Washington Restaurant Magazine September 2015

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Inside

www.warestaurant.org

Features 8

Your Government Affairs team successfully navigates Washington’s longest ever legislative session

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The longest session in Washington’s history

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2015 Session Review

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Legislative heroes

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Meet the WRA’s Government Affairs team

Other stories

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WRA President and CEO: A time for solutions

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Local government report

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Ask the Expert: Thoughts to consider before implementing a service charge

On the cover 2015 saw the longest legislation in Washington’s history. Washington Restaurant Magazine’s Legislative Review is your guide to the intricacies of this session and how your WRA Government Affairs team helped protect your bottom line and your ability to run your business.

8/25/2015 1:31:21 PM

September 2015 | 5

WRA President and CEO EDITORIAL STAFF Publisher, Anthony Anton Executive Editor, Lex Nepomuceno Managing Editor, Paul Schlienz Contributing Editor, Andy Cook Contributing Editor, David Faro Contributing Editor, Stephanie Davenport Contributing Editor, Marianne Scholl Research Editor, Sheryl Jackson Art Director, Lisa Ellefson WRA EXECUTIVE COMMITTEE Chair, Phil Costello Stop n’ Go Family Drive In Vice Chair, Chad Mackay El Gaucho Hospitality Secretary/Treasurer, Mark Chriest Oki Developments, Inc. Immediate Past Chair, Jim Rowe Consolidated Restaurants WRAEF President, Gary Sutter Northern Quest Resort & Casino WRA EXECUTIVE TEAM President and CEO, Anthony Anton Vice President, Teran Petrina Director of Business Development, Ken Wells Director of Communications & Technology, Lex Nepomuceno Director of Education, Lyle Hildahl Director of Government Affairs, Bruce Beckett Director of Internal Operations, Bekah Cardwell 510 Plum St. SE, Ste. 200 Olympia, WA 98501-1587 T 360.956.7279 | F 360.357.9232 www.warestaurant.org

Letters are welcomed, but must be signed to be considered for publication. Please include contact information for verification.

Reproduction of articles appearing in Washington Restaurant Magazine are authorized for personal use only, with credit given to Washington Restaurant Magazine and/or the Washington Restaurant Association.

Articles written by outside authors do not necessarily reflect the views or positions of the Washington Restaurant Association, its Board of Directors, staff or members.

Products and services advertised in Washington Restaurant Magazine are not necessarily endorsed by the WRA, and do not necessarily reflect the opinions of the WRA, its Board of Directors, staff or members.

ADVERTISING INQUIRIES MAY BE DIRECTED TO: Scott Randall Allied Relations Manager 206.790.5922 scottr@warestaurant.org Washington Restaurant Magazine is published monthly for Association members. We welcome your comments and suggestions. email: news@warestaurant.org, phone: 800.225.7166. Circulation: 6,310.

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A time for solutions

By Anthony Anton, President and CEO Politicians get a bad rap (often earned) for not seeking solutions.

They have a reputation for being more passionate about their party’s majority status, their personal reelection or special interests than finding solutions. But to give credit, we have seem moments of greatness out of the political system from the U.S. Constitution to the National Park System to keeping Boeing in Washington and creating the country’s strongest unemployment insurance system. These moments come from not bullying people from a particular corner, but by bringing people together in finding solutions. That was our goal this session.

This was the longest legislative session in Washington state history. And while advocates were pushing for a new minimum wage law at the state level, unions were gaining ground on ordinances and ballot initiatives at the local level. On top of those moving pieces, the world was waiting to see how the minimum wage increase would impact Seattle. Belief that the minimum wage must be increased has permeated the public: 40 percent of voters support $15 an hour while an even greater percentage support $12 an hour (58 percent). It was clear to us, as the discussions were had in every arena, that we had to start a new conversation about minimum wage.

We’ve now seen firsthand that in order to be the best advocate for local restaurants, we can no longer just stand in opposition to ideas. We have to be a source of solutions. We have to do more than just say “no.” In looking for solutions we found there is a workable way and a wrong way to increase wages.

We are the state that revolutionized the way the world thinks about air travel, computers, shopping and even coffee. Why shouldn’t passion for innovative solutions drive us, instead of 100-year-old “We good – they bad” caveman politics?

Unfortunately, during this session, the majority of people, in Olympia, were not looking for solutions. As you will read later, there were statewide solutions offered on minimum wage. Two bills would have increased the state minimum wage to $12 per hour over a four-year period. Another bill would have would phased in a $13 per hour minimum wage over five years and included a credit for tip income and health care benefits. However, these ideas were put down by advocates on both sides of the issue.

As the next session arrives, we will be working to find a solution. We will be looking to talk with lawmakers and stakeholders to move forward for a better Washington for all of our members and their customers. The WRA will be a leader not in digging fox holes, but in setting tables for a discussion around innovative solutions. 

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Your Government Affairs team successfully navigates Washington’s longest ever legislative session What a long, strange trip it’s been!

Counting the regular 165 day legislative session plus three special sessions, Washington’s legislators were in session for 176 days, an all-time record for our state’s history books. Only at the end, just before the July 1 deadline, was the budget approved.

Over the course of these many months, there were legislative proposals that could have seriously hurt our hospitality industry, but, thanks to your WRA Government Affairs team, our industry managed to get through this lengthy lawmaking season in good shape.

CHAD MACKAY

We stopped many proposals that would have had major tax impacts on our industry. Among these were:

Capital gains taxes that would have kicked in upon the sale of a business, B&O tax increases for services, Street utility taxes based on hypothetical usage of streets, Elimination of the pop syrup B&O tax credit, and New health care coverage fees.

SHANNON BOLDIZSAR

As we look back on this long session and look forward to next year, we still face many challenges. The Liquor Control Board and its approach to regulating channel pricing remains a difficult problem. And the growing number of local governments that are imposing their own ordinances on issues like paid leave and minimum wage have challenged our industry in new ways. We believe there may be opportunities to craft compromise, bipartisan legislation on a statewide basis on these important workplace issues during next year’s legislative session.

We look forward to working with legislators in both houses and on both sides of the partisan aisle. The current Legislature is the most open to our input of any in recent memory. It’s nice to have our hospitality industry’s voice well represented at the table through your Government Affairs team. Expect more proactive advocacy on key issues, implementing grassroots efforts and coalition building with other like-minded organizations from our GA team as we prepare for next year’s legislative session.

Thanks to all our members who took the time to come to Hill Climb and Taste Our Best in January. These events were well attended, providing effective advocacy with lawmakers on all the issues that matter most to our industry. Your support and participation in these great events means more than you can ever realize in helping your Government Affairs team represent you in Olympia. Special thanks to the restaurants, suppliers and sponsors who helped make these events the great successes they were.

Thanks also to all of the WRA members who participate in the Government Affairs Committee. We are fortunate to have the best and most professional Government Affairs team and consultants in Olympia. Your input and guidance makes all the difference in the world, helping our Government Affairs be the effective force it is in defending and advancing the interests of our hospitality industry. All WRA members are encouraged to participate in the Government Affairs Committee. If you are interested, contact the WRA’s Shannon Garland at shannong@warestaurant.org.

We are honored to co-chair your Government Affairs Committee. Thank you for this opportunity. We look forward to more legislative success in the coming year.

Thank you, Chad Mackay and Shannon Boldizsar WRA Government Affairs Committee Co-chairs

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Local government report

By Paul Schlienz, Managing Editor

Local government matters.

Like never before, Washington’s restaurant operators are being impacted by new wage and labor laws that are being introduced at the local level, city-by-city. Paid leave ordinances are frequently precursors to minimum wage ordinances, as seen in Seattle and Tacoma. Additionally, we are closely monitoring the situation in Spokane, where work by a taskforce on paid leave recently concluded. At the same time, the WRA is also keeping its eyes peeled on Bellingham, where initial talk of paid leave has begun.

