Lakeland Currents 1110 – Bemidji Municipal Liquor Stores


♪ ♪ ♪ ♪ ♪ Lakeland Currents. Your public
affairs program for North Central
Minnesota, produced by Lakeland
Public Television with host, Bethany
Wesley. Production funding for Lakeland
Currents is made possible by
Bemidji Regional Airport serving the
region with daily flights to
the Minneapolis-St. Paul
International Airport. For
information available at Bemidjiairport.org. Closed
captioning for Lakeland Currents is sponsored by Nisswa
Tax Service. Tax preparation for businesses and
individuals online at Nisswatax.com. ♪ Bethany: Hello. Welcome to
Lakeland Currents. I’m Bethany
Wesley. The Minnesota State auditor
reported that in 2016, there were 195 Minnesota
cities operating 228 municipal liquor
stores in the state. Cities, according
to the auditor’s office, were originally authorized to
own and operate liquor
establishments as a means to control the sale of
alcohol. Proceeds from municipal stores
also provide cities additional
revenue, in addition to traditional taxes and fees.
Bemidji operates two municipal liquor
stores, both of which have had
a notable year. The state legislature opted
earlier this year to end a 159-year-old ban on
Sunday liquor sales, giving liquor stores the
option to stay open on Sundays. Also this year, the Bemidji
City Council voted to fund a major
construction project for its
north store. And so for tonight’s show I
welcome Nate Mathews, the Bemidji city
manager, and Ron Eischens, the Bemidji finance director, to
discuss municipal liquor operations in Bemidji. Welcome. [Thank you, Bethany] Let’s get
the stats first. Just the main data here. So there’s 2 stores.
Where are they Ron? Ron: One is on the north side
of town on Paul Bunyan Drive
and the other is the south side of town near
the South Shores, Sanford Center on Paul
Bunyan Drive South. Bethany: How long have there
been 2? Has it been for many
years? Ron: It predates me so I’m
guessing it’s going to be in that 30, 40 year range
for sure. Bethany: Okay. How many employees? Ron:
There’s about 8 full time employees and approximately 20
part time/temporary. Bethany: Okay. Alright. And so
is it fair to say that municipal liquor stores are a
common thing that cities run municipal liquor stores pretty
regularly? Would you say it’s common throughout the state?
Nate: It is a common practice
for cities to own and operate municipal
liquor stores. Both off sale and on sale stores. It’s been around for many years. In many cases it predates state
law where cities that are older than the
state had no structured for alcohol
management and so because of that cities
began controlling liquor sales
directly. Bethany: Would you say it’s
more common rural Minnesota
verses like the major metropolitan
area? Nate: Um at this stage probably yeah. There’s… are
some municipal stores in the metro area. Bethany:
Okay. Alright. I want to talk
about the revenues. So first let’s go
through the numbers. In recent years, approximately Ron
how much revenue do the stores bring in? Ron: Sales
wise our revenues are close to a $6,000,000 level
right now. Profit wise it’ll be closer to the $700,000 mark so depending on how you want to
look at it. Six million in sales and approximately $700,000 in
net profit. Bethany: Okay. Has that been
pretty consistent? Is it going
up each year? Is it declining? Ron: Sales,
slow and steady. I think our sales in the last 5 years
increased between 2 and 5 percent depending on the
year. Bethany: Okay. Does one
store perform stronger than the other
store? Ron: Yes, actually the north store is our busier
store both from a customer
perspective and more customers
relate to more sales so our north
store is our busier store. Bethany:
When you look at the 2 stores
is one larger than the other? Do they
have specialties? Are they
pretty comparable in terms of the
offerings and things like that? Ron: Size wise I think they’re
pretty comparable. However the north store has a basement
which we hold most of the inventory
so we’re moving inventory down to
the basement and up several times a day often.
The south store is on one level so that’s a much
different layout store but retail floor space they’re
approximately the same. Bethany: Okay. I want to talk
about what happens with the
money at the liquor stores. So the profits that are made go
where? What happens to them? Are they earmarked? What? Nate: The profits are used
primarily to offset property taxes in the city of Bemidji.
