1. Read the below information
2. Send an email to the Liquor Control Board (details below)
3. Let us know you contacted them here.
4. If you are available, please attend the board meeting on Wednesday at 10 a.m. to ask the LCB NOT to amend the initiative! The meeting will be held at:

LCB Headquarters
3000 Pacific Avenue
Olympia, WA 98501

Background:

Initiative 1183 privatizes the sale and distribution of liquor. Under the new system, a competitive market is established to set the price of liquor, and restaurant licensees will have the option of purchasing direct from a distiller, a distributor or from a retailer. While we believe most restaurants will purchase their spirits from a distributor, having competition from direct sales and retail-to-on-premise retail sales is essential for competitive pricing in the market.

The initiative allows for retail-to-on-premise retail sales of 24 liters, however the Washington Restaurant Association was adamant during the drafting of the initiative that NO LIMIT be placed on the number or frequency of these transactions. Initiative 1183 contains no limits on the number or frequency of sales.

In response to I-1183 opponents, the LCB is now proposing rules to limit sales– rules that would hinder competition and favor distributors over retailers and restaurants.

The Liquor Control Board will be discussing this at their next board meeting on Wednesday, February 22, and they need to hear from you!

Even if your business never intends to purchase from a retailer, this will negatively impact your business by removing competition and raising your prices.

Directions:

Please send an email to the Liquor Control Board and staff asking them to stop any consideration of this alteration to the initiative. Please include the information below in an email to the LCB addresses listed. Remember to include your name at the end.

To: sf@liq.wa.gov; rkuro@liq.wa.gov; cjm@liq.wa.gov; rules@liq.wa.gov

Subject: Reject changes to 1183 that restrict retail-to-retail sales.

Dear Liquor Control Board:

I urge you to remove rule language that restricts retail-to-retail sales.

Further limiting our ability to purchase spirits will have a harmful impact on my business.

Limiting an open, competitive marketplace for spirits by restricting retail-to-retail sales to one transaction per day is directly contradictory to what was approved by voters this past November.

I-1183 is very clear: any change to this provision is contrary to the specific language within the initiative and what voters overwhelmingly approved with I-1183.

Sincerely,

<<Name>>

Don’t forget to go here and let us know you contacted the LCB .

Thank you for your participation!

While the positive revenue forecast is helpful, lawmakers still face the daunting task of finding $1 billion in savings, fund transfers or new revenues to balance the budget. This will be extremely difficult for majority Democrats, who face ardent opposition to more reductions from labor unions, state workers and social service groups.

2012 legislative session going well for hospitality sector
The first five weeks of 60-day sessions are challenging. Legislators typically introduce the same number of bills at the outset of the session as one would see during a long session. Accordingly, there is a sizable volume of bills in hearings and being considered on the floor of each chamber. However, once the first series of major cutoffs occurs, focus can shift to the major issues needing resolution.

The WRA is very pleased with the outcomes thus far this session. Numerous bills, that could have adversely impacted the hospitality sector, failed to be moved along in the legislative process. Included among the bills that died are:
•    Restrictions on the use of packaging and bans on plastic bags
•    New requirements on workers’ compensation claims that would have added cost and time for claim management
•    Imposition of labor agreements on current and new vendors at Sea-Tac Airport (see below)

Additionally, the WRA worked closely with the Department of Revenue to develop a bill granting the DOR the authority to collect spirits taxes. Of keen importance to the WRA was the definition of spirits taxes and where they are collected.

Finally, the WRA remains engaged in both legislative and administrative processes implementing I-1183.

