Duluth came up empty on its request for legislative authorization to increase its local sales tax this year, even though 77 percent of the city's voters supported the proposed hike.
The Minnesota Legislature adjourned shortly before midnight Sunday without approving the tax or a funding package that could have fueled a massive investment in Duluth's medical district.
But the city notched several smaller wins in a bonding bill sent to Gov. Mark Dayton's desk Monday morning, including a $6.9 million appropriation to complete the conversion of a downtown steam heat plant to a more efficient hot water closed loop system. Several other projects also made the cut:
- $4 million for restoration work at Glensheen Mansion.
- $1.9 million for upgrades to the Lake Superior Zoo.
- $3.9 million in funding to fix up the chemistry building and preserve other assets at the University of Minnesota Duluth.
- Western Lake Superior Sanitary District eligible for a combined heat and power grant
- $5 million for the port development program.
- $28.1 million for regional mental health crisis center grants across the state, likely including funds for a facility in St. Louis County.
"The bonding bill is actually really good for Duluth. It's great for Duluth," said Mayor Emily Larson. She noted that Duluth's Local Government Aid remained intact, as well, providing continued critical funding.
Yet Larson said she felt "disheartened" with the session as a whole and the failure of the Legislature to support Duluth's request for a local sales tax.
"It's frustrating to have such a clear message sent by the electorate and to not have that honored, and to have put in so much time to seeing it get through," said Larson, who personally made 15 separate trips to lobby lawmakers in St. Paul.
"We worked incredibly hard. There was no stone left unturned," Larson said Monday.
The proposed half-percent sales tax would have generated about $7 million annually, with the proceeds earmarked exclusively for street improvements.
Local voters demonstrated their will to step up and pay for better streets in a November referendum, but any sales tax increase must be approved at the state level.
"We were asking for permission, not funding," Larson noted.
Duluth's request didn't make it into a tax bill that Dayton has threatened to veto, saying it fails to adequately fund schools.
Recognizing that the Legislature and the governor were at an impasse over the tax bill, local legislators devised another strategy, linking Duluth's local sales tax request with a funding package to aid in the growth of the city's medical district.
District 7A Rep. Jennifer Schultz, DFL-Duluth, said folding the sales tax into the medical district bill seemed to make good sense. A requested $184 million in state support would have leveraged an $800 million investment by Essentia Health and spurred another $20 million in infrastructure improvements by the city of Duluth.
"Unfortunately, the sales tax was in the medical district bill, because we thought that would be one of the best paths forward. We thought early on we had the governor's support, we had Chair (Greg) Davids' full support, and we had (Sen. Tom) Bakk's support. So we really did think we could get it accomplished," Schultz said.
Sen. Erik Simonson, DFL-Duluth, sought to have the medical district package along with the sales tax rolled into the state bonding bill but said the proposal fell off the table at about 10:30 p.m. Sunday.
"That's kind of one of the unfortunate losing projects in this whole deal, because we put a lot of work into that and really tried to make that something that would have worked well, and it was really sad to see that kind of get wrapped up in partisan politics," he said.
In spite of strong local support for a higher sales tax in Duluth, Simonson said: "The Republicans kind of dug in early on and said, 'We're not interested in doing any local sales taxes anywhere.'"
While Larson said she was disappointed, she noted that it took Rochester two tries to pass its own medical district bill. She vowed to continue to make the case for investment in Duluth's medical district and a local sales tax.
But Larson acknowledged Duluth will probably have to wait, as Dayton has adamantly maintained that he will not call a special session.
Duluth was unsuccessful on a couple of other fronts, as well. A request for a $1 million forgivable loan to help upgrade the Verso Paper Mill in Duluth, protecting 240 jobs there, failed to gain traction, although Larson said a lesser amount of aid may still be made available.
Duluth also was unable to obtain bond funding to replace a failing seawall behind the Duluth Entertainment Convention Center. But Larson noted such projects often take a couple of years to garner legislative support.