And we also have over the years used the profits
in the municipal liquor store to help fund special projects for the city
like our library. Like the South Shore Park shelter
and other projects that otherwise would require
property tax use, so. Bethany: So for the money that
goes in to offset the property taxes is
there a way to look at like how much taxes would
perhaps go up if there weren’t
revenues? Is there a way to kind of judge
that? Ron: Yes if property taxes would have to increase
approximately 7 to 8 percent if we didn’t use the liquor
profits. Or we wouldn’t be doing certain things depending
on how the council would want
to deal with that. But it’s about a 7 to 8
percent levy impact. Bethany: Sure. So when you look
at the special projects or the ….kind of the … the extra
things you’re able to fund with those funds, is there a set
council policy? Or is that just
something that the council routinely
discusses or how do you
determine which projects kind of use
those dollars? Nate: There isn’t a policy that
I’m aware of that we have had over the years. It’s
kind of the expense of proceeds up from
the liquor store and special projects has come
through a deliberate
conversation over many months before the city
council would decide to use the liquor store reserves
or profits to fund a park
project or a library initiative for
instance. So we don’t have a
policy. Ron: The council understands
that the liquor store funds are
accumulated and not committed until such
time that there is a project that comes
up that doesn’t have
alternative funding. And then we have that
discussion as we did with the
South Shore Park here in the last 18
months. That we had accumulated liquor funds that could help
pay for that project without tax dollars. Bethany: Would you
say… I know that you have
reserves too that you can sometimes dip
into for some of those special
projects. But does it give you added flexibility then
to fund some of those extra community projects? Nate:
Absolutely it does. Bethany: You appreciate then
the flexibility? [Mmhmm] I want to talk a little
bit about the change that
happened this summer with Sunday liquor sales. So
obviously they’ve been
discussing it for years. Did you kind of know it was
going to happen? We’re you
surprised that it passed? We’re you anticipating that it
was going to go through? Nate: We weren’t surprised it
passed we knew… we felt the winds of change were coming
in the industry. We just wanted to make sure
that the public understood the ramifications to liquor
stores. Particularly small businesses like ours with the
passage of Sunday sales. But we felt that the consumers in Minnesota
were really advocating and calling for Sunday sales.
And so we it was…growing over time. And so when it passed this
summer we weren’t surprised. We
were disappointed. We weren’t surprised. Bethany:
Okay. Initially when that… change came what
was the city’s position? Did you want
to open immediately on Sundays? Or did…how did the council
kind of feel about that as you
started to have that
conversation? Nate: We were reluctant to open
on Sundays because from the analysis that
we’ve done and we anticipated that opening up another day doesn’t necessarily increase
the liquor market that’s there and would spread sales out over just another
day. And so [Okay] that was our primary
reason for being reluctant to open. So we’re concerned about
profitability and making sure that we’re
maximizing our revenues and expenses at the store. And
just being open another day for the sake of the consumer
was of a concern for us. Ron: And
we did look at other states that went through this
same process. And their experience was just what
Nate indicated that you spread 6 days worth of
sales over 7 and your… total sales for a 12
month period don’t increase because
you’re open an extra day. It just spreads the sales out to
that additional day. So we did look at other states
that had done this as well.
Bethany: Okay. Ultimately you did end up
opening both stores on Sundays though
correct? Nate: We did. We ended
up opening both stores in response
to the other stores around us opening. And so we did that for the summer months when the
tourists were here. And since
that time we have closed one store, the south store. Bethany: But
then you remain to keep the
north store open for convenience or whoever else
decides to stop by. Okay. Since that, it’s been
about 4 or 5 months depending on how you want to
look at the calender. Have you
seen numbers that show you one way
or the other whether opening on
Sunday did end up spreading it out
over the week or are you making
additional revenues? Ron: I would say that
we’re spreading it out over 7 days instead of 6. Bethany:
As you expected. Ron: We’re
covering our labor costs with our Sunday
sales amount but that’s it. So from a bottom
line profit perspective we don’t anticipate significant
changes just because we’re open on
Sunday at all. Bethany: Okay.
