Maple Valley, Covington take a hit after change in state’s liquor sales laws June 1

Published 1:00 pm Thursday, June 28, 2012

It’s a tale of very different cities when it comes to the effects of the new liquor laws.

Despite a one-year loss of around $61,000, Covington will be mostly unaffected by changes to the state’s liquor laws, while Maple Valley suffered a loss of $120,000 at a time when spending is outpacing revenue. Meanwhile, Black Diamond is still waiting to learn how its budget will be impacted.

According to Covington City Manager Derek Matheson, the city will lose $61,000 this year legislative fiscal year. While the city managed to retain the liquor fees and licenses, the state Legislature eliminated its share in excise taxes from June to July 1, 2013, approximately $93,500. Every year after that, the city’s share will be cut by approximately $23,500.

At the same time, however, Matheson said Initiative 1183 sets aside money from the liquor license distribution fee to go to municipal governments for public safety services in the amount of $23,500, which, in addition to increased sales tax revenue, effectively makes up the loss from excise taxes.

The $61,000 is a far cry from projections earlier this year, when Covington officials were anticipating a $250,000 cut.

Yet, Matheson said it’s too early to celebrate, as the state Legislature may come back to it during its next session and make additional cuts.

Meanwhile, he said the city will have to decide where the cuts need to be made.

“We’ll see how that shakes out in the fall,” he said. “We’re seeing increases in sales tax revenue that could offset that, or more. But we’re also seeing that familiar increase in the cost of providing current services, that’s the biggest challenge.”

In Maple Valley, however, the city’s loss is $120,000 this legislative fiscal year, according to City Manager David Johnston. The loss of revenue also occurred from a cut in its share of the excise tax. According to Johnston, the legislative fiscal year is July 1 to June 30, while the city’s fiscal year is Jan. 1 to Dec. 30.

Johnston added that the Association of Washington Cities, which lobbies on behalf of municipal governments, would likely take up the cause with the state.

“The biggest battle that AWC needs to wage now is hopefully this is not permanent,” he said. “Right now, it’s not. It’s my understanding that it’s not, but AWC is prepared to lobby hard.”

Recently Johnston and Finance Director Tony McCarthy gave a presentation to the City Council explaining Maple Valley had to spend more money from the general fund than it was taking in. This news, he said, only makes it more difficult for the city to balance out the budget.

“You hate to lose any money in state revenue or the general revenue stream, because there’s very limited ways you can recoup,” he said. “In the strong economy we could maybe recoup in strong sales revenue. We’re not seeing it…So anytime you see that your revenue pot isn’t growing faster than what you lose, it’s troubling.”

In Black Diamond, Finance Director Mayene Miller said it is not entirely clear how the city will be affected by the new legislation. City officials expect to have more information in two months, when the city receives its revenue.

“I don’t have any projection,” Miller said. “We probably won’t know for two months how this will exactly work. It’s not certain. We’re still waiting for all the clarifications to come through.”

Miller stated the city received roughly $50,000 in liquor revenue and excise taxes last year, which is used for public safety.

Under state law, the state legislature shares liquor revenues and excise taxes with cities and counties. Gregoire proposed eliminating the revenue sharing in November last year as way of closing the $2 billion deficit in the state budget. Under Gregoire’s proposal, the state would have kept all of the revenue generated by liquor licenses.