Washington state officials abandon two proposed bids that would have privatized liquor distribution system, saying proposals not financially beneficial

Nevin Barich

OLYMPIA, Washington , November 2, 2011 (Associated Press) – State officials abandoned two proposed bids Wednesday that would have privatized Washington's liquor distribution system, saying the proposals were not financially beneficial.

Gov. Chris Gregoire's budget director, Marty Brown, ended the bidding process by recommending that the state not accept either proposal. He said the plans could have left the state with significant financial risks.

The bidding process had been moving along parallel to a statewide initiative that voters are currently considering. Lawmakers had asked for the bids, which would have privatized liquor distribution but not the process of ordering, selling or pricing the product.

The initiative on the ballot this month, backed by Costco, would privatize the whole system while increasing revenue by tens of millions of dollars per year for state and local governments. Costco has contributed some $22 million to get the measure passed after failing with a different privatization proposal last year.

One of the bidders, the Washington Beverage Company, said it was surprised and disappointed by the decision. The company was offering the state a $300 million up-front payment, but it wasn't clear how much the state would benefit in the long term.

Under the company's assumptions, which include increased revenue growth, the state would lose about $20 million over the next decade following the initial payment. Because of planned improvements, the company claimed that the whole system will be worth more at the end of the decade -- arguing that it is essentially a $444 million benefit for the state.

And the company said that if the state decides to keep its current markup on liquor instead of lowering it as is expected, the state could bring in hundreds of millions of dollars more, according to a bid proposal released by the state.

Sandeep Kaushik, a spokesman for Washington Beverage, said the up-front commitment would have ensured that the company would meet its targets.

"The bottom line is that in making this decision the state has missed an opportunity to modernize the liquor system, improve service for consumers, preserve hundreds of jobs, and bring in substantial new revenues, all without creating any new risks to public safety," Kaushik said.

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