Costco won't back Oregon liquor privatization this year

Costco won't back Oregon liquor privatization this year
Bottles of liquor are shown on shelves at a state-run liquor store, Wednesday, March 7, 2012, in Seattle. (AP Photo/Ted S. Warren)

SALEM, Ore. (AP) — After bankrolling an effort last year that broke a government monopoly on liquor sales in the state of Washington, Costco says it won't pay for another round.

If a similar effort comes to Idaho or Oregon this year, the big-box retailer will be a spectator, not a combatant.

"We're going to be cheering on the sidelines," said Joel Benoliel, the top lawyer for Costco Wholesale Corp.

Costco last year put up almost all of the $22 million spent in the Washington campaign to free up hard liquor sales to private businesses. Previously, it was only legal for government-run stores to sell spirits.

The campaign worked. Washington voters decided overwhelmingly to privatize liquor sales, emboldening supporters who promised to bring the fight to neighboring states. Lawmakers also took notice, promising to revisit liquor regulations that date back to Prohibition.

"Things have changed since 1930, and it would be good to have another review about what we're doing," said Oregon Republican Rep. Bill Kennemer on Friday.

Oregon's liquor laws allow the sale of packaged hard liquor only at stores run by state-licensed agents who keep a percentage of their sales. Most of the profits go to the state's general fund, totaling about $450 million last year.

Idaho has similar controls.

But liquor sales are big business, and observers think challenges are coming from those who want in.

"Even the people who like the system the way it is recognize that there's probably going to be some change one way or the other," said Oregon Democratic Rep. Chris Garrett.

The Northwest Grocery Association plans to ask lawmakers in Oregon and Idaho to open up liquor sales in 2013. And the organization likes its chances to change the laws.

"We do believe it is coming. We believe it's popular in Oregon," said Shawn Miller, an Oregon lobbyist for the grocery industry trade group.

Even so, Costco, disappointed to find itself "essentially going it alone" in funding an initiative campaign that turned into the most expensive in Washington history, is "not going to be leading the parade," Benoliel said.

With Costco out, a ballot initiative is unlikely in Oregon this year as grocery association officials say they won't be involved in such an effort. Their counterparts in Idaho have already taken that stance, but a group of political conservatives there is working on a proposal.

State officials seem to be working to get in front of such efforts.

After the Washington initiative passed, the Oregon Liquor Control Commission proposed allowing grocery chains to open "store within a store" liquor operations at some locations and allowing some liquor stores to sell beer and wine.

Grocery chains, which can sell beer and wine but not hard liquor, say that proposal doesn't go far enough.

In Idaho, Attorney General Lawrence Wasden said in February that a privatization measure proposed by the Idaho Federation of Reagan Republicans might be illegal because the constitution says such decisions are the Legislature's purview.

An Oregon House committee will spend the summer and fall looking at the issue and potentially crafting legislation to open the system, officials said. Lawmakers and industry officials said it was way too soon to know how far they'll go.

The Legislature will probably want to ensure that an expansion of liquor sales doesn't cause social consequences like increasing drunken driving or alcoholism, said Kennemer, a co-chair of the Business and Labor Committee that will look at Oregon's liquor legislation.

And lawmakers probably won't want to make changes that significantly reduce the state's revenue from liquor sales.

"I would imagine the state's going to continue to have a prominent role in the whole liquor issue," Kennemer said.