Do you anticipate opening both stores
up again on Sundays come next summer, next tourist
season? Nate: We’re going to
evaluate this as a city probably in January
or February and make that decision as a council
and bring them the information. It’s still you know…we’re
still gathering it and assessing it
so we’re not sure yet [Okay] if we’re going to open
both stores on Sunday. Bethany: Okay. I want to turn
to the north stores
specifically because if you’re driving by you certainly can
see that changes are coming. So what was the … precipitous for wanting to
change the north store? I mean is this
a new thought? Was there something that was
happening recently that made
you want to do that? Or has this been
coming for awhile? Nate: Well the city of
Bemidji’s been looking at enhancing the north store for
about 10 years. And the reason for that is the store’s old. It’s 40 plus
years old. And also the products that we’re selling and that are
coming forth are changing. We talk about
craft beer. And we talk about the
differences in wines. And how wine is sold? We also feel that how we’re managing our
inventory needs to be done in a more efficient
manner. And we’ve been really doing it the same way
for 40 years. And so those are some of the main reasons why
we’ve kind of precipitated the discussion at the city
council table to increase our shelf capacity, increase our store
customer shopping capacity and as well
to so we can sell more product. Bethany:
What is it about the north location that kind of
puts the spotlight on it? I
mean is the south store just better
positioned in terms of the footprint? Or what is it about
the north store that is kind of…needs so tweaking?
Or the location of it, sorry? Nate: The location is ideal.
Paul Bunyan Drive in that area is one of the
busiest commercial sections in this whole part of the state.
[laughing] And that intersection in particular
at Irvine Avenue and Paul
Bunyan Drive is very busy. It’s close to the
university and it’s close to
our major retail hubs like the mall. And is a thoroughfare to people
going north as well on Irvine Avenue. So we love
that location and I think as the city built
that store 40 years ago they cited it very
well. And we also took a look at that
location and how tight of a spot that is
and how tricky that is for a
developer to develop. It would be very difficult to
redevelop that site without the liquor stores
property. And so when we took a look at that site we thought it
really made sense to expand our store as opposed to
move somewhere else in the northern
part of the city. But that’s…it’s a great
location fundamentally. Ron: In addition too I think
the south store is much newer as far as age of
the facility. The north store’s just tired as
a building. I mean you get 40 years old you can
reinvest money in repair and replace but at some point
you’ve got to look at expanding and really improving. So i
think age of the building
itself played into the decision as well. Bethany:
Okay. And now you mentioned
that you know, the site itself is
kind of tight …it’s a smaller little site
and you’ve got the you had the
gas station right next to it. You had
looked at other sites before this current project
came up correct? Nate: Yes we did. Bethany: Over several
years. I mean it’s been an
ongoing conversation. And each of those sites
eventually never worked out
because … Nate: Because of costs.
Because of location. Because of feasibility, of timing, of many things. Ron: I think
one of the bigger issues as far
as expanding. When we were looking at expanding in the past it was
always a third location in addition to the 2 that we
already had. And there was some legitimate
concern that the market is only so big. And are you
just going to spread sales to 3 different
locations that you currently had in 2? So
when this opportunity came up to expand and to expand on the current location it was
much different than in the
past. We were looking at potentially a 3rd
location. There was always some concern on the council
level of are you going to cannibalize
our other stores if you added a third location so? Bethany: How
did this opportunity come up? Did you
guys approach them or did they
approach you? Or how did that all come
together? Nate: We identified
different sites that would be of… you know of importance for us
to look at. And this was one of
them. And as we were evaluating them
the property owner and I continue conversations and it
just continued to evolve to make sense for both of us. Primarily that’s how it was. We
were looking at 3 or 4
different sites and this was one of them. And like
I said the owner Frank Orton and I had a lot of
conversations and we were able to work it out so.
