As we reported yesterday, Costco is cueing up a liquor privatization bill in Olympia.

We have since spoken with Costco about the proposal.

The bill is similar to I-1100, the liquor initiative that failed last year, in that the three-tiered regulatory setup would be dismantled. For example, retailers could buy directly from distilleries and retailers could become distributors. Also, the liquor control board would have no price setting authority, which means retailers could get volume discounts from distributors.

However, acknowledging voters' concerns about the potential proliferation of neighborhood liquor stores and the financial impacts to the state, the Costco bill is different from I-1100—which Costco spent $1.2 million trying to pass last year—in two significant ways:

1. It would limit eligibility for liquor licenses to retail spaces that are at least 9,000 square feet. This, Costco estimates, would limit licensees to about 1,100 outlets as opposed to the thousands—including gas stations and convenience stores—that would have been eligible under 1100.

2. Rather than the nominal license fee under 1100 (a $1,000 application fee and a $1,000 license fee), retailers would pay six to seven percent of gross receipts from booze sales back to the state after the first five years, estimated by Costco at several hundred millions.

However, it's only a one time fee. Subsequently, licensees pay just $166 a year to renew the license. The bill, like I-1100, does keep state liquor taxes in place—which generate close to $300 million a year.

Costco VP John Sullivan tells PubliCola, "The timing has always been right to get the government out of a business that is not an essential service. High numbers of voters supported the concept of privatization, but they had some specific concerns—an excessive number of outlets and that privatization would lead to a hole in the state budget. This proposal addresses those concerns by substantially limiting the number of licenses and having private retailers paying  hundreds of millions of dollars to the state for the privilege of having a liquor license."

Here is a copy of Costco's proposal. The bill has not been introduced yet.
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