Liquor Control Board to consider restrictions for licensee purchases of spirits
The WRA is asking the WRA members and liquor licensees consider joining us in Olympia, Wednesday, February 22, at 10 a.m. at the Liquor Control Board meeting, where the Board will be considering unwarranted restriction of sales by retailers to restaurants.
Initiative 1183 privatizes the sale and distribution of liquor and creates competition for the first time for restaurateurs, by allowing them to purchase from distillers, from retailers and direct from distillers. The initiative’s only restriction is that sales between retailers and restaurants must be in 24 liters per sale, and the retailer must retain records documenting the purchase. There are no limitations on the number of sales that can occur, but the Liquor Control Board is considering amending the initiative to further restrict the number of sales through rule.

If the Liquor Control Board does, in fact, adopt a rule limiting sales, this would have serious and damaging impact on our industry. Even if your restaurant does not ever intend to purchase from a retailer, this will effectively remove competition from the market, and any market pressure for competitive pricing.
Please consider making the journey to Olympia on Wednesday to show the Liquor Control Board that we are very loudly opposed to this idea.

Liquor Control Board Headquarters
3000 Pacific Avenue
Olympia, WA 98506

Update from Liquor Control Board on retail outlets
The Liquor Control Board released this memo to update licensees as the state continues through the transition to a privatized sales and distribution system.
Various liquor bills continue on as one

In the Senate on Tuesday, the various liquor bills were rolled into one bill and will carry on through the process as SB 6477.

The bill contains:
•    Provision to allow for microbreweries to co-brand private labels for restaurants
•    Creates a Senior Center liquor license
•    Creates a Day Spa liquor license
•    Allows contract liquor stores to sample spirits
•    Allows spirit sampling at farmers markets

The bill will be heard in committee in the House on Tuesday.

Sea-Tac Airport labor issues with concessionaires resolved internally, HB 1832 dies on House floor
In 2011, HB 1832 was introduced and passed the House floor by a narrow margin. Immediately thereafter, the bill caught our attention, as well as that of the retailers and other impacted stakeholders. HB 1832 was written by the labor community and would have imposed stringent new labor requirements on all current and new concessionaires in SeaTac airport. The bill did not move in the Senate last year; and once the 2011 session ended, the Port Commission convened a stakeholder group made up of labor, airport business and non-partisan Port staff to work through the issue. The group set out to craft a series of recommendations for the Port commissioners to consider for future leases at the airport. In December, following several months of work, the stakeholders presented a set of recommendations, developed to balance the labor community’s concerns with the airport’s goal of establishing a positive financial and aesthetic trajectory. For the airport, these goals originated during its construction of the central terminal, which was designed to be an environment where local restaurants and retailers could become a part of the overall travel experience.

The Seattle Port Commission formally heard these recommendations in December and created a timeline for adoption so that HB 1832 would not be necessary. Unfortunately, the labor community felt the recommendations did not go far enough and came to Olympia this session with a renewed push to pass their bill. Unlike the the scenario in 2011, the WRA, the Port, Alaska Airlines and other impacted stakeholders communicated loudly and clearly. The collective group contended that the Seattle Port Commission had put together a sound process to develop its recommendations, and expressed their belief that the Port Commission (an elected body) should have the authority to decide how to proceed with the issue. In the end, though not without some drama, enough legislators agreed, and HB 1832 was not voted off the House floor in time to meet Tuesday’s floor cutoff. Consequently, the bill will not be considered further this session. The very same day, the Seattle Port Commission voted 4-0 (with 1 abstaining) to accept the staff recommendations and move forward with creating the RFP process for current and new concessionaires, based on these recommendations. We are pleased with this unanimous vote and look forward to continuing to work with Port commissioners as the airport leases come up for renewal between 2015-2017.

We would like to thank all of our operators as well as the retailers, the Port, Alaska Airlines and others for their willingness to weigh in and help allow the Port Commission to be the body that directs these types of decisions at the airport.

Budget writers in both the Senate and House have worked since the beginning of session on their respective approaches to balancing the state’s $1.5 billion budget deficit. There is no shortage of ideas on how our state should climb out of this financial hole; and other than Gov. Gregoire’s budget proposal released back in December, we have yet to see any of these ideas on paper as serious proposals. That may change soon, as there are rumors circulating that the Senate and House will be releasing their budget proposals within the next few weeks. We will be watching these developments closely and engage as budget ideas arise that impact the hospitality industry.

