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HomeMy WebLinkAbout05.14.12 Work Session Minutes City Council Workshop Minutes May 14,2012 Present: Larson,Bartholomay,Donnelly, Fogarty,May Absent: None Also Present: David McKnight, City Administrator;Randy Distad,Parks and Recreation Director;Cynthia Muller,Executive Assistant Mayor Larson called the workshop to order at 6:37 p.m. MOTION by Fogarty, second by Bartholomay to approve the agenda. APIF,MOTION CARRIED. The purpose of the workshop was to discuss liquor operations. Staff provided a summary of the MMBA report including some recommendations and past history. Member Fogarty wanted a better understanding of the 2007 recommendations compared to today. Some are internal management items that are a concern if they haven't been addressed, and she wanted to know what is left that hasn't been addressed. She was on the Council in 2007 and assumed these items were taken care of. She wanted to know what on the list has not been done and why. City Administrator McKnight stated the past information was included in the MMBA report to say that they have been here before. Parks and Recreation Director Distad explained the product price survey shows we are in line with surrounding cities. So the price issue has been addressed. The profit variance analysis report shows the number of times product turns over. We are at 11 turns per year which is very good. It means we don't have product sitting on the shelf. That number has come up from where it was previously. Regarding inventory, staff is not sure where the$37,000 reduction in inventory came from in 2007. City Administrator McKnight is following up on this item. There is an inventory variance report generated at the stores which will now be provided to management. On a monthly basis, different department counts are done to track inventory. Councilmember May asked about the standard procedure for counting inventory and why only one product is counted per month. Staff explained it is a checks and balance and we don't have a lot of extra staff on duty to do counting. Councilmember Bartholomay asked about portable scanners to do the counting. Councilmember May wanted to know what the standard procedure is for counting inventory and if adding another employee would help to reduce any losses in inventory. Staff explained we cannot monthly count all inventory in the store, so we choose different areas. Councilmember Bartholomay asked staff to check on the cost of radio frequency scanners for bar coding. With those we could maybe do weekly cycle counting. Parks and Recreation Director Distad explained there are a series of steps to watch internal control of inventory. Councilmember May was concerned that we do not do split deliveries. She would like to know what the cost would be. Staff has been told there would be an up-charge for splitting a delivery between stores. Councilmember May would like 9 Council Workshop Minutes May 14,2012 Page 2 to know the difference in cost between the up-charge and employee time going through the process to deliver inventory between stores. The reports are meaningless if no one is evaluating things or holding anyone accountable. Parks and Recreation Director Distad noted surrounding cities also split their deliveries with staff and deliver inventory from store to store. This is common practice. Councilmember Fogarty wanted to discuss the current report. The items on the list that need to be addressed could be huge losses for us. She asked if we have policies that address these things. Staff has recently put items into place prior to receiving the report. The items were not addressed in 2007. Staff now has different levels of things they are allowed to do,as far as voiding sales, discounting, ordering product,tracking inventory, etc. Councilmember May wanted to change the course of the discussion as she felt they were discussing things that needed to be discussed by a liquor committee if we decide to stay in the business. She felt the committee should review the policies and discuss checks and balances. Council should discuss if we want to stay in the liquor business,and if so,what is the decision regarding downtown. Those decisions have a lot to do with the policies. Councilmember Bartholomay needed to know if things were being taken care of in order to decide whether to stay in the business. Mayor Larson asked for Council comments on the future of liquor operations. Councilmember May felt the City should not be in the liquor business. She realized she was one out of five that feels that way, so based on what she has read in the report,there are management issues,profit issues, and now we have a lease issue. She suggested moving to one store, shrink the staff, get all the policies in place, and run a good operation. At the same time, explore where a second store should be. We don't want to be in the current location downtown, and Mr. Wartmann is not inclined to negotiate,so why continue there. Mayor Larson noted there are new numbers for transferring from the liquor operations to the general fund. Employees tracked their time spent on liquor operations for one month. In the past there was a transfer of$70,000. City Administrator McKnight is recommending a transfer of$50,600 to more accurately reflect time spent. The