Have you ever wondered why some Minnesota cities operate liquor stores and bars? When national Prohibition was repealed in 1933, states quickly designed their own systems for controlling liquor sales. Minnesota’s law at the time allowed cities with less than 10,000 people to operate their own on-sale (bars) and off-sale (stores) businesses. “Grandfather” provisions gave those cities the right to continue if they later grew beyond 10,000.
Within the seven-county Twin Cities metropolitan area, 19 cities currently own municipal liquor shops. Rogers and Wayzata also operate municipal bars. Some local governments even prohibit private liquor sales within their borders, thereby ensuring their monopoly on booze.
According to the Minnesota Office of the Legislative Auditor, municipal liquor shops “tend to charge prices that are about 3 to 8 percent higher than privately owned liquor stores.” The most profitable city-owned establishments are in Edina, Richfield, Eden Prairie, Lakeville and Apple Valley.
What does this have to do with real estate? Net profits from liquor sales are typically transferred to the city’s general fund, resulting in lower property taxes for home owners. In fact, some municipalities actively promote their shops as a means of funding services like street maintenance. This strange marriage of alcohol supply to government services gives a novel meaning to the phrase, “I’ll have one for the road.”
Sources: Office of the MN State Auditor, 2008 Analysis of Municipal Municipal Liquor Operations and the Freedom Foundation of MN, Drinking on the Taxpayer’s Dime.