Saturday, March 10, 2012

Municipal liquor stores

Each year, the Minnesota State Auditor provides an analysis of the state's municipal liquor stores. In 2009, 210 Minnesota cities operated 242 municipal liquor stores. The report states that "liquor operations provide access and convenience in areas that might be unable to attract a privately-run establishment. In addition to these functions, profitable municipal liquor operations have provided another source of revenues to supplement traditional tax and fee revenues." 

However, some lawmakers are skeptical about Minnesota cities' reliance on liquor sales. State law requires that any city whose liquor store loses money to hold a public hearing to reconsider the continued operation of the store. In 2009, 38 Minnesota cities reported net losses. The number of Minnesota municipal stores has steadily declined over the last few years due to these losses.

The City of Edina liquor stores consistently rank in the top three Minnesota municipal operations for net profit. Edina has three liquor stores generating roughly $1 million a year in net income. The Southdale store is the largest grossing store for a municipal operation in Minnesota. These liquor stores compete with private and municipal stores in surrounding cities.
Figure 1: Edina Liquor Fund

Edina liquor stores subsidize the city’s construction, the golf courses, Braemar arena, and the art center. In 2011, the city transferred $765,100 to the General fund, $150,000 to the Construction fund, $100,000 to the Golf Course fund, $80,000 to the Arena fund, and $160,000 to the Art Center fund. Although the liquor fund continues to provide stable financial support to city amenities, there is growing concern about the City's reliance on these funds. Instead of continuing to heavily rely on the Liquor Fund, City officials have begin to analyze how to make dependent funds more self-reliant in order to decrease their subsidies. This has spurred a philosophical discussion on the role of cost recovery in park and recreation.

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