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Costco in spirited bid to privatize liquor sales

Washington state to vote 2nd time on selling fifths

- The Washington Times - Sunday, November 6, 2011

The campaign for Washington state's Initiative 1183 is based on the belief that Costco shoppers should be able to pick up a fifth of Jack Daniels along with their family pack of hot-dog buns and three-pound tubs of mixed nuts.

And Costco is willing to pay to make it happen. The warehouse-store giant, based in Issaquah, Wash., already has broken a state elections spending record by sinking $22.5 million into the initiative campaign, which would privatize Washington's state-run liquor business.

Washington voters rejected a similar measure in 2010, bucking the national trend away from state-run liquor stores. Only 18 states now operate a liquor system, and of those, just 11 control retail sales through state-run stores, including Washington, according to the National Alcohol Beverage Control Association.

Standing in Costco's way are wholesalers' organizations, led by the Wine & Spirits Wholesalers of America, whose members enjoy a lucrative business with the Washington State Liquor Control Board. Like a couple of rival bootleggers in the Prohibition era, the dueling campaigns are battling over territory.

The most recent poll indicates that Washington's days as a so-called "control state" may be numbered. A Washington Poll, conducted by the Center for Survey Research at the University of Washington and released Oct. 31, shows voters at least leaning in favor of the initiative by a margin of 50 percent to 43 percent, with the rest undecided.

The "no on I-1183" campaign has centered its message on safety. Television ads show firefighters and relatives of drunken-driving victims decrying an anticipated increase in underage drinking and accidents, thanks to a projected fourfold increase in the number of liquor outlets.

The initiative limits liquor sales to stores with at least 10,000 square feet in order to prevent gas stations and convenience stores from selling the hard stuff. Even so, the opposition is running ads saying that the measure will expand liquor sales to almost 1,000 mini-marts.

That's because there's an exception: In locations without large stores, the state Liquor Control Board can waive the 10,000-foot requirement. The governor's budget office estimates the number of stores will jump from 328 now to 1,428 stores, although proponents point out that it's unlikely most of those will be mini-marts.

Still, the ads against I-1183 are sobering, showing teenagers purchasing liquor at a gas station, followed by scenes of a car-crash site.

The pro-1183 campaign calls the state-run liquor system a relic of the post-Prohibition era and urges voters to get Washington out of the liquor business. Supporters point to Iowa and West Virginia, the two states that most recently privatized their liquor sales and say that both states saw a reduction in consumption after privatization.

Initiative 1183 addresses concerns about underage drinking by doubling the penalties for selling liquor to minors, according to the campaign. The measure is winning the endorsement battle so far, with 24 newspapers in the state calling editorially for a "yes" vote.

"The ad campaign [against I-1183] implies this would create carnage on the roads," said the Seattle Times in its endorsement. "But other states regulate liquor rather than sell it, and they are no more dangerous than Washington. Road safety depends on penalties and enforcement — and both are strengthened under I-1183."

Costco lost a similar bid in 2010 with Initiative 1100, a defeat that analysts chalked up to the presence of another privatization measure on the ballot and the perception that the proposal did too little to help local governments cope with the anticipated increase in drinking.

This year's initiative pours millions more into state and local governments. A state Office of Financial Management study estimates that as of 2017, the state would collect $35 million to $42 million more per year than under the current system. Local governments would gain an additional $26 million to $34 million.

"The state is selling an asset — the question is, how much is Costco going to pay for it?" said Todd Donovan, political science professor at Western Washington University. "In 2010, that was the knock against it. The argument is that this measure is a better deal for the state."

Democratic Gov. Christine Gregoire opposes the measure, but she may have inadvertently given Costco a boost by releasing a budget proposal Thursday that eliminates $61.8 million in revenue to local governments from state liquor sales. Under I-1183, however, those shared liquor dollars would remain uncut, according to the campaign.

"This gives money to state and local governments at a time when the governor is making these dire cuts," saidKathryn Stenger, a "yes on I-1183" spokeswoman. "It's a net positive for taxpayers, and it allows the states to focus on regulation and enforcement, instead of sales. It gets us up to date."

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