Friday, August 17, 2007

Shorewood Liquor Store Being Sold

The story plastered all over the Lakeshore Weekly News this week is the decision by the Shorewood Council to sell the city's two liquor stores. According to Member Martin Wellens who initiated the action, the city originally got into the business to control the sale of alcohol to minors. Lately, however, the city is competing with private enterprises for market share, and profitability of the liquor stores has been spotty.

This type of issue drives home the question of "how involved should government be" to the most local level. Is city government's role to support infrastructure and provide for public safety? Should government broaden its role and delve into areas where private industry is already thriving? Should government rely on taxes and fees as revenue sources, or is a for-profit business venture a valid source of city government revenue?

My kneejerk reaction on a topic like this is that Government shouldn't be in this or other businesses, for a few reasons:
1. A city government office and a council cannot be a jack-of-all-trades, and it is silly to think that a city government can be highly efficient in things as varied as issuing bulding permits and providing public safety, while tacking on the side-job of dabbling in the retail liquor trade.
2. When government takes over a function, it becomes a monopoly. Government healthcare in Canada is a monopoly. The Department of Motor Vehicles is a monopoly. It is no coincidence that both of those examples foster excessive paperwork and unbearable wait times. Monopolies stifle customer service, innovation, and efficiency. In the end, a monopoly can hardly run as efficiently as multiple, private-sector competitors.
3. There is high risk involved in running a business. It is great that the liquor stores currently add to the city revenue source. But what about the year, or consecutive years, when it loses money? It is acceptable for the public tax dollar to be saved because the money came instead from liquor stores. But would it be OK for the public to subsidize a losing business, if and when that time came? Government revenues, while minimal, should be a near sure-thing -- tax revenue, fee revenue, etc. The profit made from a competitive business involving risk doesn't fit well in the framework of a predictable government revenue stream.

In the end, I think Shorewood will be better off by operating in a "lean and mean" government environment rather than attempting to have their fingers in private industry.

Thoughts, especially from those of you in Shorewood?


  1. It's easy to argue against Shorewood's liquor store business. The city isn't big, so although the city has a monopoly, it's not as if you can't get to another liquor store within a few minutes. If you live near Shorewood City Hall, your nearest liquor store is not the Cub Foods location operated by Shorewood, it's the MGM Liquor "Warehouse" in Tonka Bay. (That chain has good sale prices, but its prices aren't very competitive otherwise...they have a lot of advertising to pay for, and it's paid for by that gin, whiskey and beer you buy from them.) Unless I know they have a good sale price on something I want, I avoid that chain like the plague, but I digress.

    So given how easily it is to shop elsewhere for liquor, I'm not surprised to learn that Shorewood's liquor operations aren't that profitible. But I have a question for the anonymous author of this blog. If you lived in Edina, Eden Prairie, Lakeville or Richfield, would you feel the same way? They have monopolies too, and in some cases they generate more than $1 million per year in revenue. (I haven't seen that list in a couple of years, but I seem to recall that the top cities net $3 million per year.)

    It appears you favor a government-run liquor operation if its profitible. Your first two points, that government cannot be a jack of all trades and that government monopolies are inefficient, have little bearing on liquor operations in Shorewood. Yes, private enterprise might run a liquor store better, but there's no evidence to support it would do better running a Shorewood liquor store. And you gave no evidence that a government-run store in Shorewood is more inefficient in the selling of vodka or wine than MGM liquor warehouse at 7 & 101.

    Your biggest gripe seems to be the economic risk, which is a valid concern in Shorewood. Clearly you would support your city's liquor operations if you lived in Eden Prairie.

  2. This comment has been removed by the author.

  3. My views would be the same if I lived in Edina or Eden Prairie. I think government is ill-advised to hang out a shingle in a highly competitive business. Do we want our council elections to include the criteria of who we think has the most savvy in the retail liquor trade?

    Granted, the momentum to get out of the liquor business would not exist to nearly the same degree in a place where profits where rich. It is alot easier to make the case when margins are slim. As with all policy items, forward progress not only requires the right idea, but the right timing as well.

  4. You can argue you'd feel the same way if you lived in Eden Prairie, but your initial blog says otherwise. If you really felt the way you do, you did a lousy job of communicating that. Either you did a lousy job of making your point initially or you're saying the right thing even though you don't believe it. Either way I'm not impressed by your blog, but thanks for your effort nonetheless. I hope somebody others enjoy it.

