News & Articles

Now that Spirit Mountain’s financial difficulties have become mainstream news (the Duluth News Tribune finally published a story about them on August 10, 2014, two months after my own article on the subject), we can expect the public debate to take a familiar turn. First, Spirit Mountain will be defended vigorously by the city. This is already happening. Second, after one or two bailouts, the media will start demanding that people be held accountable. Third, when it becomes clear that the city will have to pay to support Spirit Mountain forever, citizens will start to ask the question that always gets asked too late: How did this happen?
Fortunately, I already have the answer. It happened because Spirit Mountain thought it would be a fine idea to build $20 million worth of improvements within five years, and nobody told them no. Mostly, what you heard in the community during that time was gushing praise and cartwheeling cheers, as if the mere idea of new stuff going up wiped out people’s common sense. For the past five years, Duluthians—citizens, politicians, and media alike—have been star-struck Spirit Mountain groupies, blissfully following wherever Spirit Mountain led.
And so we have been led here, to a land of subsidy where the city will pay whatever is necessary to prop up the beautiful dream. There is no upper limit to what the city might eventually lay out for Spirit Mountain. Unlike other city projects, which are confined by budgets, Spirit Mountain has a blank check from the city at its disposal. Whatever the ski area needs, the ski area will get.
 In this respect, Spirit Mountain resembles the Great Lakes Aquarium, which was built on a similar foundation of rosy promises, optimism and a mountain of city-backed debt. In the end, only the debt turned out to be real—more than $12 million in city funds to build the aquarium, and a permanent $350,000 annual subsidy to operate it.
Another similarity with the aquarium: We have been put in this situation by altruists—by volunteers working for the good of us all. Spirit Mountain Board Member Todd Torvinen made this clear on June 18, 2009, several months before Spirit Mountain’s Big Build-out commenced, when board members were discussing how they might get the city to increase Spirit Mountain’s share of the tourism tax. Torvinen laid out the strategy he thought would be most effective.
“When we talk to [city] councilors,” Torvinen said, “I just have to [tell them] that we are appointed by the city, and our budget ultimately gets approved by the city, and if we want to sell any debt that’s not a lease, it has to be issued through the city, and so we are working on behalf of the city. So a lot of times people think we’re a separate entity, coming [from] outside and trying to ask for tourism tax, but in reality, we’re a quasi-department of the city. We’re working in the best interest of the city’s long-term interest.”
Board members nodded and agreed, as they always do when Torvinen speaks.  As Chief Financial Officer for ZMC Hotels, which is headquartered in Duluth and operates 29 hotels nationwide, Torvinen is a highly respected figure. The Spirit Mountain board invariably pays attention to him on financial matters—much as citizens paid attention to him in 1998, when Torvinen, who was then City Finance Director, explained to them that the Great Lakes Aquarium would be self-sustaining.
Later in the 2009 meeting, Torvinen produced a sheet of paper that showed an oval heavily criss-crossed  with red arrows and surrounded by blocks of text. A title at the top of the sheet said “Duluth Visitor ROI” (Figure 1).
“This is something that I’ve been toying with in my head for a year,” Torvinen said, “and I had somebody put it into a visual form. My whole adult life, I’ve looked at tourism and visitor visitation, and the value of that. And so the purpose of this is to say just how important tourism taxes are, for promoting tourism [in] the city of Duluth, to get people to the city of Duluth, and also to take care of those key entities like the DECC and Spirit Mountain, because it’s part of a very successful formula that we don’t want to mess with.”
According to Torvinen, the ROI—return on investment—that Duluth gets from promoting tourism is immense. “It starts here,” he said, pointing at the top of the diagram, “and it says we promote the city of Duluth, which draws people into town, and they stay at hotels and restaurants. And with that, we create jobs, and start new jobs and sustain them. And it also generates about $6 million in tourism taxes. Twenty percent of that goes to the general fund, which is good, and it also generates a huge amount of state sales tax, which comes back to us in the form of local government aid, and it creates the huge variety of restaurants and hotels that we would never see in any other community our size.”
