By MATT ERICKSON
brainerddispatch.com

Municipally owned liquor stores in Minnesota, authorized by the state to control the sale of alcohol and provide cities with a source of revenue, saw an 8.9 percent decrease in net profit in 2008, according to a state audit released last month.

And while many area municipal liquor stores are still showing profits, it's not at the levels they used to be. At the Spirits of Nisswa and The Pickle Factory and in Nisswa, profits in 2008 were $51,792, compared with between $140,000-$200,000 in profit in past years.

Laurie Hemish, Nisswa city clerk, said 2008 was one of the least profitable years. The Nisswa municipal liquor stores - on- and off-sale at The Pickle Factory and off-sale at the Spirits of Nisswa in 2007 had a profit of $187,748, in 2006 a profit of $126,427, in 2005 a profit of $172,941 and in 2004 a profit of $192,631.

In an effort to bring back revenue, the city replaced management at both liquor stores last year and has remodeled The Pickle Factory.

"To me, this year will be the true test of how well that has worked," Hemish said.

Minnesota cities were originally authorized to own and operate liquor establishments as a means of controlling the sale of alcohol. Also, profitable municipal liquor stores provide another source of revenue.

Without the profits from the municipally owned liquor stores, Nisswa Mayor Brian Lehman said the city's levy would need to be increased or services cut.

"The liquor stores are helping us," Lehman said.

Spirits of Nisswa general manager Ron Bialke thinks so, pointing to a 22 percent increase in sales from March of 2009 to March of 2010. With alcohol sales throughout the state declining in the poor economy, he's worked to bring back his regular customers through sales and promotions.

Bialke, who came to Nisswa from the private sector, said he uses the mentality that he runs the liquor store like he owns it, not the city.

"I want to make money for myself and with that attitude the city makes money," Bialke said.

At the Palisade municipal liquor store, sales since 2002 have averaged just over $380,000 a year, but profits have disappeared. In 2004, the Palisade municipal on- and off-sale liquor store had $14,773 in profits. That number fell to $6,658 in 2005 and by 2006 the store was showing a $18,818 loss followed by a $20,023 loss in 2007.

In 2008, the loss wasn't as severe in Palisade, population 152, as the previous two years - $4,905 - but because of the consecutive years of losses the city had to hold a public hearing about how to correct the problems.

Mayor Eric Howe said the city's liquor store still struggled in 2009 because of turnover in management, but said things appear to be looking up.

"We did really good for years and it's a definite asset to the city but we miss the way things (used to be). We were close to dying," Howe said. "Now we seem to be on the right track and hopefully we will turn the corner."

Along with staff turnover and declining revenues, Howe noted that building maintenance ate a large share of profits. Along with developing a new business plan, city leaders are considering expanding the off-sale portion of the liquor store if they can find the money.

While some municipal liquor stores have closed their doors because of the lack of profit, Howe said the plans are to keep the Palisade liquor store open for business.

"Over the years it's always been a good revenue source, just not lately," Howe said. Not only for the city's general fund, but specifically for the Palisade Fire Department, which sells pull-tabs and uses the revenue to purchase equipment.

Hackensack, population 308, also has been through lean years, with a $6,427 net loss in 2008. There were net losses of $38,517 in 2007, $5,798 in 2006 and $10,087 of 2005.

Though the 2009 numbers aren't in, Mayor Mel Rateike said he's positive the sales and net profits at the Hackensack liquor store have bounced back thanks to a change in the business plan and staffing.

"Things have really picked up quite a bit," Rateike said. "Those situations that declined business are gone and we're looking for a better year even this year. It's going really good now that the weather warmed up early."

When municipal liquor store revenues are down, Rateike said the city survives but when profits are up it allows the city to afford to do things it otherwise couldn't.

To increase profits, the city council had to rethink its business model for the Hackensack municipal liquor store and add amenities, such as a Nintendo Wii, that will draw people in, Rateike said

"The bar business will never be the same as it was 10 years ago, but with some intelligent planning and the right atmosphere we will keep people coming here," Rateike said.

Not all area cities are hurting. In Longville, with a population of 175, the municipal liquor store in 2008 turned a profit of $58,342, in 2007 a profit of $44,648, in 2006 a profit of $130,686, in 2005 a profit of $56,788 and in 2004 a profit of $105,159.

For 2009, preliminary figures show an increase in profits over 2008, Longville City Clerk Dayna Merten said.

"It's definitely been a good offset for our budget," Merten said. The steady numbers, she said, are due to the marketing efforts of the city and the Longville Chamber of Commerce in branding Longville as a tourism destination.