A year after failing to get voter support to privatize Washington state liquor sales, Costco Wholesale Corp. and its allies are returning to the ballot for a second opinion.
This year's plan attempts to assuage the concerns that voters raised in 2010, providing a boost in revenues for state and local governments while largely prohibiting small convenience stores from participating. It doubles penalties for retailers who sell liquor to minors, and supporters believe that consumers will start seeing lower liquor prices.
"It's a win-win-win," said Joe Gilliam, president of the Northwest Grocers Association. "The state of Washington gets revenue for essential services. The private sector picks up a new product line that helps serve the customer. And the customer gets more convenience and a better shopping experience."
But opponents point to a potential loophole in the limits, warning that vague wording could mean that minimarts around that state will qualify for liquor licenses. The measure, Initiative 1183, says the liquor control board shall not deny a retail license to proper businesses if "there is no retail spirits license holder in the trade area."
It does not specifically define what a trade area is, leaving that to the liquor board or the courts to ultimately decide. Opponents have created their own definition -- one mile in urban areas and five miles in rural areas -- to estimate that it could allow some 1,000 retail outlets to get exemptions.
"This loophole is big enough to drive a liquor truck through, and that's what they're going to do," said Alex Fryer, a spokesman for the opposition group Protect Our Communities.
Gilliam said he expects the exemptions will be much more narrow, arguing that trade areas for some stores reach 40 miles.
Washington is one of about 18 states that have broad control over the distribution of liquor. A smaller number of states, including Washington, also maintain control over liquor sales, such as through state-run liquor stores or contractors. Because of that, Costco and other major retailers cannot sell liquor on their own.
Opponents of the bill, including Gov. Chris Gregoire, have largely cited the public safety concerns as a reason to vote no. They say private stores are less likely to catch and prevent minors from buying liquor and that the expansion of liquor outlets will simply lead to more consumption -- and the societal costs that accompany alcohol abuse.
The number of outlets qualified to sell liquor would quadruple under the plan, according to state estimates.
Last year's proposal got support of only 47 percent of voters despite more than $4 million of campaign contributions from Costco. The Issaquah-based company has contributed even more this time around, and both sides have raised millions of dollars, with a coalition of wholesalers providing much of the cash for the opposition. The initiative has substantial financial implications for both businesses and the state.
The plan would bring in tens of millions of dollars each year to state government and a nearly equal number for local governments. The state would also gain a one-time benefit of about $28 million for selling the state liquor distribution center.
It's not clear if consumers will see a benefit at the point of sale. The state's initial projections assume that businesses will sell at a markup of at least 25 percent on top of the 10 percent in fees paid by distributors and 17 percent paid by retailers. The total of 52 percent is about how much the state already marks up liquor products for sale.
Supporters of the initiative believe competition will drive down how much businesses mark up the liquor. They also believe prices will be aided by allowing companies to bypass wholesalers, who have long served as intermediaries.
But that issue also has complications. A provision of the measure requires the new liquor license fee for distributors to reach at least $150 million by March 2013. If not, distributors would have to cover the difference. The state estimates that fees will come in about $60 million short of that, which could further drive up the costs for businesses that rely on distributors and give an advantage to those who do not.
The distributors have lined up in stiff opposition to the idea, arguing that they provide insulation between alcohol producers and sellers. John Guadnola, executive director of the Washington Beer & Wine Wholesalers Association, said the system helps streamline tax collection, keeps prices stable, and prevents coordination between a producer and a retailer to drive prices down.
"It's the one product where it's not in society's best interest to be sold as cheap as possible and as great of quantity as possible," Guadnola said.