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Spirit Mountain certainly has friends in high places. Two weeks ago, when the ski hill asked the city to give them another $300,000 so they could make payroll, former lieutenant governor Yvonne Prettner Solon sent a long letter to the Duluth city council, urging them to grant Spirit Mountain’s request.

“In 1975, Spirit Mountain was created to boost Duluth’s tourism industry with a year-round component,” Ms. Prettner Solon wrote. “When it was created, city leaders knew that it would require a subsidy from our tourism taxes and, at that time, Spirit Mountain received approximately 30% of the tourism taxes collected as well as receiving additional support from city financed capital infrastructure bonding paid for through the first Minnesota city sales tax.  When those bonds were finally paid off in the first decade of this century, the legislature allowed the city to permanently keep the 1% sales tax.  You should feel grateful to be allowed to have a city sales tax, the largest in state history, with which to meet your many financial obligations…”

It was a little weird listening to Yvonne boast about Duluth having the largest city sales tax. Certainly, the tax is an important source of revenue for the city, second only to Local Government Aid in importance. In 2014, the one percent sales tax raised about $13 million for the city. But it’s a little hard to feel grateful for the privilege of paying one percent more for everything. At best, the feeling is mixed.
Yvonne continued, extolling Duluth’s tourism industry.

More recently, because of many dedicated city leaders and their belief in Duluth, we have seen several DECC expansions, such as the new Amsoil Arena, the Great Lakes Aquarium, Lakewalk, Bayfront Festival Park, the North Shore Scenic Railroad, Glensheen historic mansion, the Depot, the Rose Garden and Leif Erikson Park, to name a few among our many parks and many other attractions created and paid for primarily by tourism taxes paid by our visitors.  And here is the key point, all of these amenities just listed are available for Duluthians to enjoy without one dollar of property tax support.  We have created a quality of life for us as Duluthians that rivals any city in the US and this quality of life is financed by our visitors.  In addition, while in Duluth, these visitors pay general sales taxes that go to the City’s General Fund which has an effect that lowers an average property tax bill by about $400.  Tourism has been one of Duluth’s biggest recipes for success.  Tourism taxes are self-generated.  Without our great attractions that bring people here and help create the demand that drives the buildout of hotels and restaurants in Canal Park and retail Downtown and at the Mall, we wouldn’t have tourism taxes generated in the amounts we do now.

Now, this is a pet peeve of mine—the endlessly repeated claim that Duluth’s tourism industry is “financed by our visitors,” as if visitors alone are responsible.
Tourism taxes are added to the price of hotel and motel rooms in Duluth, and to purchases in food and drinking establishments. It seems fair to assume that most of the hotel/motel taxes come from tourists—or, at any rate, from non-Duluthians—but the food-and-beverage taxes hit locals every time they eat in a restaurant, drink in a bar, or pick up a rotisserie chicken at the Super One deli. Visitors make flashy contributions to the tourism tax fund in certain seasons; locals pay steadily, predictably, day in and day out, all year long.
Yvonne does not mention this in her letter. Like every politician who talks about the tourism taxes, she ignores the contributions of local citizens. And yet, if we assume that half of the money collected by the food-and-beverage tax is paid by locals (and I wouldn’t be surprised if it’s more than that), tourism tax records show that local citizens have paid $17,866,450 to tourism in the last ten years.
One would think a payout of this magnitude would be given more respect by our city fathers and mothers. They should feel grateful for the support.
Also, to say that tourism provides all of its wonderful benefits “without one dollar of property tax support” is nonsense. The money to pay for the thousands of city staff hours that go into building tourism projects comes entirely from the general fund, which is property tax supported.

But enough of my pet peeves. Let’s get back to Yvonne’s letter.

Several years ago, Renee Mattson, the Executive Director who had gifted political skills along with widespread support from many citizen groups, the Mayor, the City Council, and our state legislators, including myself, embraced a new master plan and efforts were made by all to bring that into reality.  As a destination, Duluth needs a new attraction every five years to bring repeat visitors back to Duluth.  The new alpine coaster, zip line and lift, and several national class mountain bike trails promised to be just that.  Prior to these being built, the Edge Waterpark that opened in 2005 and the Great Lakes Aquarium that opened in 2000 were the last attractions built to bring new life for Duluth’s repeat visitors.

