News & Articles

I. Rip it down!

At their regular meeting of July 21, 2014, the Duluth city council unanimously approved Resolution 383, which granted $52,000 to the Minneapolis consulting firm of Meyer, Scherer and Rockcastle (MSR) to conduct a “library facility alternatives study” of the downtown Duluth library. According to the agreement, MSR would help to realize the “ambitious, visionary dreams” of the library’s supporters by conducting a thorough survey of the facility and developing different possible ideas for its future. Councilor Emily Larson, who served on the committee that picked MSR for the job, was enthusiastic about their choice, as she tends to be enthusiastic about most things.
“We interviewed three different entities,” she told the council, “and this one rose to the top.[…] This was one of those where you just knew it. They got it. They understood part of what our struggle is, not just with the utility of the space, but with the literal function, and with the potential of it to function better.”
The downtown library, which opened in 1980, has long suffered from problems of energy inefficiency and complaints about its layout. What surprised me, though, was the level of distaste some councilors displayed for the building itself. Councilor Jennifer Julsrud started insulting it immediately.
“Ever since I moved to Duluth, over 20 years ago now,” she said, “[I] have always found the downtown library to be a cold, thoughtless place, a place that the architecture of the building was not well-thought-out. […] There were these beautiful historic buildings that surrounded the building, that they could have had these gorgeous views of. It’s near Lake Superior, it could have been tall enough to see the lake. […] And when you look at the energy use […] it was really obsolete when it was built. And so I think there’s a lot of opportunity for us to rethink the library itself, and I’m not opposed to tearing it down and rebuilding something new.”
“It is an unwieldy building,” Councilor Sharla Gardner agreed. ”You know, I think, ideally, if the city had lots of money […] that would be one of the things I would like to see.”
“If we had unlimited funds,” said Councilor Joel Sipress, “I would love to tear it down and reclaim that end of town, and build a building that actually works with the downtown.”
“It’s gray, it’s drab,” piled on Councilor Zack Filipovich, but left his building-bashing there. Being a moderate, he stopped short of reducing the place to rubble.
Even after observing city politics for 16 years, I confess to a certain level of naivete when it comes to how things actually work in the city. As someone who uses the library more than 99 percent of the population (and 100 percent of the city council), I have never found the building offensive. It’s an unusual-looking structure, meant to resemble an ore boat, but the key features that I look for in a library—books, Internet access, good archives and plenty of comfortable chairs—are all there. If I were a city councilor, I would never consider tearing down a 34-year-old building because I didn’t like how it looked. Yet, already, before the consultant had even been hired, three councilors had declared themselves open to the idea. I couldn’t believe my ears.
Does anyone remember 2008? It was six years ago. In 2008, the city was hit with several converging circumstances that threw the budget into turmoil. The state cut local government aid to the city, the Great Recession played havoc with the city’s investments and the ongoing need to fund retiree healthcare consumed large chunks of the city’s discretionary income. In 2009, the Fond-du-Luth Casino stepped out of a revenue-sharing agreement with the city and reduced the budget further. For the first time in history, the city’s reserve fund plummeted into negative territory. At one point, the city was considering selling historic stained glass windows to make ends meet.
Things have stabilized since then, but not without pain. The Ness administration made many hard decisions, alienating some people—city unions and retirees among them—in the process. Today, the city’s general fund budget is $7 million lower than it was in 2009—$74 million instead of $81 million. The portion of the city’s work force supported by the general fund has been cut by 11 percent. The amount of unsecured debt carried by the city (debt that has no earmarked funding source) has nearly doubled, from $22 million in 2009 to $41 million today. During the same period, the city’s most important source of discretionary income, the Community Investment Trust Fund, has dropped from $58 million to $19 million (Figure 1). Withdrawals from the CIT continue.
Citizens’ pocketbooks have shared the city’s pain. Since 2008, Duluthians have shouldered a new tax to fund parks; a new tax to build a police station; three water rate increases; four property tax increases for debt service and general operations; increased parking meter fines; a new fee to pay for streetlights; and, most recently, a hefty new fee to pay for street repair. Such conditions would present a hardship anywhere; in Duluth, where the median income is only two-thirds that of the state as a whole ($41,000 versus $59,000), the burden is all the greater.