House Democrats suggest alternative to sales tax hike route
A new idea for reconciling the state’s budget deficit surfaced this week from House Democrats, indicating that support for a half-cent sales tax increase may be waning. The idea prescribes borrowing against some of the state’s more substantial revenue sources–tobacco settlement money and lottery revenue have been named as possibilities. Proponents of the idea note its potential for generating funds comparable to those from a sales tax hike–all in a manner that would eliminate the need for an unpredictable public vote on such an increase. Meanwhile, critics of the idea are decrying the notion of the the state borrowing its way out of the budget hole. While not an official proposal, this idea was analyzed in depth Friday on Washington State Wire. Read on for the full story.

House and Senate both advance DOR’s liquor tax bill
HB 2758/SB 6751 met the fiscal committee cutoff last Friday and advanced in both chambers.

This bill was requested by the Department of Revenue and grants the agency the authority to request that the Liquor Control Board suspend liquor licenses for failure to collect and remit spirit taxes. Of initial concern for the WRA was ensuring that restaurants would not have any additional requirements under the legislation, as well as protecting members from other businesses’ tax obligations if they happened to purchase spirits from an entity that had not paid the proper taxes.

The WRA worked closely with the Department of Revenue to ensure that: 1) the Department understood that restaurant licensees are not the collector of any spirits taxes, we are the payer, and 2) the Department was not asking for authority to suspend restaurant licenses for the failure of another business to pay spirit taxes and 3)our members were not being obligated or tasked with any additional requirements.
HB 2758/SB 6571 does not amend the initiative, and will not require a two-thirds majority of the Legislature to pass. A simple majority vote will suffice.
We will continue to monitor the bill to make certain the protections stay in place, and we can continue with the implementation of the initiative.

List of spirits distributor applicants released
The WRA has acquired, through a public records request, a list of businesses that have applied for a spirits distributor license. Currently, approximately 85 percent of brands are carried exclusively through two distributors. The WRA is pleased to see 16 applicants to distribute spirits. Read on.

Minimum wage, tips as wages and training wage hearing
A big thanks to three WRA members who testified this week during a House Labor Committee hearing on four minimum wage-related bills. These members clearly articulated how the state’s climbing minimum wage has impacted their businesses. We applaud Karissa Bresheare, owner of the Gourmet Latte coffee stands throughout Western Washington; Dan Sutton of Cottage Inn in Wenatchee; and Travis Rosenthal, owner of Tango in Seattle for traveling to Olympia and making a compelling case before the Committee. The WRA also is appreciative of Rep. Cary Condotta, (R-12th) sponsor of the bills, and of Rep. Mike Sells (D-Everett), the chair of the House Labor Committee, who agreed to hold this hearing. Although these bills will not make it through the legislative process, we are pleased that this topic is being discussed for the first time in many years. Moving forward, the WRA is committed to ensuring this issue remains visible.

Statewide mandatory paid sick leave bills die in committee
SB 6229 and HB 2508, companion bills in the Senate and House that would have mandated every employer in the state (with more than four full time employees) provide paid sick/safe leave days for employees, did not move out of their committee of origin by today’s policy bill cutoff and will no longer be considered this session. The WRA opposed both bills during their committee hearings and had a restaurant operator testify when the Senate bill was heard last week. Although both bills are technically dead for this year, the language contained within them could potentially be amended into a another bill that survived today’s cutoff.  Therefore, your GA team will be watching all related bill titles moving forward to make sure this does not happen.

Plastic bag ban bills and to-go packaging bills do not survive policy cutoff
The myriad of bills in the Senate and House dealing with plastic bags and to-go packaging did not move out of committee by today’s policy cutoff and will no longer be considered this session. The concepts within these bills come both from national and local (Seattle) efforts to reduce what goes into our waste stream. Although we will not be debating the merits of these proposals for the remainder of the session, these conversations will continue in our communities, and the WRA will remain a productive contributor in these conversations.