This was not the first time I had heard Spirit Mountain’s former executive director, Renee Mattson, being praised. For years, Mattson was viewed as an uber-competent administrator and visionary; her every appearance before the city council brought down a shower of kudos. It was only in the last three months of her tenure, when I started reporting on Spirit Mountain, that anybody realized that Ms. Mattson’s acclaimed approach to ski hill management might have a few flaws.
Spirit Mountain has big problems. In 2010, under the gentle guiding hand of Renee, Spirit Mountain spent its entire capital maintenance budget on a new alpine coaster. Renee followed that up by building a zip line, a tubing hill and a mini golf course in 2011 and a new chalet in 2012. Nobody in the community questioned this. The media universally cheered. The city council happily rubber-stamped everything. And the capital maintenance fund was never seen again.
Another problem is the weather. During the same period that the Big Build-out was going on, Spirit Mountain experienced a string of winters where the weather was bad for skiing—it was either too warm or too cold. This affected season pass and daily lift ticket sales, causing the ski hill to suffer from cash flow problems. Renee solved this by getting the city to advance Spirit Mountain a line of credit (LOC). The LOC was instituted in 2007, with a $250,000 limit. In theory, Spirit Mountain was supposed to pay the balance of the LOC down to zero each year; in reality, Renee just kept borrowing more. In the next seven years, Mattson asked the city to raise the line of credit four times. Today, it stands at $1.2 million, and it is completely maxed out.
Spirit Mountain’s share of the tourism tax also grew substantially under Renee. When she was hired in 2005, the ski hill was receiving $225,000 in tourism tax support. By the time she departed in 2014, the ski hill was receiving $975,700. In 2015, we are already up to $945,700—and there are still eight months left to go in Spirit Mountain’s fiscal year.
Figure One shows Spirit Mountain’s tourism tax support for the last 23 years. The city’s line of credit to Spirit Mountain is represented by yellow bars. Key events are also noted on the timeline.

Back to Yvonne’s letter.

When the alpine coaster, zip line and new Grand Avenue Chalet were built, the projections didn’t quite work out as planned. Fortunately for our visitors and Duluthians, they are now built and available for everyone.  If you don’t know the story or don’t remember, the DECC, the Depot, Glensheen, the Great Lakes Aquarium,  the North Shore Scenic Railroad and even Bayfront Festival Park’s  original projections didn’t work out as planned, and these entities are still evolving annually to be more self-sustaining and supported by their own operations and self-generated tourism taxes.  And yet they remain assets for the community because they still bring new and repeat tourists to Duluth to help keep property taxes down.

It’s a rare booster who can tell us that we are “fortunate” that nine of our tourism projects were built with bogus projections. Yvonne carries off the task like a pro. She wraps up her letter with a final flourish of trumpets for tourism.

Spirit Mountain is part of a bigger equation called tourism and has been a recipe for Duluth’s success that cannot be ignored.  Without Spirit Mountain and our other tourist attractions, I wonder if we would still enjoy the same quality of life, the same legislative support for UMD and the medical school, whether Cirrus would have located here, or if Maurice’s would have decided to build its corporate offices in downtown Duluth.  Would we be considered #1 by Outside Magazine without the great skiing, boarding and national class mountain bike trails we now have?  Let’s take a long term approach with Spirit Mountain and understand how it was built, the support that was always intended it would need, and help [new executive director] Brandy Ream, her team and its board finish what was started.

To sum up the former lieutenant governor’s main idea: Tourism is responsible for everything.

Back in June of 2014, I wrote an article entitled “Too big to fail, Duluth-style” about Spirit Mountain’s troubles. I explained that because the city had fully committed itself to Spirit Mountain, there was no telling how much we might end up paying to keep the ski hill open. Since I wrote that, Spirit Mountain has received $1,195,700 in tourism tax from the city for operational support and debt payments. This does not include the tourism tax that the city has pledged to pay back the $2.1 million in bonds that were issued to build Spirit Mountain’s new water line. We will be paying those bonds until 2035.
The amount of money that we will eventually sink into Spirit Mountain depends only on the ski hill’s requirements. If they need something, we will give it to them—no matter how high the price tag climbs. This is a statement of fact.
The problem we face is this: The forces of tourism in Duluth like to build things, but they don’t necessarily worry too much about whether the things they build are financially sustainable. These projects are more political than economic—they’re all about state bonding and sales tax exemptions and people calling someone in the Legislature. Certainly, everybody SAYS they want financially sustainable projects, because that’s a great way to get them built. But they don’t really care. Everybody knows, from decades of experience, that if troubles arise, the city will step in with your pocketbook to save the day.

This arrangement, to the tourism industry, is the height of enlightened progress. They often state it right out, as Yvonne did: In order to keep the tourism industry growing, we need to build something new every five years. They don’t say anything about the projects’ sustainability—just that we have to keep building new ones.

At that task, we have done very well.