Privatize liquor in Oregon? Why would we be that foolish?

Jesse Cornett

Will Costco and the Northwest Grocers Association spend $15 million in Oregon to dismantle one of Oregon’s most effective, revenue-generating agencies? It seems they may be on that path. This weekend, the Salem Statesman-Journal published the latest in what have been many articles on the topic of privatizing liquor sales in Oregon. This week, the legislature held hearings on the topic.

Currently all liquor sold in Oregon is warehoused and distributed through the Oregon Liquor Control Commission (OLCC). The only retail outlets here operate almost exclusively as agents of the state selling only liquor. This model is, however, changing to allow some stores who sell liquor to also sell beer and wine. It may sound like an odd system, but one that works extraordinarily well.

As a young politico and even as proud liberal, I thought for the longest time that Oregon’s system had little merit. The state could relinquish distribution of liquor and still earn as much in tax revenue as they did from direct sales. It sounded great. The argument that perhaps most resonated with me from a public policy perspective is that not only does OLCC sell all the liquor in the state but they also police it. These functions seem to be at odds with each other. Alas, since there have been no cases cited where a problem has arisen as a result of this arrangement, I think it is safe to dismiss this argument as a red herring.

Over time, I have become convinced that a move to privatize liquor in Oregon would be a mistake. Here's why...

First, as a one-time pub owner, I learned there was no product that I could buy more conveniently for my business than liquor. Second, Washington State, who had a very similar model to ours, voted to privatize in 2011 and it has been a quagmire.

Bar and tavern owners obtain their liquor almost the same way that anyone in Oregon does: they buy it from a liquor store. It comes with a small discount and can include delivery. When I called in my order, they would ask when I wanted it. Right away? Sure. See you in 30 minutes. At a certain time? Great, we’ll see you then. Run out of a particular product late in their hours? Just pop by. Call on your way and it’s sitting at the counter waiting for you. The system works exceptionally well for Oregon’s pub, bar and restaurant owners. Obtaining liquor was much more convenient than any other product.

The State of Washington had a similar system until a 2011 ballot measure. When they privatized liquor, the price to consumers skyrocketed. In addition to state taxes, a retailer and distributor each have their fingers in the pot, getting their cut. The chief proponent of this idea in Washington and now Oregon is Joe Gilliam, head of the Northwest Grocery Association, who himself now admits that prices are too high because his ballot measure allows a middle man to take a 30% cut.

The price stores pay varies in Washington and as result, the amount the consumer pays fluctuates. Instead of having a fixed wholesale price, as we have in Oregon with liquor, beer and wine, Costco can use their size to bully distributors into giving them a price break, while smaller mom and pops end up paying a premium to make up for it.

Since Gilliam’s Grocery Association and Costco are big business, you can bet your bottom dollar your neighborhood store would have to pay more for liquor and as a result charge you more. But they’ll probably prohibit smaller stores from having liquor at all, because that’s business Costco wouldn’t get.

When we are trying harder than ever as a society to discourage minors from drinking, the shoplifting rate of liquor in Washington is downright alarming, and we only know part of that problem. That the state laid off 1000 employees, half of whom are still looking for work, while allowing private distributors to hire low-skill, low-wage replacements is a travesty.

We have a system in Oregon that works well and keeps liquor affordable for consumers. In addition to every downside seen in Washington, there are additional concerns about privatizing in Oregon. It would would endanger the craft distilling industry that has developed here. In all likelihood, revenue for the state would drop if we privatized. So, why would we be foolish enough to try this?

By Jesse Cornett Sept. 18, 2013