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If there’s loose cash in that liquor monopoly, take it

Post by Patrick O'Callahan on April 12, 2011 at 7:34 pm with 1 Comment »
April 12, 2011 5:44 pm

This editorial will appear in Wednesday’s print edition.

Nestled in the state House of Representatives’ recently released budget is an intriguing idea: leasing out the state’s liquor wholesaling monopoly for a cool $300 million up front – plus yearly payments thereafter.

Maybe the Legislature shouldn’t be banking on that money, but it certainly ought to be looking at the proposal behind it. If there’s a downside to the leasing scheme, we’re not seeing it.

State government for many decades has exercised complete control over the wholesaling and retail sale of high-octane beverages – buying it from distilleries and other suppliers, warehousing it, distributing it to state-owned liquor stores and pocketing the cash when it is sold.

The sale of booze is not a core function of government; with proper controls, it belongs in the private sector.

Nevertheless, Washingtonians voted down two proposals to privatize liquor last November. Several lawmakers are trying to revive the idea, but the Legislature is not in the habit of saying yes after the citizens just said no.

The leasing notion is another question. The brainchild of Tacoma business consultant Tom Luce – who’d like a shot at the contract – it wouldn’t touch the liquor stores but would let a private outfit run the wholesaling operation.

The private partners would pay $300 million in the next biennium for that opportunity and continue to share profits with the state. After 20 years, control would revert to the state along with any infrastructure improvements made by the partner.

The key provision in the bill requires the successful bidder to “demonstrate to the satisfaction of the Office of Financial Management a net positive financial benefit to the state.” If no bid pencils out in the state’s favor, the state walks away.

The state would retain the retail pricing authority it now has; the private company wouldn’t be able to run up costs to consumers. The attraction to investors would lie in the chance to run the wholesale and distribution system more efficiently than the state does.

That shouldn’t be terribly hard. Government monopolies are not famous for running tight ships. There’s probably plenty of room to squeeze out profits to be shared with the public. A 25 percent improvement on the status quo could yield the state well over $1 billion over the next 20 years.

It’s the $300 million up front that makes the idea so attractive during this fiscal crisis. As the House recognized, that’s enough money to preserve health insurance for the working poor until they are covered by “Obamacare” in 2014.

Liquor in Washington is the equivalent of a state-owned oil well. People drink, so it gushes money.

Maybe government shouldn’t own the oil well, but the voters have settled that question. There’s no reason the state shouldn’t entertain private proposals to run the well and pay the public for the privilege. What’s the harm in asking for proposals?

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  1. ttown508 says:

    Pat, we didnt know you wrote this editorial. We thought more of you than agreeing to this type of grifter deal. But I guess you have certain loyalties to people like Simon and Dicks. But calling Luce a “business consultant”, come on, that must have raised some bile in your throat.

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