Tuesday, October 5, 2010

Q: What's the difference between beer and "hard liquor"?

A: "Beer drinking accounts for most of the hazardous alcohol consumption reported in the United States"

(see Rogers and Greenfield, Journal of Research on Alcohol, 1999)

And the hazardous consumption attributable to beer is greater than beer's share of all alcohol consumed in the U.S.

The Big Beer interests funding the NO on 1100 campaign are trying to convince us that allowing 3,000 grocery stores currently licensed to sell beer to also sell Scotch would somehow be far more dangerous to public safety than the status quo of selling beer in the 5,000+ outlets that currently sell beer. Their explanation is that beer and "hard liquor" are "different".

Well, yes they are. As the aforementioned research (and other research) has found, beer accounts for more problem drinking and public health and safety problems than wine and liquor put together. Of course, the alcohol in beer is the same substance as the alcohol in Chivas Regal. But for whatever reasons of attitudes and behaviors regarding alcoholic beverages, beer is the drink of choice for underage and dangerous drinkers. The research stops short of proving a causal relationship, but experts believe reckless beer consumption is likely encouraged by a widespread misperception that beer is a "safer" form of alcohol. And that's precisely the misperception that the Beer Industry is exploiting and encouraging in this campaign.

Meanwhile, the "Protect Our Communities" campaign has been completely unable to produce a shred of evidence-based research to support their scaremongering that expanding the mix of alcoholic beverages at licensed grocery stores could plausibly lead to any increase on public health and safety problems. This should confirm that the "Protect Our Communities" campaign scaremongering about liquor in grocery stores has absolutely nothing to do with actually protecting anybody's communities. It is solely about protecting one group of vendors from competition and consumer choice.

Nine-hundred and thirty-five thousand dollars of beer on the wall: Many more barrels of out-of-state beer money flows into Washington to "Protect Our Communities"

According to Monday's PDC filings, the "Protect Our Communities Beer Sales" coalition deposited another $935,625 since last week's report, bringing the total cash + in-kind raised to more than $7.1 million.

The latest report alone includes $25,000 from Allied Beverage in Sylmar, California, $10,000 from the Budweiser distributor in Newark, OH, a total of $19,000 from 8 beer distributors in Kentucky, and a total of $85,000 from the state beer wholesalers associations in Arkansas, Colorado, Florida, Georgia, Maryland, Maine, Missouri, South Carolina, Tennessee and West Virginia.

I hope my readers are as touched as I am that this diverse nationwide coalition of beer distributors are so committed to protecting our communities!

To date, 64% of the funding for the "Protect Our Communities Abnormal Profits From Voters in Our Home States Getting Any Ideas in Their Heads About Taking Away the Anti-competitive Trade Restraints That the Beer Industry Uniquely Enjoys Here Too" campaign comes from outside the state of Washington. Most of it's beer money, some is from the Teamsters and UFCW. 26% comes from the Washington Beer and Wine Wholesalers' Assn. PAC. The remaining 10% comes from other Washington state donors, mostly liquor store employee unions, contract liquor store managers and liquor store landlords.

Wednesday, September 29, 2010

A few questions for Sen. Mike Hewitt (UPDATED)

Scroll down to bottom for an update

State Senate Republican Leader Mike Hewitt appears in a video ad for the beer industry's "Protect Our Communities Shelf Space" NO on 1100/1105 campaign. The ad should prompt diligent reporters to ask Sen. Hewitt a few questions:

Before he proclaims his opposition to both 1100 and 1105, Sen. Hewitt tries to show his bona fides by claiming that
"I co-sponsored legislation in the State Senate to privatize liquor sales"
Question 1: Sen. Hewitt, which bill exactly did you co-sponsor?

While we'll stop short of saying conclusively that he never co-sponsored any such legislation, we can't find any evidence that he actually ever did. The list of all bills he's co-sponsored since he joined the Senate in 2001 can be found here.  As far as we can tell, none of his bills would have privatized liquor sales. He definitely wasn't a co-sponsor of any of the three Senate privatization bills in the 2010 session  that we know about (SB 6204, SB 6840, SB 6886). As anonymous bloggers with an axe to grind, we can't just call him up and ask him to tell us the number of the bill that he claims credit for.  But we encourage our friends in the media to do just that.

Sen. Hewitt did sign on to a Seattle Times op-ed last January that called for liquor store privatization, but it doesn't appear that he actually did anything to follow through.  Now that there are two privatization measures in front of the voters, he turns around and claims in the video ad that these initiatives are "exactly the wrong way to go about it".

Question 2 part 1: Sen. Hewitt, what is "exactly the right way to go about" privatizing liquor sales, and how is that different from these bills? 

Question 2 part 2: And why didn't you introduce exactly that bill during this year's session when you had a chance to do so?

We will link to any news articles in which these questions are asked and answered. If Sen. Hewitt wants to e-mail us directly with his answers [yes1100no1105 -AT- gmail.com], we'll post his response in full.

UPDATE 9/29 4:00pm: Progress report: Michelle Dupler of the Tri-City Herald e-mailed to say that Sen. Hewitt sponsored SB 5729 "Concerning Alcohol Sales", filed in January 2009.  This bill would have converted 25 state owned stores to contract status, changing the mix from 160 state / 155 contract to 135 state / 180 contract. The state would continue its monopoly on distribution and setting prices at all retail stores. We don't think this meets any reasonable standard for "privatizing liquor sales".

