Due to remodeling bond payments, the municipal has been taking a loss
By Jennifer Gallus
During a workshop that took place after the council meeting, the city discussed the fate of the municipal liquor store, due to the fact that it has lost money two out of the last three years.
A public hearing about the topic a month ago yielded no comments from city residents.
After much discussion, the council determined that it would indeed keep both the off-sale and on-sale portions of the liquor store open for 2009.
The projected loss for 2008 is $57,175. An annual bond payment for the 2005 remodeling project accounts for $48,860 of that amount, and a projected loss of revenues in the amount of $8,315 accounts for the remainder.
The 10-year bond has seven years of repayment left after this year’s payment. Any losses experienced by the liquor store is paid out of the general fund.
“We can’t afford to keep paying the bond payment and covering the loss,” Council Member Pete Zimmerman said. “The gap needs to close.”
“What percent of our levy is this?” Zimmerman asked.
“About 10 percent,” Hinnenkamp said.
“That’s a lot,” Zimmerman said.
Options were discussed as to what the profit/loss scenario would be if the on-sale portion of the store were closed. It was estimated that the profit would be about $17,543, coupled with the $48,860 bond payment would reduce the loss to $31,316.
“There are so many variables, though. It’s hard to estimate,” Hinnenkamp said.
No council members want to pursue the closing of the on-sale portion at this time.
“If you close it, it would be hard to get the patrons back when you decided to re-open,” Mayor Richard Lammers said.
“It happened with the remodel. We didn’t have some come back,” Liquor Store Manager Aaron DeMarais said. “Our population base isn’t big enough to afford losing customers. When you open back up, you don’t have a bunch of new faces walking in.”
Zimmerman suggested that DeMarais research what times of day that the sales/customers aren’t covering the cost of staff.
“There are lots of variables. It changes with the seasons,” Lammers said.
“We have to do something. We just can’t keep talking about it,” Zimmerman replied.
“We have,” Council Member Mike Mitchell said. “We’re closing earlier and we’ve changed our hours.”
“And that’s not enough,” Zimmerman replied.
The council decided that the problem isn’t going to suddenly get better in a year’s time, but is hopeful that the economy will help turn things around some time in the next couple of years.
The operations of the liquor store will remain the same for next year, with some tightening of expenditures in the budget.
“Can it (the liquor store) generate $40,000 to $50,000 a year after the bond payment is gone? Absolutely,” DeMarais commented.
Late MnDOT bill is legitimate, council finds
Turning to other subjects, the council reviewed information brought forward as the result of city staff and engineer digging through past records to verify how much it, indeed, paid MnDOT upfront back in 2002 for the Highway 12 project.
The file search was prompted by an unexpected bill in the amount of $90,000 from MnDOT for the remainder of the project’s costs, though six years later, and just two weeks after the city certified its preliminary levy for 2009.
Because the budget is already set, dollars to pay the outstanding debt will result in “taking away” item(s) that are already planned for next year, according to City Administrator Kelly Hinnenkamp.
When the project went up for bids in February 2000, the preliminary cost to Howard Lake for the project was estimated at $1,272,647.
After bids were opened, the revised estimated cost reported in August 2000 was $1,130,253.
The final cost, as reported just recently by the state is $1,137,447.
The city paid MnDOT $1,046,530 upfront before the project began. The city was informed back then that the 8 percent engineering fee would be charged upon completion of the project, according to Hinnenkamp.
Now, six years later, those fees have been assessed in the amount of $84,255, plus additional final construction charges in the amount of $6,661, which adds up to $90,916 yet to pay.
Howard Lake isn’t the only city that is being charged this late in the game. Surrounding cities such as Cokato, Montrose, and Waverly are also facing similar short-notice bills.
State Representative Dean Urdahl assisted the City of Cokato in securing a payment plan consisting of a four-year payment plan at no interest.
Urdahl told the City of Howard Lake that it could also receive the same deal, but the city isn’t jumping at the offer.
“There’s a couple of considerations they should allow us,” Hinnenkamp explained. “They (MnDOT) called us two weeks after we already set our preliminary levy, and Cokato’s tax burden is different than ours because their tax base is higher than Howard Lake’s.”
The council decided to table any decisions until further discussion could take place between Urdahl and MnDOT about the conditions of repayment.
Delinquent sewer and water bills are adding up
The council certified all sewer and water delinquent accounts, and special assessment delinquencies that currently are $200 or more and two months delinquent.
“I think the public should know that these total $32,000,” Council Member Jan Gilmer said.
Hinnenkamp explained that $19,000 of that is just sewer and water accounts, and that $1,800 of that amount had recently been received. The remainder is charges for code enforcements and to developers.
“Keep in mind that some people’s bills (sewer and water bills) average $200 a month. That’s a pretty hefty bill,” Hinnenkamp said.
Odds and ends
In other business, the council:
• approved a permit for an amateur radio relay field day at Memorial Park Saturday and Sunday, June 27 and 28, 2009 for emergency communications training.
• authorized the fire department to call for bids for the purchase of a new pumper truck to replace the 1976 Dodge pumper.
• approved the transfer of $50,000 from the storm water utility fund to the sewer and water fund to help pay for storm water portions of the 2008 improvement project.