“By far the biggest challenge we faced this year, in the local government arena, was all these different municipalities taking these issues up locally,” said Samantha Louderback, the WRA’s local government affairs coordinator who focuses on Tacoma and other cities in the south Puget Sound region. “It’s been a real game changer.”

Because local government matters so much and can so deeply affect your restaurant’s operations, the WRA Government Affairs team has three members – John Lane, senior manager, Government Affairs; and two local government affairs coordinators, Morgan Hickel, in addition to Louderback – who are completely devoted to representing your interests with local governments, advocating for you in ever greater ways.

becoming deeply involved in this debate, ultimately resulting in a $15 minimum wage increase that was not what we would have wanted, but was nowhere near as damaging as the initial proposal from the $15 Now activist group. The new minimum wage took effect this year on April 1.

Since the minimum wage battle, the WRA and Seattle Restaurant Alliance proactively joined forces with the Seattle Hotel Alliance and formed the Hospitality PAC to give the Seattle hospitality industry a voice in the local political environment and to educate candidates for public office that will consider the importance of the hospitality sector in their decisions. The goal of this PAC is to be a serious participant in the local political environment and effectively utilize our industry’s immense resources to elect candidates that understand a healthy hospitality industry translates into a strong local economy and community.

Already, we are starting to see positive results.

In 2013, Seattle voters passed a measure to change the structure of the Seattle City Council. Starting this year, the makeup of the Council will be seven district-based seats and two at large seats. This is a tremendous opportunity for the hospitality industry, and the Hospitality PAC has jumped in full force into the electoral process, making endorsements in seven of the Council races. Restaurateurs and hoteliers made the endorsement decisions jointly.

In the August primary election, the Hospitality PAC saw incredible success when candidates it endorsed survived the primary in every district and in the one at large seat up for election. The Hospitality PAC-supported candidates who will now go on to the general election, in November, are:

Council Position 1: Shannon Braddock Council Position 2: Bruce Harrell Council Position 3: Pamela Banks Council Position 4: Rob Johnson Council Position 6: Catherine Weatbrook Council Position 7: Sally Bagshaw Council Position 8: Tim Burgess (At large)

Seattle Since early 2014, Seattle has been at the front and center of the minimum wage battle. The WRA spurred into action, 10 | warestaurant.org

“We are very pleased that our endorsed candidates made it through the primary,” said Hickel. “Our members’ engagement level was very high. We’ll continue to engage with the political process and continue to advocate on issues of interest to the hospitality industry. We have a real

opportunity with the general election to see some positive changes at Seattle City Hall.”

task force of business, labor and non-profits to see if an alternative could be found. The task force did not reach a consensus, but presented two different proposals.

Stay tuned.

The WRA supported efforts to find alternatives to the extreme $15 Now initiative because of the drastic impact it would have. Our members already face huge challenges under current minimum wage policies. In response, the WRA worked to have a proposal that meets the mayor’s request for simplicity, ease of regulation and which phases in, reflecting the economic differences between Seattle and Tacoma.

In July, the Tacoma City Council accepted Mayor Strickland’s minimum wage initiative proposal. This came after the mayor received recommendations from the stakeholder process she convened, in May, to develop an alternate option to the $15 per hour initiative that will appear on Tacoma’s November ballot.

Tacoma Tacoma and Seattle, despite being only 30 miles apart, are very different cities. While issues like minimum wage and paid leave have become of significant concern in both cities, thanks to the engagement of WRA members and a more sympathetic political leadership, these policies appear to be taking a very different course in Tacoma from what we’ve seen in Seattle.

During the stakeholder process, the WRA worked closely with Tacoma area members, and the chamber, to find options that supported restaurants as much as possible.

The mayor’s proposal would:

Require employers to pay a minimum hourly wage

to employees aged 16 and older performing work in Tacoma of not less than $10.35 per hour, beginning February 2016; Increase to $11.15, beginning January 2017; Increase again to $12, beginning January 2018; and Thereafter be adjusted annually based on the Consumer Price Index.

In Tacoma, the WRA and Washington Lodging Association fought for our members in relation to new standards for paid leave and minimum wage. Our team worked closely with the Tacoma-Pierce County Chamber of Commerce to make sure the voices of the business community, as well as our members, were heard during the resulting debates. As a direct result of these efforts, the subsequent ordinance, crafted to address paid leave, took into account many of the hospitality businesses’ needs.

The WRA Government Affairs team and local Tacoma restaurateurs succeeded in getting a true alternative.

However, the next step in this process includes a very complicated ballot title. Both $15 Now’s proposal and this alternative will be options in November.

In contrast to Seattle’s ordinance, which mandates 8.67 paid sick days per year with a max of 13.5 days allowed to be carried over to the next year, Tacoma’s ordinance mandates three paid sick days per year with a max of 40 hours allowed to be carried over to the next year.

This November, Tacoma voters will vote on an initiative to raise the minimum wage to $15 per hour in 2016.

“We’ve had a great working relationship with the chamber members and Tacoma City Council,” said Louderback.

“Our members showed great dedication. They spent a lot of time on this issue this summer. Being local businesses, their stories had the biggest impact with the Council. I’m sure our WRA members will continue to be engaged as the November election approaches.”

In response to the ballot initiative, Mayor Marilyn Strickland and the Tacoma City Council convened a September 2015 | 11

Up to 40 hours can be carried over. (However, the annual cap would only allow you to use 40 hours in a calendar year, so rollover hours do not impact the cap.)

The framework, however, does not include information on funding, enforcement or private rights of action – key concerns for business. The WRA is closely following the drafting of this ordinance, providing input along the way.

In related news, the City of Spokane filed a lawsuit in Spokane County Superior Court challenging a provision of a Worker Bill of Rights initiative set to appear on the November ballot.

Spokane and beyond If you thought issues like paid sick leave would stop at the Cascades, remaining in Western Washington, think again.

In April, the Spokane City Council initiated development of a paid sick leave ordinance by forming a task force of stakeholders to provide ideas and recommendations to the Council. The time and effort of Spokane Chapter members to voice concerns to the City Council earlier this year, and your outreach to Council members made a difference. At the time, the Council appeared ready to proceed with an ordinance with little input from business.

Trent House, a member of the WRA Government Affairs team, was appointed to the task force. The WRA focused on identifying flexible options for meeting paid sick leave requirements, minimizing disruptions to current industry practices and not creating new layers of enforcement and causes of action against business.

We feel that other members of the task force viewed our ideas constructively. The task force completed its formal work at the end of May. Recently, the Spokane City Council received the report from the task force. While nothing has been finalized, it appears that the Council is responding to our concerns. The recommendations in the framework document include:

The initiative is the latest from Envision Spokane, an activist group that has mounted two unsuccessful attempts to pass its Community Bill of Rights using the initiative process.

The Worker Bill of Rights would require what is being called a “living wage” for most workers, equal pay, protection against termination and the elevation of individual rights over those of corporations. When Envision Spokane submitted its initiative for review, the matter of corporate rights was the sticking point.

A hearing examiner concluded that the fourth provision would illegally deny corporations access to the courts.

The lawsuit, filed August 3, argues that the last provision of the Worker Bill of Rights should be kept off the ballot because it falls outside the scope of the initiative process and conflicts with state and federal law.

The City will seek a swift resolution to the lawsuit because November ballots will soon be finalized and printed. The WRA is keeping a close eye on this issue as it develops.

Issues like paid sick leave are also becoming important in Washington’s smaller cities.

In July, a Bellingham City Council member asked the Council to consider paid leave for businesses within the city limits. While it was claimed that this was simply an introduction, we know from past experience that local paid leave ordinances tend to pick up traction fast. In response, the WRA sent a letter to Bellingham Mayor Kelli Linville, requesting that she consider creating an opportunity for stakeholder input.