    By the way, a front page story isn't the same as a story that is "plastered all over" a newspaper. The fact that there's a story, and a column from the un-elected ward 4 representative hardly qualifies as "plastered." Your analysis is misleading. But keep up the effort. I'll check back in a few months and see if you're doing any better.

  5. Thanks, Craig. All views are welcome here.

    As for the critique of my blog, I appreciate your candor. If you have any specific suggestions on topics or ways to improve it, I'm eager to hear them.

    Based on the Analytics numbers, there are already a number of loyal readers of this blog. I encourage people do begin posting more of their thoughts like you did, regardless of their position on the issues.

  6. I wouldn't read too much into the Google analytics. Trust me on that. There's a reason why your numbers look good but you aren't getting many comments. There aren't many people out there who are reading this, yet. These things take a while to find an audience. I'll bet you don't have more than a handful of people who have bookmarked this site or checked in more than once. That's not meant to discourage you, it's simply a statement about the numbers. Don't put too much weight into them. When you start seeing a variety of diverse comments, then you'll know people are reading, not by analytic results.

    I agree with Craig, you don't make a convincing argument against liquor stores. If you agree with your good friend Marty Wellens, simply say so. I don't think it's a wrong opinion, but don't try to craft weak reasoning to support the position.

  7. Thanks for your comments.

    Regarding the website hits, you can tell how many come to the site and leave within, say, a minute, versus how many stick around for several minutes and hit several different articles. All I'm saying is that when I winnow it down to even the most conservative estimate of how many people are reading the blog, which I'm assuming is a very small fraction of total visits, I'm pleased so far.

    As for my reasons against the liquor store, it is really more a philosophical belief that Governments should limit their involvement in running businesses for the 3 reasons I've been stating all along: 1) Government is not good at developing the necessary expertise in random business disciplines 2) Government-run businesses tend to be or develop into monopolies, which I am against and 3) Government attempting to run a business introduces risk that I don't think is warranted, whether it be local or federal Govt. You can't compete with the private sector without incurring risk.

    It seems like people aren't buying my argument, which is fine. But what are the good reasons for Government to remain involved in running a business like a liquor store? I have yet to hear those, and maybe there are some very good ones. I'd love to hear them.

    I have a feeling that the main reason for supporting the Shorewood-run liquor stores will be "they make money". While not a particularly principled position, it is probably one that is shared by many and is certainly a valid one.

  8. I don't think there's a good reason for municipal liquor in this day and age, you just didn't support your arguments very well.

    You're opposed to the state monopoly on lottery and "scratch off" games, too, right?

  9. The Star Tribune's West section will have the liquor store story plastered all over Wednesday's paper!

  10. Gambling is its own can of worms that doesn't fit neatly into any argument. I'd hardly call gambling a competitive private sector business, so my arguments can't apply as easily.

  11. But you're opposed to govt. run gambling nonetheless, right? You couldn't possibly be in favor of it, based upon your statements about liquor stores, regardless of how gambling does or doesn't compare as an industry to liquor sales.

  12. In a situation where no good or service of value is purchased by a consumer, the main competition is a group of sovereign nations, and the industry is not taxed, I think a separate thread and discussion would be warranted. I don't think the gambling topic fits on this thread.

  13. I have a crummy Internet connection today, but maybe it's working well enough to allow me to post a word of thanks.

    I have read this blog on a few occasions, and enjoy what I see, whomever the author is. I think it's fair for people to question the motives of the author when the author maintains an anonymous identity, but the blog raises a few good questions nonetheless.

    Some of the comments have been interesting to read, too. I wish people would express them in other ways, but if this blog gets people talking and paying attention to local issues, that's a good start.

    All that being said, the comments here helped inspire my own thoughts on the liquor store discussion. In looking back at this article I see I used two arguments that were raised in responses here. My biggest question, however, wasn't if the city should be involved in the liquor business. My question is what or who is driving this? You'll see that in the next day or so.

    Keep up the good work.

  14. Thanks, Mike. I appreciate you saying that you have found this blog valuable. The goal is to engage people, and we're slowly doing that.

    I have a new appreciation for the work of an editor. The posts I think will get the most enthusiastic responses and discussion often fizzle quickly. The posts that I assume are purely a community FYI often get the most hits and comments.

    I hope that some people who may not feel comfortable sending letters to the editor will be willing to post commentary on this blog -- if so, I think it is worth it.

    Thanks again.