Several alcohol bills will survive cut-off, others will not
Committees in both the Senate and House considered the following alcohol bills dealing with licensing that will continue through the legislative process:
SB 6076 – Creating a Senior Center License
SB 6060 – Allowing Spas to Serve Beer & Wine
SB 5650 – Allowing Craft Distilleries to sell their own spirits at farmers markets
SB 6196 – Allowing microbreweries to identify themselves on private labels
HB 2179 – Concerning objections to liquor licenses
HB 2179, which was introduced by Rep. Jeff Morris after a liquor license was denied to a applicant based on their ethnicity, would change how local governments provide input into the licensing process. The WRA will work closely moving forward to ensure changes will not impact the length of time licensure takes, and make certain input from local government is based on public safety rather than personal biases.

The following bills regarding sampling/tasting of alcohol were considered and will move forward:
SB 6475 – Changing the criteria for the beer and wine tasting endorsement for grocery stores
SB 6477 – Concerning spirit sampling in former contract liquor stores
The following bills regarding the collection of taxes will continue:
HB 2758/ SB 6571 – Strengthening the Department of Revenue’s ability to collect spirit taxes.

The following bills did not move forward, but were considered:
HB 2425 – Concerning the sampling of spirits
HB 2426 – Prohibiting the issuance of spirits retail licenses to certain membership organizations
HB 2626 – Regulating sales and samplings by manufacturers of liquor
SB 5258 – Concerning methods of payment for purposes of the alcohol beverage control statutes
HB 2249/SB 6366 – Creating a theater license
Two additional bills relating to the structure of the board have been introduced and not heard in committee  – however, they are “necessary to implement the budget” and are not subject to cut off dates.
HB 2723 – Creating the office of alcohol beverage control
SB 6554 – Consolidating the liquor control board into the gambling commission

Governor proposes to eliminate the Liquor Control Board
Last week, HB 2723 was introduced by Rep. Sam Hunt, (D-22) by request of the governor, and would eliminate the Liquor Control Board.
The 223-page bill proposes to replace the Liquor Control Board with the “Office of Beverage Control”, and rather than a three-person professional board, would be directed by and executive director appointed by the governor, and confirmed by the Senate. Initial review of the bill indicates this proposal simply transfers all powers of the board to the office of beverage control. The WRA Government Affairs Committee will review the proposal and take a position next week.

• HB 2496 which would change the current index that the minimum wage is adjusted against to the Consumer Price Index (CPI).
• HB 2497 which would allow for a modest level of tips to be credited against wages to the level of the federal minimum wage;
• HB 2498 which would freeze the minimum wage when the unemployment rate exceeds 7.5%; and
• HB 1258 which would allow for a training wage for a specified period of time.

The WRA is grateful to Rep. Mike Sells (D-Everett), the Chair of the House Labor Committee who has agreed to hold a hearing on this collection of bills. Although the WRA does not believe these bills will move through the process, we are pleased that, for the first time in many years, the Legislature is opening up this topic.

The WRA is assembling a panel of restaurateurs from across the state to speak to the Committee. WRA members can also send us comments which we will give to the Committee at the hearing.

State-wide mandated paid sick leave bills heard this week

SB 6229 and HB 2508, identical (companion) bills in the Senate and House, were heard in their respective Labor Committees on Tuesday and Wednesday of this week. The companion bills are almost identical to what was adopted in city of Seattle last September. Both hearings were well-attended with small business owners and representatives of different industries testifying in opposition to the bills, including Boeing, National Federation of Independent Business, NW Grocery Association, small retailers and service-oriented businesses throughout Washington state.

