Since passage of initiative 1183, the Washington Restaurant Association has been actively engaged in the rulemaking process to implement the privatized system set up by voters.

While most challenges have been cooperatively worked through with the WSLCB, we are still working through a very significant issue -the Board is seeking to limit retail-to-on premise retail sales to 24 liters per day. The WRA has voiced adamant opposition to this limitation for several reasons:

• The limitation was not included nor contemplated in the voter-approved initiative
• The LCB does not have the authority to impose such a limitation
• A limitation on business – business transactions serves no public safety objective
• Regulating such transactions is an inappropriate intrusion into a private market, and unnecessary to implement the initiative
• Inserting a limitation will negatively impact restaurant and bar licensees, limiting competition for our industry

The postponement of the rule adoption will allow an additional public comment period – we urge restaurateurs to join the WRA in opposition to this limitation. Please contact Shannon Garland at Shannon.Garland@wrahome.com to join the effort.

Early Wednesday morning, the Legislature completed amendments to the two-year budget adopted just last May. Naturally, we understand that there are some questions about why the state Legislature convened two special session in 2012 (the second special session lasted only about 8 hours), so the following may be helpful in clarifying the situation

The WRA fared very well in this session. We accomplished the goals set out by the GAC in November. And most of our predictions about how the Legislature would behave proved true. Here is a broad summary; the WRA team is assembling specific results for the next edition of Washington Restaurant Magazine.

Finally, we are fortunate to have the support of our members in achieving our goals. On behalf of GA, THANK YOU!

Session Overview

The 2011-2012 Washington State Legislature has spent an unprecedented amount of time in session over their two-year cycle. During 2011, the Legislature convened for its regular, 105-day session, followed by a 30-day special session to finalize the two-year spending plan. They were called into special session during December 2011 to make further adjustments to the budget. After the December 2011 special session, many felt that lawmakers could, indeed, complete work on balancing the remaining $1.5 billion budget shortfall before the end of the regular, 60-day session. The decision points were well understood, the economic forecasts were more reliable, and the economy appeared to be “bottomed out” or improving.

Instead, lawmakers failed to complete work on the budget during their 60-day regular session, were called back to a 30-day special session, and finally completed work following an “all nighter” that required the Gov. Gregoire actually convening a second special session.

So, what happened to de-rail plans for resolving the budget in a timely manner?

• The governor, House Democrats and many Senate Democrats were preparing to write a budget predicated on raising $500 million in new revenue by sending a half-cent increase in the state sales tax out for voter approval. In March, however, the Economic Forecast Council predicted that state revenues would exceed earlier estimates by about $90 million, and that caseload costs would be under forecast by about $330 million. The forecasts took the steam out of putting forward a major tax hike to the voters, disappointing stakeholders and legislators interested in growing the tax base.
• The House passed a budget that called for delaying $330 million to school districts by one day, effectively kicking the major portion of the budget shortfall to the next biennium.
• A number of government reforms that would assist the state in achieving a balanced, sustainable budget over time were introduced with bi-partisan support in the Senate, but were initially met with strong resistance in the House (see below for detail).
• On March 2, just days before the close of the regular session, a coalition of Republicans and three Democrats gained control of the budget process in the Senate. The coalition passed a balanced spending package to the House, along with a number of longer term reforms. Despite attempts to meet the House more than half-way on their differences, the new Senate coalition and House were unable to bridge their differences until the waning hours of the first special session.

It’s rare for a majority party to lose control of the budget process – it has not happened in more than 30 years. It’s fortunate that the Senate coalition remained firm in its resolve to enact a more sustainable spending that does not rely on accounting nuances or major tax increases.

What Finally Happened?

The $1.5 billion shortfall in the 2011-2013 budget was balanced by:

• New forecast estimates that lower long term caseload costs by $330 million and increase state revenues by $90 million over the biennium.
• Transferring revenues between state and local governments in a timelier manner, saving the state considerable revenue.
• Reforming state pension benefits to align more closely with private sector benefits. These measures apply to new state employees, and lower the annual pension obligations.
• Lowering health care costs for school employees by taking advantage of state health care purchasing power versus individual, costly programs as negotiated district by district.
• Requiring the state budget to be balanced against a four year cost and revenue projections instead of the current two year projection.  This should help alleviate what are commonly called “bow wave” costs typically associated with initiating new programs in state government.

