New study released about city-owned liquor stores

State Auditor Rebecca Otto today released the

2011 Analysis of Municipal Liquor Store Operations. The report provides

comparative data on liquor operations owned and operated by Minnesota

cities.

In 2011, 208 Minnesota cities operated 240 municipal liquor stores,

with 114 cities operating both on-sale and off-sale liquor

establishments and 94 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.

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

revenues to supplement traditional tax and fee revenues.

Highlights from the report include:

-- The combined net profit of all municipal liquor operations totaled

$23.4 million in 2011. This represents an increase of $1.7 million, or

8.0 percent, over the amount generated in 2010. Among on sale

operations, net profits totaled $2.6 million in 2011, which was an

increase of $598,468, or 30.3 percent, over 2010. Total net profits for

off-sale operations totaled $20.8 million in 2011, which was an increase

of $1.1 million, or 5.8 percent, over 2010.

-- During 2011, Minnesota's municipal liquor stores transferred $20.1

million of their profits to other city funds. This represents an

increase of 20.8 percent over the total net transfers made in 2010.

Transfers totaled $6.5 million among Metro Area establishments, compared

to $13.6 million for Greater Minnesota establishments.

-- During 2011, Minnesota's municipal liquor operations reported a

16th consecutive year of record sales totaling $317.2 million. Total

sales generated in 2011 increased by $3.8 million, or 1.2 percent, over

2010. Total municipal liquor sales ranged from $81,839 in Canton to

$14.4 million in Lakeville.

-- Municipal liquor operations located within the Metro Area are

considerably larger and more profitable than their Greater Minnesota

counterparts. Although only 19 of the 208 Minnesota cities (9.1

percent) that own and operate municipal liquor stores are located in the

Metro Area, they represent 37.4 percent of the total sales and 36.6

percent of the net profits of municipal liquor operations. Sales by all

Metro Area operations averaged $3.0 million in 2011, compared to average

sales of $988,189 for all Greater Minnesota municipal liquor

operations.

-- Over the past five years, net profits have increased 4.4 percent.

Among off-sale stores, there was a 6.5 percent increase in net profits,

while on-sale stores showed a decrease of 9.9 percent.

-- Thirty-six Minnesota cities reported net losses for 2011, compared

to 40 cities in 2010. All 36 cities with losses were from Greater

Minnesota.

-- Minnesota law requires cities to hold a public hearing on the future

of their liquor store(s) if the liquor operation shows a net loss in at

least two of the past three years. While this report is based on 2011

data, an examination of losses for the years 2009, 2010, and 2011 shows

that 30 cities should have held hearings on or after November 17, 2011.

Of the 30 cities required to hold a hearing in 2011, 22 were on the

previous year's list.

To view the complete report, which includes an Executive Summary,

tables, charts and graphs, go to:

http://www.auditor.state.mn.us/default.aspx?page=20130329.000 .