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Details of liquor privatization proposal leaking out
Posted by Andrew Garber
The Washington State Liquor Control Board released a document Thursday indicating a range of potential gains and losses under a proposal to privatize the state liquor distribution system.
State lawmakers for weeks have been talking about the prospect of turning over the distribution system to a private vendor in return for money upfront that could be used to save some social-service programs such as the state Basic Health Plan.
Under the proposal, the state would establish a competitive bidding process in which it would partner with a private company to handle the wholesale side of the business. The winning company would make a substantial payment to the state upfront -- to the tune of $300 million -- in return for a share of the profits from the distribution business for a set period of time.
The analysis released by the board comes from a company that would like to run the distribution system. It assumes state sales would increase 3 percent annually if the state kept the business for itself and did not partner with a company.
If the state privatized the distribution system and the vendor was able to boost sales an average of 5 percent annually over 20 years, the state would see a gain of $1.2 billion, on top of the $300 million upfront, according to the analysis.
If sales increased by only 3 percent annually, the state has the potential to lose about $1.2 billion over the same time period, compared to how much money the liquor system would have made if it did not enter into an agreement. The loss would essentially be the share of revenue owed to the vendor.
Sandeep Kaushik, a spokesman for Washington Beverage Company, which produced the analysis, said the 3 percent growth scenario is unlikely. "We believe we can improve the annual profitability of the business by at least one and very likely closer to two percent (more)," he said.
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