Wednesday, September 22, 2010

Gas station mini-marts joining the pile-on against gas station mini-marts?

The latest bizarre twist in the NO on liquor privatization campaign, courtesy of today's Seattle Times:
Some small retailers worry about I-1100, too.

"It's wide open and means volume discounts for Costco and other large stores, which makes it very competitive for the smaller stores," said T.K. Bentler, executive director and lobbyist for Washington State Neighborhood Stores [sic], a group of 500 independent convenience stores.
Despite the Washington Association of Neighborhood Stores cuddly name, it isn't only about "independent" "neighborhood" stores, unless your neighborhood is a highway rest stop. The organization is dominated by large chains of gas station mini-marts. Its board of directors includes executives from the 103 store Plaid Pantry chain, BP, the 7-Eleven Franchise Owners Association and local gas station chains like Yorkston Oil. Here are some photos of WANS members.
And who is the beer industry's NO on 1100 "Protect Our Communities Excessive Beer Prices" holding up as the poster child of Stores-That-Can't-Be-Trusted-To-Sell-Beer-Responsibly-So-We-Can't-Let-Them-Sell-Other-Forms-Of-Alcohol?

So... Let's see if we can get the NO on 1100's overall argument straight. It's okay (not great, but not worth changing the law over)  to allow gas station mini-marts to sell beer at current prices between 6am and 2am. But if 1100 allows consumer-driven competitive pricing,  they won't be able to compete against larger retailers (against whom they are currently able to compete selling every other product even though there's competitive pricing on every other product). But even though they supposedly can't compete selling alcoholic beverages, there will still be a lot more of them selling scotch until 2am, which is somehow infinitely more dangerous than selling beer until 2am.

Of course this makes no sense whatsoever as a public safety argument. The real motivations here are that the beer industry doesn't want competition from other forms of alcohol. And nobody who currently wants to sell beer at prices which are artificially inflated by government-enforced anti-competitive restraints wants to give up their inflated prices. But inventing imaginary public safety problems makes better television than asking voters to vote to preserve pointlessly higher prices.

At least he's honest about it

We swear we're not making this up. It was on an eastern Washington TV or radio station website last week, and seems to have disappeared into the memory hole. Silly us, we saved the text, but forgot the link. You'll just have to take our word for it, the quote is better than anything we could imagine. From a wine maker in Zillah:
Sales Manager for Hyatt Vineyards, David Adair said "[wine is] just a huge very valuable input for every economy here. If that's threatened, those dollars will go away."

Initiative 1100, on the ballot this November would privatize liquor sales.

Adair says if I-1100 passes, it will hurt the local wine industry because it would take wine off store shelves, to make room for hard liquor.

"We need as many shelf feet as we can get. Those shelf feet are going to be smaller when spirits are allowed to be sold outside of the state liquor system," Adair said.
Consumer choice? Feh. What else does Adair want the government to ban from grocery stores in order to protect his shelf feet? Grape soda? Milk?

Friday, September 17, 2010


Ryan Ryals of the Covington Reporter has a great answer to the few beer and wine producers who pout that they are somehow deserving of current "legal protections" (which are unique to alcoholic beverages, but irrelevant to public health and safety considerations): "Follow the liquor money and decide on intiatives"
“But we need the current laws to protect the little guys!”, they might say. Well, what about other markets? I’d like to make a breakfast cereal called Ryan’s Raisin Flakes, which would be made here in Washington. However, I can’t compete with Kellogg’s and Post for shelf space, and their prices are far lower than I can sell my cereal for.

Should we make some new protectionist cereal laws so that I can employ 20 people to make Ryan’s Raisin Flakes? Should the state start opening breakfast cereal stores, and restricting wholesale cereal prices so I can compete? If you said no, then please tell us why you don’t support jobs in Washington.

And that’s the biggest argument you hear whenever a protectionist law is lifted; “We’re going to lose jobs in our state”. Yup, we probably will. But are those jobs worth saving? They’re artificially supported by higher prices charged to you and me, which are more like hidden taxes
Ryals concludes:
You can tell that I’m in favor of this initiative [I-1100], but please research it and decide for yourself. And remember, public safety and health are not at risk here; this whole issue is only about money. Where do you want your money to go? 

Wednesday, September 15, 2010

Time to let the consumers reign (for a change)

Fred Obee of the Port Townsend Leader makes what strikes us as a strange argument about Initiatives 1100 and 1105:
There may be good reasons to take down the state liquor store system, but I would feel a lot more comfortable with the idea if the proposal had been fashioned and vetted in the state Legislature. That way, we could have heard the testimony of wholesalers and small wine and beer producers. That way, we could have weighed the impact of revenue losses more carefully.

It’s not too late to have that conversation. All we have to do is vote no on both measures.

The Legislature created the state liquor store system in January 1934 and has spent the last 77 years maintaining that system. None of the several liquor privatization proposals fashioned by legislators last session were even vetted out of committee. To think that the Legislature would act differently any time soon seems less than realistic -- especially if both I-1100 and I-1105 are defeated by voters this fall. If voters defeat both measures, your typical legislator's reaction to any liquor privatization proposal for years to come would of course have to be "Well no, the voters said they didn't want that". 