Your GA team was fortunate to have a WRA member, Karissa Bresheare, in town to join us in offering testimony at Tuesday’s Senate hearing. Karissa did a wonderful job explaining how our industry has a well-functioning system in place of shift trading that allows our employees to stay home will sick without loss of pay. Karissa also made it clear to legislators that restaurant owners and operators do not allow sick employees to work in our establishments, pointing out that not only does shift trading take care of this problem but also that allowing a sick employee to work in a restaurant is against both state and county health department law. We want to extend a huge “Thank You!” to Karissa for her willingness to represent our industry at Tuesday’s hearing. We will stay actively engaged with both bills as this debate continues through the session. A fiscal analysis has been requested for both bills and therefore, if moved out of their respective Labor Committees, these bills should still have to be discussed in each chamber’s fiscal committee before moving forward for serious consideration by the full Legislature.

Liquor Control Board adopts training requirements for retailers

Initiative 1183 requires spirits retail licensees to have adequately trained employees who engage in the sale of spirits, through a “responsible vendor program” established, by rule, by the board,  and includes training centered around the “prohibitions against sale of spirits to individuals who are underage or visibly intoxicated.”

On Wednesday, the Liquor Control Board adopted requirements for the Responsible Vendor Program, and agreed the MAST program will meet the training requirements passed by voters to ensure safe alcohol sales. The WRA agrees this training, which our industry has relied on to maintain safe alcohol sales, is appropriate for the new role retailers will take on. Additionally, we look forward to the new opportunity this provides for the Association’s Education Foundation, as providers of the MAST program.

Thanks for a great Hill Climb & Taste Our Best 2012

WRA members gathered Monday in Olympia, where they grouped up to discuss industry-specific challenges in meetings with more than 100 state legislators. Members were urged to thank legislators for their leadership during last session on issues such as unemployment insurance reform, employee meal tax exemption and for allowing joint tourism promotions between wineries and restaurants. The show of gratitude served as a platform for restaurateurs to appeal for continued improvement of business conditions for Washington state’s largest private industry–one that garners some $649 million in annual state tax revenue.

Members asked lawmakers to reevaluate the state’s automatic escalator on minimum wage and shared detailed accounts of how labor costs have created an ongoing struggle for maintaining staffing levels, profitability and employee benefits in their businesses. Similarly, restaurateurs expressed concern over Senate Bill 6229/ House Bill 2508–a current piece of legislation that aims to mandate paid sick leave in Washington businesses. Members talked about how employees are able to achieve time off by shift-swapping, and encouraged legislators to get a better handle on the potentially debilitating effects this bill could have on employers if passed.

The day concluded with the WRA’s annual Taste Our Best legislative reception, one of the most highly anticipated events every session among legislators and their staffs. The evening showcased a delectable sampling of some of Washington’s finest restaurant beverages and cuisines. Thank you to all WRA members and sponsors who made Hill Climb & Taste Our Best 2012 such a success.

Workers’ comp and Retro debated in Committee        
Retro – HB 2207, which would enhance the claims management authority for scheduling independent medical examinations for Retrospective Rating programs, was heard in the House Labor committee on Tuesday.  The bill, which is championed by a number of Retro groups, was criticized by organized labor and trial attorneys – prompting some lawmakers to ask if the bill would be acceptable if it tightened restrictions on Retro groups. The WRA has remained neutral on this bill because we feared it could be a legislative tool to undermine Retrospective Rating programs. The WRA team will continue to monitor this bill closely.
Workers’ compensation – two bills ( HB 2431, HB 2359), which would begin to undermine the significant reforms passed in 2011 for new statewide medical provider networks and add new reporting burdens, were heard in the House Labor committee this week. Both bills are vigorously opposed by the broad business community, including the WRA.
Interestingly, in 2011, major reforms were passed for both unemployment insurance and workers’ compensation. Hence, coming into the 2012 session, the leaders from both sides of the aisle in these committees had an agreement that UI and workers’ compensation bills would not be debated this year. To date, there are no major UI-related bills introduced, but that agreement seems to be in jeapardy in the House. In fairness, it may be a bit early to tell, but we should have a better sense following the February 3 cut-off.

