By Jennifer Kotila
HOWARD LAKE, MN The public hearing for the Howard Lake Municipal Liquor Store, and the truth in taxation hearing took place Tuesday at the Howard Lake City Council meeting.
A public hearing is required if a municipal liquor store has operated at a deficit for at least two of the last three years. Howard Lake’s municipal liquor store has been operating at a net loss for the last five years.
Several factors, including the bond payments for remodeling done in 2005, the smoking ban of 2007, increased competition in nearby communities, and the economy, have resulted in a loss of revenue at the municipal liquor store, said City Administrator Kelly Hinnenkamp.
Thus far, the city has not had to levy taxes specifically for the operation of the liquor store, but it has transferred money out of the general fund to cover the net losses.
As of Dec. 31, 2009, the liquor store owed the general fund $219,970. The general fund reserve is $1.2 million, with $370,000 cash available, Hinnenkamp said.
If the net losses to the liquor store continue over the next two years, the cash reserve in the general fund will be depleted, and the city will have to start taxing residents to keep the liquor store open, according to Hinnenkamp.
When the liquor store had made profits in the past, that money was transferred to the general fund, Hinnenkamp said.
For instance, between 2000 and 2005, the liquor store made net profits of $469,572, and transferred $395,000 to the general fund.
Between 1990 and 1999, the liquor store had net profits of $958,691, and transferred $630,926 to the general fund.
Over the past year, the liquor store committee has tried many strategies to turn the liquor store’s finances around, according Council Member Pete Zimmerman.
For instance, it cut the number of hours the off-sale is open, thinking that may save money, but it did not help, he said.
The bonds left to pay on the liquor store are still about a quarter of a million dollars, pointed out Council Member Jan Gilmer. At the rate the liquor store is losing money, it will never be able to make it.
“With the population of Howard Lake at about 2,000, just to pay the bond, for every person in town, that’s 10 cents a day in a jar $15 a month for every person in town, whether they drink or not,” Gilmer said.
He asked liquor store manager Aaron DeMarais what he would do if he personally owned the business.
“I have no idea; that’s why we’re looking for suggestions,” DeMarais replied.
Liquor store customer and rural Howard Lake resident, Shelly Bratton gave her opinion, that the liquor store should remain open because it has to make the bond payment no matter what.
Bratton also expressed the opinion that a major reason for the drop in profit at the liquor store is due to the manager and poor customer service.
She brought up an incident that happened a couple of months ago that occurred between a friend of hers and DeMarais, after which her friend was banned for life.
Mayor Rick Lammers asked Police Chief Tracy Vetruba to investigate the incident Bratton brought up.
City resident Shelly Reddemann pointed out that discounts are given by Neisen’s Liquor Store in Cokato to firefighters, police officers, and emergency medical technicians and asked if that is something the Howard Lake liquor store could do.
Council Member Tom Kutz said that was brought up at the last liquor store committee meeting, and is something to consider.
Lammers noted that the liquor store was profitable in the past, but with things the way they are now, he doesn’t know when the losses will end.
“I do know that anytime we lose a business in town, it affects us all. Right now, we are on a positive wave, with the grocery store and other new businesses,” he said.
Council Member Mike Mitchell gave his thoughts on the liquor store, saying a bar not open Sundays or serving food will not make a profit.
He also noted that reducing the hours of operation for the on-sale side of the liquor store caused it to lose the business of the “sunshine club,” a group of people who went there in the later morning hours for coffee and other beverages.
City resident Sandy Diers asked how long the council plans to continue operating a liquor store losing money.
“We discussed that same question at the last liquor store committee meeting, and we do not have an answer. We’re just as confused as the citizens,” Zimmerman said.
Lammers noted that the city would close the liquor store before it allowed its losses to affect funds available for other city services.
Darrin Blanchette, manager of the Legion, was asked by the council if he had any ideas for turning the profits of liquor store around.
“It’s foolish for me to give input, because I manage the same kind of business across the street. What you’re looking at is a $40 per day turnaround. Customer service has to be the number-one priority, and the liquor store could easily turn things around,” Blanchette said.
“Forty dollars a day the sunshine club brought in $50 per day,” Mitchell said.
Truth in taxation hearing
The truth in taxation hearing for Howard Lake also took place during Tuesday’s meeting.
The proposed levy for 2011 is $673,041, about a 5 percent increase from the 2010 levy of $637,515.
Most of the increase in the levy is due to city employee wage increases, and a 2.9 percent increase in city employee health insurance, Hinnenkamp said.
Reddemann told the council he had a problem with the $29,000 increase in the budget for the police department from 2010 to 2011.
He noted that $15,000 was for the school liaison officer and was reimbursed by Howard Lake Waverly Winsted School District, but wanted to know about the other $14,000.
“Jan, you’re a fiscal conservative, what do you think?” asked Reddemann.
Gilmer said he did not know what to think, that the council already takes a hard look at it.
Reddemann then noted that local government aid will come to an end, there will be more taxes, and the council needs to take a hard look at the budget.
“And department heads increase wages by $11,000. That’s a lot of money under the economic conditions today, when people are fighting to keep their jobs and homes. Please do a better job,” Reddemann said.
Hinnenkamp clarified that the wage increases were in line with policies set by the council, which call for a 2.48 percent cost of living increase yearly.
She also noted the pay structure scale used is a typical government pay structure.
Some of the council members agreed with Reddemann when it came to an increase in city employee wages.
Another city resident, Vern Kleve told the council he would like to see no levy increase at all.
He noted over half the levy increase is for wage increases and he thought it would be better to freeze wages at this time.
Odds and ends
In other business, the city council:
• approved a 2.9 percent increase in employee contribution for health coverage.
• approved an amendment to the joint powers agreement for the wastewater treatment facility.
The amendment splits the cost of an audit for the plant between Annandale, Maple Lake, and Howard Lake.
• approved a $250 donation for the Smith Lake Cemetery monument that will be placed next spring.
The monument is to signify where Smith Lake Cemetery used to be and will be placed at near Locke Ave. and 50th St.
• approved policy changes to the police department’s use of force policy.
• approved a resolution for a grant agreement with the Minnesota State Patrol for the Safe and Sober and NightCAP programs.
A motion had been passed at a previous meeting for this, but the state patrol required a resolution.
• discussed DARE training for school liaison officer Darek Sczcepanik.
Howard Lake Middle School requested the school liaison officer begin teaching the DARE program.
The training to be a DARE officer is two weeks in length and costs $600.
Mitchell stated he didn’t think DARE did any good, and he could not believe the training took two weeks to complete.
The council approved the training with a vote of 4-1, with Mitchell opposed.
The council directed Vetruba to ask the school to contribute to the costs associated with the training.