Paid time off policies are allowed, Shift swapping is allowed, Accrual is one hour per 40 worked (up from one hour per

It is still not clear what will happen in Bellingham, but the WRA is monitoring these developments closely and will offer help to city leaders in finding solutions and options.

Annual cap of 40 hours can be taken, and

If you have any questions, please contact the WRA’s Morgan Hickel at MorganH@warestaurant.org or Samantha Louderback at SamanthaL@warestaurant.org. 

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The longest session in Washington’s history Bruce Beckett, Director of Government Affairs

The 2015 legislative session began on January 12 for its 105 day regular session. Three facts entering the session ultimately set the tone and tempo for this budget setting year:

The Washington State Supreme Court had ruled the

Legislature in contempt for failing to increase funding for K-12 education at an adequate rate.

Washington’s economy was improving, and tax collections were growing well beyond forecasted levels.

The Legislature was sharply divided: • The Republican-dominated Majority Coalition Caucus had gained an additional seat in the 49 member State Senate; indeed, Republicans had secured a two-vote majority in the 2014 elections; while • Democrats held a thin, two-vote margin in the 98 member House.

In December, Gov. Jay Inslee released his proposed 2015-17 biennial budget. The governor proposed $1.5 billion in new taxes in order to increase state spending across most agencies and to meet the Court’s mandate for K-12 education. The governor proposed a new capital gains tax, taxes on carbon and the elimination of a number of “tax preferences” to achieve his proposed $1.5 billion in new revenue.

In contrast, Senate Republicans entered the session with the conviction that the Court’s mandate could be met with existing resources. Their view was bolstered by the growing level of tax collections driven by the improving economy.

The stage was set – and it took a record three special sessions and 176 days of the regular legislative session to finally resolve the impasse over the state budget. To put it into perspective, under a normal, two-year legislative cycle, lawmakers meet for a total of 165 days. This year alone, lawmakers were in session for 176 days, with next year’s 60-day regular session still before them.

Persistence pays off The WRA Government Affairs team spent considerable time defending our members against a number of tax proposals that were repeatedly debated in the regular and special sessions. Examples of bills that were defeated include:

New taxes on capital gains resulting from the sale of a

business, Higher B&O taxes on services, New authorization to impose street utility taxes based on hypothetical usage of streets,

Elimination of the B&O tax credit for pop syrup, and New fees to fund gaps in health care coverage for full and part-time workers.

In the end, the Legislature largely adopted the Senate Republican approach for the budget with one disappointing change – the elimination of a preferential tax rate on royalty income received by franchisors. Unfortunately, there are a number of Washington-based franchisors that will be impacted by this change.

No action on minimum wage, paid sick leave or liquor fees Increasingly, cities have been adopting unique paid sick leave and minimum wage ordinances across the state. The WRA believes the state should set these policies because setting wage and benefit policies city-by-city will simply lead to an overly complicated patchwork of laws. In the House, on a strictly partisan vote, legislation passed to raise the minimum wage to $12 per hour over four years, and to require paid sick leave benefits for employees. Both bills died in the Senate. Although the WRA did not support those specific bills, we will continue to educate other business sectors, stakeholders and lawmakers on the wisdom of taking these issues up at the state level in 2016.

Finally, the WRA, with strong support of Democrats and Republicans in both chambers again asked the Legislature to eliminate the 17 percent fee imposed on the sale of spirits from retailers to restaurants. Despite strong support for the change, House Democrats sided with the Teamsters Union, which expressed concern that the change could eliminate Teamster jobs delivering spirits.

Achieving priorities The session ultimately was dominated by tax and fee issues, and the WRA can take pride in key outcomes on a number of priorities:

No new capital gains, street utility or carbon taxes.

No increases in B&O taxes or surcharges on B&O taxes

(with the exception of elimination of the preferential rate on royalties for franchisors).

No new utility taxes.

Defended against increases in workers’ compensation costs.

Defeated proposals to impose new health care mandates on employers.

Passed new enforcement and licensing resources to assist the Liquor Control Board.

September 2015 | 13

Educated lawmakers on the

importance of promoting tourism, setting the stage for further legislative action in 2016.

Educated legislators on both sides of the aisle on the challenges of city-by-city regulation of wage and benefits.

2015 legislative elections There are two special elections this fall that could impact the balance of power in the State House. In the 9th Legislative District, appointed Rep. Mary Dye, R-Pomeroy, will face another Republican challenger.

Regardless of the outcome of the general election, the seat will remain Republican.

However, in the 30th Legislative District (Federal Way and vicinity) Republican Teri Hickel is challenging appointed Democrat Carol Gregory in a hotly contested race. The WRA supports Teri Hickel and is delighted that Hickel outpolled Gregory in the August primary election. If she prevails in the general election, the Democrats’ majority in the House will be reduced to only one vote.

Thank you to the Government Affairs Committee The WRA GA team is grateful for the support and guidance it receives from the Government Affairs Committee during the session. The length of the session(s) this year was unprecedented; nevertheless, the WRA team always received the input it needed on important issues despite the three overtime sessions.

Additionally, we want to express our appreciation to everyone who took time from their busy schedules to join us for Hill Climb and Taste our Best – and, in particular, a thank you to the restaurants, suppliers and sponsors who helped make that day so special.

Thank you. 

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2015 Session Review Alcohol HB 1124 – Beer and wine sampling in restaurants HB 1124, sponsored by Rep. Dean Takko, D-Longview, allows restaurants and bars to provide samples free of charge to customers. Currently, licensees are not allowed to provide alcohol for free, and must charge at least the cost of acquisition. While providing customers a small taste of a new beer or wine before pouring a full glass is fairly customary, licensees ran the risk of violating the law if a sale was not eventually made and they did not recoup the cost of the product. HB 1124 allows the common practice of providing a small sample to customers in bars and restaurants. The bill was signed by the governor and took effect July 1.

HB 1807/SB 5660 – Assisting former state and contract liquor stores HB 1807, sponsored by Rep. Christopher Hurst, D-Enumclaw, and Rep. Cary Condotta, R-East Wenatchee, and SB 5660, sponsored by Sens. Steve Hobbs, D-Lake Stevens; Jim Honeyford, R-Sunnyside, and Jan Angel, R-Port Orchard, were introduced to provide assistance to the struggling former state and contract liquor stores. In their original form, the bills provided additional assistance to the businesses by:

Reducing the 17 percent fee (to retail customers only ) to 7 percent on the first

$50,000 in sales if total monthly sales were below $300,000; Capped late penalties imposed by the LCB to .5 percent; Waved late penalties incurred prior to effective date of the bill; Allowed for former state and contract stores to re-open a closed store, relocating a store and the selling of a license for two years; Insisted no retailer could absorb the 17 percent retail fee and must be added to the total bottle cost; and Allowed retailers to combine delivery sites.

The Senate version of the bill also included a provision that prevented price differentials and prohibited restaurants from negotiating preferential pricing for spirits.

The WRA was heavily opposed to the Senate version of the bill due to the above provision that prohibited our industry’s ability to negotiate price, while we were neutral on the House version of the bill.

The final version of the bill that passed was contained in E2SHB 1807, and included a one percent cap on late fees, and the ability to receive deliveries at other locations to combine orders for volume discounts.

SB 5353 – New privileges for craft distillers Since the passage of liquor privatization, Washington has become the fastest growing market for craft distillers in the country. Sen. Jan Angel, R-Port Orchard, introduced SB 5353 to make a number of changes to outdated liquor laws that prevented growth in Washington’s craft distiller market. The bill proposed a number of significant

changes, but some were of concern to the WRA. Specifically,

A provision allowing craft distillers to effectively function

as restaurants and bars by serving other producer’s spirits, wine and beer for a $75 fee (On premise license fees range from $1,000 - $2,000.); Creating a new “special occasion license” for craft distillers with separate regulatory requirements; Allowed craft distilleries to sell mixed cocktails; and Exempted craft distilleries from paying some spirit taxes that all other licensees were required to pay.

