Red plan called a stimulus package for Twin Ports

When the dust settles in 2012 on the Duluth schools' red plan, the project will have had a $450 million economic impact in the Duluth-Superior area and provided about 1,600 people with work, according to a study sponsored by the Duluth Area Chamb...

Duluth school district
(File / News Tribune)

When the dust settles in 2012 on the Duluth schools' red plan, the project will have had a $450 million economic impact in the Duluth-Superior area and provided about 1,600 people with work, according to a study sponsored by the Duluth Area Chamber of Commerce.

"That's a big impact," said James Skurla of the University of Minnesota Duluth, who led part of the study." I am sure it was unintentional, but the [red plan] is a mini-stimulus package at the right time in this recession."

Details of the study, which were released Monday afternoon at a chamber luncheon, looked at the economic effects of the long-range building plan that can be measured -- most specifically in the the construction industry -- over the five years it will be put into effect.

Skurla, director of UMD's Labovitz School of Business and Economics, said he relied on a nationally recognized model called IMPLAN to come up with his numbers, which found that every dollar spent on the red plan will generate an additional 61 cents in the economy.

The chamber, which has endorsed the red plan, hired UMD's Labovitz School and the Minnesota Department of Employment and Economic Development to conduct the research.


The red plan's impact stems largely from work created in the construction industry, Skurla said. Ripple effects will be felt among architectural and engineering firms, food services, wholesale trade businesses and retail stores.

Skurla's research found that the real estate industry also has benefited from the red plan as the school district acquires property to accommodate school expansions.

He said more positive effects will be seen when certain properties such as Woodland Middle School and Central High School are sold.

Tony Barrett, an economics professor at the College of St. Scholastica who wasn't involved in the Chamber-sponsored research, said a $450 million economic impact is a big deal for the local community.

"This isn't going to transform our region," he said, "but an impact of that size in our region -- and this will be largely concentrated in the Duluth area -- is significant."

Red plan critics at Monday's lunch took issue with what they saw as a narrow study that only tells one part of the story.

"This whole thing is built upon a population of people with fixed incomes and a regressive tax system," said Harry Welty, a spokesperson for the anti-red plan group Let Duluth Vote. "This may be great for the construction companies, but how about the economic impact it has on the poorer people paying for it?"

Welty also questioned the possible economic effect of students leaving the Duluth school district because of the red plan.


But Skurla said a different type of study, called a cost/benefit analysis, would look at more-speculative consequences such as loss of tax base as property taxes rise or jobs lost due to school consolidations. A cost/benefit analysis is much more expensive, he said.

"There are impacts that can happen from a project like this that are non-quantifiable that were beyond the scope of this study," Skurla said.

According to numbers compiled by the Minnesota Department of Education, Duluth had a net loss of 417 students to other districts -- 80 more than the year before and up 223 students from the 2004-2005 school year. The red plan was adopted in June 2007.

"If the overall impact of the red plan is to cause a significant blow to the reputation of Duluth schools," Welty asked the researchers, "what kind of impact would that have on Duluth's economic corner?"

Skurla said he expected the stability the red plan eventually will create for the Duluth district will attract more families than it loses.

Barrett said the study can't be faulted for not addressing some of the opponents' issues.

"To get into those impacts, you would have to make so many assumptions about people's behavior that we can't really know right now," Barrett said. "The more assumptions you make, the weaker your results."

Barrett said the multiplier used in the study was conservative, which lends credibility to the results.


"There have been times in Duluth history, when someone wants to push a project, that they put in a multiplier that is very optimistic," Barrett said. "But that doesn't sound like the case here."

The full results of the study are available online at the Chamber's Web site at www.duluth

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