Costco pours money into Washington state liquor vote

A customer walks past a Washington State liquor store in Seattle, Washington November 3, 2011. Washington state voters will decide on a ballot initiative that would privatize liquor sales and close state package stores, a controversial measure that has drawn a lot of money from brewers and spirit makers and retailers such as Costco.

SEATTLE (Reuters) - An initiative backed by Costco to allow supermarkets and warehouse stores to sell liquor in the state of Washington has shattered an election spending record, and a recent poll showed the measure may pass.

Washington has 328 liquor shops, about half run by the state and the rest by contractors. If Initiative 1183 passes on Tuesday, 1,100 additional stores with at least 10,000 square feet of retail space each could sell liquor and the state-run stores would be sold to private owners.

State residents vote by mail, and began returning their ballots two weeks before Election Day. A University of Washington poll released on October 31 showed the privatization of liquor sales winning by a slight majority.

The Yes campaign has collected about $23 million, almost entirely from Costco, the Issaquah, Washington-based warehouse store chain, according to Kathryn Stenger, Yes on 1183 spokeswoman.

This shattered Washington's record for the largest single-donor contribution for a state initiative, surpassing the American Beverage Association's $16 million for last year's successful repeal of tax increases on candy, gum, bottled water and soda pop.

Other supporters include retailers, such as Safeway and Trader Joes, and restaurants that would benefit from the measure's provisions for volume discounts, alcohol storage and delivery options.

If the measure passes, Costco would be able to sell liquor, negotiate for discounts on wine and serve as its own distributor. Some analysts believe Costco will set its sights on opening up the market in Oregon next, securing an entire West Coast supply chain.

Costco declined requests to comment for this story.

The opposing Protect Our Communities campaign has raised $12 million, largely from alcohol distributors, who are against the 10 percent of gross revenues they would have to pay in first two years, followed by 5 percent. Labor unions also are opposing the measure because it would put some employees at state-run outlets out of work.

"We never thought we'd have to spend the amount of money we've contributed to combat the lies told by the opposition," said Stenger, Yes on 1183 spokesperson.

While it allows grocery stores to sell beer and wine, Washington is among eight states with the country's most restrictive government-run liquor sales systems. The rest have some form of privatized sales, though less than half permit supermarkets to sell hard liquor.

The most recent states to go from state-run to private liquor sales were West Virginia and Iowa, and both have been fine, Stenger said. California, which has more liquor outlets per person than Washington and also has a popular local wine industry, actually consumes less alcohol per person.

Washington is not the only cash-strapped state considering liquor as a budget boost; in Pennsylvania, a state-commissioned study recently concluded that the state's liquor stores should be privatized, as well.

But Alex Fryer, Protect Our Communities spokesperson for the opposition, said a majority of Washington's lawmakers oppose the measure despite the revenue it would generate, including Governor Chris Gregoire.

"When you increase liquor stores from 328 to more than 1,400, public safety officials say this will cause problems in our communities," Fryer said. "The trade-off isn't worth it."

Seattle residents stocking up on liquor recently were divided on the measure.

"I grew up in Los Angeles, where there's a liquor store on every corner," said Cain Hollowbone, 37. "It's up to the parents and the people selling the alcohol to do their jobs."

But some said they were put off by the money spent on the campaign.

"There's too much money on both sides, and it undermines representative democracy," said Ken Torp, 68, packing a bottle of French cognac into a bag strapped to his bicycle. "I'm voting no, on principle."

(Editing by Steve Gorman, Dan Whitcomb and Greg McCune)