Liquor law brings inevitable change
Pullman — While Tuesday’s election revealed that Washington voters want their liquor sales privatized, the Whitman County vote was not one of overwhelming approval.
About 53 percent of Whitman County ballots supported Initiative 1183, which will effectively close down state-run liquor stores and state liquor distribution centers and open up the opportunity for grocery stores such as Walmart, Safeway and Costco to sell liquor in-store.
That means inevitable change for the county’s five liquor stores, found in Pullman, Colfax, Rosalia, Tekoa and St. John. Pullman has the only state-run liquor store. The remaining four could stay in business and in compliance with the law with some significant changes.
Rules and regulations
Currently, Washington liquor stores are either state-run stores or so-called “contract” stores, which are run by independent owners and paid on commission by the Washington State Liquor Control Board. The initiative will do away with state-run stores and state-run distribution by June 1, 2012.
Contract stores will be grandfathered in, meaning they’ll still have to obtain the new “spirits retail license” like anyone else but can remain in business within certain limits.
Brian Smith, communications director of WSLCB, said of the contract stores, “We own the inventory, so they’ll have to purchase what’s in the stores in order to keep selling it. It’s about $125,000 on average in inventory, which is going to be pretty steep for a lot of these guys.
Grocery stores already have a grocery license, which enables them to sell beer and wine, but to sell liquor they’ll need to obtain the newly created spirits retail license, Smith said. Those who obtain one under certain guidelines can begin selling liquor as soon as March 31, 2012. As of June 1, 2012, state-run liquor stores will be closed.
Creation of the new license and the opening of applications for it will happen soon, he said, so that the expected 45- to 60-day review of each new license can take place by March 31.
“We’re going to be pretty busy here soon,” Smith said.
The initiative restricts opportunities to obtain a spirits retail license to stores with at least 10,000 square feet of retail area, intentionally eliminating places such as gas stations and other convenience stores. However there are a few exceptions to that rule, Smith said, and it doesn’t apply to the contract liquor stores that will be grandfathered in.
Toni Camp, spokeswoman for the Yes on I-1183 campaign, said the stores that meet the 10,000 square foot requirement are not automatically qualified to sell liquor as of June. Grocery stores hoping to obtain a spirits retail license have to show that they have not had a public safety violation within the last two years and have been prudent about not selling beer or wine to minors.
“So just because a Safeway in Bellevue starts selling liquor doesn’t mean a Safeway somewhere else in Washington will,” Camp said.
Multiple grocery stores in the area declined to comment on whether they had plans to obtain a liquor retail license.
For the fiscal year 2011, the state returned about $514,000 from liquor sales to governments in Whitman County — $364,000 of that went to Pullman alone, and $36,000 went to Colfax.
Camp said that the initiative, in an effort to keep government revenue from liquor sales from declining, retailers will be required to pay 17 percent of their liquor sales to the state as a “licenser fee.” The initiative also requires that liquor distributors pay 10 percent of their liquor sales to the state for the first two years, and 5 percent thereafter. Those two fees, plus annual retail and distributor license renewal fees, are expected to generate an extra $10 million to be divided among towns and cities, based on the area population, Smith said.
The initiative says that a certain amount of that money must go toward local public safety enhancement programs. Camp said that money is proportioned out to counties based on what their public safety enhancement programs are already receiving.
“So obviously big counties like King will get a little more than Whitman — some may get $10,000 and some may get $2,000, but that’s $2,000 for a DARE program or something like that,” Camp said.
Each county and city is currently required to spend 2 percent of its liquor revenues on chemical dependency services, and the Office of Financial Management expects that percentage to increase, Smith said.
In terms of the cost of liquor itself, Smith said, currently the state marks the price of liquor up about 52 percent — it is expected that prices will stay at that 52 percent without much variance, but it’s possible that prices could jump as high as a 72 percent markup, as that decision is now left to the businesses themselves.
Because Costco wrote and backed the initiative with $22 million, Smith said, it “suits their business model.”
The corporation typically buys in bulk straight from the manufacturer. The initiative changes state laws that created the three-tiered “manufacturer, distributor, retailer” process and allows the “middle man” distributor to be cut out.
“We don’t know exactly what will happen to prices afterward because the free market will set that, but we know that taxes won’t change,” Smith said. “The general rule of thumb right now is that it is very likely that prices will stay the same.”