Developers in paradise

On the St. Louis River, private dreams and public planning intertwine

John Ramos

Part Two: The beautiful vision

Last week, we saw how Mayor Emily Larson and the City Council strong-armed the political process to push forward a new park at Tallas Island, over the objections of the Parks Commission. We saw how the decision to build the park was made unilaterally by the Ness Administration in 2015, without public input. We saw how the city ignored citizen opposition to the park for the next three years, continuing to plan it as if no opposition existed. We saw the city’s obvious attempt to maneuver the Parks Commission into a Yes vote, and we saw the mayor kick the Parks Commission aside when they voted No.  This all combined to paint a picture of a city that was determined to build a park at Tallas Island, no matter what.

The question we did not answer last week was why. What explained this unusually strong appeal that Tallas Island had for city leaders? Why was THAT SITE so important that Mayor Ness committed half-and-half money to it immediately and Mayor Larson risked political capital to ram it through? Sure, it was a nice site—but there were plenty of nice sites on the river, both existing and planned, where you could do the same thing at a quarter of the cost.

The idea of a Tallas Island water access park first came to public attention in 2015. But to answer the question of why everybody loves it so much, we need to go back further.

Tallas Island reborn

The section of shoreline facing Tallas Island was not always as picturesque as it is today. Prior to 2010, the narrow channel of water separating Tallas Island from the mainland had been silting in and getting shallower for half a century. Encroaching vegetation was turning more and more of the channel into a wet meadow, to the point that Tallas Island was becoming part of the mainland itself. Had nothing been done, the channel would have eventually filled in completely.

In the early 2000s, the Minnesota Department of Natural Resources, the Minnesota Pollution Control Agency, and others began working on a clean-up plan for Stryker Bay, in West Duluth, whose sediments were contaminated with tar seeps and industrial chemicals. As part of the remediation plan, certain areas of open water were scheduled to be capped with earth. However, under federal regulations, if a project destroys open water in one place, it must mitigate the loss by creating new open-water habitat elsewhere. To meet this requirement, the DNR opted to dredge out the clogged channel between Tallas Island and the mainland. The dredging work was done in 2010, re-opening a channel five feet deep and allowing small boat navigation for the first time in decades.

The Spirit Valley Land Company

The Spirit Valley Land Company (SVLC) was formed by Brad Johnson in 2008.  Johnson, a developer from Chanhassen, had been involved with building the Ramsey Village townhomes in West Duluth in the 1990s. In a story that Johnson often tells, while driving past Spirit Mountain day after day in the course of his business, he became interested in all the undeveloped land he saw around the ski hill. He formed the SVLC, recruited investors, and began purchasing parcels of land around Spirit Mountain. The long-term goal of the company was to assemble enough property for large-scale development, then find someone to develop it—a task Johnson believed might take ten years or more. 

For two years, the SVLC did little but buy property. Some of the property the SVLC purchased was private property, some was city property, and some was tax-forfeit property managed by the county. The county, eager to get property back on the tax rolls, urged the SVLC to buy as much tax-forfeit property as they could. By small pieces and large, the SVLC’s holdings grew. 

Today, the SVLC owns about 90 acres of property around Spirit Mountain and Riverside, roughly divided above and below Grand Avenue. The property above Grand is mostly forested hillside and drainages; it has never been developed. The property below Grand is a landscape of meadows and forested drainages that was once, though you can’t tell it today, a golf course. The SVLC’s property ends at the BN railroad tracks. The new Kayak Bay Road will continue over the tracks and end at the new water access park on the river.

Johnson has been unusually open about his group’s goals for a long time, attending public meetings and visiting community groups, sometimes to pitch his vision and sometimes just to listen. He made his first public presentation of the SVLC’s plans to the Spirit Mountain board of directors on July 16, 2009. 

At that time, Johnson told the board that the SVLC’s development might include housing, retail, and possibly a hotel or resort, but that the overall theme of the development would be “soft recreation.” Johnson wanted to take advantage of the river corridor’s recreational amenities to create a “new sort of hub” in West Duluth.

“There’s not many places in the world that have both [a ski hill and a river] adjacent to it,” he told the board. “It’s kayaking, it’s oriented toward trails, it’s oriented toward biking … The concept is that trails are good. Okay? … For whatever we’re thinking about doing … trails are just good. It’s good for business, it’s good for people.”

