Duluth Mayor Don Ness has laid out ambitious plans to enhance recreational opportunities along the city’s St. Louis River corridor and to promote it as an emerging tourist destination.

He hopes to fund the effort in large part by reinstating a tourism tax that expired in 2012. But to revive the tax, Ness’ administration needs the support of both the Minnesota Legislature and the Duluth City Council.

Toward that end, Ness and his supporters will make their pitch in St. Paul before this legislative session is up for the inclusion of language in a tax bill that would empower the city to renew a 0.5 percent tax on local food, beverage and visitor lodging revenue.

The tax was generating about $1.25 million annually when it sunset in 2012. This particular sliver of the tax stream first had been earmarked to cover the cost of locker room improvements at the Duluth Entertainment Convention Center’s original hockey arena and subsequently to help retire debts associated with the construction of the Great Lakes Aquarium. The tax had been scheduled to run through the end of 2013, but it expired more quickly when revenue from Duluth’s booming tourism surpassed expectations.

Ness now is laying plans to resume the tax and use it to support the development of additional tourist attractions in Duluth’s western neighborhoods that flank the St. Louis River. If he’s successful in his bid, the mayor will procure the ability to levy the hospitality tax for a maximum of 15 years or until $18 million can be raised.

“All we’re asking for is the authorization we need to make this decision at a local level,” Ness said of his efforts to line up the legislative support he needs in St. Paul. He contends the case for renewal should be made easier because Duluth is looking to resume a lapsed pre-existing tax instead of implementing an entirely new hospitality charge.

Although Senate Majority Leader Tom Bakk has given the proposal slim odds of passage during this expedited bonding session, Gov. Mark Dayton has expressed support, according to comments he shared with the Duluth News Tribune Opinion page.

“Duluth is a perfect example of how that kind of incentive can be used and used well,” Dayton told the paper’s editorial board for an editorial published today.

If he prevails in St. Paul, Ness aims to ask the Duluth City Council to take up the issue yet this summer.

City Council President Linda Krug already has lined up in support of the idea.

“I would love to see this tax reinstated and targeted toward Duluth’s western neighborhoods,” she said.

Krug noted the investment that already has been made in West Duluth for a new ski chalet at the bottom of Spirit Mountain, as well as a pending upgrade of Grand Avenue, aka Minnesota Highway 23.

“I see additional momentum coming out of this. These funds could be used to help renovate Wade Stadium and to help the Lake Superior Zoo, where we know additional funds will be needed to cover flood repairs” from 2012, she said.

Ness predicts that by investing in additional paths, improved river access and other recreational opportunities, the city will attract not only new visitors but also new residents.

“I see this as a critical piece to support the housing market in those neighborhoods,” he said, noting that a large portion of residents in western Duluth are senior citizens.

“We need to make a more compelling case for young families to consider home ownership in these areas or we will see the conversion of traditional residences to more and more rental housing, and that will change the fabric of these neighborhoods,” he warned.

Todd Torvinen, president and chief financial officer of Duluth-based ZMC Hotels, doesn’t oppose the idea of reinstating the tax on his company’s local operations in order to promote tourism and new attractions.

“Duluth has done a phenomenal job in terms of using tourism taxes wisely to develop a whole new local industry,” he said, noting that tourist spending has lessened the city’s dependence on residential property taxes and has improved the quality of living all residents enjoy.

“We need to continue to build new attractions to keep people coming,” Torvinen said. “I think we have a tremendous opportunity to promote Duluth’s western waterfront and attract people to a part of town that has too often been forgotten in the past. There’s still a lot of potential for recreational adventure tourism.”

While Torvinen expressed support for the renewal of a half-percent tax to support tourism, he said he would staunchly oppose any effort to use such a tax to cover the cost of delivering basic core city services, such as maintaining roadways as some have proposed. He said such a diversion would run counter to the whole rationale for a tourism tax.

Ness said the idea of Duluth using tourism tax dollars for street maintenance wouldn’t fly in the Legislature, at any rate.  

“The whole idea of tourism-related taxes is to support the industry, so the city doesn’t have to use general fund taxes to pay for tourist amenities,” Ness said, predicting: “The Legislature would never give Duluth authority to tax visitors in order to pay for its streets.”

Gerry Goldfarb, general manager of the Holiday Inn in downtown Duluth and chairman of Visit Duluth, an organization promoting Duluth as a tourism destination, said that group hasn’t yet weighed in on the mayor’s proposal to resume the half-percent tourism tax to help develop and promote the St. Louis River corridor.

But Goldfarb said: “It’s my individual opinion that this is an idea that’s worthy of exploration, because I view it as an opportunity to promote a beautiful area of Duluth that has largely gone untapped in the past.” 

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