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Originally published October 15, 2011 at 6:30 PM | Page modified October 17, 2011 at 11:06 AM

Truth Needle: I-1183 ad exaggerates

The campaign against Initiative 1183, which would privatize the state's liquor business, is running a television spot that says the initiative has "giant loopholes deregulating our liquor laws, allowing almost 1,000 gas stations and minimarts to sell hard liquor in every community across Washington, where police stings prove they sell to one out of four minors." A Seattle Times analysis judges the ad to be mostly false.

Seattle Times business reporter

Video: I-1183 ad

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The claim: The campaign against Initiative 1183, which would privatize the state's liquor business, is running a television spot that says the initiative has "giant loopholes deregulating our liquor laws, allowing almost 1,000 gas stations and minimarts to sell hard liquor in every community across Washington, where police stings prove they sell to one out of four minors."

What we found: Mostly false

Stings by the Washington State Liquor Control Board show that almost one in four minors who try to buy alcohol from private establishments, such as restaurants, grocery stores and convenience stores, gets away with it. So that part of the claim is true.

But there's considerable doubt about whether almost 1,000 gas stations and minimarts would sell liquor if voters approve I-1183 in next month's general election. The number could just as easily be zero. That part of the claim is mostly false, and given that the information about minors is attached to it, the ad's overall assertion becomes mostly false.

The state Liquor Control Board's compliance checks for the last fiscal year show that more than three-fourths of minors who tried to buy alcohol at private establishments — bars and restaurants as well as stores that sell beer and wine — were not able to. State-run and state-contracted liquor stores had a far better compliance rate — well over 90 percent.

If I-1183 passed in November, all stores selling alcohol would be private businesses. The measure would make the fines and license-suspension penalties for selling liquor to minors twice as strong as existing fines and penalties for selling beer or wine to minors.

That leaves the question of whether nearly 1,000 gas stations and minimarts would add liquor to their beer and wine offerings.

The short answer is, it's almost impossible to know.

The state's Office of Financial Management estimated in August that 1,428 stores would sell liquor in Washington if I-1183 passed. That includes 328 existing liquor stores, which it assumed would continue to sell liquor through private owners, plus grocery and other stores that meet I-1183's requirement for measuring at least 10,000 square feet.

The budgeting office did not include in its estimate any stores under a provision in I-1183 that would allow a store smaller than 10,000 square feet to apply for a liquor license if no other store sold liquor in its "trade area."

The campaign for I-1183 says the provision was meant for small, rural communities, but opponents say it's a loophole that would lead to lots of small stores selling liquor all over the state.

I-1183 does not define "trade area," and it would be up to the Liquor Control Board to do that.

For the purposes of the campaign, the No on I-1183 coalition created its own definition. Using the placement of Safeway stores in Seattle and Tacoma, it figured that a trade area is a one-mile radius around big stores in cities and a five-mile radius in rural areas. It applied that formula statewide and found 929 small stores selling beer and wine that fall outside the one- and five-mile radii of large stores selling beer and wine and existing liquor stores.

The TV spot assumes the small stores would be gas stations and minimarts, but a lot of stores smaller than 10,000 square feet are small grocery stores.

Other definitions of trade area would yield different results. The state budgeting office did not include any stores from underserved trade areas in its estimate, it said, partly because the Liquor Control Board could define "trade area" as places where it currently has liquor stores. Under that definition, all trade areas would automatically have a liquor store and no more small stores would be allowed.

There is a lot of debate about how the Liquor Control Board would define "trade area." In fact, a budgeting-office official said last week it has since learned that the definition might need to be broader, depending on how the state's lawyers interpret the intent of the initiative.

Alan Rathbun, director of licensing and regulation for the Liquor Control Board, said it's hard to know how trade areas would be defined, but that I-1183 would not mention such areas if it intended to maintain the status quo.

"Why not just leave the restriction to stores with 10,000 square feet except for contract and auctioned liquor stores?" he said.

Yes on I-1183 spokeswoman Kathryn Stenger said the provision was meant to "be fair to small, rural communities that may not be served by a larger grocery store, or by an existing liquor store in their area."

"There is no intent to promote a proliferation of smaller outlets," she said, adding that the Liquor Control Board could define trade areas as it has in the past to determine where to locate the state's liquor stores.

Such an area might become underserved if, for example, its existing liquor store went out of business, she said.

The yes campaign also ran two analyses similar to that of the no campaign, but instead used a five-mile radius around existing liquor stores and large grocery stores statewide in one analysis. In the other, it used a three-mile radius in cities and a 10-mile radius in rural areas.

The metrics were based on three- to six-mile metrics that the Federal Trade Commission has used to analyze grocery-store competition issues in urban areas.

Under those parameters, the campaign found that 2 percent to 6 percent of Washington's communities would not be served by large grocery stores or existing liquor stores. It didn't determine how many small stores might apply for liquor licenses in those areas.

Another main reason the state budgeting office did not include any stores from underserved trade areas in its estimate is that local governments and schools could object to liquor-license applications.

And local governments also might adopt zoning laws to restrict liquor sales, although there's disagreement over how and whether that would work.

The Liquor Control Board said existing zoning laws do not restrict where alcohol can be sold.

Alex Fryer, a spokesman for No on I-1183, said that with budgets tight, "agencies like [the Liquor Control Board] wouldn't risk being sued for an abuse of discretion" by turning down stores that apply for liquor licenses saying they do business in underserved trade areas.

He points to language in the measure that says the liquor board "shall not deny" qualified applicants in trade areas where no other store sells liquor.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com

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