Bethany: We should explain for
those outside of Bemidji. You’ve got the
store here right? And then right next door has been Ortons gas
station. [Correct] Right. Nate: And that… has
been a gas station on the
location for 40 years as well. I mean that
was the edge of town. And you look… how cities
develop. The cemeteries are on the edge of town. And so
that was…on the way out of
town. And so it’s been there for many
many years. And because of that the
accesses to the property. The site itself. It’s … smaller lot size for a
commercial lot typically in Bemidji. And
so that’s why we looked at it
because it’s right next door to us. Bethany:
It would have been tough for him probably, correct to sell it to
somebody else and develop it as anything unless they had
partnered in some way with you? Fair? Nate: My
understanding in the
convenience store world is you need floor space
as well to sell your Snickers bars, and
your chips and your pop as well. That site is limiting for a convenience store it to
expand because of the setbacks and
because of the way the tanks, fuel tanks are currently set in
the ground for instance. And so it was a tricky site for
even the owner to expand so but um… They had
a good business there and they…own a
business across the street too. And so they wanted
to maintain their presence on that general
vicinity of town as well. Bethany: Okay. I want to go
through the specifics of the
plan so the gas station has come down.
They did the site work correct? [Mmhmm] So
what…is…are you building a
new building? Are you expanding the existing
building or what is the plan for the actual store?
Nate: Well, our plan is to
build an 11,000 square foot store
where the Ortons gas station was. [Okay] And we would like to keep…our
goal is to keep our current
existing liquor store running as long as
possible while we construct a store right next
door to it. And then after that
store is built we move our product
into the new liquor store and we’ll take down the
existing liquor store and use
that as our parking for customers. And
in the mean… as well, we are going to be
redesigning and redoing 23rd Street which is to the
south of that. And that street is ready to be
redone as well so we’re kind of doing a public works
project at the same time as
we’re doing a liquor store there. [Okay]
But it’s a 11,000 square foot
store on the corner. Bethany: Okay.
Was the street plan already in place? Or did that come up
because as long as you’re doing
this it makes sense to readdress 23rd? Nate: It came
up as we looked at pedestrian
access, vehicle access, utilities, all of that as well. Bethany:
Okay. What’s your budget for? The
project? Ron: The budget probably is in
the $3,000,000 range, $800,000 roughly for the land and the construction side we’re getting preliminary
numbers hopefully in the next 45 days. But we’re anticipating a
$3,000,000 project in total. Bethany: Okay. Who’s
doing the design? Nate: It’s a firm out of
Virginia called DSGW. Bethany: Okay. So tell me about as this has come together and
you’re starting to put it
together what has the response been?
Have you heard concerns from
other businesses? Like some of the
private, outside? Or no, it’s
just, this is what’s best for the city and you move
forward? Nate: I haven’t heard a lot to
be honest with you from… people. In fact we’ve
been talking about it a lot. And I know some
of our liquor store staff have customers come in and purchase
products and say what’s going on next door? What
happened to the gas station? And so we’re getting out. This is a great way for us to
promote our project and but it’s really, there hasn’t been
a lot of push back or cheerleading either. Bethany: I
want to talk a little bit about
the role of the city in just liquor
business in general. You know considering some of the struggles some people have. If
they turn to alcoholism and
stuff. Does the city council weigh that? The benefit verses having
the revenue and the liquor and controlling the
sale. Verses whether you’re you know, helping to spread
something that can in some cases spread problems. Nate: That’s a good question.
That hasn’t been discussed
recently by our city council as far as
supporting an industry that has an
addiction associated with it. I know that that is an issue
for many people but fundamentally for the city over
time I don’t think it has been. I think they’ve been able to
explain to the community and understanding in an understanding way that
yeah, this is an industry that
has that problem. And that’s why we’re
taking leadership role in controlling it. Many
years ago we did have an on-sale component to what we
did. Bethany: Here in Bemidji.
Nate: Mmhmm. That was sold. [Oh] Ron:
Historically when we’ve looked at expanding our liquor store
locations we do receive some comments or letters regarding how that
impacts the concerns and social issues
that it creates. So when we’ve looked at
expanding in the past that’s
come up. I can’t say in this instance
we’ve heard much of that. Bethany: Okay. It’s been
something that’s certainly has
been discussed and people have the option to
reach out if they want to do so. I want to go back because I
don’t know if I hit it hard
enough, Ron, on the current north
store. Because it’s two floors. That’s where all your
product is. So you’re constantly moving
from downstairs, upstairs. How does that…you
said something about a conveyor
belt. Is that what I heard? Ron: There’s an old conveyor
belt that runs that runs in reverse to get it
down, to get the product down in the basement when the
inventory shipments come in. And they come in 3 days a week.
