HomeMy WebLinkAboutCCMinutes_2003_11_18 164
Brookings City Council
Tuesday, November 18, 2003
The Brookings City Council convened in a planning session on Tuesday, November 18, 2003 at
4:36 p.m. in the City Council Chambers at City Ha11 with the following members present:
Mayor Scott Munsterman, Council Members Tim Reed, Tom Bezdichek, Julie Whaley (left at
6:58 p.m.), Tom Bozied, Mike McClemans, and Doris Roden. Acting City Manager Allyn
Frerichs, City Clerk Shari Thornes, and City Attorney Steve Britzman were also present. All
present voted yes; motion carried.
Municipal Liauor Store An�lvsis. Lyndon M. Griffin, Griffin Communications — A Marshall,
Phillips Co., was hired by the City Council to conduct an analysis of the Brookings Municipal
Liquor Store. Mr. Crriffin reviewed the operation at the store on November 17 and 18 and was
present to provide a verbal report to the Council. A written report will be forthcoming.
He was the head of the Municipal Liquor Store Association in Minnesota providing full line
consulting to their 370 stores and over 500 liquor licenses. In that position, he has had
significant comparative data, statistics, and projections to assist in liquor consulting work. His
primarily works in"dram shop" legal work on the East Coast.
His understanding is that the Council has experienced confusion on the statistics of liquor
operations because the "override" was integrated in the mix. He noted that the"override" is very
unique and this feature doesn't appear in any significant database of liquor operations that he is
aware of. The BMLS has, in recent years, separated the "override" from the retail store
operation which is extremely helpful in analyzing the operation. He further noted that the City of
Brookings is more involved in enterprise accounts than any city he has ever seen. The Liquor
Store is the smallest of the enterprise accounts but provides 10% of the transfers with relatively
small gross assets producing at a phenomenal level for transfer. (Bezdechek arrived at 5:34 p.m.)
He said even though the Liquor Store is a small part of city operations, this Liquor Store is the
5`"or 6�'largest in the state for a freestanding private or public store.
He clarified that his report will analyze the gross retail operation, not the override sales, in order
to deternune what level the revenue generation should be. He said the current operation and
sales levels are substantial. The options the management and council have are almost unlimited.
He complimented the BMLS management for tight cost controls.
One problem is the BMLS gross margin of 18.5 to 19.0% range. After subtracting operational
costs of 13.9%, they are left with 5.5% net profits. This number should be closer to 10%. The
reason is because of the gross profit margin. This problem is easy to fix by creating markup
policies consistent with industry standards. The second problem is the location of store. It is
hard to find, out of the main flow of traffic patterns and visitors. The third problem is the facility
itself. It is inefficient and the 3,500 square foot selling area is too small. The warehouse and
receiving areas are very inefficient. The fourth problem is the lack of advertising budget which
is currently $2,735. He noted the store's knowledgeable management staff and the store's
excellent inventory as current strengths.
He outlined the following options:
• Do nothin�. Based on the 2003 numbers, the margins are better which should provide a
5.5% increase in net revenues. Consumers would be the primary benefactor.
• Do nothin�plus. Develop a mark-up policy to be implemented in a 6 to 9 month period in
various categories which would place new products at full mark-up and not affect beer
products.
• Go to new store. A new, larger store at a higher traffic location on the east or south which
would allow the Liquor Store to expand product lines, particularly in wines, and have more
purchasing power. A signiflcant advantage of a new store would be a new design based on
modern traffic flow (deflection theory). A 17% increase is consistent with implementation
of warehouse style merchandising.
Agenda Amendment. A motion was made by McClemans, seconde� by Reed, to amend the
agenda to move the second penny discussion up on the agenda and to add an executive session
regarding contractual negotiations All present voted yes; motion carried.
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Second Pennv Discussion. City Manager Williams reviewed the projected second penny funds
for 2004 to 2007. Williams estimated the Council would have $1.3 million available funds for
the ne� four years. He estimated the city general fund could need, due to declining utility
transfers, $110,000 to $120,000 per year of these funds. However, he recommended the Council
rely on the 25% of the second penny funds for city general budget needs first. He notec� that the
sales tax rate is up from last year and his revenue projections are very conservative using a 2.5%
sales tax increase and a 2.0% interest on the fund balance.
The Council discussed the need to have a detailed expenditure plan for 2004 to 2007 and
suggested the City Manager develop a rough budget for 2006 and 2007.
(Whaley left the meeting at 6:58 p.m.)
Jerry Bergum, Elks Lodge spokesperson, reviewed the Elks proposal to sell the facility to the
city for a new senior citizen facility. The Mayor noted that the City plans to continue
negotiations on the building.
Performance Measurements & Benchmarks. Mayor Munsterman recommended the Council
schedule and review one department per monthly planning session commencing with the
Library. The City Manager was asked to develop a schedule commencing in December.
Interim Pvlicv. �City Manager Michael Williams reviewed the draft Interim Policy. The
Council requested recommendations for him on who to appoint as Interim Manager. Action on
the policy is scheduled for November 25, 2003.
Citv Manager Salarv Policv. The Council reviewed the policy with the revisions made on
November 13 . Reed suggested the Council consider implementing overlapping pay grades
with midpoint percentage raises. Item 3 pertaining to Pay Range was modified as follows:
"... Justification would be based upon the Midwest CPI and regional market analysis, unless
an exception is warranted. However, the City Council is not obligated under this podicy to make
an adjustment. "
Action on the policy is scheduled for November 25, 2003.
Capital Card Lease Agreement. The Council reviewed a draft lease agreement between the
city of Brookings and Capital Card Services, Inc. pertaining to a joint use parking facilities for
Swiftel Center/Ice Center activities. A motion was made by Bozied, seconded by Rocien, to
approve the lease agreement. All present voted yes; motion carried.
Review Budset Policv. Increasing the sales tax rate from 1.9% to 2.0% was discussed. The
increase would generate approximately $260,000. Action to increase the rate would be referable.
To institute by July 1�, the Council would need to take final action by February 2004. Some
other communities are considering earmarkin� the funds for economic development purposes.
This includes the second penny. The change can only be made twice per year on either January
l�` or July 1�`. The change must be submitted to the Department of Revenue at least 90 days
prior.
The Council discussed keeping the increase as an option if needed. "Sunsetting" a raise in the
tax was discussed. The Council agreed to revisit the issue at budget time. If desired by 2005,
action would need to be completed by August l�`. The issue will be scheduled for a pla.nning
session in June or July 2004.
Presentation bv Mavor Munsterman. Mayor Munsterman gave a PowerPoint presentation to
the City Council and public entitled "Establishing a Vision for Brookings". He plans to present
the vision to community groups and will be scheduled for the Council Retreat in January 2004.
He provided the Council with a summary on the proposed Research Park development. No
action was taken.
Ezecutive Sesssion. A motion was made by Bozied, seconded by McClemans, to enter
executive session at 8:50 p.m. for the purpose of discussing purchase of the Elks Lodge with the
city council members, city attorney, city clerk, and the city manager present. All present voted
yes; motion carried. A motion was made by Bozied, seconded by Reed, to leave executive
session at 9:25 p.m. All present voted yes; motion carried.
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A motion was made by Reed, seconded by Roden, to adjourn at 9:25 p.m. All present voted yes;
motion carried.
CITY OF BROOKINGS
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Sco . nsterman, Mayor
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