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Originally published Monday, October 31, 2011 at 8:02 PM

State studies bids to operate liquor warehouse

As Washingtonians vote on Costco Wholesale's liquor-privatization measure, Initiative 1183, the state is weighing bids from two companies interested in taking over its liquor-distribution business. The bidding process would end if I-1183 passes.

Seattle Times business reporter

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As Washingtonians vote on Costco Wholesale's liquor-privatization measure, Initiative 1183, the state is weighing bids from two companies interested in taking over its liquor-distribution business.

The bidding process would end if I-1183 passes.

The Legislature, looking for new revenue to help patch a hole in the state budget, last spring directed the Office of Financial Management (OFM) to seek proposals to lease the Seattle liquor-distribution center now run by the Washington State Liquor Control Board.

Two firms submitted bids, which are under wraps while the state reviews them.

Marty Brown, director of the budgeting office, will recommend Wednesday either that the state move ahead with one of the proposals or forget about the whole thing. The Liquor Control Board would have 60 days to consider a proposal OK'd by Brown.

If one of the proposals were accepted, the state would continue to order liquor, determine prices and sell it through state-run and state-contracted liquor stores. Workers at the distribution center would be offered jobs with the new operator, and their union ties would be honored.

The general election falls in the middle of this bidding process, which will come to a halt if I-1183 passes. Ballots for the all-mail election must be postmarked by next Tuesday.

Although the distribution center would be in private hands, it would be just one company doing work for the Liquor Control Board — not an open market for private companies to distribute liquor in Washington, like they do beer and wine.

It would be a fraction of the privatization I-1183 would bring, and could cost the state a lot of money over the long haul in exchange for fast cash now. I-1183 would get the state out of the liquor business, selling off state liquor stores and the distribution center, and allowing grocery stores to sell spirits.

The idea for privatizing the distribution center was pushed during the last legislative session by Washington Beverage, a company funded by the East Coast private equity firm Lindsay Goldberg and represented locally by business consultant Tom Luce, a former staffer to U.S. Rep. Norm Dicks, D-Bremerton.

The state has not disclosed what is in the current bids, but various scenarios last spring involved a company giving the state $300 million in exchange for a 20-year contract to run the distribution center.

The state would pay the company for that service, and because its general fund and local governments receive money each year from the liquor business — $416 million in fiscal 2011 — OFM estimated how much the state would lose by paying someone else to handle distribution. The budgeting office figured the net loss over 20 years would be $884 million to nearly $2 billion.

One proposal is from Washington Beverage.

The other is from Washington State Beverage Logistics, which is not in the secretary of state's database of corporations. It is not clear who is behind the company.

However, anyone who wanted to bid had to attend a tour of the distribution center in September. That group included people from Luce's organization; someone representing Costco Wholesale; Mitch Sullivan of United Warehouse; and people from two distributing companies — Young's Market of California and Odom Southern, a partnership of Bellevue-based Odom and Southern Wine and Spirits in Florida.

Those two distributors backed a 2010 liquor-privatization initiative that failed.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com

Seattle Times Olympia bureau reporter Andrew Garber contributed to this report.

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