Osakis Liquor Store profits explained

Talk about it

Liquor may be flowing at the Osakis Municipal Liquor store, but it’s more like a steady trickle than a constant gush.

In a recent Osakis Review story outlining the 2008 state municipal liquor store report, the city of Osakis was reported to have transferred $165,000 out of the liquor store fund. While that looks like a phenomenal profit margin, there’s more to the story.

While the extra money appears to be profit, much of it came from liquor store reserves. The business has a savings account, where excess profit is kept, along with a checking account for day-to-day operations. According to City Clerk Angela Jacobson, $65,000 was taken from the liquor store’s checking account to help balance the city budget. In addition, the city removed $100,000 from the liquor store’s savings account and put that into an interest-earning CD. That guaranteed interest was used in accounting procedures to help balance the budget, while the original money put in the CD remains intact.

For 2008, the liquor store’s gross profit – total sales minus cost of sales – was $289,392. That is not clear profit. To calculate net profit, operating expenses, such as utilities, payroll and taxes need to be taken out. Operating expenses for 2008 totaled $232,584, leaving $56,808, which is called income from operations. Finally, non-operating revenues and expenses – interest, vending machine and pull tab booth rent, refunds and reinbursements – are calculated and either added or subtracted. The Osakis store’s non-operating revenue totaled $15,039, leaving a net income, or profit, of $71,847 for the Osakis Municipal Liquor Store in 2008.

Profits generated by municipal liquor operations generally serve two purposes. First, municipal liquor operations use profits to ensure that they have an adequate level of reserves to purchase inventory and maintain their facilities. Second, profit in excess of what is needed to fulfill the first purpose may be transferred to other city funds to supplement existing revenue sources. Osakis has a history of transferring about $35,000 each year from the liquor store profits into the city.

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