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Originally published May 25, 2010 at 12:31 PM | Page modified May 26, 2010 at 10:33 AM

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Costco backing state initiative to open up liquor sales

Costco Wholesale stores in Washington will begin collecting signatures next week to put Initiative 1100 on the ballot in November. The initiative would take the state out of the liquor business.

Seattle Times business reporter

Initiative 1100

COSTCO IS THE FIRST major backer of an initiative filed in April by a group calling itself Modernize Washington. In general, it would:

Take the state out of the liquor-store business.

Eliminate price controls and allow volume discounts.

Force the state to sell its distribution warehouse.

Allow retailers to buy beer and liquor directly from manufacturers. Some direct wine sales are allowed now.

Allow retailers in good standing with beer and wine licenses to sell liquor for an additional fee.

Give local jurisdictions six months to adjust zoning regulations to limit their number of liquor outlets.

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Costco Wholesale stores in Washington will begin collecting signatures next week to put an initiative on the ballot in November that would take the state out of the liquor business.

Initiative 1100 would allow businesses in good standing that currently sell beer and wine to also sell liquor, and it would eliminate price controls and allow volume discounts.

The push comes more than two years after Issaquah-based Costco, the country's third-largest retailer, lost most aspects of a court battle to change the state's beer- and wine-distribution rules.

Several legislative efforts aimed at overhauling the system failed to make headway.

"Some things are politically very difficult to change through a legislature," said Costco's chief legal officer, Joel Benoliel. "There are so many stakeholders with entrenched roles in this, whether it's distributors or others."

He said some law-enforcement and temperance representatives also oppose letting retailers like Costco sell liquor.

John Guadnola, executive director of the Washington Beer & Wine Wholesalers Association, said the group does not have an official position on the initiative but that he personally supports keeping the current regulatory system.

Price controls and other regulations minimize alcohol abuse and related problems such as domestic violence and workplace problems, he said.

"In Great Britain, they're selling beer as loss leaders in grocery stores," Guadnola said. "It's easy access to alcohol, and the lower the price, the more the consumption."

Small grocery stores may like the idea of selling liquor but say Initiative 1100 goes too far.

"This would allow very large retailers to acquire and sell alcohol at a price that many of our family-owned grocers would not be able to compete with," said Jan Gee, president and CEO of the Washington Food Industry Association, which represents independent, family-owned grocers.

Others are concerned that the state needs the revenue generated by its liquor stores, about $655 million in fiscal 2008 and 2009. The state runs more than 160 stores, and an additional 155 are owned by businesses that contract with the state.

Costco and Sharon Gilpin, a political consultant who put together Initiative 1100, say the state could raise liquor taxes to make up for that loss.

"The Legislature taxes alcohol, and that power is not being taken away, and they should go for it," said Gilpin, who worked with Bellevue attorney Richard Stephens to draft the initiative's changes to the state's Prohibition-era alcohol laws.

Even with higher taxes, consumers would pay less for liquor than they do now because of increased competition and the elimination of price controls, Benoliel said.

"If we're allowed to apply our efficiencies to any commodity, we can lower the price," he said. "To some extent, other retailers can as well."

To make the November ballot, the initiative needs almost 242,000 signatures by July 2.

More than 50 people are collecting signatures now, and Costco will add dozens to that effort next week, when it sets up tables inside 26 warehouses staffed by Costco employees who are registered voters.

"We know we're going to get an overwhelming response, because we know the concept is very, very popular with Washington people," Benoliel said.

Costco considered three initiatives before backing 1100.

Gilpin and Modernize Washington, a group she organized for this effort, had a second initiative to change the alcohol-sales system. It was backed by the small-grocers association because it would have kept price and other controls.

Gilpin said that initiative will be withdrawn. "We don't want to compete with ourselves," she said. "We're going with 1100, because it's getting the most support from people in the industry."

A third effort, Initiative 1105, would close state liquor stores and revise regulations and taxation. It is thought to be backed by at least one major spirits distributor.

Charla Neuman, a government-affairs consultant in Tacoma who is listed as its sponsor, said it is too early to name the initiative's supporters. They are not collecting signatures yet, and its description for the ballot is open to public challenge at the Secretary of State's office until June 1.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com

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