Politics & Government

Privatizing state liquor distribution gets hearing

Privatizing Washington's liquor control warehouse could happen after all under a bill the Senate Ways and Means Committee heard Tuesday.

A proposal to lease out the state’s liquor distribution operations first came up in the House budget in April as a way to get some quick cash to help fill the state’s budget shortfall.

Now it’s getting a second chance as a bill that would require the state to get bids from companies looking to take over its liquor distribution operations. But nobody’s counting on the idea to be a silver bullet for patching the state budget anymore.

Senate Bill 5942 requires the Office of Financial Management to take proposals from private companies to run the distribution center. It doesn’t require the state to adopt any of them, and proposals would have to show that they would provide a financial benefit to the state before they would be accepted.

It follows a provision in the initial House budget bill to privatize the distribution center for a quick $300 million that legislators could use to help address the state’s $5.3 billion budget shortfall over the coming two years.

According to an analysis of the House idea by the Office of Financial Management, though, that approach could lead to $1 billion in lost profits to the state over 20 years.

Rep. Ross Hunter, a Medina Democrat and the head budget writer in the House, said that based on the latest numbers, he didn’t think the House idea would go into a final budget, though he was still open to the Senate proposal.

The Washington Liquor Control Board oversees a liquor distribution warehouse in Seattle that is responsible for selling to all the state liquor stores and contract liquor stores in the state.

Rick Garza, deputy director of the board, said a private company would probably have a hard time running the distribution center for less than the state does already.

“We do it on par or cheaper than the private sector,” he said.

Right now, he said, running the warehouse costs about $15 million per year, and it requires about a 6 percent mark-up on liquor to pay for that. According to a state auditor’s report in 2009, privatizing the liquor distribution center would probably have a small effect on costs based on the experiences of other states that have tried the same thing.

But Washington Beverage Company representative Tom Luce said his company was poised to make a competitive bid if the state did begin accepting proposals, and he said he was confident they would be able to cut costs enough to make privatization a good deal for everyone.

“What we’re saying is give us a chance to prove to you that we are able to make improvements to the system financially,” Luce said.

Luce, who supported the House proposal to lease out the warehouse for $300 million up front, said a new proposal from his company under the Senate bill would look at ways to grow the business and cut costs long-term rather than relying on a one-time check.

Others weren’t so eager for the state to accept proposals from the private sector.

Seamus Walsh of the Washington Public Employees Association said at the hearing that he wanted to see some job protections for the state workers at the distribution center.

Others, including Holly Chisa, a lobbyist for the Northwest Grocers Association, opposed the measure because, she said, just taking proposals to privatize distribution didn’t go far enough and would shut out grocery stores from taking part in the distribution process.

“This is going from a monopoly to a monopoly,” Chisa said. “If we’re going to talk about privatization, let’s talk about privatization as a whole.”

Katie Schmidt: 360-786-1826 katie.schmidt@thenewstribune.com