Last week, I reported on a potential loophole in I-1183 that would allow stores smaller than 10,000 square feet to sell liquor.

The initiative, funded by Costco, is being sold as an improved version of last year's failed liquor privatization plan because unlike last year's I-1100, it supposedly won't allow small corner stores to get into the booze business. The prospect of convenience stores turning into liquor stores scared many voters.

However, section 103 (subsection 3a) of the initiative allows stores that don't meet the size requirement to sell liquor if they meet a list of prerequisites, the main one being located in a "trade area" that does not have any other liquor retailers.

When I first wrote about this issue last week, it appeared (based on the comments of Brian Smith, Communications Director for the Liquor Control Board and Mark Funk, the former spokesperson for Yes on 1183) that the Liquor Control Board and Yes on 1183 agreed there was no potential loophole. However, opinions are now diverging.

In a reversal of last week's dismissal of the potential loophole, Liquor Control Board Deputy Director Rick Garza contends that a loophole could very well be in the works. Garza echoes the anti-1183 campaign Protect Our Communities, noting concern over the vagueness of the term "trade area." "I have never heard of the term," Garza said.

Garza detects makings of a loophole in other parts of the provision's phrasing as well, specifically in the aforementioned section that states: "the board shall not deny a spirits retail license to applicants that are not contract liquor stores or operating rights holders on the grounds of the size of the premises to be licensed, if such applicant is otherwise qualified and the board determines that...there is no retail spirits license holder in the trade area that the applicant proposes to serve."

Garza explained that the Liquor Board interprets that clause to mean size cannot be grounds for a denied liquor license if there are no other liquor retailers in the area (and the store has not had a public safety violation for three years in addition to meeting operational requirements set by the WSLCB).

Given the fuzzy boundaries of "trade area," this creates a loophole through which "[stores] that are not contract liquor stores, auctioned off state liquor stores or liquor stores [that are] 10,000 square feet or more" can potentially slip through to sell liquor.

Kathryn Stenger, the new spokesperson for Yes on 1183, dismisses the possibility of any loophole.  She clarified former spokesperson Mark Funk's comment last week that there would be "150-200" rural retailers that would qualify for the exception. According to Stenger, Funk's statement was referring to the "existing [163] contract liquor stores already operating in rural areas" that would be grandfathered in, and not meant to imply an allowance of additional small liquor retailers.

She affirmed that the primary purpose of the exception provision is "to protect the small business owners who operate existing contract stores and to allow them to continue to serve small rural areas as they currently do."

More importantly, Stenger noted that it is ultimately up to the Liquor Control Board to decide how many exceptions to grant. When asked about the definition of "trade area," she put the ball back into the Liquor Control Board's court, responding that "the initiative intentionally places the authority with the Liquor Control Board (as in all cases, with input from the local community) to determine on a case by case basis when and if the Board will choose to exercise that specific exemption and whether an applicant meets the criteria." In other words, it is up to the discretion of the Liquor Board to nip any loopholes in the bud.

(Note: Despite the emphasis on gathering community input, the initiative does not actually outline any processes for how that would work.)

Ultimately, the bottom line could be bad for small businesses, says Theresa Hancock, a contract store manager and council member in Sunnyside. She descsribes I-1183 and its predecessor, I-1100, as "Costco writing for the corporate model in each and every circumstance" without having the "consumer or small business in mind."

Even though I-1183 tries to protect the small business contract stores by grandfathering them in, Hancock predicts that the contract stores will be driven out of business any way because they cannot compete with larger retailers' volume discounts or the profit margins to absorb the 17 percent revenue cut paid to the state. Hancock, who has served as president of the association of Contract Liquor Store Managers, revealed that most contract stores are opposed to I-1183.

Of the current system, Hancock conceded that "it's not perfect, but it generates revenue [and] supports services." She added that "if people are angry about government in business, then let small businesses take over. And the Liquor Control Board is working that way, towards increasing the number of contract stores."
 

 
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