative 1183.

If that measure fails, the system stays as is, at least for a while.

In a letter Wednesday to the Liquor Control Board, OFM Director Marty Brown said the two proposals from private companies to take over the liquor warehousing system “do not represent ‘net positive benefit’ to the state or local governments.” Because of that, OFM officials say, state law doesn’t allow the board to accept either proposal.

Selling the state’s liquor warehouse has been a perennial idea in the Legislature, where some members believe the state should get out of some or all aspects of the liquor business and let the free market work. Opposition to state control of liquor also generated two ballot initiatives last year, which failed, and I-1183 this year.

Some budget proposals in the last session counted on revenue from the sale of the warehouse to help close the gap between expected revenues and scheduled expenses, but critics questioned whether the revenue estimates were realistic.

Before I-1183 was filed, the Legislature passed a law requiring a study of the possible financial benefits of selling or leasing the state’s warehouse and distribution system, while maintaining its retail stores. Companies were invited to submit bids, and OFM was directed to examine them and make a recommendation to the Liquor Control Board, which has ultimate authority over the state’s alcohol business.

Only two companies bid, Washington Beverage Co., LLC, and Washington State Beverage Logistics LLC. Both offered proposals that gave the state and local governments a good financial outcome under some scenarios but could cost money under other scenarios, the analysis said: “An award on either proposal … is not in the best interest of the state.”

The report comes as many voters have yet to return ballots for the general election, and selling or leasing the distribution system was seen by some as a partial step between keeping and ending the current state monopoly.

Kathryn Stenger, a spokeswoman for the Yes on I-1183 Coalition, said the OFM recommendation, coupled with Gov. Chris Gregoire’s recent budget proposals that could cut liquor revenue payments to local governments, could sway undecided voters into the yes column on the measure.

The initiative provides more revenue to the state and local governments than the two rejected proposals, she said, through licensing fees as well as the sale of the distribution system, and “is the best plan for getting the state out of the business of selling liquor.”

(Editor’s note: An earlier version of this story incorrectly quoted Stenger as saying extra revenue comes from new taxes. The initiative sets “licensing fees” on a percentage of the revenue from distribution and retail sales, and Stenger didn’t refer to them as taxes.

But Alex Fryer, spokesman for the no campaign, Protect Our Communities, said many voters probably weren’t even aware of OFM’s study of the alternatives. Those who were might conclude it shows the Legislature can come up with a process to study proposals until the best alternative for the state is found.

I-1183 went around the legislative process, Fryer said. It never had a legislative hearing, was drafted by a small group of supporters, qualified for the ballot in record time and now has $22 million campaign fund. “I think people object to that,” he said.

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