BILL REQ. #:  S-2867.2 

Read first time 04/14/11.   Referred to Committee on Ways & Means.

     AN ACT Relating to the warehousing and distribution of spirits, including the lease and modernization of the state's spirits warehousing and distribution facilities and related operations; amending RCW 66.08.050 and 66.08.070; adding a new chapter to Title 66 RCW; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   FINDINGS. The legislature finds that it is in the public interest to seek revenue opportunities through leasing and modernizing the state's spirits warehousing and distribution facilities and related operations. The legislature finds that it is also in the public interest to conduct a competitive process to select a private sector lessee for this purpose. Nothing in this act is intended to affect the distribution or sale of beer or wine, the operation by the state of state liquor stores, or the authority of the Washington state liquor control board to oversee, manage, and enforce state liquor sales.

NEW SECTION.  Sec. 2   COMPETITIVE PROCUREMENT. (1) Within one hundred eighty days after the effective date of this section, the office of financial management, in consultation with the Washington state liquor control board and the spirits distribution advisory committee, must establish and conduct a competitive process for the selection of a private sector entity to lease and modernize the state's spirits warehousing and distribution facilities and related operations. The competitive process must assume that the Washington state liquor control board retains its existing exclusive retail spirits sales business, be designed to encourage the participation of private sector entities with previous wholesale distribution experience with a public partner excluding licensees engaged in the manufacture of alcohol or the retail sale of alcohol in the state, and be designed to encourage competition among such entities.
     (2)(a) To implement the competitive process required under subsection (1) of this section, the office of financial management must, after consultation with the Washington state liquor control board and the spirits distribution advisory committee, request proposals for:
     (i) The lease of or other contract for the entire state spirits warehousing and distribution business, including the facilities, operations, and other assets associated with the warehousing of spirits and the distribution of spirits; and
     (ii) The exclusive right to warehouse spirits and to distribute spirits in the state.
     (b) The request for proposals must include without limitation:
     (i) A requirement that proposals demonstrate to the satisfaction of the office of financial management relevant previous experience as well as the financial capacity to perform obligations under the contract;
     (ii) A requirement that proposals demonstrate to the satisfaction of the office of financial management positive financial benefit to the state over the term of the proposed lease or contract compared to current financial benefits to the state from spirits warehousing and distribution including, and taking into account without limitation, an initial up-front payment to the state during the 2011-2013 biennium and proposed profit sharing payments to the state during the lease or contract term; and projected business and occupation tax revenues generated as a result of the lease or contract. The office of financial management, in consultation with the spirits distribution advisory committee, must develop a definition and criteria on how to determine "positive financial benefit to the state";
     (iii) A requirement that the prevailing proponent deposit into an escrow account, within fifteen business days after the announcement of selection of that proposal and definitive resolution of any appeals to such selection, the full amount of the initial up-front payment offered in the proponent's response to the request for proposals, pending and subject to successful negotiation of a mutually acceptable lease or other contract;
     (iv) A requirement that proposals include a quantified commitment to invest in capital improvements to warehousing and distribution facilities and a mechanism to ensure that such investments are timely made, consistent with requirements in a mutually acceptable lease or contract;
     (v) A requirement that proposals include a commitment to assume responsibility for the costs associated with the operation of spirits warehousing and distribution;
     (vi) A requirement that proposals demonstrate to the satisfaction of the office of financial management a commitment to improved distribution including without limitation logistics and delivery improvements to improve margins, ensure regularity of deliveries to retail stores to reduce out-of-stock problems, improve service to stores located in geographically remote areas of the state, expand spirits selection, provide for bottle rather than minimum case purchasing and stocking of retail stores, if practicable, and enable electronic funds transfer of payments;
     (vii) A requirement that the variety of brands and types of spirits available to licensees, contract stores, and state liquor stores must be equal to or greater than what is being distributed by the Washington state liquor control board; and
     (viii) Measurable standards for the performance of the contract.
     (c) After consultation with the Washington state liquor control board and the spirits distribution advisory committee, the office of financial management is authorized to recommend to the Washington state liquor control board the proposal that in the determination of the office of financial management best meets the criteria required under this subsection (2), in the best interests of the state. If, in the determination of the office of financial management, there is no proposals that meet the best interest of the state, the office of financial management must notify the Washington state liquor control board to not accept any of the proposals.

NEW SECTION.  Sec. 3   CONTRACT. (1) Within sixty days after the recommendation of a proposal under section 2 of this act, the Washington state liquor control board may accept that proposal and enter into a long-term contract with that entity for the lease of the business, facilities, and assets associated with the warehousing of spirits and the distribution of spirits in the state. The contract must grant the exclusive right to distribute spirits in the state for the period of the contract. The contract must include enforceable performance standards and minimum financial returns to the state. The contract must provide a provision that allows the state to terminate the contract should specific performance standards or financial returns to the state not be realized. The contract shall provide for a reasonable termination notification process as well as financial terms of termination should termination of contract take place.
     (2) If the state receives an up-front payment of one hundred million dollars or more as a result of accepting a proposal from the procurement process in section 2 of this act, the contract must provide that the private entity place the up-front payment into irrevocable trust with the state being the beneficiary. The contract must provide that the trust be created in a manner that the state may not receive more than one-sixth of the up-front payment placed into the trust in any fiscal year.

