Some Cloquet bars and restaurants have requested a reduction in the liquor license fees the city charges, but the City Council was hesitant to make such a change during its meeting Tuesday, May 19.
Three bars have requested the city reduce the fee, but City Administrator Tim Peterson said the move could set a precedent for other businesses affected by the COVID-19 shutdown.
“If we reduce liquor license fees, we don’t have a way to recoup that cost,” Peterson said. “I don’t think we necessarily want to increase the levy in order to subsidize license fees … The next thing I would say, with other licensing that we have, how are we going to determine that liquor licenses were more impacted than say tobacco, when there are certain businesses that sell tobacco that were closed?"
Adam Bailey, owner of The Jack on Cloquet Avenue and a former city councilor, was one of the entrepreneurs who requested a reduction in the liquor license fee and disagreed with Peterson’s assessment.
“Licensing isn’t a substantial amount of what the city takes in in revenue,” Bailey said. “Number two is, we’re still operating businesses. Small businesses like mine contribute $5,000-plus a year in 0.5% sales tax that goes to fund our park systems.”
Ward 4 Councilor Kerry Kolodge was sympathetic to the business owners, especially as restrictions continue without a definite end date, but he said the choice for the city isn’t easy.
“It becomes kind of a circular argument when we say we lose $50,000 in revenue because of giving breaks on licenses and it causes us to raise our levy 2%,” Kolodge said. “We’re just taking that money back out of their pockets again when it comes tax time. It’s hard to know what to do with it because we can’t play favorites.”
Following the May 22 meeting, Peterson told Bailey and other bar owners in Cloquet they had the option of deferring payment of their liquor license fee until December if they choose. If the owners had already submitted the application and payment, Peterson told them the city would return the check without cashing it.
“In a perfect world, I would like to have seen it reduced,” Bailey said. “But things aren’t perfect, and I’m thankful the city of Cloquet was willing to work with us.”
Other cities in the county have already reduced the cost of liquor licenses for bars and restaurants or are considering a change. Carlton reduced it’s fee by $264, about 11.5% off the $2,300 fee.
“Unfortunately, it’s not as much as we would like,” Carlton clerk Jodie Johnson said.
In Scanlon, the City Council discussed prorating the fee for 2021 to match the length of the 2020 shutdown, according to city clerk Lori Stigers, but no decision was made during the May 10 meeting.
Erika Aranda, owner of Pedro’s Grill and Cantina on Cloquet Avenue, said her restaurant has lost $30,000 per month in alcohol sales since Gov. Tim Walz closed establishments to dine-in service March 17. She’s already sent in the full payment for her license to the city, but said she would welcome a reduction in the fee.
“It’s not that big, but it would be helpful,” Aranda said.
The pain will likely continue for Bailey and Aranda after Walz’s latest executive order. Walz is allowing restaurants with outdoor seating to begin opening June 1 — a luxury not available at The Jack or Pedro’s.
While Carmen’s Bar and Restaurant on Big Lake Road has some outdoor seating for customers, co-owner Ryan Lindstrom feels like the phased reopening will continue to cost his business with customers going across the border to Wisconsin, where bars have been open for business since May 13.
Small businesses like his are struggling to survive the fallout from the coronavirus pandemic and the city needs to step in, he said. Aranda said the price of beef has risen to nearly $8 a pound, making her operating costs skyrocket while also losing a substantial portion of income to the reduction in alcohol sales.
Bailey and Cloquet Bar and Lounge owner Jesse Dugger said they would take advantage of the city’s offer and defer the fee until their bars are open again. Like Aranda, Lindstrom already paid his fee for 2020.
While Bailey and Dugger appreciated the gesture from the city, it doesn’t end the economic pain small business owners are feeling.
“We’re hurting,” Bailey said. “I’ve been in the bar business for ... 20 years. When you’ve got a guy like myself that’s on the brink of collapse, imagine the people down the street. Cloquet Bar and Lounge has had their bar for just over a year. The boys at Carmen’s just took out big loans. I’m on the brink, I’m tapping into money I was hoping to retire with.”
EDA aid available to small businesses
The Cloquet Economic Development Authority announced at the May 19 City Council meeting that it is making $300,000 available in loans to local businesses struggling as a result of the COVID-19 pandemic.
The loans are targeted at for-profit businesses affected by Gov. Tim Walz’s executive orders limiting or closing non-essential businesses during the public health emergency. They can provide up to $20,000 in working capital with a six month deferral period, a five-year term and 2% interest rate.
Business owners can begin the application process at info.entrepreneurfund.org/cloquetbusinessassistanceloan or contact EDA Director Holly Hansen at 218-879-2507, ext. 4.