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Bemidji's city-owned liquor store profits are a difference-maker for local projects

The year 2020 was a strong one for sales at Bemidji's two municipal liquor stores. In total, the city had $8.4 million in sales, which, after expenses, will be used on a variety of items from property tax reduction to special projects. Bemidji Mayor Jorge Prince, though, believes the dollars generated can be targeted more toward the problems that come with alcohol.

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Sales at city-owned liquor stores in Bemidji are shown from 2015 to 2020. (Pioneer graphic)

BEMIDJI -- Sales at the Bemidji municipal liquor operations have steadily increased over the past five years and the profits have been regularly utilized for city needs.

According to City Finance Director Ron Eischens, over the past several years, the city has used revenue generated by its two liquor stores to invest $250,000 in the new Bemidji Veterans Home, $430,000 for various park projects and $600,000 to renovate the historical Great Northern Depot. One park project in particular was to renovate the area on Lake Bemidji's south shore.

After the city utilized a Lessard-Sams Outdoor Heritage grant to clear debris from the area, the city utilized the refuse service fund and the liquor store dollars to invest $600,000 in the creation of the South Shore Park. Liquor store revenue is also utilized to lower property taxes.

Eischens said for 2022, the city will use $528,000 for its property taxes, which reduces the levy by 8%.

Since 2015, the sales and net profits for the city have been as follows:

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  • In 2016, the city had $5.8 million in sales and a $713,240 net profit.
  • In 2017, the city had $5.9 million in sales and a $645,024 net profit.
  • In 2018, the city had $6.03 million in sales with a $325,380 net profit.
  • In 2019, the city had $6.5 million in sales and a net profit of $381,564.
  • In 2020, the city had $8.4 million in sales and a net profit of $827,742.

Eischens said the net profits reflect the amount after expenses, operating costs and financial transfers for special projects. While the net profits have been lower in recent years other than 2020, Eischens said the operating profit margin for the stores has remained strong, on average running between 9% and 14%.
"Due to labor efficiencies since the new store opened, operating profit margins are higher due to reduced labor cost per dollar of sales," Eischens said.

The new store is First City Liquor, which opened at 500 Paul Bunyan Drive NW in summer 2019. The facility replaced the 50-year-old building that housed the city's Discount Liquor store. First City Liquor was built at a cost of nearly $4 million.

RELATED: Liquor sales surged in 2020 for Bemidji and beyond

To pay for the store, the city is making annual bond payments of $255,000 to purchase land and construct the building. The city utilizes liquor operation dollars to make the bond payments.

The city's other shop is Lakeview Liquor, located at 510 Paul Bunyan Drive SE.

Future uses of liquor store profits

While the city reinvests its liquor profits in several community needs, Bemidji Mayor Jorge Prince sees a need to use the dollars in alternative ways.

"I've often said it bothers me greatly that we profit as a community from the sale of alcohol, not just from our stores, but also through our liquor licenses," Prince said. "Yet we don't as a city fund anything that works to prevent the ills of alcohol. As a council, by state laws and city policy, we're not going to write a check to a nonprofit from those funds because it's prohibited. But what we can do is contract a service."

Some examples Prince gave are helping to fund a homeless shelter or bringing a new program for alcohol abuse by partnering with an agency.

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RELATED: RACHEL BEGLIN COLUMN: Something's not right about city-owned liquor stores

"We potentially have the ability to do that within state ordinances," Prince said. "When I think of partnering in some way shape or form, I think it would be good to take some percentage of our profits and funnel them into those kinds of activities."

Since winning the mayoral race in 2020, Prince has brought the idea up a few times and said the concept has gained interest.

"I do feel there's been a warm reception," Prince said. "As we go through our final budgeting process here in December, I hope to revisit that again and have a more definitive conversation on what amount we could conceivably look at and maybe start the process on how we might use those funds."

Bemidji compared to the region, state

Bemidji was one of 179 Minnesota cities that operated 213 municipal liquor stores in 2020. The number was down from 2019, where 182 cities operated 215 stores.

The majority of the stores are in Greater Minnesota, as just 18 cities in the seven-county metro area had municipal operations in 2020. The combined net profit of all municipal liquor operations in 2020 totaled $3.6 million, an increase of $8.2 million, or 29.2% over the amount from 2019.

RELATED: Minnesota's municipal liquor stores saw a 29% profit hike in 2020

In other regional communities the sales and net profit have been as follows:

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  • The Bagley municipal liquor operation had $1.9 million in sales and after expenses, a net profit of $181,514.
  • In Big Falls, the city had $247,502 in sales and a loss of $5,801 after expenses.
  • Blackduck's operation had $1.28 million in sales and a net profit of $10,635 after expenses.
  • Clearbrook's operation had $505,821 in sales and a net profit of $39,342 after expenses.
  • In Kelliher, the operation had $684,494 in sales and a net profit of $23,532 after expenses.
  • Littlefork had $230,203 in sales and a loss of $43,604 after expenses.
  • Mahnomen's operation generated $1.005 million in sales and had a $31,239 loss after expenses.
  • Northome had $295,861 in sales and a $5,205 loss after expenses.
  • In Walker, the city's operation had $1.12 million in sales and an $86,678 net profit after expenses.

In addition to analyzing individual cities, the state auditor's report tracks results for regions of Minnesota. Beltrami County is in the Headwaters Region, as well as Clearwater, Hubbard, Lake of the Woods and Mahnomen Counties.
For average sales per off-sale liquor establishment by region, the Headwaters has the third-highest among 13 regions at $3.4 million, behind the metro with $3.6 million and central Minnesota with $3.9 million. The average net profit for the Headwaters is $317,000, behind only central and east central Minnesota, which had $449,000 and $339,000 respectively.

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