DEDA OKs money for new skywalk sections

Duluth's skywalk system will grow longer.

The Duluth Economic Development Authority approved plans to pay for two new segments of the elevated walkway system: linking the Technology Village across Lake Avenue with Lake Superior Place and connecting the Sheraton Hotel with Greysolon Plaza by a bridge spanning Third Avenue East.

The improvements are expected to cost about $6 million, and several additional pieces need to fall into place before construction can begin.

The skywalk across Lake Avenue hinges on easements from five property owners and a successful on-budget bid. In light of these complications, DEDA President Jim Stauber said construction of this segment may be delayed until 2009.

However, Stauber said he believes the skywalk across Third Avenue East could easily come to pass this year.

Sherman Associates, which recently built the$40 million Sheraton Hotel and condominiums and which also owns Greysolon, has agreed to build the bridge for no more than$1.65 million. That's about20 percent less than the project's anticipated construction cost, Stauber noted.

Tom Cotruvo, DEDA executive director, said money for the skywalks will come primarily from tax-increment financing funds. Tax-increment financing -- often called TIF for short -- involves taking a portion of new taxes generated by a project and using that money to cover certain development costs or to support future growth in the area.

The Third Avenue East skywalk would draw its money from three sources:

* $1.1 million from bonds issued in anticipation of continued TIF revenue that stem from the construction of the Sheraton Hotel and condominiums;

* $372,000 from TIF District No. 7, a citywide housing district;

* And $181,000 from TIF District No. 20, an area that includes United Health Care's facility on Rice Lake Road.

Cotruvo said the expenditures constitute a legitimate use of TIF money because skywalks are public infrastructure that support business and residential development. He also explained the city has the latitude to spend up to 25 percent of the money it collects in any TIF district outside the boundaries of that district.

The Lake Avenue skywalk will cost considerably more to construct because it involves an elevator and will stretch 350 feet -- nearly twice as far as the Third Avenue East skywalk.

The bulk of the $4.4 million budget for the Lake Avenue structure would come from two sources:

* $2.99 million from TIF District No. 4, established for the waterfront and east business districts;

* $1 million from the city's Storefront Loan program, leaving that fund with a cash balance of about $2 million;

* Benefiting property owners, namely Minnesota Power and VonRock LLC, would chip in $250,000 and $50,000, respectively.

An earlier proposal to use Municipal State Aid money designated for transportation improvements met with opposition from DEDA commissioners who were worried about siphoning away money needed to repair the city's aging streets.

But the plan to use TIF money was much better-received. DEDA commissioners voted 8-1 Monday night in support of the revised funding mechanism for both of the new skywalks.

Garry Krause cast the only dissenting vote. He suggested the TIF money could be put to better use, especially as Duluth competes with other communities across the nation to attract economic development.

"The city keeps spreading itself thinner and thinner," Krause said. "We keep diluting the money we have for things, like skywalks that really don't create jobs, except for during construction."

Stauber said he shares Krause's concerns about spending TIF money wisely, but he also noted that skywalk promises were made when SMDC Health System invested in a larger downtown medical campus, Sherman Associates erected a new Sheraton Hotel and when A&L Properties constructed the Technology Village building. He contends the city has an obligation to keep its pledges, especially in light of the jobs those projects brought to downtown Duluth.

The last expansions of the skywalk occurred in 1999, when the city built an elevated passage to the Duluth Plumbing Supply building and a skywalk tunnel dubbed the "skunnel" between the Radisson and the Duluth Public Library.

There has been much talk during the interim but little action.

"We're glad that after so many years of discussion these skywalk links are finally coming to fruition," said Kristi Stokes, president of Duluth's Greater Downtown Council. "Connectivity is so important to the health and success of the downtown area."

Stokes said she remains hopeful that one day soon the Duluth's skywalk system will span the downtown east-to-west, unbroken. She pointed out that a May survey of downtown property owners and businesses showed that92 percent of them support a further extension of the skywalk system.

PETER PASSI can be reached at (218) 279-5526 or by e-mail at ppassi@duluthnews.com .