“Snow Job”

How Duluth was sold on Spirit Mountain

You have to sympathize with Spirit Mountain’s new executive director, Brandy Ream. In June, she had no idea what kind of a financial nightmare she was stepping into.
Four months into Spirit Mountain’s fiscal year, the ski area’s revenues are $277,000 below budget—and $275,000 below where the mountain was at the same time last year. Of the $1.2 million line of credit extended to Spirit Mountain by the city, the ski area has consumed $1,082,000.
To reduce expenses, Ream has closed the Adventure Park (alpine coaster, zipline, mini-golf) for four days a week; closed the Grand Avenue Chalet (bar, restaurant, banquet facilities) for four days a week; and closed the scenic chairlift rides and mountain bike trails for four days a week as well.
“We are not in a position to be able to have these operations open seven days a week,” she told the Spirit Mountain board on September 18, 2014. “The business is not there. At all.”
Ream has also laid off three of Spirit Mountain’s senior full-time employees; she left another permanent position unfilled when an employee retired. She has instituted new duty-sharing policies among the employees who remain. Looking ahead to the winter, she is already considering closing the hill for one day a week—though, in many ways, she is flying blind.
“It’s tough not having gone through a winter here and seeing the operation full-on, and knowing what to expect, [when I’m] trying to look at forecasting revenue to get us through December,” she said. “I am at a loss, to be quite honest.”
You don’t get into this kind of situation overnight—or even in four months. The budget that Spirit Mountain is failing to meet was not crafted by Ream, but by the previous executive director, Renee Mattson.
Spirit Mountain’s financial difficulties have two main causes. The first is weather. Spirit Mountain has experienced three consecutive winters of poor skiing weather: two winters were too warm, and one was too cold. This is the reason cited by city officials when they’re trying to justify giving Spirit Mountain more money.
The second reason exacerbates the problem. In the last five years, Spirit Mountain has expanded without restraint. In total, nearly $20 million of new projects have been (or are currently being) built. The bond payments, added maintenance, and labor costs of these projects have a huge impact on Spirit Mountain’s bottom line. If only someone had sounded a note of caution during the Big Build-out, perhaps advocating a slower or more measured approach, the problem might have been mitigated. But nobody did.
This recklessness is understandable, insofar as city leaders are concerned. Mayors and city councilors love to build things, and they fall all over themselves at any opportunity to do so. It’s sad to watch, but it’s not unexpected. What is truly disheartening about Spirit Mountain is its treatment by the media. As Spirit Mountain descended further and further into the financial abyss, the media asked no hard questions. They expressed no skepticism. They never verified any numbers. Instead, they cheered wildly every step of the way, giving the ski hill as much free marketing as possible.

The rise of Renee

Ever since the Spirit Mountain Recreation Area was created, in 1973, the idea of making it a four-season operation has been part of its vision. In 2001, when developers proposed building a golf course and hotel at the top of the hill, this was one of the reasons given. The project had the support of Mayor Gary Doty, but was fiercely opposed by many in the community, including environmentalists and Native American groups. To make a long, painful story short, the golf course project was eventually scrapped.
Renee Mattson was hired as executive director of Spirit Mountain in 2005. People hoped she could heal the wounds wrought by former executive director Rick Certano during the golf course debacle. Despite having no experience running a ski hill, Mattson beat out 63 other candidates for the job, including William Junnilla, former president and co-owner of the Lutsen Mountains ski resort, a successful four-season destination. Mattson’s background was in marketing; she had worked as director of sales and operations for the Duluth Convention and Visitors Bureau for 17 years. She was also married to Terry Mattson, the DCVB’s president.
Mattson also had the support of Mayor Herb Bergson, who repeatedly stated his desire to make Spirit Mountain “self-sustaining.” At the time, the city was supporting Spirit Mountain with $225,000 a year in tourism tax, which the ski area used to pay off old bonds. In return for this subsidy, the city required Spirit Mountain to set aside $225,000 in a “repair and replacement” account, which was to be used to maintain and upgrade existing facilities.