NEW SECTION.  Sec. 4   (1) The director of the office of financial management must appoint a spirits distribution advisory committee. The purpose of the committee is to assist and make recommendations to the office of financial management and the Washington state liquor control board regarding the provisions of this act including, but not limited to, setting requirements for the competitive procurement process, selection of a private entity or recommendation that no entity be selected, and creating the terms of a contract with a selected private entity. The advisory committee's recommendations and assistance to the office of financial management and Washington state liquor control board in regards to the provisions of this act are advisory in nature and do not prohibit the office of financial management and Washington state liquor control board from performing their duties under this act as they deem fit.
     (2) The spirits distribution advisory committee is composed of the Washington state treasurer or his or her designee, a designee from each of the two largest caucuses of the senate determined by the leaders of each caucus, and a designee from each of the two largest caucuses of the house of representatives determined by the leaders of each caucus.

NEW SECTION.  Sec. 5   DEFINITIONS. For the purposes of this chapter, unless the context clearly requires otherwise:
     (1) "Spirits" has the same meaning as provided in RCW 66.04.010.
     (2) "State liquor stores" includes "stores" and "contract liquor stores" as those terms are defined in RCW 66.04.010.

Sec. 6   RCW 66.08.050 and 2005 c 151 s 3 are each amended to read as follows:
     The board, subject to the provisions of this title and the rules, shall:
     (1) Determine the localities within which state liquor stores shall be established throughout the state, and the number and situation of the stores within each locality;
     (2) Appoint in cities and towns and other communities, in which no state liquor store is located, contract liquor stores. In addition, the board may appoint, in its discretion, a manufacturer that also manufactures liquor products other than wine under a license under this title, as a contract liquor store for the purpose of sale of liquor products of its own manufacture on the licensed premises only. Such contract liquor stores shall be authorized to sell liquor under the guidelines provided by law, rule, or contract, and such contract liquor stores shall be subject to such additional rules and regulations consistent with this title as the board may require;
     (3) If a contract under section 3 of this act is not then in effect, establish all necessary warehouses for the storing and bottling, diluting and rectifying of stocks of liquors for the purposes of this title;
     (4) Provide for the leasing for periods not to exceed ten years of all premises required for the conduct of the business (other than premises subject to a lease or other contract under section 3 of this act); and for remodeling the same, and the procuring of their furnishings, fixtures, and supplies; and for obtaining options of renewal of such leases by the lessee. The terms of such leases in all other respects shall be subject to the direction of the board;
     (5) Determine the nature, form and capacity of all packages to be used for containing liquor kept for sale under this title;
     (6) Execute or cause to be executed, all contracts, papers, and documents in the name of the board, under such regulations as the board may fix;
     (7) Pay all customs, duties, excises, charges and obligations whatsoever relating to the business of the board (other than obligations assumed by the lessee through a contract under section 3 of this act);
     (8) Require bonds from all employees in the discretion of the board, and to determine the amount of fidelity bond of each such employee;
     (9) Perform services for the state lottery commission to such extent, and for such compensation, as may be mutually agreed upon between the board and the commission;
     (10) Accept and deposit into the general fund-local account and disburse, subject to appropriation, federal grants or other funds or donations from any source for the purpose of improving public awareness of the health risks associated with alcohol consumption by youth and the abuse of alcohol by adults in Washington state. The board's alcohol awareness program shall cooperate with federal and state agencies, interested organizations, and individuals to effect an active public beverage alcohol awareness program;
     (11) Perform all other matters and things, whether similar to the foregoing or not, to carry out the provisions of this title, and shall have full power to do each and every act necessary to the conduct of its business, including all buying, selling, preparation and approval of forms, and every other function of the business whatsoever, subject only to audit by the state auditor((: PROVIDED, That)). However, the board ((shall have)) has no authority to regulate the content of spoken language on licensed premises where wine and other liquors are served and where there is not a clear and present danger of disorderly conduct being provoked by such language.

Sec. 7   RCW 66.08.070 and 1985 c 226 s 2 are each amended to read as follows:
     (1) Every order for the purchase of liquor ((shall)) must be authorized by the board, and no order for liquor ((shall be)) is valid or binding unless it is so authorized and signed by the board or its authorized designee.
     (2) A duplicate of every such order ((shall)) must be kept on file in the office of the board.
     (3) All cancellations of such orders made by the board ((shall)) must be signed in the same manner and duplicates thereof kept on file in the office of the board. Nothing in this title ((shall)) may be construed as preventing the board from accepting liquor on consignment.
     (4) In the purchase of wine or malt beverages the board ((shall)) may not require, as a term or condition of purchase, any warranty or affirmation with respect to the relationship of the price charged the board to any price charged any other buyer.
     (5) This section does not apply to a contract entered into under section 3 of this act. For the purposes of this subsection, "spirits" has the same meaning as provided in RCW 66.04.010.

NEW SECTION.  Sec. 8   Sections 1 through 5 of this act constitute a new chapter in Title 66 RCW.

NEW SECTION.  Sec. 9   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.