Category Archives: Privatization

OLCC Privatization Initiative Withdrawn

OLCC Privatization Initiative Withdrawn

Problems with the drafting of the initiative led to delays in obtaining a final ballot title for the preferred version of the measure.   The primary problem related to references to the word “tax.”  The Oregonians for Competition, proponents of the initiative, wanted the word “tax” replaced with the phrase “revenue replacement fee.”  The issue ended up at the Oregon Supreme Court where supporters and opponents of the measure made their arguments.  On May 30th, the Court ruled to require a rewrite.

Ultimately, proponents of the measure would not have enough time to gather the 87,213 signatures needed to qualify an initiative for the November ballot by the July 3rd deadline.  After the ruling, it would have likely taken another week or two for the Court to approve a revised ballot title.

Oregonians for Competition indicated that they plan to push for privatization in the 2015 Legislative session or on the 2016 ballot.


OLCC Privatization: The 2014 Oregon Legislative Sessions Ends With No Overhaul of the OLCC

OLCC Privatization: The 2014 Oregon Legislative Sessions Ends With No Overhaul of the OLCC.

The Oregon Legislature adjourned on Friday March 7th.  Senate Bill 1559 that proposed to “modernize” the OLCC did not even make the list of the session’s biggest issues.

The likely reason for the quiet death of SB 1559 is that Oregon lawmakers signaled early that the proposal was essentially doomed.  In short, the bill would have allowed grocery stores, drug stores, and other retail locations with more than 10,000 square feet to sell distilled spirits while preserving the OLCC’s control over the supply chain.  The bill also would have potentially provided existing liquor stores with a path to continued viability.  This compromise on liquor privatization was apparently too much of a compromise–leaving most stakeholders unhappy without enough to bring them all together.

To be fair, privatization, modernization, or whatever you want to call it will have winners and losers.  Potentially big winners and big losers.  With stakes that involve so much money and the very viability of a business model in some cases, making everyone happy will likely be impossible.  For this reason, the proponents of privatization may have a better chance at the ballot box than the legislature.

The Northwest Grocer Association has filed numerous initiatives seeking to privatize the OLCC and to allow businesses with over 10,000 square feet to sell spirits at retail.  At some point, they will select one version to qualify for the 2014 ballot.  By filing numerous versions, the Association has been able to keep its options open with the goal of building the best coalition possible to back the ballot in the fall.  The initiatives have some commonalities with Washington’s Initiative 1183, which may or may not be a good thing.





Last OLCC Retail Innovations Meeting: Privatization Will Create Winners and Losers

I attended the last of the OLCC’s Retail Innovations meetings on Friday January 24, 2014 and privatization was not surprisingly the main topic of discussion. The meeting took place just following the OLCC’s Commission Meeting at their main offices. Importantly, it was the first meeting since the Northwest Grocery Association filed the first of many initiatives to privatize the OLCC. Since the filing of the initiatives, the OLCC helped put forward a draft piece of legislation to modernize the OLCC and to be a counter to the NWGA’s many initiatives. Given the many divergent interests of the many stakeholders, almost everyone has found something that they don’t like about the proposed legislation. We can anticipate fixes in the near future. You can take a look at the draft legislation here. To learn more about the OLCC to put this into context, you can view a recent powerpoint presentation given to the Senate Business and Transportation Committee and the House Business and Labor Committee here.

An important theme for the meeting was that any changes to the OLCC, whether through legislation or initiative, would result in winners and losers. Owners of existing liquor stores may have the most to lose, but Oregon’s craft distilling industry, Oregon cities and counties dependent on OLCC revenues (and the taxpayers that benefit from their services), and certain industry members also have a lot at stake. Consumers and Oregon’s restaurants and bars may also see a price increase.

More to come …

The Northwest Grocery Association Filed Initiatives to Privatize the OLCC

We live in interesting times. Following the privatization of the Washington State Liquor Control Board in 2011/2012, many have anticipated that a similar initiative would follow in Oregon. The OLCC itself anticipated such a move and tried to provide an alternative through a Retail Innovations Task Force that it initiated. The Task Force brought together the stake holders to discuss what privatization and/or modernization would look like. As mentioned in an earlier blog, the OLCC recently asked for more time to more fully develop the concepts.

Today, the Northwest Grocery Association filed five versions of an initiative to privatize the OLCC. I will be reviewing those shortly and posting with more details in the near future.

You can access copies of the initiatives here.

The OLCC’s Retail Innovations Task Force: Initial Impressions

The OLCC’s Retail Innovations task force has been meeting since October 4, 2013. The purpose of the task force is bring the various stakeholders together to discuss how the OLCC’s retailing and distribution of distilled spirits may be changed, improved, or modernized. The group has met five times and was scheduled to meet for a sixth time on December 13, 2013. The OLCC recently postponed the meeting date for the upcoming meeting for a date to be determined in January.

