State making sensible changes in how it handles liquor sales

March 20, 2011 

What message were voters sending last fall when they defeated two initiatives to privatize state liquor sales?

Leaders of the Liquor Control Board took away three messages from the defeat of Initiatives 1100 and 1105, according to Rick Garza, deputy director:

 • Public safety is paramount. The public wanted no part of moving from 350 liquor stores statewide to more than 3,300 – twice as many stores as California.

 • Revenue is important. Without a state income tax, Washington is a sin-tax state. We tax the heck out of tobacco products and liquor – often with the highest taxes in the nation – to support community and state programs from schools to law enforcement programs paid for with an income tax in other states. Voters did not want to take another $370 million away from an already cash-strapped state by ending the state’s monopoly, its tax structure and markup program.

 • Convenience is a concern. More stores and efficient delivery of liquor products is important to consumers.

With the privatization question off the board – for the time being at least – the Liquor Control Board, led by chairwoman Sharon Foster, has put together a reasonable plan that focuses on improving customer convenience – improvements that will generate more money for state operations.

Don’t look for bills in the Legislature. Instead, expect most of the changes to be spelled out in the Legislature’s two-year budget that should emerge in the coming weeks, now that lawmakers know just how deep a revenue hole they are digging out of — $5.3 billion.

While the state enjoys a monopoly on liquor, the fact is about half the state’s liquor distribution and sales system is in the hands of the private sector. The state had 367 liquor stores in 2010 – 166 state operated, 162 contract stores, 15 tribal stores and 30 military stores. In addition, about half the state’s distribution center operation is run by private contractors – trucking services, for example.

The state’s liquor operation generated about $870 million in sales last year with about $370 million in “profit” going to fund state, city and county governments. Much of it is directed toward law enforcement at the local level. All of the agency’s expenses, about $125 million, is covered by liquor sales – including staff (just under 1,000 full time equivalent workers), employee benefits and pension contributions.

Liquor officials wanted to add 200 or so stores. Gov. Chris Gregoire rejected that idea and the proposal put forth by the state includes just 15 new stores – split between state-run and contract stores.

The agency is proposing to open two high-volume specialty stores in urban areas that would be about 10,000 square feet in size and carry some high-end, premium products in addition to the normal supply of spirits.

Liquor officials also are proposing to co-locate up to five liquor stores inside existing retail outlets such as a Safeway or Albertsons store – much like a Starbucks or bank branch. They will be small (300-500 products), and be closely monitored to gauge volume of sales and whether clerks are selling to minors.

In addition to adding stores, the Liquor Board is proposing to standardize store hours across the state – closing at 9 p.m. Monday through Thursday and at 10 p.m. on Friday and Saturday.

Liquor officials hope for legislative approval to start a gift-card program and to allow web-based ordering for pickup at stores. Retailers and restaurants could place their order online and pick up the spirits at the closest liquor outlet. The agency also hopes to offer a new delivery service to restaurants.

Pat Kohler, the administrative director of the Liquor Control Board, said the changes are expected to add nearly $6 million for the 2011-13 budget and a total of $39.7 million by June 2017.

One bill that didn’t make it out of committee this session – opposed by the retail industry – would have allowed liquor stores to sell merchandise such as ice, mixer, barware and accessories normally associated with alcohol sales. The legislation, introduced by a Seattle lawmaker, was not a request of the liquor agency, despite surveys that show that’s what customers want.

The changes are positive steps in terms of customer convenience without sacrificing public safety. They generate considerable income based on the state’s “user pays” philosophy. Short of the legislative policy decision on whether the state should be in the liquor business in the first place, the changes recommended by agency officials are steps in the right direction.

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