Last week, Costco filed an initiative that would close the state's approximately 315 liquor stores while making 1,500 grocery retail outlets eligible to sell hard liquor. It's the retail giant's third attempt at privatization in the last year, thereby confirming fears of concerned parents, labor unions, lawmakers, and teetotalers: Costco has the money and the determination to privatize Washington's archaic state-run system, even if it means pushing bills and initiatives at every opportunity until it succeeds through sheer voter fatigue.
"We're committed to the idea that these prohibition-era limitations on liquor and wine need to be corrected, so that's what we intend to do," says Joel Benoliel, a senior vice president with Costco. If Initiative 1183 passes, you'll no longer have to trudge into stores reminiscent of East Berlin by 6:00 p.m. to buy your liquor—you can pick it up with the rest of your groceries, like adults ought to. When questioned about polling in January that found that most people were satisfied with the number of liquor stores and the level of service "as is," Benoliel said only, "We're very confident that this initiative will pass." He wouldn't disclose Costco's latest polling on the issue.
But where Benoliel is confident, others may be dubious, considering voters rejected Costco's last privatization attempt, Initiative 1100, less than a year ago. However, Costco seems to have learned from its mistakes—this latest attempt contains several key changes to appease critics.
First, this year's initiative attempts to assuage fears of more underage drinking and drunk driving. Last year's measure would have allowed any store that sells wine or beer to sell hard liquor. A deluge of ads—funded by the beer lobby and the union employees who work in the state's stores—portrayed teenagers buying liquor at gas stations and driving away. This year, to counter that sort of messaging, the initiative mandates that the stores have a minimum of 10,000 square feet (with a grandfather clause for existing stores in rural areas that don't have large box retailers), limiting the total number of liquor outlets and keeping liquor off gas station shelves. The initiative would also double the penalties stores would face when caught selling booze to minors.
The initiative also attempts to appease the mighty beer distributors—including the conglomerates behind Budweiser—which pumped $8 million into funding the aforementioned ads. The beer lobby's biggest concerns were losing the rights to distribute beer in Washington and losing grocery shelf space to liquor.
The current iteration resolves the beer lobby's biggest concern by retaining the state's existing distribution system (while making distributors pay between 5 and 10 percent of their gross spirits revenues to the state) and allowing state wineries and distilleries to deal directly with retailers.
No word yet on whether or not these tactics are working—beer and wine groups haven't formally weighed in on the initiative.
Last, opponents attacked the failed initiative for costing the state $200 million in annual taxes, so this initiative retains that revenue and requires liquor retailers to pay 17 percent tax on gross spirits sales. The state won't tabulate the latest initiative's fiscal impacts until this summer, but some say it will produce more money than the state currently makes off liquor sales. "We believe that this initiative could generate up to $200 million in revenue, simply by the auctioning off of [liquor retail and distribution] licenses during the first two years," says Mark Funk, a consultant for the Washington Restaurant Association, which represents 13,000 restaurants in the state. The WRA co-filed I-1183 with Costco and the Northwest Grocery Association.
But these conciliations haven't appeased all of Costco's critics.
"You're still looking at about a fivefold increase in the number of stores," says Jim Cooper, the executive director of the WA Association for Substance Abuse and Violence Prevention. "I don't think that increasing the number of hard liquor outlets is going to be good for anybody, regardless of the [amount] of money put toward public safety or enforcement."
Which is why state lawmakers, public safety advocates, and union groups are fighting Costco's initiative. On May 24, legislators pushed through a last-minute bill (SB 5942) that could block I-1183 from privatizing one leg of the state-run system—liquor distribution—before voters can weigh in on the initiative. That bill would start a four-month bidding competition to buy the state's distribution monopoly.
Political consultant Sandeep Kaushik, who helped draft the measure on behalf of the Washington Beverage Company, says, "Costco wants their initiative to be the only thing out there."
Initiative backers must gather 241,153 valid signatures by July 8 in order to qualify for the November 8 ballot, and Governor Chris Gregoire needs to sign SB 5942 before the state can open up the bidding process and ultimately select a bid.
Even for people who agree with Costco's ambitions, this year's compromises come with a downside (last year, The Stranger endorsed I-1100, saying that the state has no business running a liquor retail monopoly). By cutting out small retailers, which some people feared could sell alcohol to teens, this new initiative would hand the liquor business squarely to the giant grocers with over 10,000 square feet like Safeway, QFC, and—of course—Costco. Not only does that mean they would hold the profits alone, it also means people who want to buy hard liquor would find it only in large supermarkets. And in some neighborhoods and cities, those big grocers are as few and far between as liquor stores are now.