II. Optimism, optimism everywhere…

Somehow, weirdly, over the same period, a general feeling of what many are calling “optimism” has been bubbling up in Duluth. It’s not just traditional boosters like the Chamber of Commerce and the Duluth News Tribune editorial board who are speaking of this wonderful new sensation. Everywhere you go, from Lakeside to Gary, on top of the hill and below it, people are skipping hand-in-hand through the streets, singing happy songs of progress. When Duluth recently won an online poll sponsored by Outside magazine that named Duluth the best outdoor city in the nation, it only confirmed what many people already believed: Duluth is a city poised for growth and success.
As far as I can tell, the new optimism has something to do with the mayor drinking craft beer and listening to local music—or maybe both simultaneously. It’s certainly not borne out by the financial statements, which show that the city has more debt and less income than it did six years ago. Yet nobody seems too concerned about this, least of all our leaders. Optimism, not reality, is driving city policy today.

III. The obligations we must deal with

I am disheartened, to say the least. If people learned nothing from the crisis of 2008, I fear they are incapable of learning. It doesn’t take a genius to figure out that if the city had had less debt to pay off in 2008, the crisis would have been less severe. To prepare for the next crisis, the city should be limiting projects, not talking about building totally unnecessary new buildings.
Nevertheless, I suffer from my own form of optimism. Against all the available evidence, I hold out hope that there are still a few level-headed individuals left in town who can see the sense in the numbers, and don’t simply dismiss me as a naysayer. For their benefit, I would like to list some obligations that the city currently faces, or may face in the future. These obligations should be at the forefront of everyone’s minds when financial decisions are made, because—no matter how optimistic we may feel, or how madly we may click our mice in online contests—these are the obligations we must deal with.

Retiree healthcare

The Big Kahuna of obligations. Thanks to the diligent efforts of two city administrations, the amount of unfunded retiree healthcare owed by the city has dropped from $400 million to $200 million—but it’s still $200 million. Everything that can be done, insofar as reducing expenses and increasing efficiencies and consolidating health plans and limiting new entries into the system goes, has been done. The only thing left to do now is pay the money. To fully fund retiree healthcare, the city must contribute $15 million annually. Currently, the city is setting aside less than $6 million.

Sewer and water infrastructure

Half of the pipes under our streets are more than 80 years old; some are 120 years old, held together, at this point, by little more than hope. Every winter, the city incurs huge overtime and equipment costs repairing ancient water mains that freeze and break. City engineers estimate that the city will see 300 water main breaks annually by 2020. “If this current trend keeps up,” advises an interesting paragraph in the 2013 city budget, “the utilities will become an entirely reactionary organization responding to emergencies with no regard to improving the infrastructure.”
In 2011, City Councilor Julsrud participated in a task force that looked at the problem. The solution they came up with was to raise water rates—three times in 2012. As our pipes continue to break, we can expect water rates to continue to rise.

Streets

With the loss of our casino revenue in 2009, the city lost its source of street-repair money. The recently-approved street utility imposes a monthly household fee that will change each year, depending on the number of projects that are planned. The current fee of $5 per month per household is not nearly enough to repair and maintain Duluth’s streets.

Tourism projects

Tourism projects, such as the DECC expansion, the Great Lakes Aquarium and the many new improvements at Spirit Mountain, are intended to be paid with money raised by tourism taxes. In addition, many of these entities receive operational support from the tourism taxes. Historically, the tourism taxes have proved excellent at meeting these obligations. Let us hope this continues. If it does not—if tourism tax collections slow down for even a year or two (or even, God help us, four or five)—the money will be snatched straight from the general fund. This is not conjecture; tourism debt is underwritten by the city.

Spirit Mountain
In addition to their bond payments and operational support, Spirit Mountain also receives a line of credit from the city, which is currently $1.2 million. Spirit Mountain has not managed to make any headway on this debt in the last three years. Prospects do not appear bright that they will do so any time soon. Financial statements for May and June of this year (the first two months of Spirit Mountain’s fiscal year) show that the ski area’s revenue is already $193,000 below expectations. If the city forgives Spirit Mountain’s line of credit, the money will come from the general fund.

DEDA levy

The Duluth Economic Development Authority is beginning to push for a levy, so that it can redevelop the site of the abandoned Central High School building (which was itself only 40 years old when it was left to rot, in 2011). We don’t yet know how large this levy might be, but you can be sure that it will add to our tax bill.

IV. Closing arguments
These are the highlights, if you want to call them that. The city administration and city council are well aware of them all. Personally, I don’t know how anybody could look at this list and continue to vote in favor of new projects and more debt, especially given the lessons of 2008, but they do it all the time. It never stops. It never even slows down. Five years ago, in the depths of the Great Crisis, the mayor built an $18 million police station.
It’s not a sure thing that the library will be torn down and rebuilt, of course. Some other plan may be adopted. My concern is that anyone mentioned tearing down the library at all, as if that could possibly be an option. Trying to drum fiscal discipline into the heads of politicians is like trying to make a plane fly backwards. They’re just not built that way.

John Ramos may be reached at jramos@shiningreputation.com.