Utah to Consider Privatization Models
The recent move by Washington voters to end state control of liquor sales, combined with ongoing corruption scandals within the Utah Department of Alcoholic Beverage Control, is causing Utah lawmakers to renew privatization discussions. Support appears to be growing to limit the state’s involvement in liquor sales at least to some degree.
Utah is among the minority of states that control wholesale and retail liquor sales. Several Utah state legislators have expressed an interest in privatizing the retail business. Some have also expressed interest in privatizing wholesale sales. Governor Herbert has expressed interest in retail change but appears reluctant to remove control of the wholesale system. Wholesale privatization appears less likely than retail privatization, because of a perception that state control over distribution and pricing results in fewer alcohol-related problems.
Utah currently allows some private retail alcohol sales through “package agencies.” Package agencies are located in resorts and rural areas and offer a modest selection of products. Similar to liquor licenses, package agency contracts are granted based on population with one package agency allowed per 18,000 people. Expanding the package agency system, for instance to allow grocery stores to operate liquor outlets, could act as a bridge to full privatization.
Any privatization reforms will have to clear several hurdles, including compensating for the substantial profit the state realizes from liquor sales.
TTB Rules to Expand Sonoma AVAs
On Wednesday November 16, the TTB published a ruling (T.D. TTB-97, available here) amending the federal definition of the Russian River Valley viticultural area and the Northern Sonoma viticultural area, by expanding each. The action first began in August of 2008 when Gallo Family Vineyards submitted a petition for the amendment. After receiving numerous comments both for and against, the TTB ruled to expand the Russian River Valley viticultural area south and southeast by 14,044 acres to 169,029 acres, an increase of 9%. This expansion will include land just west of Rohnert Park and Cotati.
The decision will also expand the Northern Sonoma viticultural area to include the entirety of the Russian River Valley viticultural area. The expansion will add 44,244 acres to the Northern Sonoma area, bringing its total to 394,088 acres, also an increase of 9%.
The TTB specifically noted in the ruling that the expansion will not affect currently approved wine labels but will allow winemakers in the expanded area to utilize the two viticultural designations not previously available to them.
The ruling goes into effect on December 16, 2011.
Liquor Sales to be Privatized in Washington State
Initiative Measure No. 1183 is passing by a 20% margin according to Washington Secretary of State’s 2011 General Election Results website. The same source indicates that, as of this morning, a majority of voters in only four of Washington State’s counties in the state were not definitively in favor of the measure.
A Press Release by the Washington State Liquor Control Board indicates that the agency “will continue to maximize revenue in responsible ways through the holiday season” and, in January, will focus on divesting its self of the state’s current wholesale distribution and retail operations. “By June 1, 2012, all liquor business operations - including purchasing, distribution and retail -- will be transitioned to the private sector.”
There are many unknowns that we expect to be addressed by agency rulemaking in the coming months of transition and we will be working closely with our current and future clients to help them understand how the changes affect their current business interests and strategic plans.