Sen. Angel listened to all of the concerns brought forward by the WRA, and we worked to resolve them. The final version that passed allows craft distillers to hold special events (with the same regulatory requirements other licensees have), sell and ship their products to consumers and provide samples with ice and/or nonalcoholic mixers while maintaining a fair regulatory playing field with other licensees.

HB 1108 – Creating a liquor license for food trucks Rep. Chris Reykdal, D-Tumwater, introduced HB 1108, to establish a liquor license for food truck operators. Initially, the WRA had some concerns regarding the regulatory requirements imposed in the license. For example, in its original form, the bill allowed for “guest co licensees” to obtain a liquor license without going through the numerous requirements to which all other licensees must submit. The WRA worked closely with Rep. Reykdal and committee staff to suggest a number of changes, including:

Requiring food truck licensees to disclose the closest

restroom facilities to customers, Maintain a minimum 100 foot distance from other on premise liquor licensees, Submit proper licensing from the Health Department to operate mobile food service, Submit an alcohol control plan to maintain public safety, and Maintain outside service requirements that align with sidewalk cafes for bars and restaurants.

While we were pleased to have been able to successfully reach a solution on each concern, the House Commerce and Gaming Committee failed to pass the bill out of committee before a crucial cutoff date, and the bill did not pass. The bill will be held in its status and will be ready for consideration during the 2016 session.

HB 1537/SB 5399 – Extending liquor control board enforcement officer authority During the 2014 legislative session, the LCB introduced its agency request legislation to drastically extend enforcement officer’s authority, effectively promoting officers to “general

authority law enforcement” whose primary role was the “detection and apprehension of criminals.” The WRA was opposed to that version of the bill, and worked to block its passage.

In 2015, the LCB heard our industry’s concerns and worked to address them in HB 1537 and SB 5399. This version of the bill removed the LCB request for “general authority law enforcement,” and maintained the LCB’s focus on education and enforcement of alcohol laws. The bill allowed for enforcement officers to assist licensees in situations that fell outside this narrow focus, and only while conducting their enforcement activities. For example, LCB enforcement officers would be able to assist licensees if an assault occurred, where previously they were prevented from engaging. The limited extension of LCB authority would be a useful tool in enforcing liquor laws, and correctly redirecting enforcement officer’s attention to those responsible for violations.

The WRA supported this version of the bill, but unfortunately, the LCB was not able to resolve concerns from the law enforcement community, and the bill failed to pass.

HB 1965 – Temporary license fee increase The Liquor Control Board introduced agency request legislation that called for a temporary, two year, 11 percent license fee increase to fund needed updates in their licensing equipment. The LCB’s current technology was significantly outdated and unsecured. The equipment then led to extremely long license process times and an anticipated “crash,” which would have a detrimental impact on all licensees.

An independent party analyzed the impact an update would have, and concluded it would directly result in a 25 percent reduction in processing time, allowing businesses to become licensed or make alterations to enhance their operations and increase revenue.

The bill was altered on the floor of the House to reduce the temporary increase to 6.2 percent, and the rest to be funded from a separate account.

The temporary 6.2 percent increase will expire June 30, 2017.

Restaurants are still battling to correct the 17 percent fee (House Bill 1343, Senate Bill 5301) In 2011, voters approved a private system for spirits and wine sales by initiative. Since then the Liquor Control Board (LCB) has made consistent regulatory decisions that have harmed the restaurant industry and conflict with the purpose of the initiative, which was to allow for a private competitive market.

This year, the WRA Government Affairs team returned for round three of what was yet again one of the biggest policy battles of the year, to reverse the LCB’s decision to impose an September 2015 | 15

unauthorized 17 percent fee on sales of spirits to restaurants from retailers for resale.

Last year, as well as this year, the WRA legislation faced strong opposition from the two largest distributors, which control 94 percent of spirit sales in the state, and the Teamsters Union, which represents their delivery drivers. At the heart of the issue is the Teamsters’ argument that if grocery stores are allowed to serve restaurants and bars without a 17 percent tax penalty, they will lose jobs. Numerous times, the WRA has tried to approach this heavily divided issue with facts and with great support of our members reaching out to their legislators. Our small restaurants truly need relief and an alternative way to purchase vital products when inventory runs out and a delivery minimum cannot be met, to be treated with basic customer service and to provide a competitive option when price and customer service is lacking. This year, with your help, we were able to gather personal letters from more than 120 businesses stating the true effects of the rulemaking, and place more than 5,000 emails and calls into legislators. Personal stories made a huge impact on lawmakers, and we gained support and understanding for the terrible business predicament we are in.

The vehicle for House legislation, in 2015, was HB 1343, sponsored by Rep. Larry Springer, D-Kirkland, and Rep. Cary Condotta, R–East Wenatchee. Rep. Christopher Hurst, D–Enumclaw, chair of the Government Accountability and Oversight Committee, was also a vocal supporter of the bill, and quickly scheduled a public hearing one week after introduction, then swiftly moved the measure along in the process. The House Finance Committee, too, quickly held a public hearing on the bill. Unfortunately, however, no further action was taken.

Meanwhile in the Senate, Sen. John Braun, R–Centralia, and Rep. Mark Mullet, D–Issaquah, yet again agreed to be our champions and re-introduce this legislation as SB 5301. The Senate policy committee, Commerce and Labor, moved SB 5301 into the Ways & Means Committee. In Ways and Means, the debate focused on the financial impact of the bill, which due to new data, made a greater case for our legislation. SB 5301 then moved from Ways & Means to Rules.

As we saw in previous years, as the bill moved further along in the Senate, gaining support from Republicans and Democrats, strong opposition from organized labor, which claimed that allowing restaurants to purchase from grocers would cost union jobs, continued to grow. Despite the fact that many Senate Democrats disagreed with the Teamsters’ argument, the issue yet again remained highly partisan.

HB 1763 Music licenses – Rep. Kevin Van DeWege, D-Sequim, introduced HB 1763, designed to regulate music licensing agencies. The legislation was in response to several complaints raised by Rep. Van DeWege’s constituents who felt harassed by some music license agencies. The measure 16 | warestaurant.org

established a licensure component for agencies with the state and outlined acceptable business practices. Revenue raised through the licensing component would be used to better educate the restaurant and nightlife industry on their rights and responsibilities. HB 1763 passed the House of Representatives, 92-6, and passed the Senate policy committee, ultimately dying in the Senate Rules Committee.

Representatives from music licensing agencies have expressed a willingness to work with our industry during the interim to identify issues of concern for our members and to identify next steps for the 2016 Legislative Session.

HB 1356 Paid leave – Rep. Laurie Jinkins, D–Tacoma, introduced HB 1356, establishing a statewide sick and safe leave policy. The measure was co-sponsored by 43 members of the House Democratic Caucus. A Senate companion bill, SB 5306, was introduced by Sen. Cyrus Habib, D–Kirkland.

The measure established what employees would qualify for this benefit, how the benefit was accrued and how the benefit would be utilized. HB 1356 also established penalties for employers who fail to properly comply with the law. The measure passed the House of Representatives on a straight party-line vote of 51-46. The measure did not receive a hearing in the Senate. The Senate companion bill did not receive a hearing either.

Minimum wage Minimum wage - HB 1355/SB 5285 and SB 6087 Rep. Jessyn Farrell, D-Seattle, and 39 Democratic co-sponsors introduced HB 1355 to increase the state minimum wage to $12 per hour over a four year period. Sen. Pramila Jayapal, D-Seattle, and 19 cosponsors introduced the identical bill, SB 5285, in the Senate.

