Liquor changes trickle into counties and towns

Garth Meyer, Gazette Reporter | Jan 23, 20130

When state Initiative 1183 passed in 2011 to put liquor sales into private hands, it was written to protect funds which cities and counties received from liquor sales.

Liquor now is available in local supermarkets and sales are reflecting the change in incomes to counties and towns.

The reality has proven somewhat different. Or has it?

Elements of 1183 were subject to changes, and while some have been made, others to come may counter those.

In all, the situation is in flux, according to many sources.

“The initiative had a provision in it that said cities, counties and other entities would continue to receive the same amounts (from liquor taxes) plus $10 million for public safety,” said Serena Dolly, a legislative and policy analyst for the Association of Washington Cities (AWC).

The AWC is a non-profit, non-partisan organization funded by service fees paid by its member cities.

Although, the language in the inititiative was written applying only to liquor profits, liquor excise taxes were not mentioned.

Traditionally, funds related to liquor distributed to cities and counties came from two streams – liquor profits and liquor excise taxes.

Since the liquor excise taxes were not part of Initiative 1183, they were subject to change which happened last April.

When the state legislature convened in the spring, on their last day, representatives voted to eliminate the payments from liquor excise taxes to cities and counties for one year.

In addition, the legislature deemed that after one year, liquor excise tax payments would be reduced by $10 million annually.

A usual distribution amount for the whole state runs about $25 million per year, said Dolly.

Another factor in potentially lessening revenues now is a cap put on both liquor profits and liquor excise taxes, also voted in by the legislature last spring.

This is significant because, historically, the payments to cities and counties were based on a percentage of a growing stream. However, starting July 1, 2012, due to the cap deemed by the legislature, those payments are now limited to $49.4 million per year, a number based on the four quarters leading up to passage of 1183, plus $10 million.

This is the first time a cap has been placed on these payments since 1933.

Local effect

So what does it all mean for Whitman County and its towns?

“We’re up about $8,000 in liquor profits in 2012,” said Mark Clinton, Treasurer for the City of Colfax. “That’s due to the sale of the state liquor store buildings and inventory.

“I think the excise taxes will be a wash because the sales tax will increase.”

As far as new money coming in from sales tax so far, Clinton said it’s hard to tell.

“I haven’t noticed a big difference yet, it’s all Rosauers sales and they fluctuate anyway,” he said.

Clinton indicated that the city has received about $20,000 per year in liquor profits over the past decade, while this year’s total is $28,000.

“I think that’ll probably level out,” said Clinton.

Private retailers began selling liquor in Washington on June 1, 2012, as determined by 1183.

In Washington state, liquor revenues have been sent to cities and counties for more than 70 years. Liquor excise taxes come from state tax to consumers and restaurant licensees, while liquor board profits are revenues from license fees and permits.

One of the factors regarding sales tax is competition with the state of Idaho, which is building a reputation for cheaper liquor prices.

“It’s down, I knew this was going to happen,” said Oakesdale Mayor Dennis Palmer. “We’re so close to Idaho, you look at the news, there’s a new store going in in Post Falls. Why are there so many people going to Idaho to buy it? It’s gotta be cheaper.”

Nonetheless, Palmer said the change to Oakesdale’s funds from liquor payments is small.

“We didn’t get a heck of a lot, but we got a little,” Palmer said of payments from the state, from liquor profits and excise taxes.

There is no hard liquor sold in Oakesdale, as was the case before the new law. The same goes for other Whitman County towns such as Palouse, while Tekoa and Rosalia lost their state-run liquor stores this year.

Outlook

While the state no longer operates liquor stores, the tax situation is less cut and dried.

“The state is a little unsure,” said Joyce Beeson, city treasurer for Palouse, which, like all Washington towns, received a percentage of liquor excise taxes and liquor board profits through the years.

Beeson said the payments traditionally added up to about $4,800 per year for Palouse.

“We try to guess what they’re going to do, it’s just a guess,” she said.

Dave Williams, Director of Government Relations for the AWC, said that the matter remains in flux.

“We’re anticipating going back to the legislature (this spring) to ask for two things; to restore the $10 million in gross amount back to cities and counties, and to remove the cap from liquor revenues,” said Williams.

Figures

In terms of liquor profits, in the traditional pre-1183 arrangement, cities got 40 percent of the total, the state got 50 percent and counties 10 percent.

The overall change post-1183 is that the state now earns its liquor profits not from markup at Washington-owned liquor stores, but from license fees from distributors and retailers.

Overall, the state is taking in more money under the new arrangement, said Dolly.

Williams indicated that individual cities’ liquor revenue is decreasing as a result of another move by the state legislature last year.

On the last day of the 2012 legislative session, ESH 2823 passed and directs existing state revenues from the Liquor Revolving Fund and Liquor Excise Tax Fund into the state general fund.

All of it adds up to an impact on cities, because in fiscal 2013, all liquor excise taxes which would have been distributed to local governments will be deposited in the state’s general fund.

In addition, in fiscal 2014, and each year after, quarterly distributions from the liquor excise taxes of $2.5 million will be made to the state’s general fund.

This adds up to $10 million diverted each year from cities and counties.

Whether or not this remains the policy is yet to be seen.

“It’s still a little unclear what it’s gonna be,” said Garfield Mayor Jarrod Pfaff. “I’ll be more concerned next year.”