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Wednesday, 02 February 2011 19:59

Maggie ABC stores face questions amid losses

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Maggie Valley’s liquor stores lost money in 2010 for the second year in a row, prompting some aldermen to question whether the ABC stores are being properly managed.

The two stores are opening for fewer hours. Three part-time employees have been laid off in hopes of turning the corner, according to Ralph Wallace, chairman of the Maggie Valley ABC board.

“It is paying off,” Wallace said. “I think we are going to be all right.”

But Alderman Phil Aldridge doesn’t understand how Maggie’s two ABC stores ended up in the red for a second year in a row.

“There has to be money in this. I know there is,” Aldridge said.

Towns with ABC stores get to keep a cut of the profits. That once amounted to about $40,000 a year, but instead the Maggie stores lost $70,000 over the past two years.

“I am a steward of the taxpayers money. Because of mismanagement, the ABC funds are not coming back to the taxpayers like they should,” Aldridge said. “This is an issue that needs to be brought to the public’s attention.”

Wallace blames the losses on the bad economy and additional overhead of opening a second ABC store in 2009.

In a tactical move to grow revenues, Maggie Valley opened a second store aimed at capturing business from Waynesville. Maggie strategically annexed a satellite tract into its town limits to put the new store half way between Maggie and Waynesville on U.S. 19 in Dellwood.

Financial reports out of Waynesville show a corresponding drop in revenues since Maggie opened the second store.

Liquor sales in Maggie grew by $300,000 the first full year the store was open, with $1.59 million in sales in 2010 compared to $1.235 million in 2008, according to annual revenue reports filed with the state.

But the increase in revenues wasn’t enough to offset the expense of the second store, Wallace said.

Operating costs went from around $225,000 a year to $430,000 a year, according to revenue reports.

The new store not only meant more employees and additional overhead for phones, computers and utilities, but also paying off the debt from building the store and buying the land for it.

On the surface, the growth in liquor sales seems like enough to cover the extra overhead, however, and that’s what puzzles Aldridge.

“I wouldn’t mind seeing the financial records for the past five years,” Aldridge said.

The Smoky Mountain News has requested more detailed financial records from the ABC board, but Wallace is out of town and was unable to provide them as of press time.

 

Oversight

Town leaders were not aware of just how poorly the stores were doing until recently. The town does not get regular financial reports from the ABC board, something town leaders want to change. Until now, all they got was a copy of the annual audit.

“We need to determine how they can report to us on an ongoing basis — what can they give us that will show how they are progressing over the course of the year so that we don’t just get a once-a-year snapshot,” said Town Manager Tim Barth. “Obviously it is something that concerns us.”

The town does not have a direct hand in operating the liquor stores. That’s up to a three-member ABC board. The town’s only role is appointing those three members.

“Other than that our hands are tied,” Aldridge said.

Aldridge wants to expand the ABC board from three to five members. So did former Alderman Colin Edwards.

Edwards had been leading the charge to expand the ABC board to five members. Like Aldridge, he had raised concerns about mismanagement and questioned the financial losses.

Edwards resigned as an alderman last week, however, citing irreconcilable differences with the rest of the town board.

SEE ALSO: Maggie alderman Colin Edwards resigns 

Aldridge said Maggie’s ABC board could use new faces.

“The more people the more accountability there is,” Aldridge said. Besides, it seems they could use the help.

“Five heads is better than three,” Aldridge said.

 

Red flags

Town leaders at the time hoped the second store would pay off in the long run, but it now doesn’t seem that way. Aldridge half-heartedly suggested closing the second store if it costs more to run it than it is making, but that would leave the town holding the bag on the remaining 13 years of loan payments on the building.

Barth said it wasn’t a total surprise that the stores were in the red. The issue came to a head, however, when a few aldermen noticed shelves at the second ABC store seemed empty.

“There was some concern among the aldermen about whether the stores were being stocked as they needed to be stocked,” Barth said.

The town board called a special meeting with the ABC board in early January to ask questions.

A poorly stocked store is a bad sign, and would only make financial problems worse, Aldridge said.

“You can’t sell it if you don’t have it,” Aldridge said.

It ran counter to the whole idea of capturing sales.

“We lost that edge when we let the stock run down,” Aldridge said.

Cash flow problems are likely why the store wasn’t keeping as much inventory, Barth said.

Wallace brought the attorney for the ABC board along to the meeting with the town board, as well as their accountant. Barth and Aldridge said they did not know why Wallace brought the attorney.

“It was supposed to be a casual meeting,” Aldridge said. “What was going through my mind was how can we help the ABC store.”

But the meeting allegedly got heated at times. There is no written or audio record of the meeting. The town clerk was out sick that day, and Town Manager Tim Barth said he didn’t take minutes.

This violates the NC Open Meetings Law.

 

Short of expectations

Wallace said the recession came at the worst possible time.

“When they opened the new store the economy took a downturn all of a sudden,” Wallace said. “We are not the only ABC store in the country that isn’t doing good.”

Wallace said another factor that hurt the bottom line was the closing of Thunder Ridge, a large nightclub and dancehall.

“That was a big account of ours and that has hurt business some,” Wallace said.

However, Thunder Ridge has been closed since 2004, long before the ABC board made forays into a second store.

“You can blame it on a lot of things,” Wallace said.

Indeed, in an interview in December 2009, then-chairman of the ABC board Austin Pendley cited several factors. Pendley primarily blamed the recession for a slump in tourism, further exacerbated by the closure of Interstate 40 because of a rock slide.

Meanwhile, Harrah’s Cherokee Casino began serving alcohol. Before, people gambling at Harrah’s would drive over to Maggie Valley to stock up on booze. The Maggie liquor store did a bang up business in pocket-sized airline bottles: the perfect size for smuggling into the casino.

Nonetheless, Maggie’s ABC stores posted gains in liquor sales to the public despite the recession, according to revenue reports. Restaurants and bars, on the other hand, stopped buying as much. Liquor purchased by restaurants and bars once accounted for one-third of the business done by Maggie’s ABC store.

But sales to restaurants and bars went from $300,000 a year before the recession to less than $200,000 in 2010, according to revenue reports. The recession meant fewer people were eating out, and those who did ordered fewer drinks.

Pendley passed away last year, as did fellow ABC board member Sam McCrary

Wallace said he isn’t as knowledgeable about ABC operations as they were.

“We lost both of those guys, and it has really been a struggle,” Wallace said.

For example, when questioned about overhead for the second store, Wallace couldn’t say how many new employees were added. He also said he didn’t know off the top of his head how much the annual debt on the land and building is.

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