The locked doors and empty seats in darkened dining rooms painted a grim enough picture for local bars and restaurants during the early months of Minnesota's statewide coronavirus shutdown. But as final food and beverage tax receipt numbers for March and April began pouring in to Detroit Lakes' city finance office, that picture came into sharper focus.
"Between March and April, we’re really seeing quite a hit to the food and beverage tax account," said Heidi Ostlie, Detroit Lakes' city finance officer. "Overall it's about $24,603 lost for March and April (compared to the same time frame last year)."
Because the shutdown occurred about halfway through the month of March, food and beverage sales tax receipts only dropped by about $9,000, or 26%, from 2019 totals.
The impact really hit in April, however; Ostlie said that food and beverage sales tax receipts plummeted more than $15,600, or 46%, from last year's total for the same month.
"That's pretty huge," she said — and while many restaurants and bars started reopening for on-site dining in May, the loss of dine-in revenue due to coronavirus restrictions is still being felt.
Though the state's final report for Detroit Lakes' May 2020 food and beverage tax revenues won't be coming in until early August, Ostlie said early estimates showed it could take another 19% hit.
"I would anticipate probably losing another $19,000 for May when those final numbers come in," she said. "That’s kind of where we’re trending."
Detroit Lakes' one-cent food and beverage tax has been a significant source of revenue for the city since it was first enacted by the Minnesota Legislature in April of 2011. Detroit Lakes' sales tax reports show that it brought in just over $497,000 in 2019; since its inception, the tax has raised over $3.6 million for the city's coffers.
Local option sales tax revenue
Though there isn't much in the way of comparative data, since it was only enacted last October, Ostlie said that Detroit Lakes' local option sales tax (LOST) revenue doesn't appear to have taken the pandemic-induced hit that the food and beverage tax has.
In fact, she added, receipts for that 0.5% tax continue to exceed pre-implementation projections.
"We had budgeted for about $250,000 (in LOST revenue) per quarter," Ostlie said. "We're still trending well ahead of that."
LOST receipts for the last quarter of 2019 (October-December) totaled just under $368,000, or about $120,000 per month, while receipts for the first quarter of 2020 (January-March) totaled just over $317,000, or about $105,000 per month. Receipts for May and June showed a significant uptick, with about $121,000 for May and $146,000 for June.
Ostlie attributed this discrepancy in the two revenue funds to the fact that the food and beverage tax was specifically applicable to food and drink-related establishments, while LOST is applied to all local businesses that charge a sales tax for their goods and services.
"Most of the city’s larger sales tax contributors were still operating throughout the stay at home order, so those businesses continued to remit sales tax dollars on a monthly basis," Ostlie explained, while restaurants and bars were forced to rely entirely on to-go and delivery income, when possible, and some had to close their doors entirely while the stay-at-home order was in place.
The larger-than-anticipated LOST income means that the city will be able to pay off the bonds it issued for construction of the new Detroit Lakes Police Department even earlier than anticipated — which will also result in significant savings for the city in the form of reduced interest payments.
Liquor store sales remain robust
Not too surprisingly, sales receipts from Lakes Liquor, the city's municipal liquor store, have remained robust throughout the pandemic, as off-sale liquor stores were on the list of "essential" Minnesota businesses that were allowed to keep their doors open despite COVID-19 restrictions.
Through the first six months of 2020, municipal liquor sales were up 34% from 2019 figures, according to the city's June liquor sales report.
Month-by-month increases from 2019 figures have held steady at between 30-40% since March, when there was a "huge uptick" in liquor sales, according to Ostlie.
"The increase was over $181,000, or 37.5%, from March of last year," Ostlie said. "April sales were up $162,000, or 32.6%, and May's increase was 38.98% ($254000)."
June's uptick wasn't quite as large, Ostlie said, at $185,600, or 24.2% — but this was to be expected as more bars and restaurants began to open up their doors to the public once again, albeit with capacity restrictions.