On June 18, 2008, Spirit Mountain unveiled its master plan. It included a new chalet on Grand Avenue, new chair lifts, a new tubing hill, an alpine coaster, a zip line, a mountain bike terrain park, an expanded campground, and new ski runs. According to the Duluth News Tribune,

A ballpark total cost for the plan’s projects would be about $40 million, Mattson estimated. […] Work on the management plan began last year, with officials collecting more than 200 ideas and suggestions from the public and other interested parties. The recreation area and its consultants spent the winter examining which ideas made financial sense, which would increase revenue and what upgrades are needed.

Did the DNT ask any questions about the risks of a $40 million undertaking? Or how the consultants determined which ideas “made financial sense”? Did they do anything but take Mattson’s statements at face value and print them out verbatim?

The coolest thing ever

On October 8, 2009, the Duluth News Tribune published a front-page, above-the-fold story entitled “Duluth gets wild ride.” The online version was called “Wild ride coming to Duluth.” Written by veteran reporter John Myers, the story was about Spirit Mountain’s proposal to build an alpine coaster. The project, wrote Myers, which “already [had] the blessing of city officials and the Spirit Mountain board,” was expected to cost “more than $2 million.”
“It’s the coolest thing ever,” Renee Mattson was quoted as saying. “This is going to be a great thing for us and for all of Duluth.”
For a front-page story, the article was curiously short, both in length and on facts. For example, it neglected to mention where the $2 million was going to come from, merely quoting Mattson as saying that the ride “is expected to pay for itself quickly.” None of the people who supposedly blessed the project were quoted, or even identified. No city officials, or any other locals (except for Renee Mattson), were asked to comment at all.
The story was accompanied by a large full-color picture of a guy in shorts and sunglasses sailing through a forest in a plastic yellow coaster on shiny steel rails. Weirdly, this was not a photo of a Duluthian or anything in Duluth, but a promotional photo lifted from the website of the Wisp Resort, a recreation area in Maryland.
Obviously, when an article provides no context, answers no questions, interviews no people and borrows its pictures from advertising brochures, it is not journalism at all, but a press release—in this case, a press release accorded royal front-page treatment in the region’s largest daily newspaper. It was a calculated, intentional effort by the Duluth News Tribune to achieve a particular goal for Spirit Mountain. The next day, October 9, 2009, the Duluth News Tribune ran an editorial: “Bring on the slide.”

When was the last time Duluth had a new bona fide reason for visitors to scream, “We gotta go back there!” or “We gotta check that out!”?
The Alpine Coaster ride being planned at Spirit Mountain has promise to be Duluth’s next big thing.
And the next big thing for the ski hill, too. …It’ll generate revenue to pay for other projects that also will help Spirit Mountain succeed. Things like snow-making equipment that pumps water from the St. Louis River rather than drawing from the city’s water supply.
The stainless steel track ride, the first of its kind in the Midwest, is…an investment that could quickly be recouped via ticket sales. Who won’t be eager to plunk down a measly eight bucks to whisk 750 feet downhill, achieving speeds of up to 26 mph? … And the automatic ride back up could be just as big a thrill. Visitors and locals alike will ride again and again. […]

This proposal fits. It complements an attraction that already exists, meets the region’s need for fresh draws, ties in with the existing ski hill, and doesn’t disrupt the environment.[…]
Construction could begin as soon as spring, and the new ride could be open by midsummer — but only if the city’s Parks and Recreation Commission and City Council sign off this month.
If the details prove as enticing, as promising and as sound as the proposal, neither body should hesitate to approve what very well could be Duluth’s much-needed next big thing.