The WRA encouraged legislators to work towards a compromise on the minimum wage that:

Would phase in over a period of years, Include credit for compensation not currently counted

towards meeting the wage requirements, and Include policies to assist in training first time and younger workers.

In the House hearing on HB 1355, the WRA urged lawmakers to work toward such a compromise – we believed that a comprehensive policy could gain bipartisan support.

Unfortunately, when the bill went to the House floor, procedural restrictions were invoked that limited the scope of amendments that could be considered by the full House.

Hence, amendments that may have resulted in a bi-partisan bill were not even debated, and HB 1355 passed the House, in its original form, on a strictly partisan, 51-47, vote.

The Senate Commerce and Labor Committee did not hold a hearing or work session on the minimum wage issue until HB 1355 passed the House. At that time, Sens. Steve Hobbs, D-Lake Stevens, Mark Mullet, D-Issaquah, and Maralyn Chase, D-Shoreline, introduced SB 6087. SB 6087 would phase in a $13 per hour minimum wage over five years and include a credit for tip income and health care benefits. In the end, neither bill was considered for a vote in the committee.

Prior to the session, the WRA partnered with the Association of Washington Business to assess public opinion across the state on the minimum wage, who should set the wage and what should be included in the minimum wage. The research reaffirmed the WRA’s view that a statewide solution is preferable to the city-by-city approach we are experiencing today. Unfortunately, virtually every segment of the business community opposed any change to the minimum wage by the Legislature, and the unions did not signal any willingness to engage in negotiations. Indeed, those groups may prefer that the issue go before voters in the next election year.

Nonetheless, the WRA will continue its effort educate stakeholders, business groups and legislators on the wisdom of addressing the minimum wage issue in the upcoming 2016 session.

HB 1646 Equal pay – Rep. Tana Senn, D-Mercer Island, introduced HB 1646. This legislation was designed to prohibit gender discrimination in compensation. Senator Annette Cleveland, D-Vancouver, introduced identical legislation, SB 5630, in the Senate. The legislation also prohibits employers from “providing less favorable employment opportunities” based on gender, and prohibits employers from requesting that the employee not discuss wages with others. Employers found guilty of gender discrimination are subject to fines and twice the actual damages. HB 1646 passed the House on a bipartisan vote of 55-43 and received a hearing in the Senate Commerce and Labor Committee. The bill died in the Senate Committee. While the bill is well intended, the WRA and other business organizations remain concerned with vague language that increases the risk of lawsuits against employers.

Employers continue to work on language that is clearer so as to reduce the likelihood of superfluous lawsuits.

SB 5421 Teen wage – Sens. Michael Baumgartner, R-Spokane, and John Braun, R-Centralia, introduced SB 5421, which sought to create a summer teen employment wage. The measure established a new wage rate for workers aged 14 to 19, hired to work from June 1 through August 31. Under this legislation, the new wage rate for these workers, during this period of time, would equal the federal minimum wage rate, currently established at $7.25 per hour. The WRA testified in strong support of the measure; however, it did not ultimately pass the Senate.

SB 5422 Training wage – Sens. Baumgartner and Braun introduced SB 5422, which sought to create training wage.

The measure established a new wage rate for workers aged 14 to 19 equal to 85 percent of either the federal minimum wage rate or our state’s minimum wage, whichever is greater. The measure also stipulated that no more than 10 percent of an employer’s workforce could qualify to receive a training wage.

The WRA testified in strong support of the measure; however, it did not ultimately pass the Senate.

Taxes HB 2224 – House Democrats’ tax package One of the most interesting aspects of this session was the debate over new taxes. House Democrats and the governor insisted that new revenue was necessary to fully fund the functions of state government.

The Majority Coalition Caucus (MCC), in the Senate, and House Republicans maintained that no new taxes were necessary, especially given the more than $4 billion growth of state revenues over the last biennium. In the end, the MCC and House Republicans substantially won this debate, and no large-scale taxes were adopted. Here are some of the tax increases that were debated and ultimately rejected:

Increase in B&O taxes for all businesses by 10 percent – $937 million per biennium,

Increase in B&O taxes for services from 1.5 to 1.8 percent – $532 million per biennium,

7 percent tax on capital gains – $798 million per

biennium, 5 percent tax on capital gains – $570 million per biennium, Mainstreet Fairness 5-tier nexus – $85.2 million per biennium, Extension of the Real Estate Excise Tax (REET) to foreclosures – $81.9 million per biennium, and Cap and Trade Proposal on Carbon – $379-$1.3 billion per biennium.

Again, all of these taxes were at one point debated before the Legislature, more specifically in the House of Representatives.

None were ultimately adopted. Regrettably, until the very end, House Democrats and the governor’s staff did actively push for a number of these measures that would have impacted our industry directly. Fortunately, the MCC, in the Senate; House Republicans; and a number of moderate Democrats rejected taxes on restaurants. Your Government Affairs team stayed vigilant until the final days of the third special session to ensure our industry was protected.

September 2015 | 17

HB 2224/SB 6102 Capital gains Democratic lawmakers in both the House and Senate proposed a tax on capital gains (HB 2224, sponsored by Rep. Reuven Carlisle, D-Seattle; and SB 6102, sponsored by Sen. Kevin Ranker, D-Orcas Island) as a way to provide more funding for K-12 education. The WRA testified on numerous occasions that this issue was much more than “taxing the rich” to pay for education. In fact, these proposals would have substantially taxed gains made on the sale of small businesses, thus impacting our industry directly. Fortunately, the Majority Coalition Caucus and House Republicans immediately recognized the impact on the small business community, and remained steadfast in their opposition of capital gains proposals. While this concept did get numerous hearings, no legislation that included capital gains passed out of a committee of origin.

ESSB 6188 Royalty income The final days and hours of any legislative session are particularly dangerous times for the business community. It is the point where lawmakers go behind closed doors and negotiate final deals on major issues, including the General Fund Operating Budget. Such was the case during the end of the third special session of the 2015 legislative session.

Budget negotiators proposed taxing royalty income, not fully appreciating that franchise agreements are considered royalty income in Washington. As a result, lawmakers inadvertently agreed to increase the tax rate from .484 to 1.5 percent on franchise revenue received by franchisors. Once negotiators from the Majority Coalition Caucus realized the impact on some in our industry, they tried to get House Democrats to agree to remove the proposed change from the final General Fund Budget agreement. House Democrats refused unless another tax increase was considered. Ultimately, Republicans were not willing to raise new taxes, and thus the royalty tax/ franchise fees increase was included in the final agreement.

HB 1593 Street Utility Tax This legislation, sponsored by Rep. Joan McBride, D-Kirkland, as introduced, would have authorized cities to establish a street utility for the purpose of maintaining and preserving city roadways. This street utility would have been granted the power to assess a tax on businesses for the “theoretical trips” they generated. The WRA took this legislation very seriously and provided direct input to the prime sponsor and all members of the Transportation Committee in the House.

We were joined by a number of other business organizations who also vehemently opposed this concept. Lawmakers on both sides of the aisle ultimately recognized the numerous challenges with this proposal, and the bill did not receive a vote in committee.

HB 1133 Utility tax – Rep. Stephen Tharinger, D-Port Angeles, introduced HB 1133, which would authorize a county to impose a utility tax of up to 6 percent on utilities 18 | warestaurant.org

providing service to consumers within the county. While the language is not clear, the bill’s intent would apply only to unincorporated areas of the county. Cities currently have the authority to impose a local utility tax of up to 6 percent.

The legislation allows a county council to adopt the tax or refer the measure to the voters. Exemptions are authorized, including one that caps the impact to $150,000 per year for any one customer. The bill received a hearing in the House Local Government Committee but was never brought up for a vote. Many businesses testified in opposition to the legislation.

