By Ryan Gueningsman
DELANO, MN On a split vote, Delano City Council decided to move forward with plans to expand Delano Municipal Wine and Spirits, along with enter into a 10-year lease at the facility’s present location.
Two different options were presented to the city by United Properties, which owns the Delano Crossings building that houses the liquor store.
Option one was a lease renewal without an expansion, and option two was a lease renewal with an expansion. With the 2,398 square-foot expansion, the city pays a slightly lower rate per square foot. With the expansion, the store will total 7,678 square feet.
Delano Municipal Wine and Spirits current lease expires Jan. 31, 2014. Currently, the city pays $15.50 per square foot, which is an annual rent of $81,840. With the expansion, the price per square foot will decrease to $12 per square foot for the first five years, and then increase to $13 per square foot for the last five years of the lease. For the first year of the lease, the annual cost would be $69,102. For years 2-5, it would be $92,136, and for years 6-10, it would be $99,814.
Delano Municipal Wine and Spirits will receive a three-month abatement of rent, beginning on the date the expansion portion of the store begins. It was also noted there will be a slight increase in CAM and utilities, as well as one-time costs of new fixtures, flooring, and doors. It is expected CAM and utility costs will increase by 31 percent of the current rates.
There will be no increase in staffing costs.
With the expansion, United Properties will provide all the demolition work, including a partitioned wall, a matching ceiling, flooring and paint, adequate mechanical and electrical systems, any walls needed for storage/cooler areas, and an allowance of $5 per square foot ($38,390) for necessary remodeling of the expansion space.
Drumsta said projected sales from the expansion of the liquor store are 10 percent in the first year of expansion, and 3 percent each year thereafter. It was noted these numbers are more conservative than what was previously projected in a market analysis
Staff also projected the revenue from the expansion would be 25 percent of the annual sales, which is also a conservative number in comparison to current rates.
Drumsta said the expansion will result in initial increased costs, but said the net profit from the expansion will increase from the current rate and will be able to pay off the costs in a timely manner while strengthening its presence in the current market.
Council Member Dan Vick asked that, if a large liquor store wished to locate in the city’s northwest business park, would the city refuse to allow it to go there? He said he doesn’t like the idea of expansion or a long-term contract.
“I don’t think we’ll increase our sales that much to justify the increase,” Vick said.
Council Member Jack Russek said he also doesn’t see the profit there that is being projected that warrants an expansion.
Resident Sara Beamish asked the city council what would stop a liquor store from locating within Franklin Township in the proximity of Delano.
It was noted that zoning would prohibit it from going in Franklin Township.
“In the last decade, 20 cities have decided to get rid of municipal liquor stores altogether,” Beamish said. “And we’re talking about doubling down, basically, here. So, what’s necessarily stopping surrounding communities from having some sort of discount liquor store, and have we really examined the impact that it would have?”
Beamish said it is great to look at the benefits and positive aspects to an expansion, but questioned if something bad were to happen to impact sales.
Council Member Betsy Stolfa said the city is not aware of any proposals that exist for any discount liquor stores within the market area,
“But, we do have a municipal liquor store now, and we know what it results in,” Stolfa said. “I’m not willing to give away the profits that the liquor store currently is making today that keeps your property tax low unless there is something firm that’s going to make up those dollars. Until there is a discount liquor store that can come along and do better than the funds the liquor store now contributes to the city, I don’t have anything to talk about.”
Stolfa said Delano’s results with municipal liquor have been positive.
“We’ve been making lots of money and keeping the property tax down,” she said. “Let’s keep going with that trend.”
Vick asked, if drugs were legalized, if the city would do a municipal drug store. He said he is not interested in expanding the liquor store.
“We have to deal with what’s in reality now,” Stolfa said.
The council voted to approved the lease agreement with the expansion of the liquor store. Graunke, Stolfa, and Derek Schansberg voted in favor of the expansion and lease renewal, and Vick and Russek opposed.
Background of Delano Municipal Wine and Spirits
Delano Municipal Wine and Spirits was established in the mid-1950s on the corner of Bridge Avenue and River Street, according to Drumsta. It started out as a smaller bar.
In 1983, the location moved to the corner of Bridge Avenue and Second Street to the building that also housed the Delano Senior Center and city hall.
The on-sale portion of the business closed in 2001, and the off-sale was relocated to the Delano Crossings shopping center.
Drumsta said the revenue generated from the liquor store is used to improve the quality of life in the community and maintain a lower tax base for Delano residents.
“We draw customers both from inside and outside of the community due to the convenient location, positive customer service, and competitive pricing we offer,” Drumsta stated.
From 2004 to 2013, the liquor store has contributed $1,760,290 to the city. Some projects funded by liquor store proceeds include Big Rock Park, the purchase of the building the library resides, bathrooms at Central Park, and general park improvements. There has also been more than $950,000 contributed to the city’s general fund during that time period.