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Wednesday, 12 December 2012 00:00

County leaders ponder whether Cashiers could support ABC store

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fr cashiersABCA Jackson County resident has taken it upon himself to show county decision-makers that a Cashiers ABC store is a must.

Thomas Hannon, a Cashiers resident, using public information provided by the North Carolina ABC Commission, drew up his projections on how a store in Cashiers would fare — but it’s unclear if his facts and figures will hold up.

“I really feel the Cashiers area is really growing, and we have to drive all the way to Highlands or Sylva or Brevard to get our liquor,” Hannon said.

County leaders forwarded Hannon’s study to finance officials at the state ABC Commission to reviewing it, who have initially called Hanson’s numbers overly optimistic.

“I’m sure we would do our own homework, too,” said Jack Debnam, chair of the county board of commissioners. “We wouldn’t just rely on his report.”

However, based on his own numbers, Hannon has concluded that the county would be dumb not to construct the new store.

“There is no downside,” said Hannon, who worked for 30 years as a wholesale liquor distributor in the U.S. Virgin Islands. “There is no way that it cannot make it on its own.”

The county did not commission Hannon to do the study, but he conducted the assessment himself for free and mailed his findings to various Jackson County leaders. He primarily assessed whether an ABC store in Cashiers could break even or make a profit — based on projected sales and the probable cost of running the store. His answer was “yes,” but the report didn’t fully take into account the inevitable loss of sales at the Sylva ABC store, which is currently the only place to buy liquor in the county.

If sales were diverted from Sylva to a new ABC store in Cashiers, it wouldn’t only hurt the town, but the county could actually hurt itself. The town of Sylva evenly splits the profits off its ABC store with the county. The county could trade in profits off the Sylva ABC store for profits at the Cashiers store and be now better off — or even worse off if the Cashiers store is merely a break-even proposition.

But another factor in the decision is simply that a liquor store would be an added amenity for the Cashiers area.

“I look at it more as a service to the area,” Debnam said.

Still, the county would need justification if it used taxpayer money to constructing a new ABC store, said Commissioner Mark Jones who is from Cashiers. Jones said Hannon’s report has a lot of merit, but said more due diligence is needed still.

Although Jackson County commissioners say they are interested in the state’s opinion, the majority think a liquor store in Cashiers is probably a good idea.

“My first impression would be that an ABC store there would be viable,” said Commissioner Doug Cody.

A Cashiers store could win back the business of its own residents who are currently making the trek to ABC store in Highlands, which sits just over the line in Macon County. The two towns compete with each other for tourists, and Cody said he thinks the addition of an ABC store would level the playing field.

Jones wonders if Cashiers couldn’t even steal some business from Highlands residents who journey to Cashiers to go grocery shopping at Ingle’s.

However, given the possibly high rent rates in Cashiers, Jones said that the county should not discount placing the store in Glenville or near Caney Fork where rent would be cheaper.

 

A study in the black

Hannon’s conclusion that a Cashiers ABC store will be profitable is based on projected sales — which he pegged at about $1 million in its first year.

Sales would partly come from the dozen or so Cashiers businesses that sell liquor drinks and currently get their liquor from the Sylva ABC store. Businesses serving liquor are required to order their stock through an ABC store in their own county, so those sales from the Cashiers area would wholly be siphoned off the Sylva ABC store.

During the summer, Cashiers businesses ordered between $50,000 and $62,000 in liquor per month, said Peggy Queen, general manager of the Sylva ABC store.

She said it has not seen a jump in liquor orders from Cashiers since the approval of countywide alcohol sales in May, which opened the door for more restaurants to serve liquor drinks.

While Sylva’s ABC store would not only lose orders from restaurants, it would also lose sales from residents of Cashiers and Glenville who may have stocked up while in Sylva doing other business or errands.

Hannon, however, believes much of the Cashiers’ sales would simply come from recapturing what is currently lost to Highlands.

The Highlands store brought in $1.28 million in liquor sales during fiscal year 2011, and Hannon “guesstimated” that $500,000 of that business could be transferred to a Cashiers store.

