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Duluth mayor proposes freeze in tourism funding

The snow making machines were out in force atop Spirit Mountain Tuesday as the facility prepares to open for downhill skiing. (News Tribune file photo)

Duluth Mayor Emily Larson proposes to hold the line on tourism tax spending next year. The budget she has proposed for next year assumes no growth in tax collections from local hotels, motels, restaurants and bars.

That's not to say she believes the city's tourism industry will stagnate, but Larson said she has chosen to take a conservative approach to allocating funds, after this year's proceeds came in a bit softer than projected.

Wayne Parson, Duluth's chief financial officer, was quick to note that 2016 was a banner year for Duluth's tourism industry, breaking all previous records, thanks to a slate of high-profile events, including a tall ship festival.

Although tourism tax collections have continued to increase in 2017, Parson expects this year's growth rate will come in at about 2 percent, falling shy of the $11.68 million initially projected in 2017. He predicts actual tourism tax proceeds will total about $11.52 million, and next year's proposed budget — which awaits likely Duluth City Council approval Monday — is built around that same number.

"We wanted to make allocations that the entities could rely upon," Parson said. "There's upside potential that our collections will grow, because historically they've grown. So that could allow us to build up a working fund, because there are other entities out there that have applied with ideas to fund through tourism, and we would like to look at those opportunities."

Larson said she brought the city's tourism tax recipients together in June and asked them to detail exactly how they used the funds and to what effect. She also asked them to make a case for continued funding next year.

Following analysis of those reports, Larson said: "Very few entities are getting an increase over last year. Many are getting a slight decrease. There are no real sharp turns, and that is intentional on my part."

Larson intends to make the reporting process an annual exercise that will inform future funding decisions, saying: "If we're going to make any long-term changes or bring additional partners in, we need to be intentional about how we're working with existing recipients to do that well."

Larson noted that more than 60 percent of the $11.5 million in tourism tax money it collects is legislatively committed to specific recipients.

"While it is a lot of money, what we have to make choices about is not that whole pot," she said.

Anna Tanski, CEO of Visit Duluth, applauded Larson for her conservative tourism tax budget. When this year's receipts turned out to be less than anticipated, Visit Duluth had $140,000 in funding held back, and other recipients also have had their allocations reduced.

"We definitely don't want to see that repeated, because it was a significant hardship," Tanski said.

"We're still hoping some of those dollars may come back in early 2018," said Tanski, explaining that final tourism tax receipt data for the current year likely won't be available until after February.

Under Larson's proposed budget, Visit Duluth would receive $2 million next year — $100,000 more than it was allotted for 2017. Larson said she will be looking to Visit Duluth to help bring together the local tourism industry to better promote the community's attractions. She's also suggesting popular Duluth destinations be opened to locals free of charge twice each year on a designated day during the slower shoulder months of the tourist season.

Tourism is sometimes taken for granted and misunderstood, noted Tanski, who expressed support for the initiative.

"It is easy I think to sort of overlook the fact that we have these tremendous gems sitting right here in our own backyard," she said."I think the more awareness we create around our industry, it's only going to make the industry stronger."