The WRA remains concerned with the potential impact on gas and electric rates on members located in unincorporated areas of the state. Later in the session, a new bill, HB 2156, was introduced by Rep. Chris Reykdal, D-Tumwater. The bill, as first introduced, was intended to provide local governments with additional taxing authority and included, among other taxes, the county utility tax provision. The House Finance Committee held a hearing on the bill and later removed the utility tax as a potential tax option for counties. This amended version of HB 2156 passed the House Appropriations Committee and the full House on a vote of 74-24. The bill was never considered in the Senate.

HB 1530 Papa Murphy’s prepared food, Papa Murphy’s, a Washington grown franchise, based in Vancouver, has teamed up with Rep. Sharon Wylie, D-Vancouver, to remove sales tax on this retailer’s signature product, Take-and-Bake Pizza. Takeand-bake pizzas fall into a unique category; if purchased from a grocery store, frozen or fresh, the item is untaxed; if purchased from Papa Murphy’s, sales tax is collected.

In 2014, a definition change by the Streamlined Sales Tax Governing Board gave states the option to retain or exempt sales tax on items that require additional cooking, opposed to reheating, by the consumer prior to consumption. This bill received a public hearing in House Committee on Finance, but ultimately, did not move forward in the legislative process due to its large fiscal note of $8.6 million in reduction of state revenue for 2015-2017 biennium.

HB 1550 Opportunity to dance – At the request of the Department of Revenue, Reps. Reuven Carlyle, D-Seattle, and Terry Nealy, R-Dayton, introduced HB 1550, which clarifies taxation of amusement, recreation and physical fitness activities. The Department of Revenue had been reviewing the issue for a number of years and worked to clarify what activities are and are not subject to tax. Under this bill, activities that have always been subject to sales tax, like bowling, billiards and physical fitness facilities, remain subject to sales tax. However, activities like the “opportunity to dance” are not subject to tax. Several years ago, legislation was passed to exempt the “opportunity to dance” from sales tax, and that exemption was set to expire in 2017. Under this bill, the exemption for charges for the “opportunity to dance” is made permanent.

The bill is estimated to cost the state roughly $1.9 million in the 2015-17 biennium and $3.4 million in the 2017-19

biennium. The WRA supported the legislation due to the “opportunity to dance” exemption.

HB 1938/SB 5916 Statewide tourism Rep. Sherry Appleton, D–Poulsbo, and Sen. Sharon Brown, R- Kennewick, introduced HB 1938/SB 5916, to create the Washington Tourism Marketing Authority, a private, industry funded tourism program for the State of Washington.

At the end of the 2009-11 biennium, the Legislature cut all funding to the State Tourism Program, leaving Washington the only state in the country that does not provide funding for a statewide tourism promotion program. Since then, Washington has fallen short in comparison to neighboring states and the rest of the country on tourism spending, leaving the state with fewer tourism-generated tax dollars and businesses impacted by tourism without increased revenue.

The WRA became a founding member of the Washington Tourism Alliance (WTA), a private non-profit formed to assume official state tourism marketing and promotion activities, and to run the remaining vital activities until funding ran dry. In 2014, the Legislature directed the WTA to study and propose a private funding mechanism for a state tourism marketing program, including how revenues would be allocated and collected from each tourism industry sector.

HB 1938 and SB 5916 are the results of that study and report submitted to the Legislature.

Under the bill, five tourism sectors joined together to generate revenue for the mutual benefit that tourism brings to our state.

Food Service assessments would range from $25 to $3,500 per business based on the adjusted gross revenue from the previous calendar year. Restaurants that are commonly held would be charged the combined adjusted gross revenue from all businesses. The funding model for restaurants was created and approved by a task force of our members representing both east and west, quick service and full service. Sixty-nine percent of our members would pay $25 per year and only 2.5 percent would pay more than $700.

Additionally, the authority would be governed by a board of directors comprised of 13 members representing the assessed tourism-related sectors, including lodging (four members), food service (three members), retail (two members), attractions and entertainment (one member), transportation (one member) and regional destination marketing organizations (two members). At any point, a majority vote of the board could terminate the authority as well as the fee collection.

Ultimately, the bill did not receive enough support to pass.

HB 1938 provided the beginning of a discussion to bring a statewide tourism promotion program back to Washington, and we will continue to work with the WTA on finding a solution.

ESSB 6052 General Fund Operating Budget Lawmakers ultimately agreed to a 2015-2017 General Fund Operating Budget (ESSB 6052, sponsored by Sen. Andy Hill, R-Redmond), which was signed by the governor. Adoption of the budget effectively avoided a government shutdown in the final hours of the state’s fiscal year. The $38.081 billion measure represents an increase in state government spending of $4.441 billion, the largest increase in spending in our state’s history. Given the health of Washington’s economy, this budget was adopted without new taxes. There were $200.5 million worth of tax preferences that were closed by lawmakers, resulting in modest increases in taxation for some industries.

Here is a summary of those eliminated tax preferences:

Repeal of the machinery and equipment exemption for software manufacturers – $57 million,

Extension of the economic nexus standard to wholesaling – $45 million,

Repeal of the preferential B&O rate for royalty incomes –

$31 million, Clarification of the click-through nexus provisions – $28 million, and Increasing Department of Revenue late fee penalties – $23 million.

For more information regarding the General Fund Operating Budget -- ESSB 6052 -- or for the tax preferences legislation -ESSB 6138 -- you can log on to: http://wra.cc/wra0915b http://wra.cc/wra0915c

Health Care Association health plans There remains an ongoing dispute between the business community and the Office of the Insurance Commissioner (OIC) over appropriate rating mechanisms used by association health plans. (AHPs) The OIC has recently rejected the rate filings used by a number of AHPs, including the WRA’s HIHIT plan.

Recently an administrative law judge completely ruled in favor the AHPs in a challenge to the OIC’s authority to force a kind of community rating for all small businesses within an AHP. The business community considers this a major victory in trying to provide affordable health care plans for our member companies and their employees. It remains to be seen how the OIC will react to this latest court order. The WRA will continue to work with other AHP’s to protect our rights under state and federal law.  September 2015 | 19

REP. CHRISTOPHER HURST

Legislative heroes Rep. Christopher Hurst, D-Enumclaw Rep. Christopher Hurst, chair of the House Committee on Commerce and Gaming and is a tireless champion, round-the-clock strategist, collaborator and fearless proponent. Not only did he sign on as a co-sponsor to HB 1343, the WRA’s number one priority issue to eliminate the 17 percent fee on purchases of spirits from retailers; he also championed the bill throughout the process. Rep. Hurst scheduled a hearing on HB 1343 early in session and pushed for the bill to be passed out of his committee the following day. Despite tremendous opposition from spirits distributors and the Teamsters Union, Rep. Hurst pushed for a second hearing in the House Finance Committee. Frustrated by inaction in the House Finance Committee, Rep. Hurst worked with the WRA to push for a House Democratic caucus discussion on the issue. Rep. Hurst and others spoke in strong favor of the measure, but unfortunately, not enough of his Democrat colleagues supported removing the 17 percent fee, a fee that is stifling competition in the marketplace and adding unnecessary costs to an already expensive commodity. Rep. Hurst deserves a standing-ovation from the restaurant industry for his tireless work on this issue. Thank you, Rep. Hurst, for bravely championing competition in the marketplace!

Sen. Mark Mullet, D-Issaquah Not only is Sen. Mark Mullet an outstanding member of the Washington State Senate, he is a WRA member who owns and operates two small businesses in Issaquah: Zeeks Pizza and Ben & Jerry’s Ice Cream. He knows firsthand the joys and struggles of running a small business, and has been a tireless advocate for the restaurant industry. We truly appreciate his advocacy on one of our top issues, removal of 17 percent fee imposed by the Liquor Control Board on restaurant purchases of spirits from a retailer. Year after year, he has stood with our industry despite opposition and advocated on your behalf.

