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City-owned liquor stores can help keep taxes down – but what if sales fall off?

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Municipal liquor stores in Minnesota had another record year in 2014. But some cities aren't cheering.

There were 200 Minnesota cities operating 233 municipal liquor stores last year, and these city-owned shops saw sales go up for the 19th consecutive year, according to a report released Wednesday by Minnesota State Auditor Rebecca Otto.

Sales totaled $335.6 million – up $2.8 million over 2013.

This is good news for many cities that saw profits. The money from liquor sales is poured back into the community and used as another source of revenue to supplement traditional tax and fee collections, the report notes.

But what happens if that money isn't there anymore?

Higher taxes in Edina?

Edina, which saw the second-highest gross sales at a little more than $1 million, is among the cities that aren't encouraged by the report, FOX 9 says.

That's because profits there are actually falling. In 2013, the city-owned liquor stores had gross sales of more than $1.3 million

What's the cause?

City leaders are blaming Total Wine and More, a discount-liquor giant that entered the market in 2014.

The concern comes because Edina uses its city-owned liquor revenue to offset property taxes. With that revenue being eaten in to, city officials say the falling profits could lead to higher property taxes to offset the losses, Watchdog.org notes.

Edina Mayor Jim Hovland wrote in the fall quarterly letter to residents:

"Edina Liquor is still very much a profitable business and one that we are proud to operate. However, we can no longer count on beer, wine and liquor sales to support the city budget in the way it did before the market changed. Without the expected transfer of Edina Liquor profits, we must raise municipal property taxes by about 7 percent to keep city services at the current level next year."

Number of municipal liquor stores dropping

Although city-owned liquor stores as a whole were successful, not all municipalities are in the black. Net profits and losses for shops operating as of Dec. 31, 2014, ranged from a loss of $56,362 (in Winton, located in St. Louis County) to a profit of $1.4 million (in Lakeville).

Overall, 106 city-owned liquor operations saw year-to-year increases in their net profits from 2013-14. However, 94 showed decreases in net profits.

For the most part, Minnesota state law gives cities the authority to license and regulate the retail sale of liquor. In greater Minnesota, where most municipal liquor stores are located, it's allowed "access and convenience" in areas that may not have been able to attract private establishments, the report notes.

Many are struggling to stay afloat though – 34 cities reported losses last year, all of them located in greater Minnesota. And 83 city-owned liquor stores in greater Minnesota saw a decrease in net profits in 2014 when compared to 2013, the report shows.

Lack of profits, along with insurance costs and other concerns, forced many cities to close their liquor stores, resulting in a decline in operations throughout the state.

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