Thursday, June 16, 2011

Privatizing the Wrong Half of the State's Liquor System

So set 'em up, Joe. I've got a little story you ought to know.

There are two challenges to the state liquor monopoly this summer, one from an unproven private proposal, the other facing huge odds to demonstrate public support. Let's start with the one that the legislature passed, SB 5942, and which Governor Gregoire signed on Wednesday.

Down in Olympia, late one night during the special session, a couple of legislators snuck a bill into the hopper to privatize the supply side of the state's liquor business. That's right, to lease the big distribution center in SODO to a Tacoma consultant financed by a New York private equity firm.

Why'd they do that? After all, the centralized warehouse is the crown jewel in the state's antiquated liquor distribution system, the only part that's properly computerized and automated. Ah, follow the money. The consultant says he'd pay the state $300 million. That's a big piece of the amount the state needs to balance its budget.

It's not a done deal by any means. The bill, SB 5942, names no names, but it does direct the Liquor Board and the State Treasurer to investigate the possibilities of a long-term lease. But it's got an emergency clause, making it take effect immediately, with a fast track for bids and contracts, assuming the governor signs it. (The names, in case you're interested, are 33-year-old Tom Luce, a former district director for Rep. Norm Dicks, and Sandeep Kaushik, a political consultant who formerly wrote for the Stranger; the financing would come from Lindsay Goldberg, the firm that bankrolled a similar deal in Maine in 2004.)

The bill carries a clause declaring what the Seattle Times calls a "liquor emergency," though the Liquor Board takes no official position on the matter since it hasn't been signed yet. Officially, the Board's only input was to insist that the jobs of state employees be protected.

As it happens, it costs the state about $3.25 to receive, inventory, warehouse and deliver a case of booze to a state-owned or state-franchised liquor store, and it's hard to see how any private party could perform the same service for less, especially if the new operators have to protect the existing workers' jobs. A second warehouse east of the mountains would be helpful, but no outfit that provides logistics services exclusively can do much to increase its customer's business.

One is left with the feeling that there's got to be a catch somewhere.