By Tara Mathews
HOWARD LAKE, MN After receiving the findings of a municipal liquor store analysis, Howard Lake City Council wants citizen input on the future of the Howard Lake Municipal Liquor Store.
It will hold a public hearing Tuesday, Oct. 7 at 7 p.m., at which council members want community members to voice their opinions of what should be the future of the on-sale portion of the business.
Gary Weiers of David Drown Associates recently performed a liquor store operations analysis for the Howard Lake Municipal Liquor Store.
The on-sale operations have shown a loss for many years, and the off-sale has been profitable.
The off-sales profits are negated by the loss on the on-sale side.
A liquor store profitability plan was drafted by city staff in 2013, and has resulted in an increase in net sales.
Despite the increase in sales, the on-sale shows a loss of $57,573 in 2013, and is projected to result in a loss of $62,099 in 2014.
The off-sale had a profit of $42,671 in 2013, and is projected to profit $48,829 in 2014.
However, a bond payment off-sets the off-sale profit for both years.
With 2015 being the last year of the bond payments, according to Interim City Administrator Jennifer Nash, profitability is an attainable goal.
“The liquor store has been a staple for the community for many years. Staff and council have worked hard to improve the operation, making this a difficult conversation,” she added. “The council wants to be good financial stewards for Howard Lake, while also listening to the needs and desires of the residents in the community.”
Why the loss?
What was once a thriving and profitable bar operation has declined in recent years.According to the analysis by Weiers, factors such as the smoking ban, a change and increase in competitive market, high debt service, and a significant theft case have affected the profit of the on-sale.
Part-time labor cost increases due to the minimum wage increase have also played a part, he stated.
Lastly, continued maintenance costs due to deferred maintenance have increased considerably, leaving less room for profit.
Currently, the liquor store owes the city’s general fund about $360,000; and when projected losses for 2014 are added, that number increases to more than $400,000.
“This prompts the need for closer examination of the operation as a whole,” Weiers commented.
“Based on this analysis, it is clear that the on-sale operation is a financial drain on the entity as a whole,” Weiers noted in the analysis summary.
The analysis suggests that on-sale operations should be discontinued effective Dec. 31.
“It is clear that current operations need to be modified in order to achieve profitability. In spite of extraordinary efforts to enhance on-sale profitability, the loss trend has not substantially improved,” Weiers stated.
The analysis included options regarding what can be done with the space in the event council decides to cease on-sale operations, such as using the space for storage, expanding the off-sale, leasing the on-sale portion of the building, or development of a banquet center.
“The council hopes to make a decision that best suits the community,” Nash said, “which is why they are really encouraging citizens to attend the hearing, and voice their opinions.”
If residents are unable to attend the public hearing, but would like to submit a comment to city council, a link is provided on the city website for comments.
The liquor store operations analysis is available on the city website as well; follow the link at www.herald-journal.com.