report says we have the potential to do things right and we have a lot of housework to do. Mayor Larson requested City Administrator McKnight take care of personnel issues as he sees frt. The downtown store broke even and is not as bad as we thought. Mayor Larson wanted staff to try to work something out with Mr. Wartmann because he does not want to lose customers by closing the downtown store. We may see more profit with a new location and a different way of doing business. Councilmember May would consider that if we tell Mr. Wartmann$15/sq. ft. is our top number or we close the store. There isn't any business that would run without making a profit just to please the customer. Mayor Larson stated the numbers are accurate and felt we have the potential for a lot more revenue. He would like to see $200,000 coming to the City through the liquor stores in the next four to five years. Councilmember Fogarty noted the report says we are on track to do that this year before transfers. The changes made in the last couple years are coming to fruition. 10 Council Workshop Minutes May 14,2012 Page 3 Parks and Recreation Director Distad stated in 2004 we signed leases. We had low lease rates to start,but every couple years they increased and the economy went down. Councilmember Fogarty added City Center has turned into more of an office center than a retail center. She recalled in 2003,the downtown store made more profit than the Pilot Knob store,when we were in a better location. Councilmember May suggested moving the downtown liquor store to the old Rambling River Center building. We have to spend money to abate it anyway. It would be a temporary location. Councilmember Fogarty agreed with that idea. Mayor Larson asked that Council continue the discussion on the future of liquor operations. Councilmember Fogarty felt we should stay in the liquor business. We need to have a better understanding of how to market. We need to have management that understands the level of detail necessary. Councilmember Bartholomay philosophically did not believe we should be in the liquor business. In looking at the report,we signed a lease last year, so to get out now is not the right time, especially if we have the potential to do very well. Councilmember May noted there is a caveat to get out of the lease if we get out of the business. Councilmember Bartholomay proposed going to Mr. Wartmann and say we need $15/sq. ft., but we need a backup plan. He noted we have space at City Hall,the old senior center, and the garage at the new senior center to use temporarily. He was not inclined to stay in the current downtown location. If we stay in the business,he would like to see aggressive benchmarks and see that things identified in the report are being handled. Councilmember Donnelly stated there are very specific things in this report that should be easy to track with supporting documentation. Last fall he said if we can't make money,we shouldn't be in the business. But we can make money if we run it like a business. As far as the lease, it\is too much money. We should keep a downtown store; it would be hard to recoup that. If we close it to fmd a new location, it could be a year and it would be hard to get customers back. We need to fmd an interim building unless Mr. Wartmann is willing to negotiate. Councilmember Donnelly was in favor of staying in the liquor business if we clean up our act and follow the recommendations. Councilmember May asked how viable is the old Rambling River Center for an option. Parks and Recreation Director Distad stated it is too far off the beaten path. Location is critical. Councilmember May did not agree. It is downtown. It doesn't have to be permanent. Councilmember Fogarty felt fmding out if it is viable for a temporary location gives us leverage. If we are going to keep a downtown business, and don't want to have a gap,we have told Mr. Wartmann he can do what he wants because we are stuck for a few months. We have no leverage if we don't fmd a viable option. Councilmember May stated people using the downtown store live downtown and are walking there. City Administrator McKnight asked what they consider a temporary location. Councilmember Fogarty stated a year. Councilmember May felt we should keep our eyes open for options and felt hwy 3 is the best option, but we cannot pull anything together fast enough. Parks and Recreation Director Distad noted for a year you are moving the beer caves,the coolers, all the product,that is a lot of work and a big cost. He 11 Council Workshop Minutes May 14,2012 Page 4 was not sure the old Rambling River Center has the electrical services necessary to run the coolers and the beer cave. Councilmember May stated we have to abate that building. If you take the rent we would pay Mr. Wartmann and put it into that building for renovations, it would be a more saleable building. The lease at the Pilot Knob store is $16/sq. ft. for five years. City Administrator McKnight clarified Council wants staff to go to Mr. Wartmann to negotiate for$15 -$16/sq.ft. and also look at other options in that time frame. Councilmember Bartholomay felt we need to own our own building. Councilmember Donnelly stated it sounds like it may be worth it to pay Mr. Wartmann the rent rather than move everything twice. Councilmember Bartholomay