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Erik Burgess, Published January 29 2014

Municipal liquor stores funnel millions into city coffers; state law prevents Moorhead from getting in on the action

MOORHEAD – City-run liquor stores and bars across Minnesota are often profitable operations that funnel millions of dollars into cities and ultimately taxpayer pockets.

So why isn’t cash-strapped Moorhead, fresh off a heated debate about funding the public library, considering setting up a municipal liquor store?

A state auditor report released Monday shows that municipal liquor operations across the state had another profitable year in 2012. And over the past five years, net profits of municipal liquor operations have increased 33.7 percent across the state.

Of the 207 cities that operate municipal liquor stores, 182 made a profit in 2012, many of them shipping those extra dollars back into city coffers.

Several lakes-area municipal liquor shops and bars had some of the largest gross sales numbers in the state in 2012, according to the auditor report.

But, legally, Moorhead can’t get in on the action.

Minnesota law prevents any city with more than 10,000 people from establishing a municipal liquor operation unless the city set up such an operation before July 1, 1967.

Not that it hasn’t been discussed in Moorhead. Former Mayor Mark Voxland said city leaders have informally chatted about setting up a city-run liquor business but decided it wasn’t the right thing to do.

“We’d be shutting down a lot of businesses in town that have liquor licenses. We just didn’t see that as the way we wanted to go,” Voxland said. “That’s how municipal liquor works. You either control the liquor because you sell it, or you give licenses out. You can’t have both of them.”

The auditor’s report shows that at least 18 lakes-area municipal liquor stores or bars turned a profit in 2012.

When ranked by gross sales, Fergus Falls was 10th in the state, bested only by Twin Cities metro-area operations. The top five are in Lakeville, Edina, Eden Prairie, Richfield and Apple Valley.

Bemidji was 13th, Detroit Lakes was 14th and Alexandria was 20th.

Best left private?

Just north of Detroit Lakes is the little town of Callaway, with a population of 234. It has only one bar/liquor store, and it’s run by the city.

In Callaway, the liquor monopoly is a necessity. The small town needs the revenue generated from its bar and bottle shop, said Sherry Dillon, city clerk and treasurer.

“Without a municipal liquor store in the city of Callaway, we would not have a city,” said Dillon, who is also on the board of directors for the Minnesota Municipal Beverage Association. Dillon said this is true in many other small towns.

Like other municipal liquor stores that turn a profit, the bar in Callaway gave money back to its residents in 2012 – about $15,300, according to the auditor’s report. The money helps pay down utility bills for residents, Dillon said.

Municipal liquor stores statewide transferred $23 million back to cities in 2012, a 14.3 percent increase over transfers made in 2011, according to the auditor’s report.

The city-run liquor store in Fergus Falls transferred $357,595 to the city in 2012. Lakes Liquor in Detroit Lakes moved $555,072 to the city and Alexandria’s municipal liquor store transferred $200,000.

Moorhead, strapped with debt from tax-forfeited lots, certainly could use the money, Voxland said.

Last year, the City Council dealt with a $199,000 budget deficit by cutting some already slim operating budgets by 5 percent and reducing some departments to levels of funding they had a decade ago, City Manager Michael Redlinger said.

On Monday night, a deadlocked council decided against a one-time payment of $40,805 to the public library to help keep it open on Sundays.

If Moorhead ever wants to set up a municipal liquor operation, the city could ask the state to amend the law, Redlinger said.

But Voxland said if it meant shutting down private businesses, it isn’t something he believes council members would stomach.

“Free enterprise does a very good and efficient job of taking care of citizens,” Voxland said. “I suppose we could make money on it, but I think it’s best left, in our case, to private enterprise.”

While the majority of city-run bottle shops and bars across the state are profitable, the auditor’s report shows there’s been a decline in municipal liquor operations in the past decade, from just over 255 in 2003 to 239 in 2012.

‘A real positive thing’

City-run liquor shops are abundant in Greater Minnesota, and Lakes Country is no exception. The auditor’s report states that only 19 of the 207 cities with municipal liquor operations are located in the seven-county Twin Cities metro area.

Jim Watland, store manager of Lakes Liquor, the city-run off-sale in Detroit Lakes, said it still has competitors. Many of them, though, are other municipal liquor stores in nearby towns.

When the privately run Seven Sisters Spirits opened in 2012, it had to open outside the city limits of Detroit Lakes.

Seven Sisters Spirits General Manager Steve Larsen said that was fine, though. Operators already owned some land about seven miles south of town and preferred the location.

Other than financing costly startup expenses, Larsen thinks a municipal liquor store runs pretty much like a private business.

“I think we can buy as effectively as a municipal can,” Larsen said. “I look at the competition part being good for the consumers in the area, for sure.”

Dillon and Watland said as long as the stores are run efficiently and as a profitable business, they can only help the city.

If there is a municipal liquor store that doesn’t turn a profit in at least two of the past three years, the city must hold a public hearing and discuss the future of the store.

“As long as they’re used in a way that helps lower taxes, I think it’s a real positive thing,” Watland said. “It gives people a chance to buy something they were going to buy anyway and get something back in return.”


Readers can reach Forum reporter Erik Burgess at (701) 241-5518