Ore. grocery stores aim to privatize liquor sales

Ore. grocery stores aim to privatize liquor sales

Ore. grocery stores aim to privatize liquor sales

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by NIGEL DUARA Associated Press

NWCN.com

Posted on December 27, 2013 at 12:08 PM

PORTLAND, Ore. (AP) - A collection of grocery store interests is leading a push to drive government out of the liquor business, a move Oregon's liquor commission says would threaten the state's financial stability by delaying revenue collection.

Battle lines are forming along a traditional labor-business divide, with a twist.

Large private industry sees a pot of money guarded by an outmoded post-Prohibition-era bureaucracy; public-sector unions are concerned privatization would eliminate about 100 government jobs. Liquor wholesale distributors who stand to lose money are also likely to oppose privatization.

But another group could join the fray: Oregon's craft distillers. At least one of these small businesses saw its revenues tank when neighboring Washington state privatized liquor on a grocery store-funded ballot measure last year.

The political group Oregonians for Competition filed five initiative petitions with the state on behalf of the Northwest Grocery Association, which represents large grocery chains such as Fred Meyer and Safeway.

The initiatives differ modestly in specifics, but all would allow liquor sales in stores that already sell beer and wine and are at least 10,000 square feet. Existing liquor stores would be allowed to stay open, and some smaller shops like wine specialty stores would be able to sell liquor.

The group's spokesman said Thursday that privatizing liquor would be more convenient to purchasers than the present system without endangering state finances or raising the price of liquor.

"Consumers are generally concerned about the state both being the purveyor and regulator of alcohol," said spokesman Pat McCormick. "They don't see (the state) as the one that ought to be determining price and running distribution. Being in the liquor business is not something they want."

McCormick said he didn't know whether grocery chains had calculated how much they stand to make if privatization is successful.

Organized labor will oppose privatization, said Oregon American Federation of State, County and Municipal Employees political director Joe Baessler.

"We'll fight it," said Baessler. "We'll put in resources, and it won't be an insignificant amount."

The governing board of the Oregon Liquor Control Commission argues it has already taken steps to make buying liquor more convenient with a so-called hybrid plan that allows grocery stores to sell liquor but keeps the purchasing power of the OLCC behind it.

The OLCC board will bring the hybrid plan before the Legislature in February.

At present, the OLCC buys liquor in bulk for distribution to liquor stores, which pay a set price and can ask for smaller quantities of various liquors that OLCC board chairman Rob Patridge said would not be available from a private distributor.

"My stand on it is we've got a system that works that's a stable revenue source for the state," Patridge said.

Patridge argues that now, money goes directly to the state, but under the privatization proposal, the state would have to wait one month for money to reach its coffers. Such a delay would be fiscally disastrous, Patridge said.

McCormick said he's unsure whether that complaint holds water.

"Whatever logistical issues he's referring to, I'd be happy to have that conversation, but I don't know what he's talking about," McCormick said.

The OLCC works like this: The liquor commission buys in bulk from wholesale brokers or manufacturers themselves - bourbon producers in Kentucky, importers of Swedish vodka, micro-distillers on the Portland waterfront - and ships them to one of about 240 privately-owned, state-licensed liquor stores at wholesale prices set by the broker or distillery.

The OLCC then charges a 104 percent markup, some of which is divided among commissions to the liquor store and OLCC operating costs. The majority of the markup then goes to state, county and city governments, as well as treatment programs for mental health and substance abuse.

The initiative is still in its infancy, as is the fundraising behind it, but the petition to gather signatures has already made waves. On Friday, Jesse Cornett, a former policy adviser to former Secretary of State Bill Bradbury, filed an election complaint against signature-gathering campaign, saying two separate canvassers told him that convenience stores would be able to sell liquor if the initiative passes, which is not true.

Most of the Northwest has state-run liquor stores, except Washington state, where voters in 2011 approved the sale of liquor in grocery stores, along with other larger retailers.

The price of liquor originally jumped, but moderated and is now slightly higher than it was before privatization.

The move also put former Washington State Liquor Control Board agents out of work, but state revenue from spirit taxes and fees grew significantly. Oregon stores on the Washington border reported a spike in sales. The Washington state vote also brought with it a sales tax and a per-liter tax.

Patridge said small distilleries would be hit as hard in Oregon as they have been in Washington state since privatized liquor.

"This could be the nail in the coffin for craft distillers."

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