Obee's main concern might be what he calls the "revenue losses". We reject the notion that the state's discontinuation of a retail business can fairly be called a "revenue loss", but it's not unreasonable for Obee to want the Legislature to preserve some or all of the liquor board's current surplus sales revenue. That surplus revenue is really a de facto liquor sales tax imposed by the Liquor Board. The Legislature can vote to fold the Liquor Board's sales tax into the proper statutory liquor tax any time it wants to, whether I-1100 passes or not.

Finally, we see no appeal in kicking this issue to the Legislature in order to hear the testimony of wholesalers and small wine and beer producers. The Legislature hears from their lobbyists all the time. We don't believe that economic regulations should be fashioned and vetted by business lobbyists to give advantages to their clients. Economic regulations should be enacted (or repealed, as in this case) to provide a free and fair marketplace for consumers, and by extension for the businesses who best serve the consumers. The Legislature has chosen not to take up the consumers' cause here. Now it's the voters' turn.

For voters who want a fair marketplace and for the liquor board to concentrate on protecting public health and safety, the only sure way to achieve that is to vote YES on 1100.

Tuesday, September 14, 2010

Francisco Franco is still dead ...

... and so is the link to the document "Public Health Concerns with 1100 and 1105", which is alleged to exist by the International Beer Industry's "Protect Our Communities Inefficient Distribution Network From More Efficient Retailers" campaign.

We first noticed and mentioned this on August 22. The link is still dead 23 days later. We now add to the list of "Books that Were Never Written": Public Health Concerns with 1100 and 1105 by Ann Heiser Bush.

Friday, September 10, 2010

Hopping Mad: What the beer boys fear about I-1100 (in addition to losing shelf space)

What the beer manufacturers and distributors fear about I-1100 is losing their government-enforced anti-competitive trade restraints.

These antiquated protectionist measures, imposed after prohibition with the intent of preventing the return of the 1890s saloon, were exposed to modern sunlight and became local news in 2004 when, as the P-I then summarized it:
Costco Wholesale Corp. is suing the Washington State Liquor Control Board, alleging its distribution regulations for alcoholic beverages limit competition and force retailers to charge higher prices for beer and wine.
Among the distribution regulations at issue in Costco v. Hoen:
  • Beer and wine manufacturers and distributors required to post their prices with the liquor board and "hold" those prices for a month
  • Beer and wine distributors required to charge uniform prices to all retailers
  • Requirement that beer and wine distributors charge same "delivered" price to retailers regardless of actual delivery costs
  • Prohibition against volume discounts to retailers
  • Prohibition against sales to retailers on credit
  • Prohibition on central warehousing of beer and wine by retailers
  • Prohibition on retailer-to-retailer sales
The same Washington Beer and Wine Wholesalers Association which is now frightening mothers with Halloween stories about the supposed deadly social costs of (other vendors') alcohol in grocery stores, joined the Liquor Board as an Intervenor Defendant.

As usual, the LCB and the WBWWA tried to argue that these restraints delivered all kinds of public health, safety and other benefits to the People of Washington, other than transfer payments from consumers and efficient retailers to inefficient beer distributors and extra bureaucrats.

After being forced to listen to a lawyered-up version of this press release for several days, Federal District Judge Marsha Pechman ruled that the defendants' claims that the challenged restraints offered public benefits were equivalent to the end result of  feeding beer byproduct to livestock. As she wrote in her Findings of Fact and Conclusions of Law:
The Court concludes that the challenged restraints are ... either ineffective or only of minimal effectiveness in promoting temperance, ensuring orderly markets, or raising revenue. ... the state's interests do not outweigh the federal interest in promoting competition under the Sherman Act.
Costco won on nearly every point.

Later, however, most of Judge Pechman's ruling was overturned by the Ninth Circuit. But ONLY on the grounds that the Sherman Act does not preempt state law regarding most of the restraints. In its opinion, the Ninth Circuit did not dispute Judge Pechman's findings of fact regarding the anti-competitive and overall uselessness of the challenged restraints. Indeed it noted that:
The ban removes from the market certain firms or persons who might otherwise compete; with fewer, and likely larger, horizontal competitors, prices for the consumer may be higher than they would otherwise be in the absence of the ban. But the potential anti-competitive effect is not the result of private pricing or marketing decisions, but the logical and intended result of the statute itself.  
The State failed to demonstrate that its restraints are effective in promoting temperance;
So there. To the beer wholesalers, however, the state-enforced anti-competitive price-jacking is what they were and still are fighting for.

And if it wasn't already clear, I-1100 eliminates most of those same trade restraints.

Among those who filed Amicus Briefs in the appeal were the same beer interests that are funding the "Protect Our Communities Anti-competitive Trade Restraints" campaign -- the National Beer Wholesaler Association and the Beer Institute (whose #1 member is Anheuser-Busch, St. LouisLeuven, Belgium. It's touching that those Belgians care so much about protecting our communities! Perhaps it's out of gratitude for Herbert Hoover)

The Liquor Board used to post the Costco v Hoen documents on its website. They were silently taken down sometime after Costco announced its support for Initiative 1100. Hmm.  You can still find many of the filings and exhibits here at the Way Back Machine.

Thursday, September 9, 2010

Has Initiative 1105 thrown in the towel?