was not in favor of staying in the current downtown location if we do not get a reduction in the rent. Councilmember Fogarty stated we want to keep a downtown store and asked for more recommendations. Mayor Larson asked staff to determine if it was cheaper to move or stay in the current location. Staff stated Mr. Wartmann has agreed to $21/sq. ft.which comes to $131,800 for a year. Councilmember May asked for$130,000 can we renovate the old Rambling River Center. Staff stated we actually pay$170,000 on the lease with CAM. Mr. Doug Bonar suggested the four garage bays at the old City Hall. Garage doors come out easily and store fronts go in quickly. There are already two single doors for entry. It would not take much for heating and ventilation. It may lack in square footage,but does have tall walls. So inventory could go up high and sale items down low. You could convert it to another purpose later. He also suggested in the new City Hall building,put City Hall on the second floor and the liquor store on the first floor. To move it to the old Rambling River Center,you would use half your amount just for abatement, besides a new roof. That building would be too costly. Councilmember May stated those abatements have to be done and we will incur those costs anyway. Mayor Larson asked staff to check into this option also. Mayor Larson suggested we fmd an option to move the store short-term and possibly long-term. City Administrator McKnight stated short-term,he needs to tell Mr. Wartmann he either meets our terms or we go elsewhere. But we cannot get anywhere by August 1,2012,when the lease ends. There is a month-to-month rollover after the expiration where the cost goes up to$23/sq. ft. Plan A would be to go month-to-month at a higher cost. Plan B is a different location. He asked if Council is comfortable with plan A. Councilmember Fogarty stated Council has given their ideas. If staff has other ideas,they are open to them. City Administrator McKnight stated we have been contacted by 12 property owners off of Elm Street between hwy 3 and Vermillion River Crossing. City Administrator McKnight stated for plan A,he will approach Mr. Wartmann to reduce the lease to $16/sq. ft. If no,we will go month-to-month. Then plan B is if there is a downtown store,where, and what is the cost. Councilmember May would like to see a comprehensive list of options including the old Rambling River Center and rental options. Next Council discussed organizational issues and department structure,and placement. Mayor Larson stated Parks and Recreation Director Distad has been doing a great job,but felt the liquor stores do not belong under Park and Rec. He would like to see the liquor stores transferred to the City Administrator permanently and not have them transferred every four to five years. Parks 12 Council Workshop Minutes May 14,2012 Page 5 and Recreation Director Distad noted Randy and Dave have done an exceptional job in cutting costs;we are sending staff home when we are not busy,we reduced hours at the downtown store, we have saved 400 hours of labor. City Administrator McKnight stated part of the problem is we have moved the liquor stores five times in 13 years as to who they report to. Mayor Larson wanted the City Administrator to take Council's comments,read the MMBA report with his own opinions and handle the personnel matters as he sees frt. City Administrator McKnight noted there will be a transition from Park and Rec to Administration. The liquor committee is to be determined. Council has been clear staff should show you what we have done, not just tell you. For a liquor committee he would suggest himself,the Parks and Recreation Director,two Councilmembers, and the liquor manager. Mayor Larson does not want to see numbers before and after transfers;just see the bottom line. City Administrator McKnight stated profit goals would be a discussion of the committee. Mayor Larson felt the report sets some guidelines as to where we need to be. Parks and Recreation Director Distad noted the profit margins are increasing so all the cutting is showing results. Mayor Larson stated he has received numerous complaints about customer service at the liquor store. One was they will carry a case of beer to the door,and after that it is up to you. In Rosemount,they carry it to the car. If we are going to be in this business,we have to be customer friendly and we have to make them want to come back. Parks and Recreation Director Distad stated we do that and if someone is not doing that,we need to know. Mayor Larson stated customer service will be key. City Administrator Update—Parks and Recreation Director Distad stated previously Council discussed leasing the Fairhill Park area for farming. Out of the 43 acres,there is 27 acres of tillable land. Staff has found someone to lease it from the City to farm the area for$200/acre. This person wants a five year agreement to put lime on the land to improve it. Staff asked if Council wants a five-year lease. There will be an out clause for development. Councilmember Donnelly felt the amount is low;others are leasing for$410/acre. The proceeds will go into the park improvement fund. MOTION by Fogarty, second by Bartholomay to adjourn at 8:03 p.m. APIF,MOTION CARRIED. Respectfully submitted, Cynthia Muller Executive Assistant 13