Private liquor sales pitched as way to save budget

Costco is making another run at getting the state out of the liquor business after failing at the polls with Initiative 1100 in November.

SEATTLE — Costco is making another run at getting the state out of the liquor business after failing at the polls with Initiative 1100 in November.

The company is lining up sponsors in the state House and Senate for a measure that would let private retailers sell liquor. Currently only the state can sell booze. The proposal would generate money for the state through licensing fees and business-and-occupation taxes. Liquor-tax rates would essentially remain unchanged, according to a fact sheet from Costco.

A competing proposal being considered in both chambers would raise money by leasing the state distribution system to a private company, but leave the state to handle the retail stores.

Backers for both proposals say they could generate several hundred million dollars in revenue for the state, at a time when the Legislature is looking for ways to close a $5.1 billion budget shortfall.

It's not clear if the Costco measure will make much headway.

Senate Ways and Means Chairman Ed Murray, D-Seattle, said he was leaning toward the competing proposal, to lease the distribution system, in part because it avoids a fight with labor and other backers of state control of the retail business.

House Ways and Means Chairman Ross Hunter, D-Medina, said he doesn't expect either proposal to be included in the House two-year budget that's supposed to be released next week.

"I'm not trying to book speculative revenue into this budget," he said.

However, Hunter said he would likely introduce both proposals soon for discussion. At some point, one of them could be worked into the budget. "Before I'd adopt one of them, I'd make pretty significant changes to them," Hunter said.

Voters rejected I-1100, which was financed largely by Costco Wholesale, with 53 percent of the vote. The measure would have allowed grocery stores and other retailers to sell liquor. The state auditor's office estimated it would have led to more than 3,000 stores selling liquor in Washington. The state currently has 166 state liquor stores and 162 contract-liquor stores.

John Sullivan, Costco's vice president, said a key difference in the proposed legislation is that liquor licenses would be issued only to retailers that have 9,000 or more square feet. He estimates about 1,100 licenses would be issued statewide.

"The prior initiative said ... essentially that any beer and wine retail-license holder could get the spirit license. So it would be a substantial reduction," he said.

Sullivan said under the new proposal, in order to get a license, retailers would pay 6 to 7 percent of gross receipts on average each quarter for the first five years. After that, they'd pay a $166 renewal fee each year.

Among ideas that could raise significant amounts of money for the state, some form of liquor privatization is the only one so far in which House and Senate lawmakers and the governor's office have expressed interest.

Gov. Chris Gregoire said recently that there's apparently no interest in the Legislature to expand gambling. And the governor has rejected any thought of borrowing money.