City Council majority responds to critical report, says it will stay in alcohol business.
Despite some misgivings, the Farmington City Council reaffirmed this month that it will stay in the municipal liquor business and strive to improve its standing as the least profitable municipal operation in the metro area.
Two council members, Julie May and Jason Bartholomay, say the city should let private business take over liquor sales. But Mayor Todd Larson said the majority thinks the city can keep taxes down by improving liquor profits.
The city's liquor operation was critiqued in a report delivered this month by the Minnesota Municipal Beverage Association.
"We took a lot of their advice," Larson said. "The report says, 'There is a huge potential for you to straighten out your act.'"
The city has plenty of room to improve. Farmington was the lowest of the 17 metro area cities that have municipal liquor stores, ranked by profit as a percentage of sales, according to the state auditor's most recent annual liquor report. The city earned $51,000 in 2010, which was nearly half of a percent of its sales. That compared to Edina, which led the state with 9.8 percent.
Neighboring Apple Valley and Lakeville were among the top five cities for profitability, and Lakeville had the lowest expense ratio at about 15 percent of sales compared to Farmington's 23 percent, the second-highest ratio.
The critique suggested many changes, including moving oversight of liquor operations from the parks department to City Administrator David McKnight.
McKnight said he will use the association report to help develop a strategy to improve profits at the city's two stores. He said he's never managed a liquor store and is seeking advice from Lakeville's liquor manager and others to get up to speed.
"The council is clear that they want to see a future plan to make this thing more successful," he said. "We have a lot of work to do."
He said the first big decision is finding a cheaper site to rent for the downtown liquor store that has a lease expiring Aug. 1. He will discuss possible sites this week at a council workshop.
Council Member Bartholomay would rather let private business sell alcohol.
"We are trying to promote business development. How can you say you are doing that when you control and monopolize a market? Business can probably do a better job than we can."
Private liquor stores are not allowed in cities that have municipal stores.
On the other hand, Bartholomay knows city finances are tight and liquor profits help maintain the city's outdoor swimming pool. He said perhaps the downtown store, which has lost money, should be closed, leaving the profitable Pilot Knob store open.
The association report was based on several visits and interviews with the two liquor store managers and city officials by a team of four: liquor managers from Lakeville, Edina and Brooklyn Center and association executive director Paul Kaspszak.
The report was critical of the liquor manager, who was slow to provide data and hasn't produced results sought by past city officials and councils. The report said: "During our visit, liquor management did not have a basic knowledge/strategy of how these items [sales, expenses and profits] relate to each other in your operation."
Asked about the criticism, McKnight said he doesn't comment on personnel issues, but the manager was still employed. He said the council has made him responsible for dealing with liquor staff and operations.
The report also recommended that the city:
Require liquor managers to report results weekly to the city administrator.
Form a liquor committee that meets monthly to review sales and operations and report back to the City Council.
Provide ongoing training on liquor finances.
Review and update store policies and procedures, such as rules for handling merchandise returns and inventory discrepancies.
Jim Adams 952-746-3283