As we remarked two weeks ago and notice again today, the I-1105 campaign hasn't updated its Twitter feed or  Facebook page since July 27. The Facebook page has a paltry 118 fans, compared to the new I-1100 page, which recruited over 1,500 fans in barely a month.  The 1105 campaign website hasn't been updated since they posted a hallucinatory "revenue estimate" on August 10 (the day before the OFM torpedoed 1105's only plausible selling point by calling out the Emperor of "more revenue" for wearing no clothes).

Meanwhile, I-1105's charming and formerly excitable spokeswoman Charla Neuman keeps making the defeatist plea (first noticed here, most recently here) that voters "should vote for both measures". At the Tacoma News Tribune's endorsement interview, she stated that the two initiatives were not in competition. (This is a distinct change from early summer when she expressed the non sequitur that I-1100 would bring us the "Wild West").

Last month's SurveyUSA poll showed 1105 leading, but 1100 winning more decisively. I speculate that 1105's internal polling shows that their support is soft and possibly depends on enough tax-happy voters buying their now discredited claim of a "guarantee" of higher revenue. The non-scientific web poll at the Puget Sound Business Journal shows that 46% of respondents would vote for 1100 alone, 34% would vote for both measures and a pitiful 3% would vote for 1105 alone.  If they ever expected to win for real while defeating 1100, they've probably looked at their prospects and concluded it's too tough and expensive of an effort for its poor odds of success.

So what do they accomplish by pulling back on their own messaging and tying themselves to 1100? If their real goal is to defeat 1100 and maintain the status quo, they've done their part by confusing voters, sticking 1100 with its odor of worse financial consequences than it actually has, and letting their beery siblings do the heavy lifting. Alternatively, if they're genuinely motivated to win, but realize they can't win through the ballot box alone, their next best option is encouraging both to win and letting the courts and/or Legislature sort out the mess -- where their lawyers, lobbyists and ability to influence elected officials [look up by employer = Southern Wine] can give them a better deal than the voters are likely to.

Either way, the 1105 campaign is remarkably strange.

Friday, September 3, 2010

$#*! My Liquor Board Says, Episode 1, Part 2

The Seattle P-I's Chris Grygiel also busted the LCB yesterday over its bogus claim that loss of the state store mark-up would strip the LCB of its funding for licensing and enforcement.

The P-I: "State wrongly says privatized booze would hurt enforcement"

But the "clarification" by the LCB's Brian Smith of his original bogus statement is still bogus:
"The $23 million wine tax would cover Board expenses under a privatized system," he said in a recent e-mail to seattlepi.com. "That money is currently going to the state and local communities because the Board's expenses are currently covered by markup. For the Board to use that will be a takeaway for state and/or local government. I've heard the Initiatives take credit for their initiative(s) to fund the LCB. It (or they) don't. The funding already exists in statute."
As both we and Grygiel pointed out yesterday, the OFM Tax Reference manual specifically states that "expenses of the Board are first funded" by the Wine Tax before any surplus may be distributed to other government programs. Not to mention that his "clarification" is at best accounting gobbledygook. The LCB is already complaining about the total amount of "lost" mark-up. The latest statement is an attempt to count this "loss" twice.

The LCB needs to come clean with a clear and truthful disclosure of its finances.

Thursday, September 2, 2010

$#*! My Liquor Board Says, Episode 1

Unfortunately, LCB officials eager to hold onto "their" retail empire, have resorted to spreading false information about I-1100's alleged impacts in order to frighten voters into voting NO.

Perhaps the most outrageous $#*! the LCB says is that the state store "mark-up" is the sole source of funding for LCB operations, including licensing and enforcement.  Therefore, they claim, loss of the state stores would leave enforcement "unfunded".

In recent days, LCB spokesman Brian Smith has been quoted saying this to both the Seattle Weekly (here) and The Stranger, here:
"We pay for ourselves in the markup," says Brian Smith, spokesman for the WSLCB. "Without it, we can't run enforcement, licensing, alcohol-awareness programs, or the liquor control board."

Baloney. According to the LCB's own internal financial documents, which we've obtained, 100% of the board's funding for licensing, enforcement, education, rule-making (everything except merchandising) comes from a dedicated portion of the wine tax and from license fees and penalties. None of it came from store sales. The current funding sources are untouched and retained by I-1100.  Furthermore, I-1100 specifically requires all fees from new liquor licenses to be spent on licensing, enforcement and abuse prevention (See Sec. 1.9 of the Initiative Text) -- that's several million of dollars of additional funding a year, depending on the number of new licenses.

The Gory Details
See the Operating Statements for FY 2009 and FY 2010 respectively. Notice how the LCB strictly segregates revenues and expenses for Merchandise Function from those of the Licensing and Enforcement Function.  The LCB spent $18.6 million on licensing and enforcement  in FY 2009 and $16.8 million in FY 2010.  Everything having to do with Licensing and Enforcement is funded out of the total Wine and Beer Taxes and Licensing Fees and Penalties, with a large "Net Revenue" left over after the operations are funded. Other LCB documents we've reviewed show that the Licensing and Enforcement function is almost entirely paid for by the wine tax, with but a small portion coming out of license fees. The dedicated funding from the wine tax is confirmed by the OFM's Tax Reference Manual , specifically in the Wine Tax section.
"Basic tax of 20 cents per liter (3.59 cents for cider); receipts go to the liquor revolving fund from which expenses of the Board are first funded"
On top of this, other LCB documents also show that all of the Beer Tax (about $30 million a year) and nearly all of the Licensing Fees ($11 - 12 million a year) are distributed and advertised by the LCB as part of the "profit" from the state stores. Seriously. The internal documents seem credible, but in public issuances they're padding the numbers.

