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After making millions on liquor store, Kotzebue plans city-owned bar and restaurant

In an ongoing experiment to pay for city services with liquor sales, Kotzebue officials plan to open a city-owned bar and burger restaurant later this year.

The restaurant and a city-run liquor store launched in 2010 are expected to generate about 15 percent of the general fund cash needed to operate the Northwest Alaska city in the coming year, according to a spending plan approved May 15.

“We’re the only game in town,” said Kotzebue City Attorney Joe Evans. “We’re the only entity that’s allowed to apply for this type of license.”

If approved by state liquor license regulators, the business will open as early as November, Evans said. The family restaurant would be called Kotzebue Grille and include a bar area similar to chains like Red Robin, he said.

The tactic, using booze sales to fill city coffers, could be a solution for cash-strapped towns and villages across the state, though not all Kotzebue residents welcome liquor sales by the local government.

Thirty-three miles above the Arctic Circle, Kotzebue can only be reached by plane, barge or snowmachine and serves as the shopping and travel hub for 11 surrounding villages. Suicide and fetal alcohol syndrome rates in the region are among the highest in the state.

When the city opened a package store adjacent to the Kotzebue jailhouse, some residents who had not been regular drinkers suddenly began buying alcohol every day, said Kathy Ward, a local artist who grew up in the community of 3,200.

Ward noticed more drunken teens, she said. “Seeing what this has turned our people into over just a short period of time is so sad.”

The restaurant will also compete with privately-run restaurants, which do not have the ability to serve alcohol. (Only the city government can sell alcohol in the community.) The city attorney said he has not heard criticism from competing restaurants following a series of public meetings on the proposal.

For 20 years, there was no local liquor store in Kotzebue. Alcohol sales were banned although residents could ship in a limited amount each month.

Voters in 2009 approved the creation of a city-owned package store and distribution center plus a city-owned bar and/or alcohol-serving restaurant. Kotzebue officials created a liquor advisory board and opened the liquor store first. It was an immediate hit, making twice as much money as expected with 30-can packs of Budweiser and bottles of R&R Canadian Whisky among the best sellers.

In the following years, sales have expanded to include a high-end, high-profit selection of craft beers, wine and — coming soon — liqueurs, Evans said.

The liquor store made about $3 million in sales in 2013. That figure is projected to jump 20 percent this year, according to city spending plans.

The liquor store and bar/restaurant are expected to make more than $1.7 million, combined, in 2015. That in a city where the overall general fund budget that pays for services like police, planning and parks is just $11.5 million. (The general fund budget does not include the cost of water, sewer and other services that are paid through user fees.)

The Inupiat village of Kiana, east of Kotzebue on the Kobuk River, mirrored the larger city’s liquor store proposal in a move that some prosecutors say has undercut the demand for bootleggers.

Bob Beasley, interim director for the state Alcoholic Beverage Control Board, said he does not know of any other Alaska towns or villages where the local government owns and operates a bar or alcohol-serving restaurant. The village of St. Paul might have had one at one time, he said, but it has since closed.

A floor plan for the new city business shows a 12-table sports lounge and bar beside a larger restaurant seating area. Evans said the state liquor board could approve the project as early as July.

The bar and restaurant will open in a remodeled recreation center, formerly a bowling alley, at 3rd Avenue and Wanda Street, Evans said. The building currently houses a boys and girls club, although that program will be moved to a newly built youth center.

The construction loan for the youth center is being paid, in part, by proceeds from the liquor store, he said.

Originally published June 3, 2014 by Kyle Hopkins in Anchorage Daily News.

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