Municipal liquor stores play big role for small cities

Each year, the Minnesota Auditor’s Office presents an update on the state of Minnesota’s municipal liquor stores. In many cities, “munis” are the only place which are licensed to sell alcohol, and were created to boost the cities’ revenue. However, in some cities, the stores become a liability to tax payers if they are not profitable.

In 2009, 210 Minnesota cities operated 242 municipal liquor stores. More than half of the cities operate on- and off-sale liquor stores. While the majority of municipally-owned liquor stores are located in greater Minnesota, 19 cities within the seven-county metro area own and operate liquor establishments.

According to the auditor’s report, the combined net profit of all municipal liquor operations totaled $21.9 million in 2009. This represents an increase of $1.5 million, or 7.1 percent, over the amount generated in 2008. During 2009, Minnesota’s municipal liquor stores transferred $16.5 million of their profits to other city funds. This represents a decrease of 7 percent from the total net transfers made in 2008.

Thirty-eight Minnesota cities reported net losses for 2009, compared to 42 cities in 2008. There was a net decrease of one liquor store across the state in 2009.

Ranier

“Our liquor store is vital to Ranier,” said Ranier City Clerk Kim Nuthak.

In 2010, Ranier transferred $50,000 to its general account from the liquor store income. The city had a total revenue stream to the general account over that year of $185,000, including the liquor store transfer, according to Nuthak.

In recent years, the city had only transferred about $20,000 from the liquor store.

The Ranier Municipal Liquor Store had a net profit in 2010 of $60,698. Nuthak explained a new point-of-sale system in 2010 for tracking purchases and inventory has helped keep the store functioning well.

“Our liquor store is awesome, things are going great,” Nuthak said.

Last year’s profits are up over previous years. The store made $55,789 in 2009, $45,304 in 2008 and $43,419 in 2007.

Through March 31, the Ranier liquor store had a year-to-date net profit of $8,007 compared to $6,873 for the same time in 2010.

Littlefork

“Liquor stores get ingrained in a community,” said Mike Fairchild, Littlefork city administrator, speaking of the social aspect of having a community gathering spot. He said people coming in for their morning coffee adds to the use of the facility beyond the evening bar usage.

In 2010, the city of Littlefork levied $100,000 from its taxpayers, Fairchild said. It transferred $20,000 from its municipal liquor store to paint the water tower.

Fairchild said the liquor store helps ease taxpayer burden, and without such a store, the city would likely have to increase the annual property tax levy. The city also uses reserves from the liquor store account to borrow for projects and pay city staff, including Fairchild. Notably, the city has used liquor store funds on the city’s fire hall project and to repaint the water tower.

The liquor store fund also acts as an emergency safety net in cases of unforeseen expenses or reductions in revenues, he said.

Fairchild explained the 2009 sales were better for the liquor store than in 2010. Gross sales in 2009 were $406,673 and in 2010 were $309,800. Those led to a 2009 net profit of $35,927 and 2010 net profit of $17,323. The liquor store account transferred $10,000 in 2009, compared to the $20,000 in 2010 for city projects and use.

Big Falls

Big Falls’ municipal liquor store also plays an important role in that community, said liquor store manager Teckla Brown. She said many Big Falls residents frequent the store, as well as Littlefork and International Falls residents and travelers.

“It’s pretty much the only social place in Big Falls,” she said. Without the liquor store, she said, the city might be like a ghost town.

In 2010, the Big Falls municipal liquor store had a net profit after an $8,000 transfer of $10,281. During the three previous years, transfers out of the liquor store accounts exceeded the net income. From 2007 to 2009, the liquor store made a profit each year, but that amount was less than what was transferred. Amounts transferred beyond income in those years was $4,401 in 2007, $451 in 2008 and $2,249 in 2009.

That $8,000 transfer in 2010 represents about 4.6 percent of the city’s revenue budget, reported Big Falls City Clerk Joan Nelson. In previous years, the city had only transferred $6,000, which averaged about 3.7 percent of the budget.