Johnson was especially interested in the DNR’s dredging work planned for Tallas Island. “There is the big picture that you should be aware of … [Our] final major [goal] is that we give everybody that comes here year-round access to [the river] … There’s some important things going on in the Tallas Island area. They’ll actually be creating a public access and a harbor down in this area, which doesn’t exist at the present time. And that is a tremendous opportunity for visitors to Duluth, and also people that live in Duluth, because they right now have a very difficult time getting down there.”

Johnson’s statement proved to be remarkably prescient; he made it six years before the city ever suggested building a public access at Tallas Island.
When I spoke with Johnson following the 2009 meeting, he told me, “This is a green development, and it’s designed to be urban resort-ish, you know? … It’s got to make good use of the amenities. And one of the major amenities we have there is just the environment. For us, that’s an amenity. You know … any trail system, any river, any of that kind of stuff is an amenity that attracts different people.”

Johnson said that he considered the project to be a win-win for the city and developers. The SVLC’s property, he said, as it currently existed, generated about $15,000 a year in property taxes. When it was developed, he estimated it might generate “between 500,000 to a million” dollars a year. “So you have to look at the economic development and say, ‘Okay, that’s not a bad dream. How do we make that happen?’ You know? And … you try to explain that to people.”

The investors

With the exception of Johnson and one other person (Brian Burdick, from Chanhassen), the SVLC’s investors all live in Duluth or have businesses located here. They include some well-known names. 

Bill Burns, business lawyer extraordinaire. An attorney and shareholder with the Hanft-Fride law firm, Mr. Burns is frequently seen at city Planning Commission or DEDA meetings. Sometimes it seems as if hardly a development project in Duluth goes by without Burns being involved. He has been named a “Minnesota Super Lawyer” 16 times, a distinction conferred upon only the top five percent of attorneys. In addition to being an investor with the SVLC, Burns serves as the group’s attorney.

Dave Goldberg, hotelier, manufactured home entrepreneur, real estate developer, and philanthropist. In 2007, Goldberg donated $1 million to the Heritage Sports Center to build a Boys and Girls Club, complete with game room and climbing wall. As thanks for his generosity, Mayor Don Ness proclaimed a “Dave Goldberg Day” in Duluth. Mr. Goldberg has also done business with Brad Johnson on other projects.

Mark Youngren, president of Duluth Steel Fabricators, a manufacturer of structural steel.

Keith Youngren, vice president of Duluth Steel Fabricators.

Dale Johnson, founder of Johnson Carpet One in West Duluth.

Scott Neustel, owner of two Ski Hut retail shops in Duluth. For the past several years, Neustel has joined Brad Johnson as the public face of the SVLC. Neustel is also a founding member of the Northland Paddlers Alliance, which has promised to “adopt” the new park.

Andy Wheeler, managing partner at Wheeler Associates, an insurance and wealth management firm.

Pat Heffernan, managing partner at Wheeler Associates. Mr. Heffernan is quite popular with Duluth mayors. In 2014, he was the featured speaker at Mayor Ness’s 40th birthday party. Today, he is part of a small group of confidants with whom Mayor Emily Larson occasionally joins in what she calls a “circle of discussion, trust, challenge, and vision.” The other members of Larson’s circle are the mayor’s husband, architect Doug Zaun; Tim McShane, a vice president at Republic Bank; Laura Mullen, a cofounder of Bent Paddle Brewing Company; Lisa Bodine, president of the marketing firm Giant Voices, Inc.; Mark Emmel, a partner in Labovitz Enterprises; George Goldfarb, president of Maurices; Pat Mullen, a senior vice president at ALLETE; and the aforementioned Bill Burns, who uses his powers to organize the meetings.

What is notable about this roster, of course, is that two of the mayor’s nine most trusted advisers are investors in the SVLC.

Work, work, work

From the very beginning, the SVLC’s vision appealed to governmental leaders at all levels. Employees with the city, county or state have been involved with the project for at least a decade, helping the SVLC with land deals, shepherding them through rezonings, assisting them with applications, and brainstorming configurations for the new park on the river.