The task force has selected a very complicated problem to resolve. The problem is complicated by the fact that some don’t even see a problem to be solved. The threshold question of whether the current system is broken or not can easily sidetrack discussions. That being said, the real reason that the problem is so difficult to nail down and, at times, even discuss is that there is so much at stake. There is the potential for there to be big winners and big losers, particularly from a financial perspective.

The task force has identified the following as key considerations (not necessarily in any particular order):

• Revenue stream to the state;
• Consumer access and experience;
• Public safety; and
• The interests of industry members.

OLCC Revenues. The OLCC distributed $202.6 million to the state during the fiscal year of 2012-2013, including$115.4 to the state general fund, $78.8 million to cities and counties, and $8.1 for mental health, alcoholism and drug services. The state, cities, counties and social service providers do not want their revenues to be cut and would even like a bigger slice of the pie, if possible.

Consumer Access. Oregon has fewer liquor stores per capita than other comparable states and some have suggested that the nature and quality of the retail experience at Oregon liquor stores could be enhanced. Others have suggested that a majority of Oregon consumers are happy with the status quo and are not demanding change. Washington’s ongoing experience with privatization is not a secret and many Oregonians may be reluctant to follow suit.

Public Safety. The public must be protected and any changes must not expose the public, law enforcement, or any other group to increased risk or danger. All parties agree on this issue and any major changes will likely include a renewed focus on public safety efforts, including increased financing.

Industry Members. The interests of the various industry members must also be considered. Existing industry members have all invested heavily in their Oregon operations and their investment should be considered. Any change to the current system for distributing or retailing distilled spirits will have winners or losers, at least financially speaking, particularly if state revenues must be preserved. Industry members include retail agents (the operators of liquor stores), manufacturers, wholesalers, and retailers. Even within a particular category of industry member, interests can diverge dramatically. More on this in later posts.

The pink elephant in the room is a potential initiative that would privatize the OLCC, similar to what happened in Washington with I-1183 in 2012. Many anticipate that such an initiative will appear in the near future. In addition, broad policy considerations involving the free market economy, prohibition, tied house issues, the appropriate role of the state in economic activities, and even the legalization of marijuana surface in discussions.

OLCC staff are currently working on putting together models of various alternatives to the current system and it was anticipated that they would be unveiled at the December 13th meeting. Given the complexity of the task, a delay in producing these models is not surprising.

Look for future posts about the potential alternative models and other thoughts on potential changes to the OLCC.

For more information, go to the OLCC’s website here.

Alcohol Regulatory Law: 21st Century Issues

Alcohol Regulatory Law: 21st Century Issues

I gave a presentation today to Lewis & Clark Law School’s Business Law Society on the history of alcohol regulation in the US and the issues that are relevant today. We had a lively discussion of the modernization and/or privatization of the OLCC, the role of the initiative process, public interest, financial interests and other interests in today’s alcohol regulatory environment, and how understanding the history of alcohol regulatory law helped make sense of it all. It was great to see so many bright and interested students. We have a bright future with these law students in the pipeline.

Third Retail Innovations Workgroup to Meet this Morning (October 24th) at the OLCC

The OLCC is hosting its third “Retail Innovations” workgroup meeting later this morning. The group is made up of key interest groups and stakeholders in the alcohol beverage industry in Oregon and nationally. The purpose of the group is to discuss issues broadly related to modernizing and/or privatizing the OLCC. I will be providing a more detailed review of the first three meetings over the weekend.

The agenda for today’s workgroup is here.

Industry Groups Considering the Privatization of the OLCC

Oregon grocers and convenience store owners are considering a privatization effort in response to the Commission’s announcement that it would consider applications from Oregon liquor stores to carry beer and wine.  The Commission’s decision was based in part on the success of a four store pilot program at which existing liquor stores offered beer and wine.  The Commission may also be trying to give the impression of moving forward after a challenging couple years in which controversy and turnover have marred the agency.

The Commission overseas the operation of nearly 250 privately owned liquor stores across the state.  The stores own and operate the stores, but the OLCC retains title to the distilled spirits until they are sold.  The liquor stores retain a percentage of each sale.

Any talk of privatization in Oregon sits in the shadow of Washington’s mixed results.  Sales of spirits at Oregon liquor stores near the Washington border have spiked since Washington’s privatization and Washington consumers have voiced concerns about the result.  In addition, much of the cost savings of privatization in Washington stemmed from getting state employees that worked at Washington liquor stores off the state payroll.  In Oregon, they are already are–liquor store employees are paid directly by the retail agent and operator of the store.

An privatization effort would need to be well thought out and executed to have any chance at success.  While the OLCC has had its challenges, new OLCC chairman Rob Patridge’s legislative experience and pragmatism could be just what the Commission needed.  Given this backdrop, the selection of the OLCC’s next executive director, a position vacant since Steve Pharo retired last October, could be pivotal in charting the agency’s future direction.