(We don't want to bury readers with too many details, but we'll provide additional confirmatory documents upon request)

Tuesday, August 31, 2010

More strangeness surrounding 1105

The Washington State Wire today reports on both the beer industry's $4+ million investment in "Protect Our Communities Beer Sales" NO on 1100/1105 campaign, as well as the bizarre donations from the backers of I-1105 to the No on 1105 campaign.

We noted last week that Young's Columbia, the northwest outpost of I-1105 sponsor Young's Market, also donated over $300,000 to state Beer and Wine Wholesalers PAC, which was regifted to "Protect Our Communities Beer Sales". In today's Wire article, I-1105's charming but excitable spokeswoman Charla Neuman dismissed the apparent contribution from Young's Columbia as "a complete and total error". She noted that the PDC report has since been corrected to show the donation coming from Columbia Distributing, and claimed that  Young’s Columbia and Columbia Distributing “are two separate companies.”

This doesn't hold water. Young's Columbia shares the same website with Columbia Distributing and describes itself as a
joint venture between Columbia Distributing and Young’s Market out of CA. They have a shared services agreement in that Young’s Columbia pays Columbia Distributing for warehouse, delivery, and administrative services on a per case basis. The agreement covers the entire states of WA and OR.
They also have the same offices and phone numbers. It's hard to believe that venture partners so closely joined at the hip would be making 6 and 7 figure investments on opposite sides of the same ballot initiative affecting them both.

The PDC still reports a smaller contribution from Young's Columbia to the Beer and Wine Wholesalers PAC on August 9. (see all contributions to the Beer and Wine PAC since July) According to the Secretary of State's corporation records, there are two entities registered in this state, Young's-Columbia of Washington, LLC and Young's-Columbia of Oregon, LLC. Both list as a Managers Young's Market executives Vern Underwood, John Klein and Dennis Hamann.

Not only that (and sorry we missed this last week), but the PDC also reports a $5,800 donation on Aug. 9 to the PAC from The Odom Corporation, jointly owned and affiliated with Southern/Odom, the other funder of I-1105.  This is all too cozy to be a coinkydink.

Finally, we were really surprised by Charla Neuman's quote to the AP last week:
I-1105 spokeswoman Charla Neuman said the best scenario would be for both initiatives to pass.

"The best of both could be merged," she said, saying that while I-1105 supporters want to keep the current three-tier system, the main point is to get an affirmative vote on privatization.
So the 1105 people have been playing all three sides here, at different times asking voters to pass 1105 and defeat 1100, pass both, pass neither.  Hmmm.

Monday, August 30, 2010

Beer interests double down, now in for $4+ million

According to today's PDC filings, the beer industry has poured another $2+ million into the "Protect Our Communities Beer Sales" campaign against selling (other forms of) alcohol in grocery stores.  The Beer Institute, representing the breweries, tossed in $1 million and the National Beer Wholesalers added their second $1 million.

The Wholesale Beer and Wine Association of Ohio, which, the last time we checked, doesn't do business in this state, even coughed up $20,000. Ohio is also a control state, so presumably this is a preemptive strike to try to ensure Ohio's voters don't get any wrong ideas in their heads about treating their adult consumers like grown-ups.

But we're most upset by the Oklahoma Malt Beverage Association's donation of $500. It's not enough for them to take our basketball team, they have to start meddling in our elections?

Wednesday, August 25, 2010

Are Initiative 1105's backers pivoting to simply oppose Initiative 1100?

We noticed two odd things today.

First -- As of this writing the Initiative 1105 campaign ("Washington Citizens Out-of-state Wholesalers for Liquor Reform Monopoly") has not updated its Facebook page or its Twitter feed in nearly a month.

Second -- Young's Columbia, the northwest subsidiary of L.A.-based Young's Market, one of 1105's two funders, has just donated $306,000 to the WA Beer and Wine Wholesalers' Assn. PAC.  As noted below, the WBWWA PAC, with its $1+ million investment, is the largest shareholder in the NO on 1100/1105 campaign.

Some have long suspected that the 1105 effort might merely be a ploy to confuse voters in order to obstruct 1100. 1105's backers, who also sell lots of beer and wine, have an interest in protecting their existing beer and wine revenues. At the same time they also have steady, easy work brokering spirits to the state store system. Why bother to change a sweetheart state-protected monopoly?

The recent OFM report, which, for all its other flaws, conclusively exposed 1105's promises to increase state revenue as bogus. 1105 has now lost the only selling point relative to 1100 that it ever pretended to have. Since Young's and Southern apparently believe that the status quo is better than losing their monopoly (and certainly better than letting Washington voters dismantle the "Three Tier System" and set a precedent for other states), perhaps they're letting the air out of 1105 and joining the "Protect Our Communities Unnatural Profits" NO on 1100&1105 campaign.

We're speculating here, but why else would the 1105 campaign have gone dark, and why on earth would the 50% funder of 1105 also provide, in effect, 13% of the No On 1105 campaign's $2.7 million war chest?

"Protect our Communities Beer Sales", indeed

Wow. Check out today's PDC filings. The WA Beer and Wine Wholesalers' Association has invested a cool $1,000,000 cash in the "Protect Our Communities" NO on 1100 committee. This is an addition to its earlier $94,000 in-kind contribution. The National Beer Wholesalers' Association has matched with another $1,000,000.