Thank you, Sen. Mullet!

20 | warestaurant.org

SEN. MARK MULLET

REP. DAN KRISTIANSEN

Rep. Dan Kristiansen, R-Snohomish It takes a special kind of lawmaker to be an effective leader. Rep. Dan Kristiansen has proven to be an extraordinary leader by all measures. As leader of the Republican Caucus in the House, he has brought a quiet and competent style to numerous important issues.

Rep. Kristiansen is also a small businessperson, and has fought tirelessly for issues important to the small business community and our industry. More specifically, he has proven to have a great understanding of the many pressures faced by restaurateurs, and has been a leading supporter of our industry on issues ranging from tax increases to liquor issues.

SEN. JOHN BRAUN

Sen. John Braun, R-Centralia This is the second year in a row Sen. Braun has earned recognition as a hero.

His work representing his district and small businesses across the state continues to stand out, and there is no question our state government is in better shape because of Sen. Braun’s leadership.

The WRA and the entire small business community is thankful that Sen. Braun returned in his vice chair capacity on the Senate Commerce and Labor Committee. He provided a thoughtful and respectful voice on issues that impact businesses, and importantly, was our champion and sponsor of a bill to remove the unfair 17 percent fee on restaurants and bars when purchasing spirits from retailers.

This year, Sen. Braun also served as the vice chair on the Senate Ways & Means Committee, and provided consistent and strong leadership to advance the budget priorities of the Majority Coalition Caucus (MCC), resulting in a balanced budget that lowered college tuition for the first time in our state’s history. Throughout the longest legislative session in history, Sen. Braun and the MCC stood strong against the House and Gov. Inslee’s call for an additional $1.5 billion in new taxes on business, one of the largest tax increases ever proposed.

The WRA looks forward to continued work and partnership with Sen. Braun. 

September 2015 | 21

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Meet the WRA’s Government Affairs team Bruce Beckett, Government Affairs Director Bruce Beckett is the head of the WRA Government Affairs team. He is accountable for overall leadership, strategic direction to the lobby team and ensuring WRA members are fully informed and engaged in the development of WRA positions and tactics. Bruce has been with the WRA since 2009. He brought more than 27 years of public affairs experience, including 17 years leading Weyerhaeuser Company’s Western Region and Washington state public affairs teams. Bruce also served as the director of public affairs for the Cascade Land Conservancy’s $20 million Cascade Agenda campaign.

He has served on the boards of numerous business organizations, including the Association of Washington Business as a deputy to the Washington Roundtable, TVW, the Washington Forest Protection Association, Northwest River Partners and the Washington Research Council.

Julia Gorton, Senior Manager, State Government Julia Gorton is the point-person on several issues including tourism, the Retrospective Rating program (RETRO) and the continued debate surrounding the state’s evolving liquor privatization issue. She is the No. 1 resource for the WRA’s ongoing discussion with the Liquor Control Board on liquor pricing for restaurants. Julia has been a member of the Washington Restaurant Association’s Government Affairs team since 2007. Julia grew and strengthened the WRA’s Grassroots Network. Additionally, Julia established the WRA’s Ambassador training program, which gives restaurateurs tools to communicate with their elected representatives.

Marian Ericks, Government Affairs Manager Marian Ericks is a full-time lobbyist for the WRA in Olympia, She brings extensive political experience to our Government Affairs team, having worked on the staffs of State Sen. Rosemary McAuliffe and Snohomish County Councilmember Brian Sullivan. She holds a Bachelor’s

degree in business administration from the University of Washington. Marian joined the WRA’s GA team in January 2015.

John Lane, Senior Manager, Local Government John Lane has joined our local Government Affairs team as the actions of local governments with regard to issues like minimum wage and paid leave are of increasing concern to the hospitality industry.

He brings extensive public policy experience to the WRA from his previous experience as legislative and legal counsel at the Office of Financial Management (2013-2015), a senior policy advisor to Gov. Jay Inslee on public safety and government operations (2013), executive policy advisor to Chris Gregoire (2005-2013) and assistant attorney general (2001-05). He holds a law degree from Seattle University and a B.A. from the College of the Holy Cross. John joined the WRA’s GA team in July 2015.

Morgan Hickel, Local Government Coordinator Morgan Hickel joined the WRA team in January 2014, quickly establishing herself as a key asset in the WRA’s work on minimum wage in Seattle. In just a few months, she has built the most organized and effective grassroots program of any industry in Seattle to ensure our restaurants’ voices are heard at City Hall. Morgan also works directly with the Seattle Restaurant Alliance, helping keep our Seattle members informed and pushing them to stay an active part of city politics. She was instrumental in the establishment of Seattle’s Hospitality PAC. Prior to joining the WRA, Morgan was the campaign manager for the Stop Higher Utility Taxes Campaign Committee, worked in government affairs on behalf of the American Frozen Food Institute and held successful internships with the Tacoma-Pierce County Chamber of Commerce and the Federal Way Chamber of Commerce.

September 2015 | 23

Samantha Louderback, Local Government Coordinator Samantha Louderback coordinates the WRA’s local government efforts in Tacoma and other cities in the South Puget Sound region. She came to the WRA from the contract lobbying firm Alliances Northwest and holds Bachelor’s degrees in public policy and environmental science from Central Washington University. Samantha joined the WRA’s GA team in January 2015.

Stephanie Davenport, Communications Advocacy Manager Stephanie Davenport is responsible for marketing and communications programs on behalf of the GA team to external media and also to WRA members, informing them of GA activity on their behalf. She is also responsible for research and acts as a liaison between the WRA’s Communications Department, Government Affairs and President/CEO. Stephanie originally worked with the WRA during 2004-05, rejoining in April 2014. Prior to returning to the WRA, Stephanie was a public information officer in the Washington State House of Representatives, communications coordinator for the American Institute of Architects and a legislative liaison for the Washington Retail Association.

Denny Eliason, Contract Lobbyist Denny Eliason is regarded by much of Washington’s legislative community as one the most accomplished lobbyists on the Hill in Olympia. Among other significant wins, Denny’s hard work yielded the B&O tax credit on pop syrup taxes that saves restaurants across the state an average of $3,000 annually. Denny is the founder of Alliances Northwest, a business-oriented government relations firm emphasizing representation before the Washington State Legislature and local governments in Washington. Denny has experience working on a number of issues, including banking, energy, employment, environment, finance, growth management, health care, insurance, pharmaceuticals, retail, securities, taxes and transportation. Some of Alliances Northwest’s other clients include Puget Sound Energy, Nintendo and Amazon.com.

24 | warestaurant.org

Kim Clauson, Contract Lobbyist Kim Clauson is a partner with Denny Eliason at Alliances Northwest.

Kim’s primary focus is workplace and labor issues. She is also a strong force on the front lines for the Washington Restaurant Association on some of the industry’s toughest issues. She routinely delivers results on issues that affect restaurateurs’ bottom lines. Kim landed the state’s restaurateurs their biggest proactive wins in the past five years, which include tackling issues such as workers’ compensation, gift certificates and pushing the obesity lawsuit prevention bill past the governor’s desk.

Kim defended WRA members against a series of bills that, if enacted, would have increased the overall costs of benefits for UI, thereby leading to higher UI taxes for employers.

Trent House, Contract Lobbyist Trent House brings 18 years of government relations experience to the WRA. He is an expert in health care, environmental policy, workers’ compensation, unemployment insurance and environmental policy. From 2005 to 2008, Trent was director of Government Relations for the WRA. He has also directed Boeing’s state government relations program, headed the Association of Washington Healthcare Plans and worked as a lobbyist for the Association of Washington Business (AWB). In 2010, he received AWB’s Heavy Lifter Award for going above and beyond the call as a lobbyist the call for the business community.