I-1183 reviewed in by House Ways and Means Committee        
The House Ways and Means Committee took an entire hearing to review progress in implementing I-1183, and to listen to stakeholders’ views on tax, fees and other fiscal issues related to the initiative. The WRA was invited to appear before the committee, and reiterated the following three points:
·    Acknowledged the work the Liquor Control Board has done in implementing I-1183 in the face of massive internal change at the agency.
·    Pointed out the pitfalls of some of the ideas being floated to “reform’ the liquor tax code; in particular, how some of the ideas could transfer taxes to the wholesale marked from the retail market.
·    Encouraged the Legislature to let the initiative be implemented, and then revisit potential changes based on actual experience in the future.
At the hearing, the Department of Revenue identified a legitimate issue that they need legislative guidance on. Under the current system, the state liquor stores have collected all state liquor taxes and remitted tax revenues to the state. Under a privatized system, however, distributors and retailers are accountable for collecting the state taxes and remitting them to the state. The Department of Revenue is now accountable for those collections, not the Liquor Control Board.  The WRA will be working with DOR to ensure a seamless process for on-premise retaliers. The bottom line is that on-premise retailers must know that their supplier has, indeed, collected all state taxes. If not, the on-premise retailer can be held accountable for those taxes.

WRA board member Phil Costello of the Spokane-based Stop-N-Go Drive-In shares his insights on the value of participating in Hill Climb:

Why do you drive all the way from Spokane to Hill Climb every year?

• I am a firm believer that if you don’t participate in the process, you can’t complain about it. Unfortunately, I like to complain a lot, so I figured I better show up and get involved. I think it is really important this day and age to pay attention to things that are going on at the state and federal level, and hold the people in charge accountable. It does impact what we are doing on a regular basis. I found out how a much a little increase in this tax or that tax can make a huge difference on whether or not you make a profit and are able to employ people, pay the bills and do the things you need to do to make a modest living for yourself.

Describe your first Hill Climb experience:

• The first year for me was very daunting. I am a pretty outspoken person for the most part, and I found it very intimidating to start with. I have always held legislators in high regard, and with the upmost respect. So, I was a little more careful the first year and did a lot more listening. I threw a couple of my own points in here and there to convey the story of what was happening in my particular situation. The part I really enjoyed about Hill Climb was the fact it was a chance to get all of the restaurateurs able to attend together, go up there and combat the opposite voice you see running around the hill. Participating in Hill Climb gave me a chance to get our points out there and have a discussion.

Don’t miss out! Register today for Hill Climb.

Highlights

Hill Climb & Taste Our Best is your day-long opportunity to join hundreds of your industry peers in telling lawmakers how their decisions will impact your survival and success. We’ve made all the appointments, and prepared everything you need to make these meetings a success. Just show up, ready to talk!

At the end of the day, join us at the Taste Our Best Legislative Reception—the most highly anticipated social event of the legislative session. Come savor some of Washington’s most celebrated food and drink, and continue the conversation with legislators and fellow industry leaders.

Register NOW!

Hill Climb & Taste Our Best

Jan. 23, 2012
9 a.m. –– 4 p.m.
Taste Our Best: 5 p.m., Washington Center for The Performing Arts

See you there!

Additionally, the governor proposed a half-cent increase in the state sales tax to “buy back” important programs impacted in her proposed budget. After 17 days of work, the Legislature passed a series of changes that, in total, amount to a roughly $480 million adjustment in the state’s spending plan. These adjustments include fund transfers and spending reductions. Although these changes improve the fiscal situation, the most difficult decisions have been deferred until January when lawmakers reconvene for the 60-day session.

