By Louis Hoglund
Your tea-totaling grandmother won’t like to hear this—but beer, liquor, and wine are the path to salvation.
Booze may indirectly save Pelican Rapids taxpayers from what might have been the highest tax increase in the history of the city.
Based on very preliminary number-crunching, Pelican city home and business owners may have faced a near-22 percent tax hike in 2024. That’s where the budget was heading earlier this month, until pencils were sharpened and closer inspection of reserve and set-aside funds were reviewed.
Liquor store profits, combined with several shifts of earmarked and reserve funds into 2024, will help reduce the sting for Pelican city taxpayers. For example, the council had banked up about $300,000 toward city-related Heart of the Lakes Trail-related costs. Those reserves will instead meet the city’s $30,000 per year obligation toward the multi-use, school-county-city trail building under construction. At $30,000 annually for the next five years, tapping these reserves will save taxpayers. The city will also save $20,000 originally budgeted for Americans With Disabilities Act costs pertaining to retail store entrances, as those expenses will indirectly be covered in the project by the Minnesota Department of Transportation.
But sales at the city-run retail store, Pelican Liquors, will be one of the key revenue sources in slowing tax increases in the coming years.
About $145,000 in liquor store profits will be allocated to the city’s general fund in 2024. This revenue source will help bring the tax burden down from a feared 21.8 percent to as little as 3.3 percent. But like any business, the city-operated liquor store could experience fluctuating sales and profits year to year. City administrator Lance Roisum said in an interview, “we don’t want to put too much faith in liquor store sales.” But for the near term, the revenues and profits appear on track to provide taxpayer relief.
The new city swimming pool and aquatic center alone will cost taxpayers $202,620 in 2024. Debt for the pool project has been financed over 20 years, so the obligation will continue.
Combined with general increased wages, salaries, and various overhead, Pelican city taxes are not likely to be reduced.
Meanwhile, the city’s share of the Pelican Rapids Public Library’s operating expenses is expected to rise about 34 percent in 2024. The park department’s expenses will also be up. While the dam removal and river restoration were almost entirely funded by the DNR, the city will be assuming the cost of irrigation of the newly exposed river shorefront; and additional lighting in the parks.
Also on the horizon—hefty assessments for sewer-water-utility improvements in conjunction with the reconstruction of state highways 59 and 108. The assessments will hit downtown businesses and commercial property owners especially hard. The massive project will be completed 2024-25.
“How much more can we pile on the taxpayer?” said Mayor Brent Frazier, as the council dissected the numbers at the Sept. 12 meeting.
“Between now and 2027, we need to do anything we can to make the tax increases as low as we can,” said Councilman Kevin Ballard. The highway reconstruction will have “a significant impact on businesses downtown.”
City Council review will continue in September and October, prior to the deadline for submitting the budget to Otter Tail County.
Liquor store profits will be on radar with rising costs on horizon for Pelican city
Profits from the Pelican Rapids city liquor store will be an increasingly crucial ingredient in stemming tax increases.
Profitability at the store will be important as a revenue source in coming years, with the costly highway reconstruction and sewer-water utilities improvements set for 2024-25
Through August of 2023, sales were down by nearly $100,000. But on the plus side, expenses were down nearly $153,000—setting a profitable stage, with four months of sales remaining in 2023.
Beer sales were down by $45,000 through August. Meanwhile, wine and liquor sales were down about $55,000.
Correspondingly, inventory costs are down, which helps maintain profitability.