“Enticing,” “promising,” “sound,” “a thrill”—the DNT editorial board was out of its mind with excitement. On January 21, 2010, the Spirit Mountain board approved the alpine coaster contract. Renee, calm and professional as always, told board members, “We’re starting with a fifteen-year loan that we fully plan to pay off in ten or less.” The monthly loan payment was $17,767, which Mattson assured the board was “very do-able.”
Today, Spirit Mountain is unable to cover the alpine coaster loan payment. The city is doing so, via tourism tax. The good news is that we only have ten years of loan payments left. On March 6, 2010, something incredible happened: The Duluth News Tribune published a story about Spirit Mountain that didn’t have any fawning praise in it. Entitled, “Spirit Mountain wants to shuffle cash for expenses,” the article pointed out that Spirit Mountain’s revenues for the year were running $459,000 below budget and $378,000 below the previous year. Spirit Mountain wanted to dip into its repair-and-replacement fund for operational expenses, and they also wanted the repair-and-replacement money to help them build the alpine coaster—a clear violation of the terms under which the city gave the ski area its $225,000 tourism tax allocation.
How was it possible that the shills at the DNT were writing a story that seemed to involve actual reportage? A clue came in the fifth paragraph.

Not so fast, says local blogger and Duluth taxi driver John Ramos. He contends the $225,000 fund, fueled with proceeds from the city’s tourism tax, was expressly earmarked to pay for repairs and equipment.

That’s right, the Duluth News Tribune had the story because I gave it to them. I went to the board meeting, researched the financials, tracked down the relevant legislation and handed it all to the DNT on a platter.
Not that it did any good. Confronted with the facts, everybody in City Hall immediately looked for ways to get around them. The easiest way was to rewrite the law.
At the city council’s meeting of April 12, 2010, councilors approved the cash-shuffling by adding the following sentence to Resolution 181: “Construction of the Alpine Coaster shall fulfill the obligation of the authority to expend monies for necessary repairs and replacements to the recreation facilities.” You see?
Of course, doing this meant Spirit Mountain would no longer have any money to repair or replace anything, but nobody seemed too concerned about that.
The Duluth News Tribune, terrified by their brief flirtation with journalism, returned to their public-relations role on March 19, 2010. “Spirit Mountain predicts profit on alpine coaster,” they announced happily.

Spirit Mountain has modest but realistic expectations for its newest attraction—an alpine coaster—during its first year of operation, according to Renee Mattson. […]
In the future, with the Timber Twister operating a full 12 months out of the year, Spirit Mountain is banking on the attraction selling 61,000 tickets, in order to make a profit.

Ah, yes. “Modest but realistic”—that was the ticket. That’s what Renee Mattson said, and Renee Mattson’s word was gold with the DNT.
On March 30, 2010, the DNT reported, “Small loss expected at Spirit Mountain.”

Despite a strong February that briefly put the Duluth ski destination back in the black, it’s projected to finish out the fiscal year in April about $1,000 in the red.
Poor weather and a still-shaky economy double-teamed Spirit Mountain this year, said Renee Mattson […]
In a budget approved Monday afternoon by the Spirit Mountain Authority, Mattson projects a return to profitability in the next fiscal year. She’s looking for the recreation area to earn more than $300,000 during fiscal year 2010-11.

A thousand dollars in the red? Three weeks earlier, they had reported that Spirit Mountain’s revenues were down $459,000. Didn’t anybody at the Duluth News Tribune find anything unusual about a half-million-dollar deficit being erased so quickly? Did they even read what they wrote? Or was Renee Mattson writing the articles?
In reviewing the financial statements of that time, I can find nothing to support the $1,000 figure. As far as I can tell, she made it up.
On June 20, 2010, the Duluth News Tribune published another editorial. This one was titled, “Alpine Coaster is Duluth’s latest tourist attraction to keep ‘em coming back.”

Our latest attraction is unlike any of its predecessors, making it even more gotta-check-it-out desirable to tourists and to Twin Ports-area residents alike.… Hotels are scarfing up 10-packs to resell or to give to guests. In 2011, when the Alpine Coaster begins year-round operations, 65,000 rides are projected. […]
There’s no public money---a.k.a. tax money—in the Alpine Coaster, but that’s unlikely to prevent some naysayers from grumbling about how much it’ll cost them. However, if the unthinkable does happen, if Spirit Mountain is unable to attract even 35,000 riders annually—a stunning 46 percent off its projections—the coaster could easily be disassembled by the company building it, Wiegand Sports of Germany, and taken away.
But failure doesn’t seem likely—not as long as we and our vacationing visitors keep the phones ringing and the … receptionist hopping at Spirit Mountain.