77% of the NO campaign's $2.7 million total is from the beer vendors.

Last week we noted the Washington State Wire's report on the state beer wholesalers' earlier in-kind contribution.

Other leading news outlets would do well to take note. Perhaps we can stop calling the NO campaign "a coalition of unions and church groups" and call it what it is: beer wholesalers protecting their grocery store shelf space from customers who would rather purchase other products.

Tuesday, August 24, 2010

Survey USA: Initiative 1100 is leading 59% - 27%

SurveyUSA / KING-5 poll released today shows that Initiative 1100 is leading 59% - 27%, with 13% undecided.

Initiative 1105 is also leading, but by a smaller margin: 54% - 29% with 17% undecided.

We haven't won yet. Take heed from Massachusetts. The Bay State voted on "Question 1" in 2006 which would have allowed more grocery stores to sell wine. Polls shortly before the election showed it winning 57-38. A cynical, but withering campaign featuring bogus horror stories about public safety risks  defeated the measure 56-44. The NO campaign was bankrolled by those afraid of new competition ("package" stores and beverage wholesalers).

A similar coalition, "Protect Our Communities Monopoly", is bankrolling the NO on I-1100 campaign here, for the same self-interested economic reasons, using the same bogus scare tactics.  Scaremongering aside, all the credible evidence shows that the differences between state vs. private stores have no impact on public safety.

Vote for the consumers to win in Washington.

Sunday, August 22, 2010

File Not Found, Information Doesn't Exist

Go to the beer wholesalers' "Protect Our Communities Economic Rents" campaign website "Get The Facts" page and click on the link to a PDF file titled "Public Health Concerns with 1100 and 1105". Your browser will return a "404 File Not Found" error message. Heh.

Snarkiness aside, this illustrates a serious point. The so-called "Public Health Concerns" about I-1100 are little more than scaremongering fabricated by the beer wholesalers and others who are trying to protect the revenue that they would lose in a fair consumer-centered marketplace. There is no credible evidence that the state liquor stores achieve any of their purported public health and safety claims. 

Our friends in the substance abuse prevention and treatment community would do well to stop spending their valuable time and resources fighting I-1100, which has no reasonably foreseeable negative impacts on alcohol abuse (not foreseeable on the basis of empirical evidence, anyway). They should instead focus their efforts on measures that actually are effective at reducing alcohol abuse and its harmful consequences. Among the effective measures are enforcement of underage drinking and DUI laws. We remind those whose concerns about alcohol abuse we share, that alone among the three present alternatives (status quo, I-1100, I-1105), I-1100 is the only option which focuses the Liquor Control Board solely on reducing abusive and underage drinking, and also increases its budget for doing so.

Thursday, August 19, 2010

Request for Information

This blog might be polemical, but it relies solely on solid and documented facts. We invite our readers to send us any unpublished documentation about Liquor Control Board operations and practices (e.g. obtained through public records requests), and documented information about the I-1105 campaign, the "Protect Our Communities Beer Sales" campaign and their respective backers.

e-mail: yes1100no1105 at gmail

Wednesday, August 18, 2010

Protecting their beer sales to help Washington families? Huh?

In addition to its $94,000 in-kind contribution to the "Protect Our Communities" campaign, the WA Beer & Wine Wholesalers Association PAC has raised $984,000 cash in the last month alone. That's many times more than they've ever raised in any single year.  It looks like they're ready to invest a lot more money to protect their communities beer sales.

It's ironic that the Wholesalers Association is the biggest investor in the campaign claiming outrage that I-1100 would cause the state to "lose revenue that helps Washington families" (when they say "lose", the only thing that's lost is the foregone opportunity for the state stores to artifically inflate liquor prices to raise money, instead of letting the Legislature transparently tax the stuff).  Ironic because the Beer Wholesaler Assocation's John Guadnola was also outraged last April when the Legislature increased the beer tax to raise another $58 million a year. Even more ironic because $58 million is just what the surplus from the state stores' artificially inflated mark up delivers to other government programs in a typical year.

Adding irony to irony here, in April Guadnola honestly expressed his main concern that the new beer tax would lead to "higher prices". But yesterday he expressed concern that 1100 would cause beer to become cheaper.

Outraged against a lawful tax on his own products, but more outraged at a "loss" of hidden fees on his competitors' products; Outraged at different times about both higher and lower beer prices. These inconsistent messages indicate a desperate campaign for a self-serving, the-heck-with-the-consumer agenda that can't possibly appeal to the voters' sense of fairness.

The Yes on 1100 initiative is for consumer choice, fair prices and honest taxes. Our opponents' campaign isn't.

Tuesday, August 17, 2010

No, Virginia, the Washington state stores' compliance rate is NOT the "best in the nation"

The Washington Liquor Control Board's primary claim for itself is that its no-sales-to-minors compliance rate is "among the highest rates in the nation at 94 percent". [2009 Annual Report, p. 10] Give the LCB the benefit of the doubt that its compliance rate (determined by the LCB's own inspectors) really is 94%.  As far as we know, the LCB has never produced any documentation comparing its compliance rate to that of any other state. Then again "among the highest" is a completely meaningless claim. Is Washington among the top 3 states, or among the top 30? Do they even have any idea how high they rank?

