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Thursday, August 11, 2011

Costco's Liquor Initiative Would Generate Millions in New Revenue, State Study Finds

Posted by on Thu, Aug 11, 2011 at 2:04 PM

The Costco-sponsored initiative that would make approximately 1,500 Washington grocery stores eligible to sell hard liquor would generate as much $253 million for the state and an additional $227 million for local governments over a period of six years, according to a recent state budget report. Meanwhile, annual costs to the state are estimated at only $158,600.

This report—one of many compiled by the state's Office of Financial Management, as Eli noted earlier—cautions that it's hard to pinpoint the precise revenue impacts of Costco's Initiative 1183 because—aside from license fees—the bulk of the state's revenue would be largely determined by liquor prices set by retailers. But according to the report, liquor revenues could increase by as much as $42 million annually for the state and $38 million for local municipalities, over the course of six years. Those numbers don't take into account an additional net $28.4 million from selling off the Washington's liquor distribution center.

If approved by voters in November, I-1183 would make all grocery outlets with more than 10,000 square feet of retail space eligible to sell liquor (a grandfather clause in the initiative also allows current state-run stores to continue operating, if they so choose). The report notes that this would likely increase the number of liquor stores operating in the state from roughly 360 to 1,428, and jump sales of liquor (by the liter) an additional five percent (on top of the predicted annual sales growth of three percent).

If Washington voters approve I-1183, retailers could begin selling liquor on June 1, 2012.


Comments (30) RSS

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Posted by Goldy's Ass on August 11, 2011 at 2:13 PM · Report this
In other news, NO SHIT. Walk across the office smack that 'Goldy' moron in the back of the head.
Posted by sonder on August 11, 2011 at 2:18 PM · Report this
rejemy 3
Woooooo-baby! Liquor at Costco! I can almost taste it already. See you in hell, State Liquor Store #113!
Posted by rejemy on August 11, 2011 at 2:26 PM · Report this
Joe Szilagyi 4
Well, that's that. The conservatives will oppose the initiative. I imagine someone will denounce it on Sound Politics within a week.
Posted by Joe Szilagyi on August 11, 2011 at 2:33 PM · Report this

Put a bar car on the LINK trains...everyone would make a mint...
Posted by Supreme Ruler Of The Universe http://_ on August 11, 2011 at 2:41 PM · Report this
Kinison 6
Lets hope QFC doesnt push out the microbrews to make room for booze (that I dont care for).
Posted by Kinison on August 11, 2011 at 2:41 PM · Report this
A perfect example of how the state legislature and governor are inept at finding new revenue, and simply because their financial backers in UFCW and church moms in eastern Washington oppose this. As a result we cut critical state programs, and maintain a very few union jobs at the cost of many more jobs. Pathetic. I wish we didn't have to rely on corporations to write law, but if our legislature continues to fail to act, then we'll see much more of this.
Posted by Meinert on August 11, 2011 at 3:02 PM · Report this
treacle 8
Why the $37m a year? Where is that added revenue coming from? Can someone clarify why that money isn't already coming through the state liquor stores?
Posted by treacle on August 11, 2011 at 3:04 PM · Report this
It's at least 10,000 sq feet, not 9,000...
Posted by mizjade on August 11, 2011 at 3:06 PM · Report this
Nutsy 10
Dammit, I really don't like the 9,000 sf rule. What about small, boutique liquor stores? Maybe I just have a soft spot for those, being from Massachusetts (where my parents owned a small liquor store for over 20 years), but it seems like shop-lifting liquor or buying w/o proper i.d. would be easier at a big grocery store than at a store that specialized in liquor and depended on following the law in order to stay in business. I do think liquor sales should be privatized, but I am wary of it being done in such a way that makes it a total give-away to large corporations without leaving the potential for small mom-and-pop stores to compete.
Posted by Nutsy on August 11, 2011 at 3:18 PM · Report this
@8 Maybe from the fact that stores will be selling liquor for 70+ additional hours per week? That's over twice as long as liquor stores are open now. (This is going off of Seattle store #2's business hours, 68 per week, as well as the assumption that stores would sell liquor between 6am-2am)
Posted by UNPAID COMMENTER on August 11, 2011 at 3:23 PM · Report this
TheRain 12
I'm with 10. This seems designed to favor big-box stores over smaller operations, and I don't think that's fair. I'll be a no vote.
Posted by TheRain on August 11, 2011 at 4:17 PM · Report this
laterite 13
Dammit, Costco, why can't you throw your weight behind a more equitable initiative? I'm all for sanity in liquor distribution in this state but not at the mercy of corporate self-interest (even when the corporation is more high-minded than most).
Posted by laterite on August 11, 2011 at 4:54 PM · Report this
Don't forget- the whole reason the 9000 sf rule was added in the first place was because people like Goldy screamed bloody murder that small shops would be more likely to sell to minors. A total logical fallacy, but one that Costco was all to happy to use to their advantage.
Posted by UNPAID COMMENTER on August 11, 2011 at 5:03 PM · Report this
@12 - agreed this isn't the best because of costcos self serving 10,000 sf clause, but it's the best we're going to get because of the lame leadership in the state legislature. Remember this when you get to vote against frank chopp next time. But if you care about more jobs, more revenue for state and local
Governments, and a less expensive and more efficient liquor distribution system, vote for this. Otherwise we get what we have now, along with more cuts to governent programs
Posted by Meinert on August 11, 2011 at 5:14 PM · Report this
stuckie 16
@3 Doesn't Costco have fewer stores further away from metropolitan areas, and charge a membership for shopping there? You do know there's no guarantee the prices will be cheaper - and given the math required to make this $38m in local profits, I'm not sure it will be.