One very big effort the city made for the proposed project involved getting permission for the new Kayak Bay Road to cross the BN railroad tracks. This was not a simple request, but a problem that took years, money, and the ongoing involvement of top city administrators to resolve. Initially, BN was adamantly opposed to any new crossing of their tracks—so much so that the city began to think they might have to end the road above the tracks. Eventually, however, an agreement was worked out whereby BN would allow the road to cross the rail at Kayak Bay if the city agreed to close another crossing at 59th Avenue West. The 59th Avenue West closure, in turn, was tied to the extension of Waseca Industrial Road, which would allow heavy trucks to bypass residential neighborhoods as they traveled to and from the waterfront district.

In short, dealing with that single element of the project—crossing the tracks—was a long, complicated, frustrating process, but the city handled it. They also took care of a lot of other things. Department heads met regularly with the SVLC at City Hall to keep the investors updated.  At one point, the city and the DNR spent a fair amount of time studying a reroute of the Munger Trail that would veer off from the current trail in Riverside and head down to the new paddle center on the river. Eventually, practical realities would cause them to abandon this idea, but it wasn’t for lack of trying.

Though scarcely a word was said about the Tallas Island paddle center in public, behind the scenes the city was always working on it. The price tag for city staff time alone must be astronomical.
In reviewing city emails and documentation on the Tallas Island project, I found no evidence that the city ever considered NOT building a park at Tallas Island. Rather, everybody was joined in a common purpose to build the park and help the SVLC establish their commercial hub. Almost all the public input the city received was opposed to a park in that location, but voices of opposition had no place in this determined process. On Nov. 30, 2017, Director of Public Administration Jim Filby Williams emailed St. Louis County Public Works Director Jim Foldesi. “Thank you very much for St. Louis County’s support for this exciting public-private project. Slowly but surely, our vision is coming to fruition.”

The proto-park

In early 2014, the SVLC commissioned Westwood, a Minnetonka-based civil engineering company, to sketch a concept drawing of a development below Grand Avenue. The drawing, which is date-stamped Jan. 7, 2014, shows colored blocks of property for apartments, retail, “mixed-use,” and a hotel. It also shows a park on the riverbank, below the BN tracks, serviced by a loop road that goes in and out, crossing the tracks twice. 

The sketch was produced two months before Mayor Ness announced the creation of the half-and-half tax, and more than a year before the city proposed a park at Tallas Island. Nevertheless, the similarities between the developers’ 2014 drawing and the city’s 2018 plan are undeniable. They share basic elements: a road over the tracks, a parking lot, access to the water, staging areas. The SVLC’s drawing has four piers sticking into the water; the city’s plan has one. 

There are also differences. In the SVLC’s picture, a bridge connects Tallas Island to the mainland. Readers will remember that Senior Parks Planner Lisa Luokkala assured the Parks Commission on Jan. 10, 2018, that the city’s plan for the park had been scaled down from previous plans—that, among other things, the city was no longer considering a bridge to Tallas Island. I had found this puzzling at the time, because a bridge to Tallas Island had never been part of the city’s proposal, not even in the 2015 concept plan. This sketch suggests the bridge idea came from developers.

Attached notes refer to the park in the SVLC’s sketch as “County Park.” At that time, in early 2014, it appears they were hoping that the county would take on the task of creating a swell little park on the river. As things turned out, the city got the honor.

The stars are aligning…for some

The funny part is, the city was being responsive to citizens’ concerns all along. It was just a very small number of citizens, nine or ten people who had been thinking about water access at Tallas Island for at least a decade. Those nine or ten members of the public also happened to be people who were on excellent terms with their elected officials. As they pushed their dream of water access, in time it became the officials’ dream. Thus, whether the Parks Commission realized it or not, by voting against the new park, they were not merely standing in the way of a three-year planning effort, but a ten-year effort, backed by some very influential people. Small wonder Mayor Larson unleashed her ruthless side.

The Lower Spirit Mountain water access park may turn out to be a fine facility, a bustling recreation hub and economic driver of much business, as the city hopes. Maybe we’re even witnessing the rise of a new Canal Park in West Duluth, as some have whispered. And maybe, indeed, the water access park at Tallas Island serves that vision in a way that a water access park somewhere else could not.

All of this may be true. But the citizens were never asked if they wanted that park. That’s all. The project was supported by so many of the right people they forgot to ask the public. 

All animals are equal, but some animals are more equal than others. - George Orwell