Duluth mayor proposes plan to divvy up tourism tax proceeds

Duluth Mayor Emily Larson acknowledged that hard decisions are reflected in a tourism tax proposal her administration will send to the City Council on Monday.

The resolution will cement a decision to slash the city's funding for Visit Duluth by more than 56% — from $1.5 million to $650,000 — as the city redirects the bulk of its marketing expenditures to Edina-based Bellmont Partners in 2022.

As announced in August , Bellmont stands to receive $1.8 million under the city's intensified campaign to raise Duluth's profile as a tourist destination. Larson said she believes the city can do better , noting that while tourism spending in recent years has continued to trend upward — with the exception of an obvious downturn during the pandemic — it has often failed to keep pace with inflation.

Visit Duluth will now play a reduced supporting role, working to attract conventions, operate a visitor center and promote special events, including sports competitions.

Initially, the city had proposed to pay Visit Duluth $400,000, but through negotiations with the organization's board of directors, they arrived at a more generous sum and a refined set of responsibilities.

"What we will receive is a fully staffed convention/visitor sale strategy based on the success that they have had in this area. It will also include visitor center staffing and availability that was not a part of the original $400,000 that they had recommended either. So, it all makes sense," Larson said of the tentative agreement unanimously approved by the Visit Duluth board Wednesday.

Additionally, the city of Duluth has agreed to make a one-time payment of $300,000 to Visit Duluth in exchange for control of the organization's website and social media accounts, as well as exclusive use of the "Visit Duluth" name and logo.

Visit Duluth Board Chair Brianna Vander Heyden said she would not comment regarding the agreement Thursday out of deference as the proposal awaits consideration by the City Council. However, the organization did issue a statement: "We look forward to partnering with the city of Duluth and Bellmont Partners, the contracted marketing agency, and are confident that as a team we will continue to drive our industry forward."

In all, Duluth proposes to spend about $13.3 million from its tourism tax fund next year — $1.3 million more than it actually expects to collect from people staying in hotels, dining out or grabbing a drink.

In order to close that gap, city administration proposes to draw on $1.8 million in currently unappropriated reserve funds now sitting in its tourism tax account.

More than half of Duluth's tourism tax collections are dedicated to repay bonds and loans associated with projects, such as Amsoil Arena, Spirit Mountain's Grand Avenue Chalet and dozens of recreational amenities developed throughout the St. Louis River corridor.

However, Larson noted that the city has significant discretion as to how to distribute the remaining proceeds from its tourism tax, so long as its expenditures can be shown to support Duluth's tourism industry as a whole.

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One of the largest projects slated to receive tourism tax support for the first time next year under the mayor's plan is a U.S. Customs facility that could be set up to welcome and process international travelers arriving via cruise ships next summer. The city has earmarked $450,000 to help set up such a facility, likely in collaboration with the Duluth Entertainment Convention Center, in anticipation of the arrival of the Viking Cruise Line, which added Duluth to its itinerary of destinations for seven trips in 2022.
Larson remains optimistic other cruise lines will follow Viking and said: "We're really excited about the economic impact that will bring. And there needs to be dedicated space. That's a requirement of Customs and Border Patrol. There needs to be some dedicated space that they can use, and this is how we get that done."

The tourism tax plan also contains first-time funding for three events: $50,000 for the Bentleyville Tour of Lights, $25,000 for a proposed international film festival to be hosted by the Zeitgeist Center for Arts and Community and $8,500 for the Kraus-Anderson Bike Duluth Festival.

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Larson characterized the funding set aside for the events as placeholders, explaining that more detailed information and plans will need to be garnered before the city disburses some of those dollars. But she noted that about 70% of participants in the bike festival come from out of town, and Bentleyville draws about 250,000 people annually.
Larson said that when she first took office in 2016, it came as a surprise to learn that no formal application or review processes were in place to evaluate requests for tourism tax support.

"There was no discussion about budget or how does this tie into the bigger tourism picture or what's your strategic plan. So, I put in place a process to start that, and we took a break from that last year because of the pandemic. But otherwise, I've worked really hard to have some accountability pieces in place," Larson said.

There's never enough money to go around. While local tourism spending continues to rebound, Larson said most tourism tax recipients will not see payments return to pre-pandemic levels, and nearly everyone saw support cut sharply in 2020 as COVID-19 precautions took hold.

"I sent a personalized letter to every entity that applied and every entity that was funded or not funded and explained the merits of why they were in that particular queue," Larson said.