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Municipal Liquor System: A Legal Monopoly

Richfield Patch explores the impacts of the liquor stores owned and operated by the City of Richfield.

The City of Richfield has been in the liquor business since early 1943, when voters approved the measure in a special January election. As the city has grown, business at the city's municipal liquor stores has, as well, providing a steady source of revenue. In 2011, the city's four stores combined are estimated to gross $11.5 million in sales. (.)

“The municipal liquor stores have paid for most, if not all, of our recreation amenities,” said Richfield City Manager Steve Devich, rattling off the , the addition on the , park maintenance and a piece of .

At the same time, the city holds a legal monopoly on all off-sale liquor sales within city limits. Minnesota law bans off-sale liquor licenses to any business in a city with a municipal liquor store. This prevents Trader Joe's and lesser-known, privately owned stores from popping up in Richfield. Also, some question the ethics of any government entity leaning on vice—gambling or alcohol—and, by extension, its most vulnerable citizens, for revenue.

Residents, Readers Weigh-In

revealed that those who chose to respond are overwhelming supportive of the municipal liquor store system (76 percent of those who cast votes believe the city should be in the liquor business).

On respondent, who identified himself as Gordon Hanson, wrote, “The answer is easy on this one. Yes, we should operate our municipal liquor stores if we want well maintained parks without additional burden to our taxpayers.”

Still, . (Richfield Patch has made minor grammatical corrections to the following written comments):

“Richfield liquor stores are overpriced compared to Bloomington and Minneapolis, and they close so much earlier during the week,” Adam Erickson wrote.

“Personally, I know myself and friends within the city don't shop Richfield liquor stores unless it's a last resort," wrote someone only identified as Marc. "With the craft beer movement exploding in the Twin Cities, Richfield has fallen behind and, in that regard, is losing sales.”

“I'm for leaving the Municipal Liquor Stores as they are. But what parks are getting improvements?" wrote Paul Black. "I have lived next to since 1972 and the pond area has steadily gone downhill the last 15-20 years, whereas you can hardly see the water because of all the silt and fallen trees.”

“It is an issue worth exploring. Private ownership should always take precedence,” Kevin O’Donovan wrote.

The Competition Factor

Richfield City Manager Devich argues that Richfield is competitive in the marketplace, with its close proximity to Bloomington and Minneapolis. The city’s buying power, he adds, allows the municipal store to receive discounts from distributors.

“Let’s face it, when most people are driving around here, they aren’t sure whether or not they are in Richfield, Bloomington or Edina,” he said. “There are many options for people to choose from.”

Municipal liquor stores are also held to the same standards as any privately owned business, according to Mike McManus, alcohol enforcement administrator for the Minnesota Department of Public Safety Alcohol and Gambling division. While there is no special treatment, McManus said city-run liquor stores are generally more observant of the laws.

"Traditionally, municipals are pretty vigilant and cognisant of state rules [and enforcement],” McManus said. “We seldom get complaints on municipals.”

What would happen if Richfield stepped away from the liquor business? According to Devich, this simple question has a complex answer.

“I would start off by saying that, in my opinion, under current law, that would be the most foolish and financially detrimental decision that this city could make,” Devich told Patch.

 are among the highest for state municipal liquor stores, along with stores in Edina and Lakeville, according to Devich. The city will net more than $500,000 this year.

“If the City of Richfield were to sell the liquor operations, that would all go away and we would offset that with property tax dollars,” Devich said.

Some may argue that if the city were to sell its operation to a private owner, the city would have profits of that sale to put into other investments. However, Devich stressed that a city is restricted on the scope of its investments and that cash from a sale would soon dry up. 

Finally, if the city were to sell its stores, its ability to manage competition would cease to exist. Of course, some would argue that this is precisely the greatest indictment against municipal liquor stores—that governments have no business managing or stifling competition.

“Even if one private owner bought all four Richfield Municipal Liquor Stores,” Devich began. “There is nothing to prevent another private store from opening up across the street from one of the stores—as long as they met [all the city’s] requirements.”

