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HomeMy WebLinkAboutCCMinutes_2005_02_01 3 � 5 Brookings City Council February 1, 2005 The Brookings City Council held a planning meeting on Tuesday, February 1, 2005 at 5:30 p.m., at City Hall with the following members present: Mayor Scott Munsterman, Council Members Tom Bezdichek, Tom Bozied, Tim Reed, Julie Whaley, Doris Roden, and Mike McClemans. City Manager Alan Lanning, City Attorney Steve Britzman, and City Clerk Shari Thornes were also present. Ordinance No. O1-OS—Third B. Second reading was held on Ordinance No. 01-05, an Ordinance amending Section 78-32(B)of the Code of Ordinances of the City of Brookings, South Dakota and pertaining to the additional Municipal Sales and Service and Use Tax in the City of Brookings, South Dakota. A motion was made by Bozied, seconded by Reed,to approve Ordinance No. 01-05. All present voted yes; motion carried. Cit_y Finance Deuartment 2003 Annual Report. Rita Thompson, City Finance Manager, reviewed her report with the Council. Representatives of the Council and City Staff will be meeting with sta.te officials to recommend a better sales tax reporting procedure. Reed recommended the Council review a policy for splitting the money for 2"a penny and 1 St penny. Smokin�. The Council reviewed a letter submitted by SDSU students requesting a ban on smoking in restaurants and bars in Brookings. The City Attorney said the city, under Home Rule, can be stricter on exercising police powers than the state. For example,the city could require bars to close earlier than the state. He was not, however, suggesting Brookings be the leading edge of a smoking ban. The City could set ground rules locally. It was noted that some restaurants have chosen to obtain an alcohol license in order to offer smoking sections, but then not serve the alcohol. Concern was noted on how far the Council would want to pursue the issue of public health(i.e. higher insurance rates for smokers). There was Council consensus not to pursue the issue any further. Liquor. Lanning provided an analysis of two separate scenarios for the Municipal Liquor Store operations. Those scenarios are public ownership of the liquor operations and private ownership of the liquor operations (override). There are a number of key issues involved and we have previously discussed the philosophical issues. This analysis provides a formula to compare operations. Essentially, a flat 10%override is compared to a partial override and retail operations combination, with the retail operation owned by the City. The key to comparing these two options is not to compare sales, but to compare purchases since everything is based on the amount of alcohol purchased by the BMLS and the override businesses. The key to the comparison is our net profit percenta.ge. If our retail store nets 8%, we along with the override businesses make the exact amount of money that a total override operation would, except for the profit on our miscellaneous sales, such as ice, candy, and other non-liquor related items. If the entities in a total override operation purchase $1,000,000 of product, they would make $100,000. If our retail store purchases $1,000,000 in product, mazks it up 25%and nets 8%we ma.ke $100,000. No inatter how you split up the business, if we net 8% we along with the override businesses will make the same as a total override operation except for the miscellaneous profit. The difference in each case is $20,000 which is our profit from miscellaneous sales. However, if that net profit percentage is 9%, we increase the difference between the two options as more product is purchased. We would attain the 9%net profit percentage in three ways. The first way is to increase our prices. The second way is to expand the total amount of alcohol being sold at the Brookings Liquor Store, by being in a better location,without taking away business from the other override entities. If this happens our expenses as a percentage of our sales axe less and therefore our net profit percentage is higher. The third way to increase the net profit percentage is to shift beer business away from other entities in the city. If we increased 31fi our purchases of beer by $100,000 a year and the malt beverage businesses decreased their purchases by $100,000 our store would net $11,250 (9%net profit percentage). In this situation we would gain$1,125 because the override entities would generate $10,000. The key issue is to hold our net profit percentage at 8% or higher and to expand our sales, without significantly increasing our operating expenses. Therefore, our operating expenses become an ever decreasing portion of our total sales. Thus, we make more money than a total override operation would make. Recommendation: Lanning recommended the city begin the process of finding a new retail location on the east side of the City. Whether purchase or rent,the city should begin saving funds now. The goal would be to have the relocation funded by operations, even if we had to bond/borrow a small amount of money, with 2007 as our target date. The Council discussed the affordability of investing $400,000 in a new location on the east side. Lanning said he can demonstrate that this option is affordable. Preparing a complete business including return was suggested. Some Council members felt there was value in maintaining control of the liquor business. Others thought private business could provide this service. Lanning recommended relocating and reevaluating in 3 to 5 years. The City has been doing this for 50 years and is better at it now than ever. He commented that he doesn't understand why the Council would want to give away the liquor store. It has the potential of making the most money by owning it. Private satellite stores would spread the sales out, increase volume, but ultimately reduce sales and profit of the liquor store. La.nning asked the Council philosophically if they wanted to remain in the liquor business. He asked what the Council's objective was. How much does the Council want in transfer from the BMLS? ACTION: A motion was made by Munsterman, seconded by Reed,to a11ow off-sale liquor operating agreements,to direct the city manager to draw up 3 operating agreements to be made available by application for a two year period, and to track liquor store sales to evaluate the operating agreements' impact on the profitability of the main store. Munsterman, Reed, McClemans and Bozied voted yes; Whaley, Roden and Bezdichek voted no; motion carried. Review of the draft operating agreements will be scheduled in the next 1-2 weeks. Onen Discussion: Reed expressed concern about the recent gift of$6,000 the 125th Committee made to the Brookings County Historical Society. The City provided $4000 to the 125�`Committee out of the 2004 contingency. He requested a policy discussion on the use of any donations made to projects or groups. This item was scheduled for the March planning session. McClemans said he has had inquiries regarding installation of a railroad spur in a development park. He asked the City Manager to investigate the interest of installing a railroad spur in the industrial park, including its value and cost. Adiourn. A motion was made by Bozied, seconded by Roden,to adjourn. All present voted yes; motion carried. Meeting adjourned at 7:56 p.m. C' okings aTY oF co unsterman, Mayor A •�.. � � ���q o����c� � �,9 •rn S Shari es, Brookings ity Clerk