Nevertheless, the LCB's defenders, including the beer distributors' "Protect Our Communities Shelf Space" NO on 1100 campaign, one-up the LCB itself and claim that its compliance rate is "the highest in the nation". (e.g. here, here and here) Except that it's not the "highest in the nation". Not even close.

Virginia, which also has a state liquor monopoly, reports that its compliance rate is 97% [2009 Annual Report, p. 9]. Give both states equal benefit of the doubt reporting their own success rates.  The difference between 94% and 97% is the difference between a 3% and a 6% failure rate. Washington state stores serve minors twice as often as Virginia's do. And a 6% failure rate is not very good given that the state store system costs $100 million a year to operate and its single most important mission is to prevent minors from buying liquor.

There are a couple of lessons here: First, the folks behind the "Protect Our Communities Shelf Space" campaign invent "facts" for dramatic effect. They've given us plenty of material to debunk. Keep checking this blog for updates.  Responsible journalists should be careful about repeating their claims without verifying them first.

The second lesson is that the Liquor Control Board is squandering its resources running  an ineffecient store system, while failing to put enough resources into effective enforcement. The proof is in the pudding. Washington's underage drinking rate is worse than the national average, no matter how many times certain people say "best in the nation".  In recent years, the LCB's enforcement budget has actually declined, while sales expenses have ballooned.  If I-1100 passes, it will increase the LCB's education and enforcement budget by 20%.  This will enable more "best practices", such as more frequent compliance checks, which have been shown to be effective at reducing underage sales in other states.

"Protect Our Shelf Space"

The Washington State Wire reports that the Washington Beer and Wine Wholesaler Association is the primary contributor to the campaign opposing both 1100 and 1105. -- $94,000 out of $226,000. The NO campaign is called "Protect Our Communities", but as the Wholesaler Association's John Guadnola admits, its about protecting beer and wine's market share. As the wags at Modernize Washington's Facebook page put it, the campaign could call itself "Protect Our Shelf Space".  Guadnola's quote cracks us up:
There are some good public-policy reasons to oppose both proposals, Guadnola said. If either measure passes, the number of hard-liquor outlets in the state could explode. The measures would allow stores that currently sell beer and wine to apply for hard-liquor licenses – up to 5,000 of them if every eligible outlet wins a license. 
“We believe there would be a significant increase in underage access to liquor,” he said.
Uh, huh. ...  5,000 outlets selling beer and wine is not a public safety concern when they're selling his alcohol. It's only a public safety concern when they're also selling his competitor's alcohol.

Does he really have such a low regard for the intelligence of Washington's voters?

Monday, August 16, 2010

I-1100 will generate a good $300 million a year for state and local government

Certain press reports on the OFM's flawed fiscal analysis predict that I-1100 will cause the state to "lose" money. But they failed to mention an extremely important point. Initiative 1100 (but not 1105) maintains the current tax rates on alcoholic beverages. Last year these generated $223 million, $30 million and $20 million on spirits, beer and wine respectively. (It might seem a bit of a stretch to include beer and wine taxes in a discussion of spirits privatization, but the Liquor Board always includes beer and wine taxes in its accounting of what it "returns to the state", so we include it for an apples-to-apples comparison).

License fees and penalties, nearly all of which is distributed to other government programs as Liquor Board "profit",  amounted to another $12 million last year. Those will still be collected after 1100 passes. (New retail spirits licenses will be retained by the Liquor Board to increase the enforcement budget). When the wine currently sold in state stores is sold in regular retail stores, the same $2.5 million in retail sales tax collected by the state stores last year (and included by the Board in the total revenue it claims as its contribution to state and local coffers) will simply be collected by retail stores. Private sector retailers and wholesalers will also pay state and local B&O tax. Per the tax rates in the OFM's Tax Reference Manual, and using standard mark-up estimates, the total combined state+local B&O rate on wholesale+retail is about 1.7% of the manufacturer's price. Based on the Liquor Board's nearly $400 million in  product purchases in each of the last few years, B&O tax will bring in another $7 million or so each year..

Of course the specific numbers will vary from year to year and will depend on impossible-to-predict product prices and consumer purchase volume. Then there are known, but harder to quantify benefits such as increased tax revenue from state residents choosing to buy more reasonably priced liquor in-state, instead of buying out-of-state; increased private sector business activity from new private sector jobs, etc.

Another difference between current and post-1100 liquor revenues is the inflated "mark up" that the Liquor Board tacks on to the store price.  The foregone mark up would amount to about $29 million a year for the state general fund, roughly 0.08% of the total state budget of $35+ billion a year. A similar amount would be divided among all the cities and counties in the state.  The Legislature gets to decide next session, before the state stores close, whether it's necessary to raise the liquor tax by the same amount as the Liquor Board's excess mark up, or not.

I-1105's imaginary financial gains

The Initiative 1105 campaign claims that its initiative "guarantees $100 million or more in additional revenue to the state in the next 5 years" . But the initiative itself makes no such guarantee. It does repeal all existing taxes on liquor, replacing it only with a directive that the Liquor Board issue a non-binding recommendation to the Legislature for a brand new liquor tax. In other words, it repeals the liquor tax and the rest is up to the Legislature. That's a big difference between 1100 and 1105. If 1100 passes, the liquor stays the same unless the Legislature votes to change it. If 1105 passes, the liquor tax disappears, unless the Legislature votes in a brand new one.