On Wednesday, April 4, the Washington State Liquor Control board adopted emergency rules to implement initiative 1183 that limit retail-to-on-premise retail sales, effective immediately.

While retailers will not be permitted to sell spirits to restaurants until June 1, the Wine Retailer Reseller endorsement for grocery stores contained in the initiative became effective upon certification on Dec. 8, 2011. If restaurants have been purchasing from grocery stores holding this endorsement, they are now limited to 24 liters per day.

The Washington Restaurant Association expressed serious concern over the emergency rules, the lack of notice to licensees about such significant changes, and the inconsistency the rules have with the intent of the voter approved initiative. The emergency rules will be in effect for 120 days, or until permanent rules are adopted. The Washington Restaurant Association has submitted comments on numerous occasions regarding our opposition to the daily limit of retail-to-on-premise retail sales, and will continue to work with the Board to seek a positive outcome with the permanent rules.

Currently, the proposed rules are subject to public comment, and a public hearing is scheduled for April 25. If the Board adopts the emergency rules, they will become effective 31 days after.

Earlier this month, the Washington State Liquor Control Board began a round of public hearings to take place across the state to gather input on the city of Seattle’s petition to allow local governments to seek extended liquor service hours.

The first meeting was held in Seattle. Next week, on Tuesday, April 3, the board will hear input from businesses and the public in the Vancouver area.

Below is information for the meeting:

April 3, 2012 

10:30 a.m. to 12:30 p.m.

Vancouver City Hall

415 West 6^th St.

Vancouver, WA 98660

The city of Seattle’s proposal can be found here: http://www.liq.wa.gov/publications/rules/2011%20Proposed%20Rules/City-of-Seattle-Petition.pdf. Under Washington state law, the authority to set hours of alcohol service is delegated to the Liquor Control Board. The Board has established service hours between 6 am and 2 am in WAC 314-11-070. The City of Seattle has asked the Board to consider a process to allow local governments, if they feel it is appropriate, to petition the Board and ask for extended hours. The proposal before the board now would not allow for extended hours, but a process for which a local jurisdiction could ask for extended hours. The Board, even if the city of Seattle’s proposal was approved, would still have the ultimate say over whether a city can extend service hours.

The Washington Restaurant Association fully supports the city of Seattle’s request, that was endorsed by the Mayor, with unanimous approval of the Seattle City Council, the Seattle City Attorney and the Seattle Police Department. The City of Seattle did an immense amount of research, which can be found here: http://www.liq.wa.gov/publications/rules/2011%20Proposed%20Rules/City-of-Seattle-background-extended-hours.pdf, and we believe local governments should have the authority to extend hours of alcohol service if it makes sense for their community, businesses and public safety services. The City of Seattle feels this would bolster tourism, encourage economic growth in several business sectors, while ensuring public safety.

Businesses in Vancouver could potentially benefit from such an allowance – as businesses a few miles to the south in Oregon are permitted to serve alcohol until 2:30am. We encourage you to join us in support of the rule change on Tuesday.

Last week, the Liquor Control Board adopted an interim policy on rules regarding central warehousing. This policy will allow for restaurants and bars to cooperatively warehouse and order product.

Initially, the LCB adopted emergency rule language that was so restrictive, it would have made co-ops nearly impossible. After hearing concerns from numerous stakeholders, the Board agreed to examine alternative language.

The new language will allow for a group of licensees to collectively register an off-site warehouse, employ staff to manage inventory, negotiate quantity discounts and place orders so long as the group of licensees have a system of inventorying product approved by the Board.

The language is effective immediately, and will remain in effect until permanent rules are adopted.

The permanent rules contain language identical to the interim policy, and could be approved by June 2, 2012.