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State report shows metro liquor stores more profitable than those in rural areas

A new report shows that most city-owned liquor stores in Minnesota turned a good profit in 2010 - although the ones in the metro area are faring better than their rural counterparts.

State Auditor Rebecca Otto released the 2010 Analysis of Municipal Liquor Store Operations this week, which provides comparative data on liquor operations owned and operated by Minnesota cities.

The report summarizes activity in 2010, which is one year behind the liquor stores' audit the Alexandria City Council reviewed recently. The audit showed that the sales at the two stores, Downtown Liquor and Plaza Liquor, dropped 9 percent in 2011 but the stores still turned a profit of $251,203, which was down 5 percent from 2010.

Minnesota municipalities were originally authorized to own and operate liquor establishments as a means of controlling the sale of alcohol.

For many communities in Greater Minnesota, municipal 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 revenue to supplement traditional tax and fee revenues.

In 2010, 209 Minnesota cities operated 242 municipal liquor stores, with 116 cities operating both on-sale and off-sale liquor establishments and 93 cities restricting their municipally owned establishments to off-sale liquor stores.

While the majority of municipally-owned liquor stores are located in Greater Minnesota, 19 cities within the seven-county metro area own and operate liquor establishments.

Highlights from the report include:

• The combined net profit of all municipal liquor operations totaled $21.7 million in 2010. This represents a decrease of $204,781, or 0.9 percent, from the amount generated in 2009. Among on-sale operations, net profits totaled $2.0 million in 2010, which was a decrease of $266,079, or 11.9 percent, from 2009. Total net profits for off-sale operations totaled $19.7 million in 2010, which was an increase of $61,298, or 0.3 percent, over 2009.

• Over the past five years, net profits have increased 8.0 percent. Among off-sale stores, there was a 16.0 percent increase in net profits, while on-sale stores showed a decrease of 35.7 percent.

• Forty Minnesota cities reported net losses for 2010, compared to 38 cities in 2009. All 40 cities with losses were from Greater Minnesota.

• During 2010, Minnesota's municipal liquor operations reported a 15th consecutive year of record sales totaling $313.5 million. Total sales generated in 2010 increased by $2.2 million, or 0.7 percent, over 2009.

• Municipal liquor operations located within the metro area are considerably larger and more profitable than their Greater Minnesota counterparts. Although only 19 of the 209 Minnesota cities (9.1 percent) that own and operate municipal liquor stores are located in the metro area, they represent 37.2 percent of the total sales and 36.8 percent of the net profits of municipal liquor operations. Sales by all metro area operations averaged $3.0 million in 2010, compared to average sales of $969,139 for all Greater Minnesota municipal liquor operation.

• During 2010, Minnesota's municipal liquor stores transferred $16.6 million of their profits to other city funds. This represents an increase of 0.7 percent from the total net transfers made in 2009.