Not to be deterred by the plain language of its own initiative which offers no assurances about new tax rates, the campaign posted on its web site last week projections claiming that I-1105 "will raise at least another $130 million revenue for the state, counties and cities over the next five years."
Curiously enough, the same campaign concurrently posts on a different page on its same website a completely different set of numbers claiming that I-1105 would increase revenue by $98 million.

The $130 million prediction assumes that the new tax would be $6.35 a liter, plus the normal retail sales tax of "8%" and a bonus $66.9 million from selling the liquor board's merchandising assets. The $98 million prediction assumes that the new tax will be $9.77 a liter, with no retail sales tax and $98 million from selling the board's merchandising assets.

What are the right numbers? $98 million or $130 million? $6.35 a liter or $9.77 a liter? Nobody can possibly know. But the 1105 folks do have vivid imaginations.

Spending more to sell less

The Liquor Control Board has released its (unfinalized) financial statements for Fiscal Year 2010 (ended June 30).
Here are the 2010 Operating Statement and the 2009 Operating Statement. The OFM's invaluable fiscal.wa.gov site, which has detailed information about all state agencies and funds, also has additional information about the Liquor Board's financials.

Note how the numbers have changed since 2009. Net pre-tax sales appear to have increased, from $558 million in 2009 to $579 million in 2010. But that's only because the board imposed a massive temporary price increase starting last August, to raise more money for state programs. (State officials thought that would go down smoother with the voters than having the Legislature go on the record and vote to raise the liquor tax).

If you look at the Cost of Goods Sold (the liquor stores' total cost of products purchased from its suppliers, at suppliers' prices), that decreased from $399.1 million in 2009 to $379.5 million in 2010 -- with both the higher prices and the recession, customers are buying less expensive brands and also less volume over all. Nevertheless,  the total spending on operating the stores (sum of "Direct Sales Expense" and "Other Expense Applicable to Merchandising Function") increased from $101.2 million in 2009 to $102.0 million in 2010. What changed to account for more spending -- among other things, according to the OFM, merchandising head count went up, from 833 employees to 888. Selling less, and spending more to do so.

The other noticeable change since last year -- resources for licensing and enforcement declined from $18.5 million to $16.4 million -- a mere 14% of total spending.

Wouldn't it better to let the private sector sell products more efficiently, and let the Liquor Control Board spend 100% of its time and attention enforcing alcohol safety laws? That's exactly what I-1100 will accomplish

Sunday, August 15, 2010

What are the differences between 1100 and 1105?

Among the key differences:

1. 1100 is pro-consumer. It was started by a grassroots movement and eventually won the backing of Costco, other grocery stores (both small and large), restaurants and family wineries. It would introduce a fair, modern and competitive marketplace with fair prices (lower than in the state stores), innovative products and a broad selection.

1105 is pro-middleman, but expensive for everybody else . Its only backers are two out-of-state wholesalers -- Southern Wine and Spirits of Miami, Florida, the largest liquor distributor in the U.S., and Young's Market of Los Angeles, California. Together they paid more than $2 million to get 1105 on the ballot. Their purpose is to secure a monopoly on liquor sales in Washington State. 1105 would require all sales of alcoholic beverages to pass through these middlemen on the way from the producer (winery, brewery or distiller) to the retailer. Without the legal requirement, producers would often choose to sell to wholesalers, and retailers would often choose to buy from wholesalers anyway. But with 1105 there's no choice. Even when it's more economical for retailers to buy directly from producers, 1105 would require them, under penalty of law, to pay the middleman for services they neither want nor need.

Of course the retailers and restaurants who support 1100 are doing so because it benefits their businesses. But their interests here are aligned with the customers they serve. They win customers only by offering fair prices and good selection -- which is what we'll get with 1100. With 1105 on the other hand, the added costs of carrying the extra middleman would passed on to the consumer. The middleman monopoly would make us all pay more, with no added benefits of any kind.

2. 1100 preserves existing liquor taxes. Liquor prices and state tax revenues are stable and predictable.

1105 repeals all existing liquor taxes, replacing them with what, nobody knows. Its sponsors promise to increase revenue for the state, but 1105 actually wipes out current liquor taxes ($223 million last year). It replaces current taxes only with a mandate that the Liquor Board make a recommendation that the Legislature create a new liquor tax to be higher than the current liquor tax by about $120 million a year (a  55% increase). Nobody knows what the Liquor Board would actually recommend. The Legislature isn't bound by the Liquor Board's recommendation, it can do whatever it wants. We could either end up with a massive tax increase (and much higher product prices), or a gaping hole in the budget, or both. And we wouldn't know which one we'd get until after we voted for 1105. A vote for 1105 is a vote for an unpleasant surprise.

3. 1100 will reduce alcohol abuse and improve public health and safety: Under 1100, all fees from the new liquor licenses must be used for licensing, enforcement and education to reduce abuse and underage drinking. This will increase the enforcement and education budget by 20%.

1105 imposes more enforcement requirements on the Liquor Board, without increasing resources. The Liquor Board will have less time and fewer resources to spend on enforcement and education against abusive and underage drinking. Instead, it will have to spend more time and resources on purely economic regulations, which only protect the wholesalers monopoly, with NO benefits to public health and safety.

Read the texts of both initiatives and confirm for yourself -- I-1100 and I-1105

and Vive la Difference!