And when they want to put product on the
shelf and they typically do that several times a day. In the
morning and you know later in
the evenings when it’s a little
slower. But they’re moving the product up and down via
conveyor belt, elevator. Bethany: Okay. Fair to say then
that is not going to be
replicated in the new store? That’s something you do
not want. Nate: Correct. When
you are going to have inventory all in one level. And in
addition we’re going to create what’s called 5 high
shelving. So we actually have because right now, I think we
have 4…stacked shelving. [Okay] What’s…emerging trend in the industry is to have 5
shelves. And so you can store more product on the
floor, sales floor itself in addition to having it
in our back room or our storage area where our
shipments come in. Bethany:
Okay. Do you have any idea Ron, in terms of
the revenues that are brought in for Bemidji, are
they pretty much in the average for the state? You know
when you look at the amounts of monies that come in. Is
Bemidji performing well? Ron: I would say the last few years when we’ve
looked at that we’re in the top 5 I think, when you exclude the
Metro area cities, we’re in the top 5 as far as gross sales are
concerned. Maybe even the top 3. I’d have to look and off the top of my head, I know
we’re in the top 5. Bethany: And is that based on
like, the populations then or is it based on how
outside privates? Or what would drive
one city to have a bigger business verses another city? Is it like competition? Ron: I
think population certainly
impacts it. But tourism impact as well. And
we’re obviously a heavy tourism area. So I would say
population, tourism. Just look at the
recreation opportunities that we have here
too. So we’re in the top 5 outstate cities as far as
sales are concerned. Bethany: Okay. Would you say
that once this building is operational and it’s in place,
this will set you up for the future? Nate: We believe
that will. We think our sales will increase by
having a better store. More convenient for the public with
better product display and a newer building. We want to make sure that
that’s happening. And so that we felt
that our sales capacity for growth is limited with the
current stores that we have so
we needed to do something. And this…will I
think set us up very well. Ron: One of the things that we
looked at is in the retail industry you have a
sales per square foot calculation and we’ve been
pretty much at max for a number of years.
Because we can only run so many
customers through the store and
you can only have so much product
on the floor. So on a sales per
square foot basis we’re we can’t
really expand in that regard. So we
need more floor space. Better parking is another
advantage of the new store. Boats and trailers and campers
and extended vehicles have a challenging time getting
in and out of that type location currently. Bethany:
Once the new store is up does operations usual continue
with the south store? [Yes, yes] You don’t anticipate
any impact on the south shore, the south
store I should say. [No] Okay. Interesting. So tell me
about what are some of the other
things you’re keeping your eyes
open in the future? Like we know that there’s been
movements to try to get alcohol sales in grocery stores and you
know, those kind of things in Minnesota. Is that
something that the city or the
league has taken a stand on, a position on? Nate: The city hasn’t taken a
stand on it yet. There’s not been legislation. We know that
that’s probably the next step that would be looked at at the state level is to put
wine in grocery stores. Who knows where that will be? As we look to the future we also look at our south
store. Because we are very busy
there too. And we are evaluating what to
do there. Because that is very
tight space as well. And so we are evaluating the
land around that area too. If
there’s opportunity for us. Umm. There’s a you know, there’s a property
for sale right now that we’re
evaluating and taking a look at. So we’re always trying to look
ahead. But the legislative issues…we try to do our best with our
association of the Municipal Beverage Association
folks to get our messages out. Ron:
We did look at that when we discussed expanding. The store
locations is one of the risks involved is
the trend in other states that have
had Sunday sales authorize the next step is what
you mentioned, wine and grocery.
And we’ve mentioned to the
council that you know that is a risk. But
there’s a larger risk in doing nothing at the north
store just because it was old
and tired. So, the council weighed that
and decided that expanding that location was a better risk to take than doing
nothing. And having the wine and grocery store issue come to bear. We
don’t know where that’s going. I’m assuming it would take time
as Sunday sales did as well. Bethany: Well listen, I want to
thank you guys for coming on
and talking about liquor stores here in
Bemidji and the plans that have happened
and are continuing to happen.
So thank you guys very much. Thank you for
tuning into Lakeland Currents. Please join us next time. ♪ ♪ ♪ ♪ ♪ ♪

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