“I am pretty confident that we are probably going to put a dent in that,” Hannon said.

Given the number of homes in Cashiers and the surrounding areas, Hannon estimated that the Cashiers store would draw from a population of about 10,000 during peak tourism months.

The study also projected that the county could expend less than $750,000 on store operations, which include cost of goods, payroll, utilities and other miscellaneous expenses. Hannon said he thought the county could find a building to lease for $24,000 a year, or $2,000 a month.

While Hannon stands behind his numbers, after a cursory review of the study, the state is less confident in his projects.

“I thought it was a little too optimistic,” said Laurie Lee, director of state ABC commission’s audits and pricing division. “It costs more to start a store than he realizes.”

Despite what the general public might think, ABC stores are not cash cows, Lee said. “It takes a lot of sales to be profitable.”

At minimum, an ABC store could earn $750,000 in revenue and still do a little better than break even, Lee said, adding a couple caveats — the town or county must own the store and have no debt to make that possible.

But, as a general rule of thumb, a store must net at least $1 million in liquor sales if it hopes to turn a profit.

Lee did not completely dismiss Hannon’s work and plans to take a closer look at his numbers before giving feedback to the county.

 

Open to other locations

Jackson County leaders have also discussed opening a store just outside Cherokee. The reservation is dry, with the exception of Harrah’s Cherokee Casino and Resort. So, residents of Cherokee must drive to either Bryson City, Sylva or Maggie Valley to buy liquor.

If Jackson County built an ABC store right outside the boundaries of the reservation, then it could become the main go-to liquor store for people in Cherokee.

“The Qualla area has to be considered,” Jones said.

However, Debnam said he is hesitant to operate a store near the Qualla Boundary. The tribe could one day legalize alcohol sales and open its own ABC store — and leave Jackson’s store on the outskirts of Cherokee without a customer base.

“I am kind of leery of going that way with one,” Debnam said. “I don’t know what the tribe will do.”

Just this year, though, enrolled members of the Eastern Band of Cherokee Indians decisively struck down a measure that could have allowed alcohol to be sold reservation-wide. The tribe has its own ABC board to handle liquor going in and out of Harrah’s, but it does not have a store that sells alcohol to the general public.

 

What about Sylva?

Since its creation, the Sylva has split its profits from its ABC store with the county 50-50. If Jackson County opens another store and siphons liquor sales from Sylva, the county could see its cut of profits go down — but it could have an even more dramatic impact on the town’s budget.

“We’ve talked about that, and there is some concern,” said Sylva Town Manager Paige Roberson. “It would have a direct impact on Sylva’s budget.”

Last fiscal year, the town and county each received $213,650. While that money is comparatively a drop in the bucket for the county, for Sylva, the loss of a portion of that funding will mean cuts to the town’s budget.

“We want it to be as accessible to the residents and businesses in Cashiers, but of course, we understand if a store opens up there, then we need to plan our budget, anticipate the loss of revenue,” Roberson said.

When declaring their support for a Cashiers ABC store, the Jackson County commissioners were careful to also state that they do not want a new store to hurt the town of Sylva.

“I don’t want to hurt them in any way financially,” Debnam said. “Their income is a lot less than our income.”

A few of the commissioners said a deal could be worked out to prevent Sylva from having to take a cut simply because the county wants to open another liquor store and that the county must remember that the town has been nice enough to share its profits.

“We have been partnering with them for close to 40 years,” Jones said. “That is pretty gracious of Sylva.”

Despite the likely negative impact on the Sylva store’s bottom line, Queen, the store’s general manager, said she supports the idea of a Cashiers ABC store, particularly since businesses have to regularly make the 45-minute drive to Sylva to pick up their liquor orders.

“There should be a store up there,” said Queen. “I am sure, in my mind, it would be easier.”

Before Jackson County opens a new ABC store, county leaders would first have to create an ABC Board.

Although town or county leaders appoint ABC board members, the boards operate as separate entities that set their own policies and procedures. Boards must consist of three or five members who serve three-year terms.

The town of Sylva already has an ABC board setup to run its store, but the board could be dissolved once a countywide ABC board is in place.

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