@8 @11
Your points seem at the crux of this. To reverse engineer this: the expectation is that the spike in sales emerging from increased alcohol availability would be so drastic that even the local taxes on it would eclipse the entire profit made by the state on all of their current stores PLUS ~$38m extra (especially if consumers are also expecting their prices to come down as a result of this). Either there's some funny math going on there, or they're counting on Seattle having some of the laziest lushes I've ever heard of.

Am I missing something? This is the part I don't quite understand:
"...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..."

Are those licenses yearly or "permanent"? (this would seem to make a difference) And given that at this point those licenses are going only to QFC, Safeway, and Costco... would they be paying like 70 million each? And they're expecting the after-tax profits on that extra booze income to make up for those licenses?
Posted by stuckie on August 11, 2011 at 5:48 PM · Report this
internet_jen 17
@6 I don't know what non-city dwellers would do, but I think Seattle is ripe for a microbrew CSA. As a non-driver who lives almost in Shorline, I'd love to have a growler delivered to my house every week. *swoon*
Posted by internet_jen on August 11, 2011 at 5:49 PM · Report this
People, WE WILL GET THERE. The first step is loosening the stranglehold the state has on our booze.
Posted by sonder on August 11, 2011 at 6:13 PM · Report this
stuckie 19
For the record, I LOVE the idea of increased access to booze. And if the math works out that the state literally does make as much revenue as it did before (less the good state jobs, I guess), I'd be all for the initiative. Someone just needs to show their work .
Posted by stuckie on August 11, 2011 at 6:20 PM · Report this
@16 First, there's a Costco in Seattle- in SoDo. Second, the membership fee is roughly $4.15 per month. Third, if shopping for booze at Costco in Alaska has taught me anything, its that the prices will be lower... a LOT lower.
Posted by UNPAID COMMENTER on August 12, 2011 at 12:52 AM · Report this
All of you in favor of the Costco initiative get ready to pay a state income tax just like all the other states do that have already privitized alcohol sales. You all might think you will save a dollar or two on a bottle of booze when the reality is you will be spending hundreds or thousands a year paying a state income tax. Why on earth would anyone want to spend a dime to save a nickel is beyond me!
Posted by www_cowgirl on August 12, 2011 at 7:59 AM · Report this
@21 Fuck yeah- Bring on the state income tax! Its high time we started using progressive taxes that fairly tax everyone across the board. The filthy rich in Washington have been getting a free pass for way too long.
Posted by UNPAID COMMENTER on August 12, 2011 at 8:10 AM · Report this
You conveniently left out the fact according to the report the extra revenues are generated by a rise in prices. Yeah, that's right, the prices will go up. The big corporations will have a monopoly and the product selection will go to hell. Costco, Safeway and the like are volume retailers and make money on how much they push out the door. If it doesn't move, they won't sell it, so say goodbye to many of the products you now see in the liquor stores. And as you have to be as big as a grocery store there will be no specialty stores to carry specialty products and high end liquors. So as the saying goes, be careful what you ask for.
Posted by arttheshark on August 12, 2011 at 9:55 AM · Report this
Why do people assume that a 9000+ square foot store can't or won't sell specialty liquor?

