Recently passed liquor initiative 1183 will put the state out of the liquor business.
Will it also put islanders out of business? Or keep substance-abuse counselors busier? It all depends on a myriad of factors.
Local businesses
Existing liquor outlets on Orcas and Lopez Islands include Eastsound Liquor Store, Russells at Orcas, and Lopez Liquor Store, all privately owned businesses that operate under the state’s license and are paid on commission by the state.
Under 1183, owners of contract stores can continue to run their shops, provided they get a spirits retailer license – but every drop of their inventory is currently owned by the Washington State Liquor Control Board.
When the state closes up shop this spring, these stores will have to buy that inventory in order to stay in business. At an average worth of $125,000, that can be a hefty check to write.
“It’s going to be an individual business decision for some of the contract liquor stores,” said liquor board communications director Brian Smith. “I’ve heard that some of them won’t be going on.”
Some owners may be able to whittle down their inventory before then, decreasing the price tag, while others may remortgage their homes or take other drastic financial measures. These businesses’ continued right to sell is also attached to their existing location, which could be problematic if they are renting.
In spite of this, all three existing liquor outlets here say they plan to continue in operation.
“We’re gonna give it a whirl,” said Marc Zener, owner of Lopez Liquor Store. “There are a lot of unknowns still. We’ll have to compete with Costco and Safeway … We’re gonna try.”
“It’s going to be an interesting ride,” said Trina Olson, of Eastsound Liquor Store. “We’re one of the few who are able to stay open; everyone else has Costco and Safeway right down the street.”
Other local businesses may be newly eligible for a liquor license, but it’s not clear which ones.
Eastsound’s Island Market and Lopez Village Market are the only stores on Orcas and Lopez large enough to qualify unequivocally. Stores less than 10,000 square feet can apply for a license only if there are no other liquor retailers within that “trade area,” a term the liquor board has yet to define.
Island Market manager Jason Linnes said the store plans to apply for a license.
Orcas Village Store co-owner Ron Rebman said Orcas Village Store may apply if it qualifies. It’s possible Country Corner could also qualify, depending on the definition of trade area.
“[1183] was written by big business for big business and it does nothing to help small grocery stores,” said Kyle Ater, owner of Eastsound’s 3,200-square-foot Orcas Homegrown Market and Gourmet Delicatessen. “It’s just the same pie cut into smaller pieces.”
With state pricing controls out of the picture, volume buyers will surely be able to find bulk purchasing discounts.
“Let’s say you have a liquor store in a big area – you might as well lock the doors,” said Rebman.
Lopez Village Market owner Aaron Dye said he will apply for a license, but is not planning on selling liquor unless Zener closes his shop sometime in the future.
“I don’t want to hurt his business,” Dye said. “We’re just going to apply for it; the process is so long that we want to get ahead of it.”
Background
Of Washington state’s current 328 liquor stores, the state actually owns 166. These stores are staffed by state employees and will be closing. The other 162 are contract liquor stores, run by small business owners who contract with the state.
If a business chooses not to continue operation in its location, the right to sell liquor at that location will be sold at public auction. Smith expects liquor distributor and retail licenses to be available by January.
The state liquor board will begin divestment after the holiday season, and be out of business by June 2012. Of the liquor board’s 1,400 employees, he said 900 to 1,000 will lose their jobs.
The agency will continue its enforcement, licensing, adjudicative and policy-setting functions.
Social consequences
The liquor board website claims state liquor stores have one of the highest “no-sale-to-minors compliance rates” in the nation, at more than 94 percent – compared with a private sector compliance rate of just 77 percent. State-owned stores had a compliance rate of 95 percent; while contract stores’ compliance rate was 92.3 percent.
Centers for Disease Control and Prevention research says the negative impacts of excessive alcohol consumption can be reduced by increasing alcohol excise taxes; reducing alcohol outlet density; and reducing the days and hours of alcohol sales.
New liquor costs are hard to predict, since they depend on private distributor markups. It’s likely that selection will also increase, as the free market determines what stocks the shelves instead of the state. The number of liquor retail outlets is expected to mushroom from 328 to 1,428.
Under the new system, sales will be prohibited only between 2 and 6 a.m.
“It does expand the hours considerably,” Smith said. “That’s the public safety concern that I think a lot of people have, is people run out of alcohol after a lot of drinking.” State-controlled stores were open from 10 a.m. to 9 or 10 p.m.
The OFM also expects increased access will cause retail liquor liter sales to grow five percent.
Each county and city is required to spend two percent of its share of liquor revenues on alcohol and chemical dependency services, and OFM expects these expenditures to increase.
The Orcas Island Prevention Partnership has yet to respond to Sounder queries on this issue. The Lopez Island Prevention Coalition has written a letter to the editor in reply.
State, county and local finances
Smith said liquor operations’ net return to cities, counties and the state has been $425 million annually.
The Office of Financial Management estimates that total State General Fund revenues will increase an estimated $216 million to $253 million and total local revenues will increase an estimated $186 million to $227 million, after Liquor Control Board one-time and ongoing expenses, over six fiscal years.
Because state liquor stores were selling Washington State Lottery products,the OFM also expects a loss of $1.8 million over six fiscal years.