You’ll notice how the projected rides have risen from 61,000 (in the March 19 story) to 65,000 three months later. If you’re going to make up numbers, you might as well make up good ones.
The Timber Twister opened, and did quite well initially, as most amusement park attractions do. “Everyone there wanted to ride more than once,” the DNT deliriously reported on opening day.
Over the next year and a half, Spirit Mountain charged ahead with building more attractions—a zip line, a tubing hill, mini-golf. When they announced plans to build the Grand Avenue chalet, financing it with $7 million in city-backed bonds, a great cheer went up in the community. City Councilor Jay Fosle, generally regarded as a fiscal conservative, told the Duluth News Tribune, “I’m hugely in favor of this. That [West Duluth] corridor is going to open up like you wouldn’t believe.” Nobody doubted it. The city council unanimously approved issuing the bonds.

A week later, the inevitable editorial cartwheeled onto the scene.

Duluth’s Spirit Mountain is looking downhill in its ongoing quest to make sure profits and business are pointing uphill. Spirit Mountain will build a 12,000-square-foot, nearly $7 million chalet at the bottom of the mountain, along Grand Avenue …. [The] existing chalet is at the top of the mountain, with access from the Proctor area and Skyline Parkway. A second chalet at the bottom of the mountain will improve the mountain’s accessibility, including by city bus. It’ll also be a welcome addition to western Duluth that should spark even more development and investment. A bottom-of-the-hill chalet makes so much bottom-line sense: Why wasn’t it built forever ago?

Today, with the chalet shut down four days a week due to lack of business, we are beginning to sense an answer to this question. The good news is that we only have 18 more years of bond payments to go.

Meanwhile, during all this time, going almost completely unnoticed by the media, the city’s contributions to Spirit Mountain have been steadily growing. During Renee Mattson’s tenure, the line of credit extended to Spirit Mountain has grown from zero in 2005 to $1.2 million today. This is in addition to the tourism tax that Spirit Mountain gets, which has increased from $225,000 to $725,700 in the same period.
The Duluth News Tribune’s breathless optimism worked its magic on the populace. As recently as April 28, 2014, when Renee Mattson spoke before the city council during Spirit Mountain’s annual budget hearing, she was showered with praise. Councilor Emily Larson talked about how much she and her children loved the Grand Avenue chalet. Councilor Jennifer Julsrud talked about how delicious the food was. Council President Linda Krug said, “I’m always amazed at what you’re able to do at Spirit Mountain, and since I’ve gotten on the council, I have found myself to be one of your biggest cheerleaders, so when we had that big dump of snow, I was so excited, and then, ‘Aaaah!’, pulled my hair out with you when we had all those days of cold weather. But you do an admirable job, and it’s really wonderful.”

On June 5, 2014, an item appeared on the city council’s agenda asking them to increase Spirit Mountain’s line of credit to $1.2 million.

On June 6, 2014, I emailed city councilors a table showing how much Spirit Mountain’s line of credit had increased over the years. A couple of councilors flipped out. Howie Hanson and Jennifer Julsrud were especially shocked and disappointed, and they made some noise. But they got over it in three days’ time, and helped the council unanimously approve the line of credit on June 9.

On June 12, 2014, I wrote an article in these pages entitled “Too big to fail, Duluth-style” about Spirit Mountain’s troubles. Two months later, the Duluth News Tribune followed up with exactly the same story, almost to the detail—Spirit Mountain’s ever-growing line of credit, the tourism taxes, their problems with the weather, and so on. The article was entitled “New executive director has high hopes for Spirit Mountain’s future.”

Which brings us full circle at last. Here we are today—waiting for Brandy Ream to save our asses.