Cities brace for liquor profit bust

  • By Mina Williams Enterprise editor
  • Tuesday, October 12, 2010 8:19pm

Financial directors across South County are in the midst of preparing city budgets. As in past budget cycles they are accounting for police, utility and labor costs. What makes this year unique is the uncertainty created by Initiatives 1100 and 1105 on the general election ballot.

The passage of either or both of the initiatives, each involving the future function of the state’s Liquor Control Board, will impact city coffers.

Under the current system, taxes and profits collected by the state are distributed, based on population, to local governments to offset public safety costs.

Taking those revenue streams out of the budget equation has city finance directors on edge during what is already a challenging cycle.

“In this economic crunch losing any revenue is difficult,” said Scott Hugill, assistant city manager for Mountlake Terrace. That city stands to lose more than $260,000 annually in combined taxes and profits.

Lynnwood, already in a budget crisis, is looking at dropping just under $500,000, according to Patrick Dugan, the city’s interim finance director.

In Edmonds, financial director Lorenzo Heinz has built into that city’s budget a $500,000 loss should either initiative pass.

The Association of Washington Cities projects that Mill Creek stands to lose $232,000; Brier would see $82,000 less; and Woodway’s loss would be $15,000.

The county itself would be cut out of more than $1.6 million in profit and tax revenues.

Cities and counties receive more than 18 percent of the funds the Liquor Control Board collects.

Both measures are aimed at moving the state out of the retail liquor business.

Most simply, 1100 puts into place a distribution system based on direct sales from producer to retailer. The state would continue to collect taxes. The effective date would be the end of 2011.

Meanwhile, 1105 calls for the distribution of alcohol to flow through licensed distributors and directs the Liquor Control Board to recommend a tax structure to the Legislature. If passed, April 2012 would be the sunset date for all state liquor stores.

Should the Tim Eyman-crafted Initiative 1053 pass, then Initiative 1105 could be considered a new or replacement tax requiring a two-thirds vote by the Legislature, according to the Association of Washington Cities.

What remains to be seen is which measure voters will pass, with the real possibility that both initiatives will receive voter favor. In that event, since the mandates and directives of 1100 and 1105 are in conflict and cannot be clearly meshed, the determination of the public’s wishes would be resolved by a two-thirds vote by the Legislature. Barring a resolution, the decision could end up in the courts.

Another wild card is who will be responsible for enforcing state liquor laws should either measure be given the go-ahead by voters come November.