Tax hikes?
Many lawmakers believe that its time to seek voter approval for new or increased taxes. Proposals to eliminate tax “loopholes” have been omnipresent the last few years, and again surfaced during the special session. Examples of “loopholes” used by proponents include the B&O tax credit for pop syrup taxes, sales tax on services and differential treatment of B&O tax rates among industries. The WRA GA team has worked closely with legislators to protect the important tax elements that uniquely impact the hospitality industry.

It’s unclear today whether the Legislature can muster a majority vote in both chambers to pass a tax package on to the voters. The group of moderate, fiscally conservative Democrats that influenced the outcome of last year’s workers’ compensation and unemployment insurance debates, is insisting on significant reform of state government before asking the voters for more money.  The question, however, is what does that precisely mean? On Thursday, the Gov. Gregoire announced a modest set of reforms that included elimination of the paid Liquor Control Board, privatizing the state lottery system and a number of modest cost saving measures. Other lawmakers view reform more boldly: combining agencies, eliminating low-priority programs, collapsing complex permitting processes, etc.

The WRA GA team expects to fully engage in the government reform debates when the regular session convenes in January.  Regardless of how the reform question is settled, it remains an open question of whether the Legislature will send a tax increase to the voters.

Progress on 1183 implementation continues
On Dec. 8, when 1183 became law, several things immediately took effect:

•    A wine retailer reseller license became available for retail-retail sales in 24 liter transaction
•    The ban on central warehousing for spirits and wine was repealed
•    The ban on quantity discounts was repealed
•    The LCB’s authority to set uniform pricing was repealed

Accordingly, the LCB needed to adopt emergency rules to implement the new license, and establish guidelines on central warehousing.

Last week, we reported that the LCB issued draft language to stakeholders, then adopted the rules less than 48 hours later, and did not allow for public comment. The WRA raised concerns over this process, in addition to the requirements for physical barriers separating inventory purchased by different ownership entities, effectively making our ability to co-op very difficult.

Since then, we have continued to meet with the LCB and staff on this issue. The emergency rules will be in effect for 120 days, and we are hopeful language that complies with the intent of the initiative can be reached.

Amendments to 1183 proposed
Even before the decisive victory of 1183, opponents of the initiative had signaled they intended to seek amendments should voters support I-1183.

Since then, two proposals have emerged from industry stakeholders. The first, would seek to “simplify” liquor taxes. However, proponents have suggested that a “simplification” would require pushing the numerous sale and liter taxes to the wholesale level. This approach would impact restaurateurs, since we purchase product at the wholesale level.
The second proposal would change the distributor fees set up and approved by voters in the initiative. Recall, I-1183 requires distributor licensees to pay 10% of their sales to the LCB as a licensing fee, and all of the licensing fees collected from distributors must make up $150 million by May 31, 2013. If it falls short, the LCB has the authority to charge distributor licensees on a prorated basis, to make up the difference. This approach was key for several reasons: foremost, it was important the transition to a privatized system did not negatively impact the state budget, ensuring $150 million is collected will accomplish this objective.

Secondly, requiring that $150 million be reached, in effect, compensates the state for a valuable asset – some legislative proposals suggested that just a portion of the state’s distribution system was valued at $300 million. Several new approaches have been proposed, which would push the $150 million fee onto micro-distilleries or manufacturers acting as their own distributor, and another would significantly increase distributor fees to as much as 25 percent.

As the lead sponsor of Initiative 1183, the WRA will continue to advocate for the policies to be implemented as the voters approved in November. Additionally, any change to the initiative in the first two years of its passage would require a super majority vote of the Legislature.