Shannon Garland, Executive Assistant Shannon Garland is an essential part of our Government Affairs team.

Shannon keeps the department running and organized. Shannon holds a B.S. degree in business with a focus on office administration from Pensacola Christian College. She has worked in government affairs since 1996, when she was first hired by the Association of Washington Business, where she worked until 2007, when she moved to the Washington State Farm Bureau. She has worked at the WRA since 2011. 

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INDUSTRY CALENDAR Sept/Oct Training

NEW RESTAURANTS Balsamroot Baking, LLC, Wenatchee

Naches Bar & Grill, Greenwater

Celebrity Cake Studio, Tacoma

Nudo, Spokane

Costa Vida, Vancouver

Quality Athletics, Seattle

Coterie Worklounge, Seattle

Renaissance Café, Tacoma

Sept. 22

ServSafe® Manager, Fife

Oct. 6

ServSafe® Manager, Seattle

Oct. 8

ServSafe® Manager, Olympia

DK’s Drive In, Ephrata

Republic Pi, Spokane

Oct. 13

ServSafe Manager, Aberdeen

Domino’s Pizza, Sequim

Saucy Sisters Brick Oven Pizza, Vashon

Oct. 13

ServSafe® Manager, Kent

Oct. 19

ServSafe® Manager, Everett

Domino’s Pizza, Woodinville

Shakabrah Java, Tacoma

Freestone Inn & Cabins, Mazama

Shingletown Pub, Seattle

Meetings

Frellard Pizza Company, Seattle

Stogie’s Cigar & Sports Lounge, Fife

Sept. 1

Executive Committee

Subway, Enumclaw

Sept. 15

Board Development Conference Call

Granola’s Frozen Yogurt & More, University Place

Sept. 15

Finance Committee

Oct. 6

Executive Committee Meeting

IHOP, Pasco

Oct. 7

MSC Sub Committee Meeting

Lost Boys Garage, Spokane

Oct. 7

Government Affairs Committee Regional Meeting, Tacoma

Mick Kelly’s Irish Pub, Kent

Oct. 12

Government Affairs Committee Regional Meeting, Tri-Cities

My Cheese Shoppe, Puyallup

Oct. 13

Government Affairs Committee Regional Meeting, Spokane

NEW ALLIED MEMBERS

Oct. 19

Government Affairs Committee Regional Meeting, Bellevue

Oct. 20

Finance Committee

Oct. 20

Government Affairs Committee Regional Meeting, Seattle

Oct. 26

Government Affairs Committee Regional Meeting, Vancouver

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Oct. 28

Government Affairs Committee Regional Meeting, Mt. Vernon

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Events Sept. 22

Golf FORE! Education

Sept. 25

Fall Institute

IHOP, Kennewick

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Time & Attendance Workforce Management Special Offer: 15% discount on HR/Pay services Ivar’s Seafood, Soup & Sauce Co. Tom Ward 11777 Cyrus Way Mukilteo, WA 98275-5406 425.493.1402 tomw@keepclam.com http://www.ivarschowder.com/ A Northwest Soup Tradition Widely recognized as one of the finest food purveyors in the country, Ivar’s Seafood, Soup & Sauce Company produces top quality seafood soups and sauces at our state of the art facility in Mukilteo, Washington. Our seafood soup tradition began in 1938 when Ivar Haglund began making and selling his homemade clam chowder on the Seattle waterfront. Today, along with our original line of Ivar’s seafood soups and chowders, we produce Ivar’s TwoSpoon soups, a selection of original, non seafood recipes and new classics. Ivar’s also develops custom soups for restaurants and food service companies, and they’re all made with the same tradition of quality that has made us famous since 1938.

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According to ACRAnet, the WRA employee background check partner, one-third of job applicants lie on their applications and another five percent falsify their social security number. In today’s economically challenging times, employers are more likely to see a rise in embezzlement and other potentially harmful behaviors. In fact, a reported $4 billion is lost annually to embezzlement and a violent employee incident costs employers on average an incredible $250,000. These sobering statistics make any small business owner cringe. However, employers can protect themselves with a mere $19 investment in an employee background check. Visit warestaurant.org for more information.

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The Washington Restaurant Association designed a health care plan just for WRA members. The Hospitality Industry Health Insurance Trust (H.I.H.I.T.) enables business owners in the hospitality industry to provide affordable healthcare benefits statewide. Contact Joe Peoples at 877.892.9203 for a FREE quote.

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Ask the Expert | Restaurant Profit Coach

Thoughts to consider before implementing a service charge

By Rick Braa, CHAE

Q:

Minimum wage has been the topic of conversation for the last year. Seattle is fast approaching another jump in minimum wage and business models are being changed.

What should operators know when evaluating whether or not to institute a service charge?

A:

The City of Seattle is setting the pace for minimum wage increases in the state; other cities are following. No municipality is immune to the possibility of political involvement pushing wages higher suddenly or phased in over time. 2015 brought new actions to some Seattle restaurants and the opportunity to evaluate how tips are managed. Thus far, the most noticeable structural change that’s been seen is the implementation of a service charge and elimination of tips.

According to the IRS, service charges are considered wages and the property of the business, “Generally, service charges are reported as non-tip wages paid to the employee. Some employers keep a portion of the service charges. Only the amounts distributed to employees are non-tip wages.” For reporting purposes the IRS states, “Employers who distribute service charges to employees should treat them the same as regular wages for tax withholding and filing requirements…”

In Washington, there are disclosure requirements, “An employer that imposes an automatic service charge related to food, beverages, entertainment, or porterage provided to a customer must disclose in an itemized receipt and in any menu provided to the customer the percentage of the automatic service charge that is paid or is payable directly to the employee or employees serving the customer.”

Some cities require 100 percent of the service charge be distributed to the employees involved in the act of service.

Seattle allows collection and redistribution of service charges.

Before moving to a model where service charges are used, WRA members should consult the Seattle Minimum Wage Ordinance Legal Review and Guide available on the WRA website at: http://wra.cc/wra0915a. Instituting service charges can be complicated, and businesses should be sure they are aware of the regulations surrounding this issue and in compliance.

30 | warestaurant.org

When evaluating the option to eliminate tipping and implement a service charge, you should also consider the following: Service charges increase the cost of doing business. Higher labor cost is inevitable with the continual march upward in minimum wage, service charges can help level the income levels somewhat. While labor costs will increase, so will the taxes paid on increased wages. Under a service charge model, the amount distributed to employees will be recognized as wages, reported on paychecks and subject to overtime calculations. Tips are not considered wages.

Of greater concern is the loss of the 45B FICA Tip Credit.

This is a dollar for dollar credit taken against the income tax due by the business owner of a pass through entity.

Under a service charge, the FICA tax amount paid will be a deduction rather than a credit. It’s not a complete loss, but if the business is making money this is an unwelcome increase in taxes. Other less obvious increases will be expenses based on sales such as B&O tax and percentage rent so be sure to notify landlords and amend leases and specifically call out service charges. The guest will also pay more as service charges are subject to sales tax.

A communication plan must be in place for employees, guests, and media. Employees need to understand, in detail, the hourly increase or decrease in pay and additional benefits or drawbacks. If a workgroup is going to take a cut in pay, make sure it knows what it’s for, and offer to increase the number of hours ordinarily worked for part-time employees, which may result in a reduction in the number of employees. Most important is the communication to the guest. Service charges represent a change for Americans. Crafting a careful message that has complete buy-in from the staff to be communicated to the guest has to be clear and consistent. Lastly, speaking to the media must be handled at the top of the organization with no exceptions. The message to the media should reflect the same message to the employees and the guests. 

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