Progress on 1183 implementation continues


On Dec. 8, when 1183 became law, several things immediately took effect:

• A wine retailer reseller license became available for retail-retail sales in 24 liter transaction
• The ban on central warehousing for spirits and wine was repealed
• The ban on quantity discounts was repealed
• The LCB’s authority to set uniform pricing was repealed

Accordingly, the LCB needed to adopt emergency rules to implement the new license, and establish guidelines on central warehousing.

Last week, we reported that the LCB issued draft language to stakeholders, then adopted the rules less than 48 hours later, and did not allow for public comment. The WRA raised concerns over this process, in addition to the requirements for physical barriers separating inventory purchased by different ownership entities, effectively making our ability to co-op very difficult.

Since then, we have continued to meet with the LCB and staff on this issue. The emergency rules will be in effect for 120 days, and we are hopeful language that complies with the intent of the initiative can be reached.

Amendments to 1183 proposed
Even before the decisive victory of 1183, opponents of the initiative had signaled they intended to seek amendments should voters support I-1183.

Since then, two proposals have emerged from industry stakeholders. The first, would seek to “simplify” liquor taxes. However, proponents have suggested that a “simplification” would require pushing the numerous sale and liter taxes to the wholesale level. This approach would impact restaurateurs, since we purchase product at the wholesale level.
The second proposal would change the distributor fees set up and approved by voters in the initiative. Recall, I-1183 requires distributor licensees to pay 10% of their sales to the LCB as a licensing fee, and all of the licensing fees collected from distributors must make up $150 million by May 31, 2013. If it falls short, the LCB has the authority to charge distributor licensees on a prorated basis, to make up the difference. This approach was key for several reasons: foremost, it was important the transition to a privatized system did not negatively impact the state budget, ensuring $150 million is collected will accomplish this objective.

Secondly, requiring that $150 million be reached, in effect, compensates the state for a valuable asset – some legislative proposals suggested that just a portion of the state’s distribution system was valued at $300 million. Several new approaches have been proposed, which would push the $150 million fee onto micro-distilleries or manufacturers acting as their own distributor, and another would significantly increase distributor fees to as much as 25 percent.

As the lead sponsor of Initiative 1183, the WRA will continue to advocate for the policies to be implemented as the voters approved in November. Additionally, any change to the initiative in the first two years of its passage would require a super majority vote of the Legislature.