I-1183 certified, challenged by labor unions, Red Apple stores, prevention community
On Monday, December 5, the secretary of state formally certified the November election results, thereby enacting I-1183 into law.
Under Washington’s Constitution, no law can be enacted by the Legislature or the people that contains more than one subject. Therefore, the final recourse for opponents to an initiative is to challenge it on the basis that the new law contains more than one subject. In recent years, two of Tim Eyman’s initiatives have been overturned for violating the one subject rule.
Not surprisingly, on Tuesday, labor unions filed a lawsuit arguing that I-1183 violates the one-subject rule, and on Thursday, Red Apple stores and the substance abuse prevention community filed a separate challenge in Cowlitz County arguing the same fundamental points. Interestingly, Cowlitz County is one of the few counties in which I-1183 did not pass.
Since I-1183 is now law, the lead counsel charged with defending the initiative will be Attorney General Rob McKenna. The I-1183 coalition has assembled a legal team to intervene in the case on behalf of the sponsors and coalition members to insure that all arguments are raised to defend the initiative.
Currently, efforts are underway to consolidate the challenges in one court. The I-1183 coalition believes the appropriate venue is King County, where the first challenge was filed. The current schedule calls for a hearing on a motion for a preliminary injunction on implementing the initiative on Friday, December 16.
Finally, I-1183 was drafted with the oversight and involvement of a very skilled legal team, and everyone expected that, if successful with the voters, that opponents would file this challenge. So, while WRA, and I-1183 coalition is confident that the initiative meets the constitutional test, its always nerve wracking to enter the unpredictable realm of the courtroom.

Liquor Control Board adopts emergency rules to implement I-1183
On Monday afternoon, the Liquor Control Board issued draft language for rules to implement initiative 1183, and adopted the rules without allowing any public comment less than 48 hours later. While this is unusual, and the WRA feels the timeline was unnecessary, the Liquor Control Board does have the statutory authority to do so.
The new rules are particularly concerning on two issues
First, the rule regarding central warehousing requires “physical barriers separating product purchased by different ownership entities”. The WRA submitted comments on this issue, stating that Initiative 1183 repeals the ban on central warehousing, the ban on quantity discounts and the Board’s authority to set uniform pricing, Therefore, requiring barriers is unnecessary, since they seem to attempt prevention of activities that are now permitted. The Liquor Control Board adopted the rule as drafted.
Second, the Liquor Control Board reversed it’s apparent decision to allow licensees to begin purchasing from distilleries beginning Dec. 8. Licensees will now have to wait until March 1, 2012 to purchase direct from distilleries.
The emergency rules will be in effect for 120 days, or until April 7. This means we will be unable to affect any change on the decision to delay direct sales from distilleries until March 1. However, we will continue to work through our relationship challenges with the Board on permanent rulemaking regarding the central warehousing issue.
The Liquor Control Board will now enter into a regular rule making schedule to implement the rest of the initiative.
For updates on the implementation of 1183, please join us on our weekly Alcohol Task Force conference calls, Thursdays at 2 p.m. Please contact Shannon Garland at shannon.garland@wrahome.com for dial in information.

Possible legislation to amend 1183?
A group of stakeholders representing independent grocers and retailers, distilleries, distributors and the 1183 coalition members met to discuss possible technical changes that may be needed to implement the initiative.
Proponents of changes feel legislation is needed in 3 areas: first, the grocers feel the liquor taxes are too complicated for POS systems to handle. They would like to consolidate all of the taxes into one tax, collected at wholesale. Second, some stakeholders feel distilleries acting as their own distributor should be included in the requirement to ensure licensing fees reach $150 million by May 31, 2013. Third, the grocers would like to see the 10,000 square feet limit for retailers adjusted to 7,000 square feet.
The WRA has been active in these discussions, and has stated we will continue to be a partner in implementation and look for solutions that may be easier for some industry members to fulfill the obligations set up in the initiative. However, any policy changes to the initiative as passed by voters decisively in November are inappropriate at this time. Additionally, any change to the initiative will require a two-thirds majority approval by the Legislature.
For updates on the implementation of 1183, please join us on our weekly Alcohol Task Force conference calls, Thursdays at 2 p.m. Please contact Shannon Garland at Shannon.garland@wrahome.com for dial in information.