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Liquor question settled

Jason Ferguson
Published: Thursday, October 18th, 2012

This graph shows the total liquor fund revenue in the City of Custer from the years 2005 -2012. From 2005-09, the total revenue is a combination of the revenue the liquor store generated as well as the 10 percent remittance the city receives from other city businesses’ alcohol purchases. In 2010, the store was open for six months and lost $7,682 dollars. From 2011-12, the revenue is from only the 10 percent remittance, since the city no longer owns the store.

 

By Jason Ferguson
The City of Custer collected $170,778 in 10 percent markup receipts from local alcohol distributors in 2011, $41,906 more than it made between the 10 percent remittance and the city liquor store revenue combined in 2009, the last year the store was open under city ownership.
A�look back at the revenue the city made during its ownership of the liquor store and the money it is making now with just the 10 percent remittance shows that, as many suggested during the battle about whether or not to keep the liquor store open, the city is seeing more alcohol-generated revenue without the store.
Through Aug. 31 of this year, the city has made $107,060 from its 10 percent receipts. Each month, each business in Custer that sells any form of alcohol in Custer must pay a 10 percent markup on invoices from the preceding month. A�few years ago, when the city council was debating whether or not to keep the liquor store open, some on the council and many in the community felt not only would the city be better off if it did not own the liquor store, it would actually make more money off the 10 percent.
From 2005 to 2009, the city liquor store had an average annual revenue of $18,457. The average 10 percent remittance revenue for those same years was $90,193—an average of around $109,000 combined, well below the $170,778 the city took in 2011 without the store.
The situation would have been even worse for the city had it been forced to pay the same 10 percent remittance on its liquor store for those five years. Except for 2005, when the store would have made $5,199 in revenue, the liquor store would have lost money—including nearly $50,000 in 2008.
In 2010, the store was open for six months under city ownership. After that, the city council voted to put its license at the store out for bid, as well as bids on renting the buildling. That allowed the council and those bidding the option of not having to necessarily have the building remain a liquor store.
The building and license were eventually retained in the same location, with a 15-month lease on the operating agreement that brought the city $3,000 in 2010 and $12,000 in 2011. Once that period of time was up, there was no price any longer on the operating agreement. The money from liquor and malt licensing fees goes into the city’s general fund.
Laurie Woodward, city finance officer, said there are factors to consider when looking at the numbers, however. Under city ownership the store may have had more expenses, such as more employees, possibly higher wages and more inventory purchased. However, that increased inventory could have also led to more revenue.
Former city alderman Ed Starr was one of those who wanted the city to be rid of the liquor store, but said his primary reasoning at first was he was more interested in smaller government and was against the city competing against private industry. However, after being shown numbers that showed the store was losing money, that the city was basically subsidizing itself and the liquor store would go under if the city paid the same 10 percent other businesses do, that fortified his position.
“That was the last straw,”â��he said.â��“The subsidy was a hit to the city’s revenue. It’s simple math. Some to this day do not understand that.”
Starr said he is happy to see the projections the city would make more money by the city not owning the liquor store have been true. He also said the city should continue to look at selling other real estate it owns to put more beautiful Custer real estate on the tax rolls.
“That’s what I have always believed,”â��he said. “Put it on the tax rolls and in the public sector. The public will probably buy and develop it, because it’s gorgeous.”

The City of Custer collected $170,778 in 10 percent markup receipts from local alcohol distributors in 2011, $41,906 more than it made between the 10 percent remittance and the city liquor store revenue combined in 2009, the last year the store was open under city ownership.

A�look back at the revenue the city made during its ownership of the liquor store and the money it is making now with just the 10 percent remittance shows that, as many suggested during the battle about whether or not to keep the liquor store open, the city is seeing more alcohol-generated revenue without the store.

Through Aug. 31 of this year, the city has made $107,060 from its 10 percent receipts. Each month, each business in Custer that sells any form of alcohol in Custer must pay a 10 percent markup on invoices from the preceding month. A�few years ago, when the city council was debating whether or not to keep the liquor store open, some on the council and many in the community felt not only would the city be better off if it did not own the liquor store, it would actually make more money off the 10 percent.

From 2005 to 2009, the city liquor store had an average annual revenue of $18,457. The average 10 percent remittance revenue for those same years was $90,193—an average of around $109,000 combined, well below the $170,778 the city took in 2011 without the store.

The situation would have been even worse for the city had it been forced to pay the same 10 percent remittance on its liquor store for those five years. Except for 2005, when the store would have made $5,199 in revenue, the liquor store would have lost money—including nearly $50,000 in 2008.

In 2010, the store was open for six months under city ownership. After that, the city council voted to put its license at the store out for bid, as well as bids on renting the buildling. That allowed the council and those bidding the option of not having to necessarily have the building remain a liquor store.

The building and license were eventually retained in the same location, with a 15-month lease on the operating agreement that brought the city $3,000 in 2010 and $12,000 in 2011. Once that period of time was up, there was no price any longer on the operating agreement. The money from liquor and malt licensing fees goes into the city’s general fund.

Laurie Woodward, city finance officer, said there are factors to consider when looking at the numbers, however. Under city ownership the store may have had more expenses, such as more employees, possibly higher wages and more inventory purchased. However, that increased inventory could have also led to more revenue.

Former city alderman Ed Starr was one of those who wanted the city to be rid of the liquor store, but said his primary reasoning at first was he was more interested in smaller government and was against the city competing against private industry. However, after being shown numbers that showed the store was losing money, that the city was basically subsidizing itself and the liquor store would go under if the city paid the same 10 percent other businesses do, that fortified his position.

“That was the last straw,”â��he said.â��“The subsidy was a hit to the city’s revenue. It’s simple math. Some to this day do not understand that.”

Starr said he is happy to see the projections the city would make more money by the city not owning the liquor store have been true. He also said the city should continue to look at selling other real estate it owns to put more beautiful Custer real estate on the tax rolls.

“That’s what I have always believed,”â��he said. “Put it on the tax rolls and in the public sector. The public will probably buy and develop it, because it’s gorgeous.”

 



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