Update on Utah's Privatization Process

As we previously reported, Utah is considering privatizing at least some aspects of its liquor control. On Wednesday, August 25, John Freeman, the Deputy Director of Operations for The Utah Department of Alcoholic Beverage Control (“DABC”) appeared before the Privatization Board to answer questions.

Mr. Freeman presented four reasons to maintain the status quo. First, he contended that privatization would decrease the state’s net revenue from alcohol sales. As previously reported, Utah garnered $59 million in profit and $41 million in tax receipts from liquor sales in 2009. Mr. Freeman cited the findings of the Alcohol Research Group, a California-based division of the Public Health Institute, which indicate that control states like Utah generate three times the revenue of non-control states. Members of the Board appeared reluctant to accept these findings, focusing instead on the state’s hard costs to run the liquor stores. As the Salt Lake Tribune reported, Randy Simmons, the Board’s chair, indicated that the primary question for him was whether the money spent to run the liquor stores (estimated at $21 million) could be put to better use. The Board did not discuss how the state would compensate for the millions of dollars in lost revenue, which appear to be far greater than the estimated savings.

Second, Mr. Freeman contended that private retailers would not have the same buying power the state has, and therefore, could not offer the same selection of products. Mr. Freeman specifically cited the state’s ability to stock stores with niche wines, indicating that more than 4,000 wines were available in the state. The Board questioned, however, whether the state is responsive to customer preferences. While there was some confusion among Board members as to whether privatization for both wholesale and retail aspects of alcohol sales were options, it appears that only the retail side is currently under discussion. Thus, the question of choice in products is likely moot as the state would still control selection and would maintain its current buying power.

Third, Mr. Freeman argued that consumers would pay more under privatization. As it stands, Utah marks products up by a statutorily-mandated 86%. Private retailers would need to add sufficient amounts to the price to cover their costs and be profitable. The discussion indicated that wages are one area that would likely cost private retailers more. Currently, the state legislature sets wages for store employees, which average barely above minimum wage.

Finally, Mr. Freeman argued that DABC’s primary responsibility was to ensure public safety and that any form of privatization would create more alcohol-related problems in the state. The Alcohol Research Group study supported these claims, showing that consumption rates in non-control states are higher than in control states, due in part to more outlets and longer hours. The Board questioned the study’s findings regarding alcohol-related problems in Utah, with Randy Simmons stating that he had read conflicting studies. The Board did not address whether the state would continue to mandate the number of outlets and their hours under privatization.

Because of time constraints, the session abruptly ended with both sides promising to forward on their sources and to continue the conversation regarding privatization. We will keep you updated as these issues develop.

Trackbacks (0) Links to blogs that reference this article Trackback URL
http://www.alcoholicbeverageslawblog.com/admin/trackback/219263
Comments (1) Read through and enter the discussion with the form at the end
Joshua Baron - December 13, 2010 6:11 AM

Thank you for keeping us posted. As Utah has experimented with liberalizing its liquor laws, it has been interesting to watch the effect on alcohol-related crimes. In October, the Salt Lake Tribune reported a decline in DUI arrests following the repeal of the private club law. http://www.sltrib.com/sltrib/home/50452603-76/utah-state-bars-percent.html.csp

From your summary, it looks like the ARG addressed consumption rates rather than crime or safety issues. I don't know that higher consumption directly correlates with public safety risks.

Post A Comment / Question Use this form to send a comment to the editor. Please do not include any information that you or someone else considers to be confidential in nature. Without prior establishment of an attorney-client relationship, unsolicited messages containing confidential information cannot be protected from disclosure.







Remember personal info?