Questions about liquor initiative focus on state revenue, availability
Readers sent questions Wednesday about a Costco-backed voter initiative on the November ballot that would privatize the state's liquor business...
Seattle Times business reporter
Readers sent questions Wednesday about a Costco-backed voter initiative on the November ballot that would privatize the state's liquor business. Here's an edited version of our question-and-answer session on Initiative 1183:
Q: What's the long-term outlook for state and local government revenues? And, is there a drop when distributor fees fall from 10 percent to 5 percent after two years?
A: The state's budgeting office gave six years of projected revenues if I-1183 passed. They're all on top of money already generated by the state's liquor business, which in fiscal 2011 sent $345 million to the state's general fund and $71 million to cities and counties.
The first year under I-1183 would bring the least extra revenue, partly because it includes the cost of liquidating the state's liquor business.
The next two years would bring the most extra revenue, largely because distributors would pay the 10 percent fees during those years and, if those fees did not total $150 million by early 2013, distributors would have to make up the difference.
The last three years projected by the budgeting office include the ongoing 5 percent in distributor fees and reflect most closely what revenues would look like going forward. For those years the additional liquor income is estimated at $35.2 million to $42.3 million a year for the state, and $25.5 million to $35.8 million a year for local governments.
Q:: Would the state sell its real-estate holdings? If so, where would those dollars go?
A: The state doesn't own the buildings where it has liquor stores. It leases that space. It would sell a liquor-distribution center in Seattle, which is valued at $28.4 million.
Q: How will craft distilleries be affected?
A: Craft distillers are worried. They've done the math and figure that their prices would probably go up quite a bit if I-1183 passes. That hurts their ability to compete with big brands, a problem they don't have with the current, state-run system.
Q: The No on I-1183 people keep hammering that thousands of minimarts will sell hard liquor. Is that true?
A: We investigated that claim and found it mostly false. While I-1183 includes a provision for small stores to sell liquor in underserved areas, it could be zero at first if the Liquor Control Board defined "trade areas" as places where it has liquor stores now.
Q: Why are distributor fees 10 percent for the first two years, then 5 percent? Is the $150 million minimum required per year?
A: The $150 million in distributor fees is a one-time minimum to be paid/made whole in early 2013. Yes campaign spokeswoman Kathryn Stenger said, "The distributor fees grew out of discussions with representatives of major distributors who were at the table and involved during the legislative session and had input into the drafting of Initiative 1183.
"This represents an estimate for the first two years' distributors' fees and the provision for the payment of fees upfront was included to help provide short-term relief for immediate state budget concerns." It's 10 percent initially as a cost for entering the marketplace, she said.
Q: Would purchases of liquor be subject to retail sales tax under I-1183?
A: No. Liquor has its own sales tax of 20.5 percent. There would not be a local 9.5 percent retail sales tax (in Seattle) on top of that. Wine and beer would continue to be subject to retail-sales tax, a Liquor Control Board spokesman said.
Q: I like finding specialty products and supporting local Washington wines. By my reading, this measure will destroy both; grocery stores would only carry the highest-return products (cheap brand-names), and would make it difficult for local wineries to compete with high-volume sellers.
A: It's not clear that those businesses would be destroyed. The folks who own Dry Fly Distilling in Spokane say they'd find a way to stay in business, even if it meant borrowing money to start distributing their liquor themselves. But small distilleries and many small wineries are worried that I-1183 tilts the market toward big players who can sell at lower prices.
Q: Many have asked if increased availability of liquor will increase crime rates? Is there any evidence that supports that?
A: There's no clear answer. A task force appointed by the Centers for Disease Control says privatizing alcohol leads to greater abuse and related problems. But it looked mostly at wine privatization. Liquor use in California is the same or less than in Washington, even though California has far more liquor stores per person.
Q: According to commercials, money would not go toward hiring additional public-safety personnel. How will the additional public funds be used?
A: I-1183 doesn't tell the state or local governments how to spend the money, except for guaranteeing $10 million a year for public-safety programs.
Q: Would a private retailer, not a grocer, with interior retail space of 10,000 square feet or more be allowed to sell hard liquor?
A: To sell liquor, stores must have at least $3,000 in food inventory excluding soda pop, beer and wine. That's relatively small inventory for a big grocery store, but would keep completely nonfood stores out of the running.
Q: How have other states fared that switched from state-run to private systems? Did the state make more money?
A: The state auditor's office studied various scenarios for changing Washington's liquor business.
Two of the most lucrative were from West Virginia, which auctioned licenses, and from Alberta, Canada, and several U.S. states with open markets for liquor licenses. Neither of those scenarios would have made more money for Washington and its local governments than I-1183.
Melissa Allison: 206-464-3312 or firstname.lastname@example.org
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