In Alaska, where you can purchase liquor in gas stations and Costco, there is a particular liquor store I frequent when I visit called Gold Rush Liquor ( which is 20,000 sq ft and carries many specialty liquors not found anywhere else. Who's to say that type of store can't or won't happen here..?
Posted by UNPAID COMMENTER on August 12, 2011 at 10:49 AM · Report this
wilbur@work 25
Here's one YES voter who cares not about whether the state increases it's revenue stream via liquor sales. The point is, and should be: The State has NO BUSINESS being in the liquor business, and runs that business as inefficiently as possible. The increased revenue is through the process of cutting off the continuous FAIL that is, was, and always will be the WSLCB.

Get it?
Posted by wilbur@work on August 12, 2011 at 1:12 PM · Report this
@#25- So you think that "slash and burn" is a good way to progressively reform the liquor system?
Most of the others on this forum have been contributing toward making a point clear- corporate funded initiatives are meant to benefit THE CORPORATION- not the consumers, taxpayers or beneficiaries of taxes collected. The Costco initiative makes Costco (Safeway, QFC, etc.) the priority, hence the 9,000sf clause, let alone the fact that they're only offering to pay a nominal license renewal when the five years of 17% runs out...what happens after that, people?
Some of you seem to want to quote the California liquor laws, but there is no minimum store size there, so how is this not a flawed comparison?
As far as pricing and selection, you can all guess where those will go- most truly handcrafted spirits will not survive a model where the retailer dictates wholesale prices as well, as they lack economy of scale and their production are typically higher than mass-produced brands. And if there is no place at a "big box" retailer for smaller brands, they will go elsewhere or just pack it in- to the tune of hundreds of businesses closing and thousands more jobs lost just so Costco can make their stock more attractive while carrying out this blood feud against the WSLCB that dates back almost ten years. And we already know that liquor taxes will surely be raised to offset any revenue losses, or would you rather a state income tax?
I'm all for liquor system reform- change is good, especially in business- but this isn't even close to a good idea for anyone outside of the major retailer arena- vote "no" and expect better ideas from our leaders, and please don't trust Costco to write legislation...ever!
Posted by SkepticInSeattle on August 12, 2011 at 2:11 PM · Report this
It's nice that there's a big liquor store in Anchorage, but just how many are there and how convenient is it for everyone? And why do you go there? Because like I said, they don't and won't carry those products. By Costco's own admission they will carry about 30 to 40 of the big movers and their own brands and in most cases only half gallons. There might be some big liquor stores pop up, but few and far between because a store that size takes a substantial investment which eliminates any chance for the little guy and leaves it all to the fat cats like Costco, Safeway and the like.
Posted by arttheshark on August 12, 2011 at 3:29 PM · Report this
There are several liquor "warehouses" centrally located in Anchorage, and they all carry rare spirits- plus, the one I linked to above is locally owned and operated!
Posted by UNPAID COMMENTER on August 12, 2011 at 4:54 PM · Report this
10,00 sq ft rule was put in because the last initiative failed because too many people cried that their would be more access for minors to purchase liquor illegaly, state run stores would have the option to stay open (a grandfather clause in the initiative also allows current state-run stores to continue operating, if they so choose)......let's stop the states monopoly...lets cautiously accept the potential increased my opinion, its a win/win, more hours for liquor sales = jobs....Stores that currently sell alcohol, i.e Safeway, Costco, QFC, Albertson's already have to i.d. consumers...take baby steps now and in the future and maybe vote to allow mom and pop outfits to open..The system we currently have is out of is time for change. Vote Yes and change the status quo...
Posted by State Monopoly needs to change! on September 12, 2011 at 11:37 PM · Report this
#21 you are wrong that all states that do not have state liquor stores have an income tax.. Texas, Tennessee and Alaska come to mind right off hand.

I believe that the availability of liquor and of choices will go up. I have been going to Canada at the Duty Free to buy the liquors I enjoy that the state will not sell. I believe if the consumers are wanting a product than a retailer will be glad to offer it as an item for purchase.
Posted by Lazarus Long on September 14, 2011 at 6:19 PM · Report this

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