He moved his finger down. “The same thing happens with retail sales. People coming into town not only create tourism taxes, [but] also buy things that go to generate sales taxes that go to the city’s general fund. And because of this going on, there’s all kind of opportunities for entrepreneurs, and you’ve seen what happened with the build-out on the Miller Hill Mall corridor, with all the new malls that have happened up there over the last ten, fifteen years, literally out of rock hillsides. And because of that, we’re able to get attractions that we otherwise wouldn’t have. And if you look at all the attractions that we have here”—he moved his finger down—“that gives us a huge quality of life that other places don’t have. And nonprofit organizations benefit from all these attractions. For instance, out here they offer school programs, Courage Center programming, the Boys and Girls Club…the things that we have in our community that are available for young people and our disadvantaged people are huge, and that’s all because of tourism and visitors coming to Duluth.
“We have the medical centers and the universities, which are much more increased in their excellence in the last ten years, because of the quality of life we’ve enabled. That benefits us, as locals, to be able to say, ‘Hey, you can send your kid to UMD, and it’s one of the top Midwest schools that there are.’ And this brings people to town that are maybe business owners, and they look at the work ethic here in the city of Duluth, and people don’t realize that they did a study a few years back that said Duluthians are actually 20 percent more efficient than people in the metro area, as far as productivity, getting things done, and there are a lot of national back-office operations located quietly here in the city of Duluth that people don’t know about. And so that generates all kinds of benefits here, and then it goes up to the medical centers, and the fact that they just put another $80 million center at SMDC, which creates construction jobs, which makes it more viable for other physicians willing to move to Duluth. We have the quality of life here, and the attractions, where physicians, really good physicians, will say, ‘Yeah, I choose to live here because of it.’”
As someone who has long reported on tourism, I am no stranger to self-congratulatory pronouncements being made by the tourism industry. But this was the first time I had heard tourism take credit for everything—expanding hospitals, skillful doctors, good colleges, the Boys and Girls Club, strip malls on Miller Hill, and so on. Everything in Duluth, it seemed, from top to bottom, depended on tourism.
Was he done? Certainly not. “It’s all synergistic, so, I mean, this circle started out to be a circle, but it ended up being shaped like an egg. […] Let’s promote people to come here. It’s a success story that has worked. Don’t be short-sighted by taking money from promoting Duluth. Let’s put it back in, because there’s such a high return on investment in this story. And it’s demonstrated, it’s right in front of our faces, and so the egg basically gets back to the golden goose. And my point is let’s not strangle the golden goose when we have a proven formula that works.”
When he finished, board members gave him a round of applause. Torvinen needn’t have worried. Since that day, five years ago, the city has raised Spirit Mountain’s tourism tax allocation from $225,000 to $725,000. In spite of this, the ski hill owes the city $1.2 million for operational shortfalls, with more deficits looming on the horizon. And therein lies the problem with Torvinen’s Egg: It doesn’t mention the failures.
Certainly, there is value in promoting Duluth. The more tourists who come to town, the more taxes they will generate. But the key players in Duluth’s tourism industry are not content with merely promoting the city; they need to build stuff. This is where the city runs into problems. Of the last three projects boosted by the tourism industry and paid for by the city—the Great Lakes Aquarium, Spirit Mountain, and AMSOIL Arena at the DECC—one failed miserably, one is teetering on the edge and one seems to be doing okay. These are not great statistics. I doubt that any of the savvy businesspeople who run tourism in Duluth would ever tolerate such hit-and-miss spending of their own money. But, of course, it’s not their money. The tourism industry knows that the city will step in to save the day whenever trouble looms. That’s the other part of the “proven formula” that Torvinen’s Egg doesn’t mention—the part where the city shoulders all the risk for every project, while the tourism industry sits back and counts the till.
I doubt that pointing it out will change anything. Duluthians have not shown themselves to be overly fast learners in this regard. No matter what happens with Spirit Mountain, the next time a big tourism project is proposed, it will fill our imaginations, and seem so do-able, and so right—again—that it will get built. Words of caution don’t stand a chance against the unstoppable force of community optimism.

DECC quilters use energy

At the regular meeting of the Duluth Entertainment and Convention Center board of directors, on July 29, 2014, DECC director Dan Russell explained to board members that the DECC’s electricity costs were determined via some magical formula (I’m paraphrasing) that included their days of peak electricity use. They had always assumed their days of peak electricity use occurred in the winter, during hockey games. In reality, it turned out that their days of peak electricity use occurred during a quilters’ convention, when everybody was madly quilting.  

In response to criticism from his proofreader, John Ramos has promised to write fun, happy, upbeat articles from now on.