A number of local organizations and tourist attractions can expect to take a substantial haircut in the amount of financial assistance they receive from the city of Duluth next year, and some will see that aid reduced to zilch.
At a Monday afternoon online news conference, Mayor Emily Larson said that with tourism tax collections down about 30% from last year, the city is "trying to get as many organizations as we can over the finish line, knowing that the impact to tourism is not just in 2020, and it won't be just in 2021."
In light of the difficult blow the COVID-19 pandemic has dealt to the city's tourism industry, Larson said: "We are looking at multi-year financial impacts. So, as we work to innovate and be creative and be vibrant and big thinkers in this area, we also are working to simply to implement and keep entities alive."
Larson noted that nine organizations that previously received tourism tax support from the city have been removed from the list for next year.
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"That may not sound like a lot when we're talking about millions of dollars. But for some of these organizations, that $15,000 or $20,000 or $40,000 they got from us are significant parts of their budget or even their budget in its totality. So, the cuts that we are projecting are not really fun to make," she said.
Jennifer Carlson, Duluth's financial director, projected that next year's tourism tax collections will be approximately 25% less than they were before the pandemic. Instead of bringing in about $12 million in revenue from hotels, restaurants and bars, as they did in 2019, the taxes are expected to generate about $9 million next year. Larson proposes to supplement that with about $700,000 from the city's reserves.
"This was of course a difficult process, as all budgets for 2021 have been, due to the pandemic," Carlson said. "This is a conservative/likely realistic number at this point from everything that we're seeing."
Larson noted that more than 60% of the tourism tax revenues will be needed to service existing debt and fulfill standing legal obligations, leaving the city with a relatively small amount of discretionary authority.
While most organizations would see the support they receive from the city reduced under the mayor's plan, Spirit Mountain would see its allocation rise from $275,000 this year to $500,000 for operations.
Larson acknowledged that's a substantial increase for Spirit Mountain.
"I think part of it, just to be really blunt, is that this is likely what Spirit Mountain is going to need," she said.
She said that especially as a special task force is working to find a more financially sustainable path for Spirit Mountain.
"It just felt like a more honest approach to say: 'We think they're going to need this amount,'" she said.
Noah Schuchman, Duluth's chief administrative officer, said: "In the end, it's clear that Spirit Mountain has needs that far exceed what the investment has been, and so, as the task force moves toward conclusion, we want to make sure that it is in the best possible position to implement recommendations that come out of the task force and move forward so that it can be in a place where it is more sustaining on its own."
The mayor's budget also contains a new allocation to help the University of Minnesota Duluth in its efforts to host a national track and field event next year.
The proposed tourism tax budget will go to the Duluth City Council for consideration Monday.
"Clearly, we have to make tough choices," President Gary Anderson said. "Mayor Larson makes recommendations to the council, and the council will look at these recommendations and debate and reflect and review and make the best decisions that we can for the good of the broader community."
Larson stressed the importance of managing expectations for a recovery.
"I do fully believe that we are going to rebound in the tourism economy and in the hospitality sector," she said. "I actually think we'll be stronger than we were before. I do think it's going to take us a while, however."