This spring, the Minnesota Legislature authorized the creation of a Regional Exchange District in the East Hillside of Duluth. This district surrounds the two Duluth hospitals, both of which will be undergoing extensive rehabilitation and construction.
This legislation — which will appropriate $100 million in state tax money and $10 million over 10 years from the city’s utilities fund and from the new Duluth half-percent sales tax for street maintenance — and the hospitals’ investments have been touted by city officials, Duluth legislators, and hospital leaders as a “once-in-a-generation” opportunity to create new jobs, strengthen the neighborhood, and boost the economy through additional “growth.”
The investment in new medical facilities — up to $1 billion — will result in many positive changes in health care through single hospital rooms, enhanced technology, advanced surgical suites, and better coordination and efficiency. But it will not create a single additional job, add an additional hospital bed, or increase capacity for additional patient care. And it must be remembered that neither St. Luke’s nor Essentia Health pays a dime in property taxes to the city, Duluth school district, or any other taxing authority.
In other words, these investments, except for a short-term increase in construction employment, will not, by themselves, generate additional economic activity in Duluth. Absolutely none.
Even so, it has been deemed a great idea for taxpayers to help pay for two new parking ramps and an addition to an existing ramp for hospital use, new streets and the extension of utilities for the benefit of the hospitals, and the possible demolition of the existing St. Mary’s hospital.
So why all the hype? Why a Regional Exchange District?
Despite all the colorful rhetoric and enthusiastic proclamations, it seems to me this scheme is chiefly about using taxpayers’ money to allow the hospitals and city to prepare vacated land for future development activities within the boundaries of the district.
While the opening up of developable land can be a net positive, the devil is in the details. The city and hospitals could continue what seems now to be a top-down approach to economic development, in which land is sold for top dollar to well-heeled developers to build mostly high-end housing, specialized retail, luxury hotels, and the like. Oh, and throw in millions in tax incentives so the city, county, school district, and other taxing entities receive reduced revenues for decades.
This failed top-down development strategy would result only in further weakening the fiscal strength of the city, and nearly all benefits would accrue to high-wealth individuals.
The real needs of East Hillside, meanwhile — such as a variety of housing choices, employment opportunities that pay living wages, and growth that results in real community wealth — would once again be ignored.
The failed development approach and policies of the city are not inevitable. In light of taxpayer investment in the district, the two hospitals could insist on preserving some property for smaller or nonprofit developers to build a range of housing types and price points. The city could reduce development fees and reserve taxpayer incentives for projects that create actual community wealth, not just the construction of new bling for high-wealth individuals. And the new half-percent sales tax could be used for active transportation projects like enhanced walking and biking infrastructure and better transit facilities.
There is a large toolbox of progressive and inclusive strategies and policies that could be cracked open in order to promote more equitable, sustainable development.
Duluth Mayor Emily Larson has proclaimed this initiative “completely catalytic.” Let’s make it so for all Duluthians.
Mark A. Baker of Duluth has worked at a regional planning agency, for an affordable housing development organization, and as a city administrator and planning consultant. He has a bachelor's degree in political science and urban studies from the University of Minnesota Duluth and a graduate degree in community planning and public administration from North Dakota State University.