Washington spills liquor-control effort
Washington voters Nov. 2 sent a message that they support state liquor controls when they voted down an initiative called Washington Privatize Liquor Distribution, or I-1100, and spearheaded by Costco Wholesalers.
The proposed measure would have closed state liquor stores and authorized sale, distribution, and importation by private parties.
The campaign was watched closely by Montana officials in the liquor and gambling divisions, and by leaders of the state's liquor and gaming industries.
Washington, like Montana and 16 other states, is a “control state” that has a three-tier system of control that prevents liquor manufacturers from selling directly to retailers. Manufacturers must sell to distributors, who then sell to retailers, including bars and restaurants. Costco wanted to buy liquor directly from manufacturers.
If the initiative passed in Washington, many here believed that Montana could be next.
Mark Staples, the Montana Tavern Association government affairs counsel, told the Gaming Advisory Council in October that because Montana's gambling system is “pinioned to our liquor control system,” eliminating the liquor control system could also eliminate “the basic foundation of gambling control.”
“The three-tier system works well,” he said then. “And so does our system of regulating gambling.”
GAC Councilman Tim Carson said then, “If the three-tier alcohol system was eliminated, we'd have to retool just about everything regarding gambling.”
The Washington measure lost 53.2 percent to 46.8 percent with just over 2,130,000 votes cast.
According to the description prepared by the Washington Secretary of State, the measure would have:
... directed the liquor control board to close all state liquor stores; terminate contracts with private stores selling liquor; and authorize the state to issue licenses that allow spirits (hard liquor) to be sold, distributed, and imported by private parties. It would repeal uniform pricing and certain other requirements governing business operations for distributors and producers of beer and wine. Stores that held contracts to sell spirits could convert to liquor retailer licenses.
The proposed measure was filed by Modernize Washington and Washington Citizens for Liquor Reform. Initiative supporters said it would not affect bars and restaurants and would generate an additional $100 million over the next five years through licensing fees and sales taxes.
Charla Neuman, spokeswoman for Washingtonians for Liquor Reform, said the initiative wouldn't necessarily make liquor cheaper but would "create more jobs and lots of private business opportunities. It certainly makes shopping more convenient.”
Supporters of I-1100 argued that the proposal would allow for lower prices, greater convenience, in addition to cutting government costs.
In comments supporting the issue in May 2010, Jim Sinegal, chief executive officer of Costco Wholesale Corporation said, "We serve our members in many states and around the world by selling them spirits, beer and wine at competitive prices. We should be able to do so in Washington State, too, and other retailers should be able to similarly serve their customers. We are excited that Washington voters will be able to have a direct voice in determining these important policies."
According to reports, Costco planned to aid in signature gathering at its Costco warehouses and provide financial assistance. In 2007 Costco challenged the current state liquor system in court but failed.
In late May 2010 the Northwest Grocery Association, which represents major chains including QFC and Safeway, announced its support for the proposed initiative. The association cited a report by the state auditor that revealed that privatizing liquor distribution and sales would increase state revenue by about $86.8 million between 2012 and 2016.
Costco spent $3,549,000 on the unsuccessful issue, while Safeway spent $609,000, Fred Meyer, $207,000; NW Grocers, $190,000; and Wal-Mart, $40,000.
Opponents of I-1100 argued that state and local governments would lose millions of dollars in liquor tax revenue should voters approve the proposed measures, if the measure would have passed.
Additionally, they argued that the measures may lead to an increase in minors illegally buying alcohol and more drunk driving incidents.
According to reports, the opposition campaign – Keep Our Kids Safe – consisted of United Food and Commercial Workers Union, the State Council of Firefighters and the Church Council of Greater Seattle. United Food and Commercial Workers Union Local 21 represents liquor store clerks and assistant managers. Despite support by larger grocers, small grocers said they oppose the proposed measure. Washington Food Industry Association president and chief executive Jan Gee said they worried about the consequences of removing so many controls. The association represents independent grocers.
"This initiative doesn't just privatize liquor; it deregulates it beyond what any other state has done," Gee said.
Wine & Spirits Wholesalers of America President Craig Wolf said the proposed measure is "not about privatization, it's about deregulation." Deregulation, said Wolf, would remove the checks on selling spirits and could lead to problems in the state. "They want to use their power to dictate terms. The retailers use market power to bully suppliers. Costco is not about a free market," added Wolf.
John Guadnola, executive director of the Washington Beer and Wine Wholesalers Association said, "We think (its) terrible public policy. Whether or not you believe in privatization, this is a horrendous way to do it."
Washington Governor Chris Gregoire also opposed to I-1100.