By Laura L. Myers
SEATTLE (Reuters) - Washington state launched an online auction on Thursday of its 167 state-run liquor stores, which are slated for privatization on June 1 under a voter-approved ballot measure.
The ballot initiative, which passed in November, changed Washington state's wine distribution laws, regulated alcohol advertising, created new franchise protections for liquor distributors and allowed grocery stores to sell liquor.
Washington is the first state since Prohibition to privatize its state-run liquor retail, purchasing and distribution system, which began in the 1930s.
The auction also is billed as the first-ever of its kind by the Washington State Liquor Control Board and includes simultaneous bidding for the individual state-controlled stores or all 167 outlets as one package.
"What's being auctioned today will allow interested parties rights to apply for a liquor license at current location," board spokesman Brian Smith said. "You're buying the right to apply for a liquor license and then purchase the right to sell at that location."
Of the state's 330 liquor stores, 167 are state-run. Another 163 are privately operated, mostly in rural locations, and not immediately impacted.
Bidders are vying for the right to operate the state's current liquor outlet locations, but will have to apply to the state separately to buy liquor licenses, Smith said.
Big-box stores and grocery stores with 10,000 square feet or more do not have to bid as a result of the new initiative that will close state-run liquor stores on May 31.
Costco, the Issaquah, Washington-based warehouse store chain, donated most of the $23 million in financial support that helped pass the measure, garnering 59 percent approval.
That support - also provided by Safeway, Trader Joe's and restaurants that would benefit from volume discounts - shattered Washington's record for the largest single-donor contribution for a state initiative.
Gross liquor sales in 2011, ending June 30, exceeded $888 million and netted about $425 million to state and local coffers, Smith said.
The state will accept bids through April 20, with staggered time deadlines, and winners will be announced on May 1.
Unions representing 1,000 state liquor store workers filed a lawsuit in Seattle's King County on December 7 to halt the plan, citing potential job losses
Liquor sales in 17 other states are government-controlled, according to the National Alcohol Beverage Control Association.
Two states, West Virginia and Iowa, have auctioned off liquor licenses, NABCA spokesman Steve Schmitt said.
Washington is not auctioning the licenses, but instead auctioning the rights to apply for a license associated with the location of a state-run store.
"Washington state is very unique in that this is the first time that this type of auction has occurred," Schmitt said.
(Editing by Dan Burns; Desking by Eric Walsh)