News & Articles

Spirit Mountain’s fiscal year wrapped up at the end of April. At the Spirit Mountain board meeting of April 17, 2014, Director of Finance John Phomas told the board that although March had been an unexpectedly busy and lucrative month for the ski hill, revenue for the year was more than half a million dollars below budget. Snow conditions were good this winter, but Spirit Mountain was hurt by the many extremely cold days when operations had to be suspended for safety reasons.
This is the third consecutive year that Spirit Mountain has come up short on revenue projections. In 2013, they fell $371,621 short; in 2012, the deficit was $633,893.
Spirit Mountain’s operating income—the money that’s left after subtracting expenses from revenue—has fallen below budget in the last three years as well (and in nine of the last eleven years overall; see Figure 1). Operating income for 2014, projected to be $570,970, actually turned out to be $142,944, leaving a hole in the budget of $428,433.
Luckily, Spirit Mountain has sources of income other than operating income. From 2003 to 2009, the ski hill received $225,000 per year in tourism tax money from the city, which was used for repair and replacement projects until Spirit Mountain decided, with the blessing of the city, to use it to build an alpine coaster. Today, with the coaster built, as well as the new Grand Avenue chalet and all the other new attractions of recent years, Spirit Mountain’s appetite for the tourism tax has grown a bit.
In 2010, Spirit Mountain’s share of the tourism tax jumped from $225,000 to $275,000.  In 2011, it grew to $350,000.  In 2012, to $500,000. In 2013, Spirit Mountain received $560,000 in tourism tax, and in fiscal year 2014, Spirit Mountain happily collected $725,700 in tourism tax to help with its many obligations. This represents more than a tripling of Spirit Mountain’s tourism tax allocation in only five years.
In addition to the tourism tax, Spirit Mountain receives a line of credit (LOC) from the city, which is intended to see them through their slower months of operation, and which Spirit Mountain is supposed to pay back at the end of each year. Starting in 2007, the city extended a $250,000 LOC to Spirit Mountain. In 2010, the LOC increased to $350,000. In 2012, it went up to $600,000. In 2013, the LOC jumped once again, to $900,000. That is where it is today.
Sadly, economic conditions have prevented Spirit Mountain from repaying the LOC the way they would like to. For the last two years, they have made no payments at all; the LOC balance currently stands at $845,000. Board member Todd Torvinen told the board that Dave Montgomery, the city’s chief administrative officer, wanted to see evidence that Spirit Mountain could support the LOC. To that end, Torvinen and the Spirit Mountain finance committee had crafted a spreadsheet with a few “key assumptions,” outlining a payback plan.
Chief among the key assumptions is an $850,000 boost in revenue predicted for next year. Spirit Mountain plans to accomplish this by raising lift ticket prices. The average daily ticket price will rise from $14 to $20, and the average season pass from $143 to $206. If the higher prices lead to the $850,000 revenue increase, Spirit Mountain will be able to start paying down its line of credit.
It all sounded good to board members, who unanimously approved the plan. And when Executive Director Renee Mattson presented Spirit Mountain’s 2015 budget to the city council on April 28, city councilors followed suit, amiably and unanimously approving it. Nobody mentioned Spirit Mountain’s steeply rising tourism tax allocation. The issue of the unpaid line of credit never came up. The only comments made by councilors focused on their pleasure and satisfaction with everything being done at Spirit Mountain, and their total confidence in its leadership. After approving the budget, they underscored their appreciation by voting to allocate Spirit Mountain another $80,000 in tourism tax.