Annie S. December 14, 2011 at 03:18 AM
God forbid. The city obviously needs that money, or a reality check on spending. I want to buy a house next year - and though I'd love to live in Richfield, it's silly when property taxes on a similar house are $1000 or more less in Bloomington.
Caitlin Burgess (Editor) December 14, 2011 at 06:13 AM
Good point. But I don't know if that can be directly attributed to the liquor system as it is. From the data I've looked at, the system keeps taxes lower. Most would probably say something similar about Edina, West Bloomington and so on. Now this is just a guess, but I would say the struggling school system is having the largest impact on taxes in town.
jeff kocur December 15, 2011 at 01:43 AM
Is this really an issue? The city has discussed the merits of this consistently over the years, and the people of Richfield keep electing councilmembers that keep the municipal system open, so people must be happy with it contrary to the issues the article manufactures. The data show that respondents prefer the municipal stores by a margin of nearly 4-1, yet the comments in the article show one positive response and four negative responses. Could we see some price comparisons to private liquor stores that border Richfield? It does not seem fair to raise the issue without actually doing some research. Also, several liquor stores are within a five minute drive of Richfield. Portland and 494 have at least two different stores, the 7/8 is at Nicollet and American Boulevard, at least two stores are at Penn and 494, Cub and Sids are 1/2 mile south of Richfield on Lyndale. The Edina Liquor store is one block from the city of Richfield, and South Lyndale Liquors is just two miles up Lyndale. Many of these stores are closer to some Richfield residents than one of the Municipals. To say that the Municipal liquor stores do not have to compete is inaccurate. That would be the same as saying that Target in Richfield does not compete against Wal Mart because it is in Bloomington. I lived in Richfield for 10.5 years, and I always found the Municipal stores well-stocked, well-staffed and very competitively priced. I would prefer my purchases directly support my city in a tangible way.
Annie S. December 15, 2011 at 03:20 AM
Post is edited as I had to correct my math. According to Wiki, 48% (2170 acres) of residential Richfield is single family housing. Most homestead lots (as anyone who driven through town knows) are less than 1/2 an acre, so let's be conservative in SAY, hopothetically, it's 2000 acres. 2 homes per acre is 4000 homes. All the houses I've looked at in Richfield, even in the current economy, are suggested to have property taxes of 2K or more per year. That's 8 million dollars... JUST on property taxes. How much does it really cost to run a city that's 1 mile squared? Don't say snow plowing... we all know what a great job they do...
Caitlin Burgess (Editor) December 15, 2011 at 03:23 AM
Hi there Jeff, I was absolutely not attempting to manufacture issues, so I apologize if you read it that way. I was interested in the topic and thought it would be cool to explore it more since it is something that some may not know or think about. As for the comments, it just so happened that more people commented on the negative aspects of the system, which isn't surprising. People generally don't highlight the good, but will definitely speak up when something bothers them. Spending nearly a decade in the retail biz taught me that. Further, those who commented didn't say that they didn't support the system itself, but rather gave opinions on the price and product. And I don't believe it says anywhere in the article that the stores don't need to compete. It states that from the city's perspective their system is competitive because of its close proximity to other towns - which you also referenced in your comment. I also think the system is well worth it. We have beautiful parks and attractive recreation facilities. And I am sure people do not want yet another raise in property taxes. And yes, I probably could've and should've looked at some prices of neighboring towns, but I didn't feel it was relevant to the whole of the story. So I'll take responsibility for that if people think it could've added to the story. Thanks for reading and expressing your thoughts.
Annie S. December 15, 2011 at 03:26 AM
I have to correct myself again.It's less than 2 square miles ALL TOLD and somehere between 1 and 2 of that are residential.
jeff kocur December 15, 2011 at 03:34 AM
Thanks for the clarification Caitlin. I think the stores provide a great service for the city, and it is not that uncommon. I know of several states which only allow state run stores to sell liquor.
Caitlin Burgess (Editor) December 15, 2011 at 03:35 AM
Haha. You really don't think the city does a good job plowing? Ah. Separate issue. Again as far as property taxes go, not all the money goes to the city itself. I believe that a third goes to the school district and I believe another third goes to the county. Richfield's close proximity to Edina and Minneapolis plays are role too. Think about buying a house in a St. Cloud suburb or western Minnesota. Property taxes are sure to be lower there as well since they aren't first ring suburbs of the Twin Cities.
Caitlin Burgess (Editor) December 15, 2011 at 03:40 AM
Of course. Again, as a resident and not a journalist, I think the concept is extremely beneficial. I'm assuming you meant that there are some states that only allow city-run stores, not state-run stores. I don't think a state would be able to monopolize all liquor sales from above the city level - well at least that seems weird to me. Either way, that's really interesting. Which states?
jeff kocur December 15, 2011 at 03:45 AM
According to the city's website, Richfield is 7 square miles, and Richfield is blessed to have a lot of that dedicated as parkland. Property taxes are complex and multi-faceted. Only a small portion actually goes to the city. That $2,000 you are seeing on property tax statements also includes taxes for the school, for the county, for the regional transit district, for the regional wastewater district and for other metropolitan council taxes. When I lived in Richfield, the potholes were paved over the day after I called, the police responded within minutes when I needed them, the water department came out at 10:00 on a Friday night to unclog our street's sewage line, and the streets were always plowed curb to curb within hours of a snowfall. I have never received better services from a city. If you think Richfield's plowing is bad, you should try driving through any Minneapolis intersection after a snowstorm. You get what you pay for, and I always appreciated Richfield's services.
Caitlin Burgess (Editor) December 15, 2011 at 03:50 AM
I think that she meant in terms of actual residential property that is deemed single family housing, there is only 2 square miles. The 7 square miles would include all commercial properties, roads, etc. But yes, as I wrote earlier. The city does definitely not get all the money from property taxes. I knew schools and the county for sure, but couldn't remember the others. Thanks for clarifying.
jeff kocur December 15, 2011 at 03:54 AM
Caitlin: Virginia, Pennsylvania & Utah are the states that I know of which only allow state operated liquor stores. I know that Beer and Wine is sold in grocery stores in Virginia, but Liquor is only sold in ABC stores.
jeff kocur December 15, 2011 at 03:57 AM
You raise the issue of competition here: "Of course, some would argue that this is precisely the greatest indictment against municipal liquor stores—that governments have no business managing or stifling competition."
Caitlin Burgess (Editor) December 15, 2011 at 04:17 AM
Very interesting. Thanks Jeff.

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