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Competing visions collide for Duluth's tourism tax spending

Some councilors seek to reduce the local property tax burden, while others promote additional project spending.

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North Shore Scenic Railroad assistant operations manager Zach Start signals the engineer as they near a string of cars in May 2021. Tourism tax support for the railroad would be reduced from $50,000 to $45,000 under a proposal aimed at funneling more money into the city of Duluth's general fund. Steve Kuchera / File / skuchera@duluthnews.com

A debate about how to allocate the proceeds of Duluth's tourism tax next year is likely to continue when city councilors next convene an online meeting Monday night.

At a Thursday evening agenda session, councilors engaged in a spirited discussion, laying out competing ideas for how the city should divvy up what’s expected to be a $13.3 million pie in 2022. But about half that pie will be eaten up by prior commitments, to pay off bonds or service other debt already incurred for projects such as Spirit Mountain’s Grand Avenue Chalet and Amsoil Arena.

As she weighed how the remaining funds should be spent, Duluth Mayor Emily Larson asked other organizations seeking tourism tax support to submit requests and detailed information about their ability to draw more visitors to the city. Her administration then reviewed these materials and made funding recommendations to the City Council.

But one of the organizations she proposed to fund has agreed to forgo $50,000 in support Larson had proposed. Nathan Bentley, the founder and namesake of the Bentleyville Tour of Lights, said the aid originally had been sought to promote the annual holiday event, but as he learned more about Bellmont Partners, the new marketing firm Duluth has hired to market the city as a tourist destination, he and the organization’s board of directors agreed they had no need for the tourism tax funds .

That decision freed up $50,000 in the tourism tax budget and has led to multiple competing City Council proposals.

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Councilors Janet Kennedy and Derek Medved were first to suggest a new use for the funds, recommending they be used to support continued efforts to build a skatepark at the Gary-New Duluth Recreation Club .

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An architectural rendering shows the skate park that is being constructed at the Gary-New Duluth Recreation Area. (Image courtesy of the Gary-New Duluth Development Alliance)

Kennedy, who represents Gary-New Duluth as part of the city’s 5th District, predicted the skatepark would draw skateboard enthusiasts from near and far, and noted the tremendous neighborhood support that already has been poured into the project.

“I think what we need to look at is: How much work have they done to get to where they’re at? And how much can we give to push them over the edge? So that it does become a place for the community but also a great place for tourism tax money to come in,” she said.

“I think it’s the right thing to do, and I think it’s the right time to do it,” Kennedy said.

However, at large Councilor Zack Filipovich had different ideas and introduced an alternative proposal in conjunction with 2nd District Councilor Joel Sipress.

“We are looking to put more tourism tax money into the general fund. It’s kind of an all-hands-on-deck sort of situation to put more money into the general fund, so we can lower the need for increased property taxes,” he said.

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While tourism tax dollars are expressly earmarked for investments that boost the city’s tourism industry, the city can seek reimbursement for services it provides in support of events. Filipovich said the $1.095 million the city currently is slated to receive falls well short of the costs it actually incurs.

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Elite runners take off at the starting line of Duluth's Grandma's Marathon on June 19, 2021. Grandma's is traditionally one of the city's biggest tourist draws, but the race was canceled last year, due to the COVID-19 pandemic. Steve Kuchera / Duluth News Tribune

Sipress said the amount of tourism tax dedicated to the city’s general fund has remained unchanged since 2016 and noted that if it had been adjusted for inflation the city would now be receiving at least $100,000 more than it’s slated to get in 2022.

To remedy the situation, Sipress and Filipovich propose to divert the Bentleyville funding to the general fund. They also would trim an additional $40,000 in proposed support for other organizations to achieve a total of $90,000 more for the general fund.

“I think it’s important to note and just emphasize that when we underfund the tourism tax contribution to the general fund, that means property tax payers pick up that difference,” Sipress said.

Sipress and Filipovich proposed cuts to tourism tax funding for the Glensheen Mansion, the Duluth Children’s Museum, the Hawk Ridge Bird Observatory, the North Shore Scenic Railroad, Spirit Mountain operations, Duluth Sister Cities International and an international film festival proposed by the Zeitgeist Center for Arts and Community.

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Birdwatchers scan the sky at Duluth's Hawk Ridge Nature Reserve watching for hawks and other raptors during the fall migration. The nonprofit Hawk Ridge Bird Observatory will celebrate its annual Hawk Weekend Festival Sep. 17-19. Steve Kuchera / 2018 file / Duluth News Tribune

The cuts largely targeted smaller organizations, and 1st District Councilor Gary Anderson asked if they couldn’t spread the pain more broadly and equitably.

At large Councilor Terese Tomanek put yet another project on the table, saying that Lincoln Park deserves more attention, as well.

“It seems to me that we have a lot of tourism and activity happening there, with the breweries and the cideries and the shops generating a lot of income. And it’s been a really tough year for them with the freeway construction. People have a hard time getting there,” she said.

Tomanek suggested wayfinding signs and a Clean and Safe Team similar to what’s in place downtown might be worthy candidates for funding with some of the proceeds that were to have gone to Bentleyvillle.

At large Councilor Arik Forsman said he saw value in both the proposed skatepark and Lincoln Park investments, yet he expressed worries about the maximum levy adopted by the Council a few months ago, which could authorize up to an 11% increase in the city’s share of local property taxes.

“As we look at setting our max levy, the tourism tax allocation to the general fund is a piece of the puzzle into reducing the total from what we set in September, which I personally agree with and believe that we need to get that number lower,” he said.

Seconding Forsman’s concern was 3rd District Councilor Roz Randorf.

“This year, we know we’re looking at up to 11%, and we’re trying to figure out ways to lower that,” she said. But Randorf noted that budget pressures continue to grow.

Randorf suggested the Council pause and consider its actions carefully, "because we’re going to be having this same discussion 12 months from now, and it’s going to be even more serious."

"So, I really want us to be thinking about not just this year, but next as well," she said.

Sipress said that ideally, he’d like to see the maximum property tax levy earlier authorized by the council reduced by at least 1.5% to 9.5%.

Filipovich said the city would need to achieve savings of about $490,000 elsewhere in its budget to reach that goal. His proposed tourism tax changes won’t come close to closing the gap. Nevertheless, Filipovich pointed out that it could be a useful start.

Related Topics: TOURISMDULUTH
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