You are on page 1of 6
October 27, 2014 A regular meeting of the Liquor Committee was held in the City Council Chambers of City Hall on October 27, 2014 with the following persons in attendance: Liquor Committee members Dave Cushman and Fred Bern, Liquor Store Manager Greg Zurbey, City Administrator Jennifer Bromeland, Shannon Sweeney of David Drown Associates and Recording Secretary Dave Maschoff. (A quorum of the Liquor Committee was present.) {Liquor Committee member Donnie Schoenrock was absent.) LIQUOR STORE FINANCING: SHANNON SWEENEY ‘Sweeney shared with Zurbey the projections from the underwriter regarding the City’s financing and sale of bonds for the construction of a new liquor store. Sweeney said a market analysis projected a 3,500 square liquor store in a new location should generate over $1.4 nin sales. He said according to the study, the Windom municipal liquor store has annual sales of $1.5 million, Worthington’s liquor store has sales of $2.7 million, Wal-Mart in Spirit Lake has sales of $1.4 million, Hy-Vee in Spirit Lake has sales of $2.8 million and Jackson has annual liquor sales of roughly $1.1 million. Sweeney said it didn’t seem like it was a stretch to assume that with a new location at the Interstate, the Jackson liquor store would generate sales oF $1.4 million. However, he explained it will take that amount of sales to make debt service payments on a new store. Sweeney said according to projections, it’s anticipated after the annual transfer of $41,000 to the general fund, an additional $20,000 to $30,000 may be generated by a new liquor store after its up and running. He said a new store is not anticipated to be a huge profit center, but it should pay debt service and continue to make a transfer to the general fund. Sweeney said its felt annual liquor sales will need to be $1.4 million to make the financing feasible. He said the Finance Committee has recommended seeking Requests for Proposals from architects to get an idea of what a new building would cost. Sweeney said the projections were based on construction of a new building costing a million dollars. He said it’s hoped that costs may be below that. Sweeney said if plans are to continue forward, the steps would be to get Requests for Proposals from an architect, eventually identify and hire an architect, get a preliminary design and cost estimate and update the market study, He said at that point, ifthe project is going to proceed, bids would be sought and work would be done to secure financing. Sweeny feels financing can be secured at fairly reasonable rates and terms He said it’s a matter of whether the City thinks it’s an appropriate investment to make and feels it can rely on the forecast and generate the sales that are needed in order to make the project work Based on the $1.4 million in sales, Zurbey asked if the projections were based on just sales, or profits on $1.4 million Sweeney said the projections also included increasing all of the operating costs for the liquor store, He said at $1.4 million in sales, profits won't be significantly higher and margins will be fairly close. However, Sweeney said it should generate more cash assets to pay debt service. He said based on $1.4 million dollars in sales, before the transfer to the general fund, there should be close to $110,000 generated annually. Sweeney said the projections are based on sales figures from this year through September, 2014, Responding to a question from Zurbey, Sweeny said it’s anticipated the liquor store's profit margin will continue to grow and that’s why it’s believed the new liquor store project will work. After reading through the market study, Zurbey said there will definitely be an increase in sales this year and also an increase if the store is moved near the Interstate. He a location near the Interstate will attract more customers off the Interstate and business people from the Industrial Park that don’t drive into downtown. Sweeney asked Zurbey if the 3,500 square feet cited in the study for @ new store would be sufficient. Zurbey said he had concerns about that. He said for a town the size of Jackson, its sounds good, but with his 25 years of experience in the liquor industry, it seems like stores are never built big enough. Zurbey said the 3,500 square feet is “doable”. He said the biggest thing is what it’s going to cost. Zurbey asked if the million dollar cost projection includes the building ventory, or just the building, ‘Sweeney said the million dollar projection mostly includes the building and site improvements, such as the parking lot, but not necessarily inventory. Zurbey said in his opinion the 3,500 square feet would be on the “small end” after visiting the Fairmont and Worthington liquor stores. He said he didn’t want to appear “greedy”, but store space is a big issue after seeing how some of the newer stores have bigger coolers where they basically keep all their beer in the cooler. Zurbey said it’s a lot easier to have the beer palletized saving labor hours and energy. But he said 3,500 square feet would be on the small end of the size. ‘Sweeney asked how the size of the Fairmont liquor store. Zurbey said it was 10,000 square feet, but not all of the space is used. He said for a community the size of Jackson, that size of store would not be necessary. Bern asked whether 8,000 square feet would be adequate. Zurbey responded 8,000 square feet would be more than enough. He said that would allow room to grow into it and would provide plenty of room for storage, display areas, a tasting area for wine-tastings and wine training. Zurbey said 8,000 square feet should be the “top end” to. be looked at. Cushman asked if Sweeney's projection numbers were based on 3,500 square feet. Sweeney said his projection number was based a million dollar budget. He said the analysis stated a 3,500 square foot store was optimal. Zurbey said 8,000 square feet for a new store would be on the top end. He said the Fairmont liquor store is 10,000 square feet and not all their space is utilized. He said square footage somewhere in the middle would provide room to grow and storage space. ‘Sweeney said he believes visiting locations is beneficial and suggested finding three or four liquor stores that could be used as good models. He suggested finding models of different size that are considered good and visit them. Bern suggested in addition to visiting sites, having an architectural firm develop a building plan based on 4,000 square feet to see how the store could be laid out. He also suggested instead of having an all brick building, constructing a metal building that looks sharp, professional and saves costs. Bern said by saving those costs, it may allow for more square footage, such as 4,000 square feet, instead of 3,500 and still be within budget. ‘Sweeney noted the MGM liquor store in St. Peter is a metal building with a brick fagade on the front. Cushman asked how big the Windom liquor store was. Zurbey said the study showed Windom has a total of 5,400 square feet and Worthington has 6,300 square feet. He said he is currently doing some site visits. ‘Sweeney noted Hy-Vee in Spirit Lake has annual sales of almost $2.9 million with 3,600 square feet. Bromeland asked when a community's population is taken into consideration in the planning for a new store. Sweeney said the sales volume drives the planning. Cushman said besides population, the workforce in Jackson also has to be taken into account. Zurbey said the number of people who work in Jackson is one of the things he noted in the market survey. He said the potential is there to garner additional business from those employees who work in Jackson, but live elsewhere. Zurbey said the size of the Windom liquor store may be comparable to the size store Jackson may consider. Cushman said a plan for a 7,000 square foot store could be designed and then determine how that fits the construction budget. He said if that didn’t work, then another plan could be looked at so the debt can be serviced. ‘Sweeney cautioned that a proposal significantly larger than the study outlines may mean more staffing and more sales clerk. He said if a store is created that requires staffing beyond what the sales are, that’s the quickest way to get into a lot trouble. Sweeney said he would need some convincing to go to a store that's way above the size the study outlined. He said it’s not that he can’t be convinced regarding a larger store, but right now he has a document that says what needs to be built. Zurbey there is currently one full-time position at the liquor store along with part-time positions. He said another full-time position would have to be budgeted for at a new store which has to be taken into account. Zurbey also said with a location near the Interstate, there will also be extended business hours. ‘Sweeney noted that this year, it's projected the liquor store will spend $111,000 on staffing by the end of 2014 and in the projection, staffing will be $162,000 with a new store.