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January 22, 2013

Sharon Foster, Board ChairLiquor Control Board3000 Pacific AvenueMailstop 43076Olympia, WA 98504

Ms. Foster & Members of the Liquor Control Board,

We greatly appreciate the opportunity to have an ongoing and constructive conversationregarding the implementation of I-502. It is important to us to ensure there is legislativeoversight and support for implementing a system that results in a carefully regulated market thatprotects public safety and assures that those who enter the market abide by Washington Statelaws and Liquor Control Board regulations.

In order to facilitate the discussion we have a number of questions that we think would behelpful to promote dialogue.

1) Application Fee The initiative states that the cost to an applicant for production, processing or

retail licenses is only $250. However, the approval process is cost intensiverequiring background checks of the applicant and all employees, a physical

inspection of the business site and in cases of rejection the appointment of an

administrative law judge for an appellate process.

Question Given that the cost of an application may far outstrip the feecharged, should the LCB be empowered to charge applicants a fee that

would cover expenses, or possibly an ongoing cost recovery process?

2) Licensing Fee The annual fee for a license for production, processing or retail is $1,000.

Questions Is $1,000 a reasonable fee given that Colorado charged$18,000 for medical marijuana and the LCB recently auctioned off liquor

licenses that reached several hundred thousand dollars? Should the LCB

be empowered to research the potential market, and consider other

alternatives up to and including conducting an auction for these licenses?3) Penalties for Non-Compliance

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After a first time offense for selling alcohol to a minor, a retailer could have hislicense suspended; after three times his license could be revoked. Additionally

the LCB has broad latitude in the implementation of significant civil fines for

non-compliance with other regulations. There is no such equivalent penalty for

violation of I-502, and in fact penalties are capped at $1000, which is significantly

below the violations of liquor laws. The only justification the LCB can use to

revoke a license for general criminal activity at the premise is in response to what

is defined as chronic illegal activity whose definition includes a pervasive

pattern of activities that threaten public health and safety or an unreasonably

high number of DUI violations associated with a licensees operation.Question Should the LCB be empowered to create and enforce rules that

have an equivalent capacity to hold license holders accountable for

violations of I-502 that they have for violations of traditional alcohol

regulations?4) Local Jurisdictions Role and Revenue

Cities and counties only have an opportunity to request hearings and introduceformal complaints in regards to a proposed production, processing or retail license

being permitted to operate within their jurisdiction. The LCB is obligated to

seriously consider and weigh their objections but local government has no direct

role in authorizing the placement of marijuana related businesses. In addition

there are no provisions in the initiative providing local jurisdictions for funds to

ameliorate any potential costs associated with the placement of production,

processing or retail operations. Question Should I-502 be amended to provide a more direct role for

local governments to participate in the siting of marijuana related

businesses, and in the alternative, should a portion of the revenue from

marijuana related operations be diverted to local jurisdictions to mitigate

local impacts as determined by a study to be conducted by the LCB?

5) Timeline for Implementation The license and regulatory infrastructure needs to be in place by December 1,

2013.Question Given that this is an entirely new and unprecedented marketand regulatory structure, is the current timeline sufficient to ensure that

the system the LCB develops will meet concerns with federal intervention,

revenue collection, moving from an industry currently run by criminal

enterprises to a legitimate one and also protect public safety?Question Phased Implementation Should the production, processing

and retail of marijuana be a multi-phased process to ensure that the

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complex logistics and public health issues are worked out in smaller

segments as part of a coordinated and comprehensive state wide

implementation? As an example, should the LCB have the ability to have a

three phase implementation process to ensure public health and safety

concerns and address unanticipated difficulties that will likely arise when

instituting a new and untested regulatory structure, and do so in such a

way that is consistent with the spirit of the initiative and will of the voters?

6) Revenue Collection Between the time in which I-502 was written, signatures were gathered and its

eventual implementation, Washington citizens also chose, via initiative, to take

the State of Washington out of the Liquor business and the system is now very

different.

Question - Is the process outlined in the initiative, post privatization, themost efficient way to collect revenue between the Department of Revenueand LCB?

7) Compliance with Legal Marijuana Market There is no incentive for consumers to move from an illegal market to a legal one.

Question Should there be an infraction for possession of unregulatedand untaxed marijuana, and should legally produced, taxed and sold

marijuana have a Washington tax stamp identifying it as a legitimate

lawful product?We appreciate the opportunity to work collaboratively with the Liquor Control Board and lookforward continuing these discussions as we move towards a full and timely implementation of I-502.

Sincerely,

Representative Christopher Hurst

Chair, Government Accountability and Oversight Committee

Representative Cary CondottaRanking Minority Member, Government Accountability and Oversight Committee

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Senator Jana Holmquist NewbryChair, Commerce and Labor Committee

Senator Steve ConwayRanking Minority Member, Commerce and Labor

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