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Maple Valley, Covington oppose governor’s proposal to eliminate liquor revenue sharing

If there is one thing Maple Valley and Covington agree on, it’s their opposition to Gov. Christine Gregoire’s proposal to eliminate the state liquor excise revenue sharing.

After attending the winter conference for the Association of Washington Cities in Olympia, Covington City Manager Derek Matheson said the organization is united in its effort to maintain the liquor revenue sharing which has been in place since the 1930s.

“When I met with them yesterday they told me that their number one issue is keeping the liquor revenue,” he said. “And that consistency and advocacy is giving the legislators pause.”

Under state law, the state legislature shares liquor revenues and excise taxes with cities and counties. Gregoire proposed eliminating the revenue sharing in November as way of closing the $2 billion deficit in the state budget. At the moment, the proposal is being discussed as a part of the budget negotiations. If proposal were to become law, Covington and Maple Valley would stand to lose $200,000 and $367,000 respectively, in annual revenue.

The passage of Initiative 1183, which voters approved in November, has complicated Gregoire’s plan. The initiative requires the state to sell off its liquor stores and replaces the liquor revenue with liquor licenses which, according to Matheson, will be shared with the counties and cities in the same manner as liquor revenue. In effect, under Gregoire’s proposal, the state would then keep all of the revenue generated by liquor licenses.

To eliminate the revenue sharing, however, the state legislature would need a two-thirds majority for the next two years, something which both Matheson and Maple Valley City Manager David Johnston think is unlikely.

“Anything that requires a 70 percent won’t happen,” Johnston told the Reporter in November. “I think politically it would be devastating. Here’s the vote of the people, and to change it on the heels of that, I think would be politically unwise.”

Matheson echoed Johnston’s sentiments in a conversation last week.

“I’d just say it’s a really high bar,” Matheson said. “It requires strong bipartisan supports and budgets are always controversial. The governor believes that somehow she can get around that two-thirds majority. But I don’t know why she thinks that. I don’t know the legal argument and I don’t even think she’s shared the legal advice. Ultimately the state attorney general may have to step in.”

According to Matheson, the legislature could stop sharing liquor taxes by a simple majority, but liquor revenue — or licenses — are where cities like Covington receive 60 percent of their liquor revenue.

“So generally the liquor taxes are very much at risk,” he said. “The liquor licensing fees are more at risk.

Although Maple Valley Finance Director Tony McCarthy said it’s uncertain how it would impact the city’s budget, Matheson said, it’s the last thing Covington needs at the moment.

“We can’t absorb that kind of a cut,” he said. “We would have to reduce the budget. In 2009, we reduced it by $1.5 million, but we knew where we needed to cut. Liquor is a general revenue, so it’s not readily evident where we would need to cut. The council would have to prioritize its programs and decide what to keep and what to live without.”

When Gregoire first offered the proposal it elicited a strong reaction from the AWC, which sent a letter signed by 150 mayors, including then-Maple Valley Mayor Noel Gerken and Covington Mayor Margaret Harto.

“It really united the local governments,” Johnston said in November. “The state does have problems. But in her (Gregoire) presentation she said that local governments haven’t felt the pain that she’s felt in cutting. Most local governments have been dealing with cuts backs for three to four years. Covington had four rounds of layoffs. We had to plug a $1.3 million deficit by dipping into our reserves. We’ve felt the pain. We were all upset about how unfair her comments were.”

In the meantime, both cities will work to ensure their voice is heard in Olympia.

“As far as the governor’s proposal, we’re going to continue to meet with legislator and share our concerns,” Matheson said. “There’s no doubt they (the Legislature) know where the city of Covington and other cities are coming from.”

 

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