DEDA hobnobs for Duluth

During the April 23 board meeting of the Duluth Economic Development Authority, Director of Business Development Christopher Eng told commissioners that DEDA will be focusing more strongly on marketing the city to developers in the coming months. To reach out to Twin Cities developers, DEDA is paying the Minnesota Real Estate Journal to organize a promotional event, focusing exclusively on Duluth, at the Golden Valley Country Club.
“[They will] take care of all of that marketing for us,” Eng said. “We just show up and tell our story. And we’ll go down with a group of people and have a panel and talk about why people should choose Duluth to do business, or build housing, or to look at this as the next retail opportunity.”
DEDA also plans to spend $10,000 on a half-page ad and 17-page write-up in Delta Sky Magazine, which is read by 5.2 million people trapped on Delta planes worldwide.
“They’re kind of a captive audience,” Eng said.
DEDA: Developer?
As they discussed the potential redevelopment of the Central High School site, Eng suggested to commissioners that DEDA might consider “taking a more active role” in the project by actually developing it themselves. Eng envisioned DEDA building “a mixed-use [project] which might include some market-rate housing, might include some retail, might include a hotel and restaurants, very similar to what we see with Bluestone Commons.”
That would be something new, to see DEDA move beyond just helping developers to actually developing their own projects. And it raises an interesting question: When DEDA comes to itself for a subsidy, will they approve it?

A DEDA levy?

Along with building nightclubs and barbecue joints in Central High School, DEDA wants to promote new housing in Duluth. Looking ahead to their May meeting, Eng told commissioners that “maybe we can start talking about a DEDA levy, to help us really get going on some of these workforce housing issues that we’re talking about doing.”
Well, the schools have a levy, and the city and county have levies, and the DTA has a levy… so I guess it makes sense that DEDA should have a levy, too. They’ll certainly need the money. At the Golden Valley Country Club, golf memberships alone cost $25,000.

Hanson in yo’ face

At the city council agenda session of April 24, affable community backslapper (and fairly new city councilor) Howie Hanson showed his crabby side. When informed that the proposed streets program would be funded with a monthly $8.50 fee on households, he flatly refused to consider any fees or tax increases to pay for the program.
“Find the money,” Hanson said flatly. “Make it a priority. Get rid of the sexy projects. Retain the basic services.” He suggested sunsetting the streetlighting fee and applying the freed-up revenue to the streets. “I’d like to rework those numbers to see what we’re really talking about, and I’ll ask the administration to sharpen its pencil even further—and without the spook tactic of losing jobs and losing police and fire. We don’t wanna be spooked. I don’t wanna be spooked. The residents don’t deserve to be spooked. They need to hear the truth.”
Chief Administrative Officer Montgomery did not appear delighted at being told to find the money. “The truth?” he said. “You want the truth? We lost $6 million [in casino revenue for the streets]. You don’t wanna pay any more taxes, you don’t wanna pay any more fees. Then you tell me what you wanna cut. This budget is not awash in fluff money. There aren’t any sweetheart projects out there that can be utilized for any of this kind of work. Do you want to take it out of libraries? Do you want to take it out of the planning department? Do you wanna take it out of police? This isn’t about spooking anybody. There is not $6 million laying around to just go pick up.”
Keep in mind that this is just an agenda session, a nuts-and-bolts work meeting where councilors organize their official business. It’s not a place for oratory and stand-taking. But Councilor Hanson returned to the subject again at the end of the meeting, for no apparent reason.
“We need to listen to our community,” he burst out, “and listen to the people, and hear the cries. I mean, literally, little old ladies are being taxed and fee’d out of their homes in the city of Duluth, and there’s anger, and unfortunately, I think there’s a lot of people who are in the Haves group who have turned a blind ear to the pain and suffering out there in this community. And as long as I’m sittin’ here behind this thing, and not to be a champion of those types of people, but those people need a voice.”
I think we can safely conclude that Councilor Hanson isn’t shaping up to be a team player. My impression of him, from hearing him on the radio and whatnot, has always been totally different.

John Ramos has observed and written on Duluth politics since he moved to Duluth in 1998, with a special focus on tourism and tourism taxes. He has been snarled at by mayors, lawyers, and CEOs for his articles, which he considers to be a form of applause.