When I moved to Minnesota in 1996 I was surprised to find that cities were in the retail liquor business. Not all cities, but some. I came in 1996 to become the new City Administrator in Northfield. We had municipal liquor. Eden Prairie has it as well.
The question is: Why?
There are many answers. Some cities are in it for the money. Cities that are in the retail liquor sales business exercise a legal monopoly on the sale of beer, liquor, and wine in their communities. Beer, liquor, and wine are desired commodities. They sell well. They have good profit margins. Municipal liquor stores generate revenue in excess of what it costs to run the operations of the store, well at least they’re supposed to. That money, which is usually called “profit” by the private sector, is returned back to the City’s General Fund where it performs two main functions, one on each side of the balance sheet. On the revenue side, this revenue displaces property taxes, so it is a form of property tax relief. On the expense side, it is spent as a General Fund revenue so it is spent on police protection, fire prevention, parks, libraries, recreation, planning, street maintenance, etc.
Some cities get into the municipal liquor business because they want to have greater control over the sale of beer, liquor, and wine in the community. Private liquor stores, driven by a desire for profit, presumably have more motivation to expand their sales than their municipal counterparts. This can make the private stores more apt to sell their products to underage customers. Most municipal liquor stores, on the other hand, have close associations with their police departments to make sure they do not sell liquor to underage customers. Most private liquor stores do not have such positive relationships with their local police departments.
The City of Eden Prairie has three municipal liquor stores. Together, they have generated an annual “profit” for the past three years of about $800,000/year. That money has funded the City’s Capital Iprovement Program (CIP), which provides funding for park development, trails, sidewalks, streets, street lighting, etc. Many good things for our community.
But there are those nagging moral questions. Should the City be involved in the sale of alcoholic beverages? Should the City give way to private liquor stores?
Almost every year the private liquor industry attempts to sway the State Legislature to adopt legislation to kick cities out of the municipal liquor business. So far, the effort has not paid off. But every year the effort gets a little more steam. The effort has a close ally in our own Rep. Erik Paulsen. Rep. Paulsen has supported the legislation in the past session (or two).
We are contemplating the future of municipal liquor. We ought to contemplate it as a community. As a community, we receive substantial benefit from the revenues generated at our municipal liquor stores. If we are going to move away from this revenue, we need to be more creative about generating replacement revenue, or lower our standards about the level of public improvements we will accomplish every year.
It’s a tough choice.
