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Duluth's financial difficulties deepen

Mayor Emily Larson says the economic impact of COVID-19 will force Duluth to do "less with less."

Mayor Larson
Duluth Mayor Emily Larson speaks during a press conference. 2019 file/News Tribune
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Mayor Emily Larson did little to sugarcoat Duluth's deepening financial difficulties at a Wednesday afternoon news conference, providing new details about the toll the COVID-19 pandemic continues to take on the city's budget.

The city had predicted that its property tax collections would fall 5%-20% shy of the $15 million in its budget because of the coronavirus, but Larson said that shortfall could be even greater, as St. Louis County announced earlier this week that it will waive late fees for cash-strapped taxpayers who are unable to make good on payments due Friday, May 15.

Larson took some consolation that as of Tuesday, the county had already received payments from 60% of property owners. But she acknowledged it is difficult to guess how much collections will increase in the final days before the tax deadline.

As for sales tax, Larson said the city's collections were started out well this year — 4% above last January's level — but were off 26% as of February. While the coronavirus shutdown had not yet begun by February, Larson pointed out the taxes are collected a month later in April, when the economic shock waves of the pandemic were being felt. Both Minnesota and Duluth allowed already-distressed businesses more time to remit those sales tax payments as a result.

Duluth collects tourism taxes on a monthly basis, and those were about 61% below last year's level this March, Larson said.

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"That is not surprising," she said. "That's a little more than we had talked about publicly, but it is completely unshocking."

About half of the $12 million in tourism tax collections Duluth had anticipated in 2020 are already committed to servicing debt related to large capital-intensive enterprises, such as Spirit Mountain and the Duluth Entertainment Convention Center.

Larson said the city must honor those commitments but warned that it clearly will be unable to meet its obligations to other tourism partners, who usually receive a cut of the taxes.

“I think it’s really important to be direct and candid,” Larson said.

“In many years past, I think we’ve been able to cobble things together,” she said. “That will not be the case for 2020. It will not be the case for 2021.”

Larson said she has had to make difficult decisions, such as temporarily reducing city staff by more than 100 positions.

“We literally will not be able to provide the same level of service that you have come to rely on,” she said. “So, we are going to ask residents to step in further with us in taking care of this community,” Larson said, pointing to activities such as a recent community-wide cleanup.

“We will be doing less with less as a city,” she said. “That isn’t anything a mayor wants to say. That certainly is not an experience any mayor wants to have. But it is the one we are having, and it is the one that we will work our way through.”

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Larson said her administration continues to meet with the bargaining units that represent city workers to discuss how best to trim costs.

If concessions and further cuts are part of the picture, Larson was asked whether administrative staff would be included. She responded: “Yes, we are having that discussion. Yes, I am committed to sharing in the sacrifice that we all have to be sharing in.”

But Larson noted further negotiations with bargaining units will be required to make progress on that front.

“I would expect you’ll hear more from us on that in the next week or two,” she said.

Peter Passi covers city government for the Duluth News Tribune. He joined the paper in April 2000, initially as a business reporter but has worked a number of beats through the years.
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