State budget director Marty Brown said that after reviewing two rival bids for taking over operation of the state’s liquor warehouse and distribution system, his Office of Financial Management recommends that both be rejected. One offered $300 million in up-front cash but posed a risk of losing money, and the other offered $150 million up-front but required liquor prices to rise.
The move, coming just a week before the Nov. 8 election, takes away the lone policy alternative to Costco’s Initiative 1183, which is aimed at dismantling the entire state-run liquor system and letting large private retailers such as Costco sell spirits.
The top-ranked bid came from the Washington Beverage Co., led by Tom Luce, a Tacoma business consultant and former aide to Congressman Norm Dicks. Sandeep Kaushik, a spokesman for the proponent, issued a statement saying the state is giving up a chance to gain as much as $1.3 billion in new revenue over a decade – and $313 million more than the Costco-backed concept would earn it over the first two years alone.
But it assumed an increase in liquor sales. If these did not increase enough, OFM said, the state could lose $603 million over 10 years.
The other proposal was from Washington State Beverage Logistics, a joint venture of Southern Wine and Spirits, which operates in 35 states, and the Odom Corp., which has corporate offices in Washington. Bobby Burg, an executive vice president for Southern based in Miramar, Fla., said there is no plan to challenge the state’s finding, and he described the state’s process as fair, treating both bidders equally.
Burg said Odom Corp. has operated in Washington for 75 years and in partnership with Southern for three, and the companies plan to continue helping the state improve its system.
It was not clear whether OFM’s decision would affect I-1183’s chances of passage.
Costco donated a state-record $22.5 million to the campaign, but it has drawn about $12 million in opposition, mostly from national and state wholesalers of alcoholic beverages. Many voters have returned ballots already, and the recent Washington Poll showed I-1183 getting support from almost half of surveyed voters.
“The developments today were part of a Legislative process,” said Alex Fryer, spokesman for the opposition campaign. “Our elected representatives have tackled issues related to liquor control in Washington, and they will continue to do so. I-1183, which began as legislation that didn’t even get a hearing in Olympia, is Costco’s solution. It benefits one company at the expense of community safety across Washington.”
Kathryn Stenger of Yes on 1183 said in a statement: “OFM has simply concluded what the YES on 1183 Coalition has been saying all along. Initiative 1183 is the best plan for getting our state out of the business of selling liquor and will provide the most benefits for Washington taxpayers.”
Stenger said I-1183 generates “$400 million in new revenue for state and local governments” over six years while protecting the current revenue stream intact for communities.
Brown sent his recommendation to the three-member state Liquor Control Board, which is not expected to act further. The three-member board chaired by Sharon Foster put out a statement saying the OFM decision “validates the efficiency of our existing distribution operations.”
Republican Sen. Joe Zarelli of Ridgefield was one of two sponsors of Senate Bill 5942, which put the liquor warehouse out for bids. Zarelli agreed with OFM’s finding, noting there is a risk of the state losing money unless prices are raised or, in the case of the Washington Beverage Co. plan, consumption is boosted.
“In the end, they were basically going to loan us some money,” Zarelli said of the proposals. “That’s not what we’re looking for.”
Washington Beverage said it plans no challenge to OFM’s analysis but said the proposal included $25 million in investments to make the distribution system more efficient.
In his letter to the board, OFM’s Brown said that both Washington State Beverage Logistics and Washington Beverage Company had “considerable credentials, experience, and capabilities.”
But Brown said that financial benefits to the state carried more weight in the evaluation and that neither proposal could assure the state it “could achieve its projected sales growth assumptions” – in effect leaving the state and local governments “with significant financial risk in future years.”
Brad Shannon: 360-753-1688 bshannon@theolympian.com www.theolympian.com/politicsblog
