Bootlegging, debauching and murdering its way through the second season, HBO’s Prohibition-themed series “Boardwalk Empire” has dramatized an era alien to its viewers but whose vestiges have remained in much of the country.
Nineteen states are “control states” in which governments have exerted varying degrees of control over the wholesaling or retailing of alcohol since the end of Prohibition, including nine in which the state has an effective or total monopoly on retailing of alcoholic beverages above certain strengths. But last month, 60% of voters in Washington approved a ballot initiative to become a “license state.” Currently, liquor sales are limited to state-owned stores and privately owned stores with special government contracts. But starting June 1, any store with at least 10,000 sq. ft. of retail space can apply for a liquor license, and wholesaling will be privatized.
Issaquah, Wash.-based mass merchandiser Costco Wholesale became not only the initiative’s biggest backer, contributing $22.5 million of the $22.7 million total, but also the biggest single backer of a voter initiative in state history. Questioning whether Costco would get a good return on its investment, Seattle Times columnist Bruce Ramsey estimated it would take 14 years of profits for the company to recoup its donations, and the company also spent millions on a similar initiative last year that failed. But the most lasting effect could be the foundation that Costco, which could not be reached for comment, helped build for challenges to similar laws in other states, such as Oregon, which also has a ballot initiative process. “To see it go 60-40, I don’t think you’d have to duplicate that kind of fight to make it happen in Oregon,” Northwest Grocery Association president Joe Gilliam told Drug Store News.
Another factor that may temper opposition is Washington’s initiative that pitted retailers against beer and wine wholesalers, which had donated to the campaign against the measure. “Now they’re in a situation where their biggest customers were on the other side of the issue,” Gilliam said. “It’s just business, but they’ve got to rebuild those relationships.”
Supporters of privatization have said a major issue is state finances: The Washington State Liquor Control Board reported $870.77 million in liquor sales in fiscal 2010 and said it returned $425.7 million to the state’s coffers in fiscal 2011. But the WSLCB’s overhead related to retail and wholesaling was $86.61 million — a pretty penny in a state with big deficits like Washington. According to the Washington State Budget and Policy Center, a liberal think tank, privatization will increase state and local government revenues by $51 million to $63 million, though that will taper off slightly as licensing fees are reduced after 2014. Meanwhile in Iowa, which privatized liquor sales in 1987, profits on liquor increased by $125 million compared with what they would be if the state had maintained control, according to a 1999 report by the state Alcohol Beverage Division. Private retailers, Gilliam said, are better suited for the liquor business. “We’re totally designed to move cases of product,” Gilliam said. “For the state, it’s a side business.”