Koochiching County's municipal liquor stores and bars in Ranier, Littlefork, Big Falls and Northome are all in the black, some placing tens of thousands of dollars in a year into city coffers while also providing jobs, according to a report recently issued by state Auditor Rebecca Otto.
But it was a mixed bag of results. Sales figures are higher than ever, but the number of Minnesota's munis, as they are often called, is on a consistent decline.
Otto's office compiled an “Analysis of Municipal Liquor Store Operations” for all of 2011, which are the latest in-depth figures available, according to the Minnesota's top government spending watchdog.
“One purpose of this report is to provide data to city officials that will enable them to evaluate the efficiency of their liquor operations through comparisons to similarly-situated liquor operations,” according to the report under “recommendations.”
The county's munis had the following net profits: Ranier, $44,584; Littlefork, $14,174; Big Falls, $22,379; and Northome, $44.584.
By comparison, the gross sales figures for Rainier, $416,257; Littlefork, $406,710; Big Falls, $314,457; and Northome, $319,287.
There were no accusations of any impropriety here or anywhere else across the state, according to the 56-page analysis and audit. And none of Koochiching County's municipal on- and off-sale liquor store establishments were among the 36 listed that operated at a loss.
Flensburg, Minn., topped that infamous list by losing almost $190,000. Flensburg is in Morris County almost dead center in the middle of the state with a population estimated at about 225 residents.
The most profitable was Edina, Minn., with $1.4 million in profit. The trend of metro success with much larger stores serving much bigger populations versus struggling rural munis is one of the main themes that the report emphasizes.
According to the state law going back decades, any city with a population of less than 10,000 could open a muni and keep it open even after their population surpasses 10,000.
In many of Minnesota's myriad small towns, the muni is the only watering hole. In fact, munis were created to provide access and convenience to places that might not otherwise be able to attract a privately-run business, according to the report.
International Falls could have muni since it has a population of less than 10,000 at about 6,500. But the Falls has several bars and liquor stores and is a regional hub for medical, education and retail services has a busy U.S.-Canadian border crossing and numerous resorts and natural tourist destinations.
Out of the county's four cities with munis, Littlefork has the largest population with 646 residents. Northome had the smallest population with 202 people, according to the report.
The difference between off-sale and on-sale is that the former is like a liquor store where someone buys bottles and cans of cold beverages and leaves while on-sale is basically a bar.
And all four of Koochiching County's munis are both on- and off-sale.
Overall, Otto's team reported that in 2011, 208 Minnesota cities had municipal liquor stores, about half of which offered both on-sale and off-sale alcohol sales. Another finding is that off-sale establishments, or off-sales just in general, are increasingly more popular with the public.
Another significant note Otto made was that the number of munis has been on the rapid decline over the past decade. Towns have been discontinuing about two a year. The factors most often blamed are a lack of profitability and insurance costs, according to the report.
Conversely, the state's munis reported their 16th consecutive year of increased sales figures, with record sales totaling $317.2 million.
But the difference in sales figures is dramatic.
Minnesota's munis had a total profit of more than $23 million, which is an increase of $1.7 million or 8 percent over 2010.
While net profits are up almost 5 percent over the past five years, almost $21 million of those dollars were in off-sales. On-sale profits over that same period have dropped almost 10 percent.
To demonstrate the divides in sales numbers, Otto's office noted that rural Canton, Minn., $81,839 in gross sales while the suburb of Lakeville, Minn., sold $14.4 million worth of alcohol.
The report's point was that while consistently the majority of municipally-owned liquor stores are located in Greater Minnesota, the most profitable ones with the highest sales figures were almost always in the Twin Cities metro area, where coincidentally most of the state lives.
“Municipal liquor operations located within the metro area are considerably larger and more profitable than their Greater Minnesota counterparts,” according to the report. “Although only 19 of the 208 Minnesota cities (9.1 percent) that own and operate municipal liquor stores are located in the metro area, they represent 37.4 percent of the total sales.”
Since munis are public entities, the report makes a number of recommendations for elected officials as well as residents to consider:
*Compare location, population, and financial indicators, such as total sales, to make a review of operations more meaningful.
*Make sure city officials compare their operations to cities with the same type of operations.
*Off-sale operations should not be compared to on-sale operations because operating expenses are generally much higher for on-sale operations, due to factors such as the added costs of bartenders, wait staff and entertainment.
*Another useful comparison are gross profits, since cities with relatively low gross profits should consider whether the gross profits reflect their intended markup policies.
*If operating expenses are relatively high compared to similarly-sized stores, city officials should look at stores with low operating expenses for ideas on how they might operate more efficiently.
But sometimes the figures can be a bit misleading, the office noted. That's why Otto encouraged muni operators to look for comparisons but also communicate to make sure these operations are running effectively and sustainably, the report concluded.
