Duluth Council to consider how to spend more than $13 million in tourism tax collections – Duluth News Tribune

DULUTH — City officials received so many requests for tourism tax assistance that the total cost of fulfilling them would exceed next year’s total expected revenues by more than $2 million.

Noah Schuchman, Duluth’s Chief Administrative Officer, said, “There are requests that far exceed our ability to fund anything. So we focus on finding the biggest bang for our tourism budget and making sure we work to support the big facilities that have big and wide reach, and then also work to make sure we maximize the use of that money .”

On Monday, the Duluth City Council is scheduled to consider Mayor Emily Larson’s recommendation for how to apportion the $13.3 million tourism tax revenue, based on an assessment protocol adopted four years ago under her leadership.

“The process that I have put in place is that people apply. They have to report what they are doing. You have to work for tourism. We need to see your budget. We need to see their mission statement. And those are recommendations that I think we’ve carefully considered and gone through,” she said.

But 5th Circuit Councilwoman Janet Kennedy announced at an agenda meeting Thursday night that she intends to introduce the resolution to allow more time to consider the proposed distribution plan.

Larson agreed that the council has the power to approve the proposed spending plan or to make adjustments at its own discretion.

District 4 Councilwoman Hannah Alstead has previously proposed an amendment that, if approved, would provide $20,000 in funding for Clean and Safe Team services in the Lincoln Park Craft District. If her amendment succeeds, Jennifer Carlson, Duluth’s chief financial officer, said corresponding cuts in support for other organizations would need to be made.

Schuchman acknowledged that some applicants may feel let down by the proposal to the city council, but offered reassurances, saying:
“A lot of thought has gone into how to allocate these funds. But we recognize that this will inevitably lead to disappointment for some companies.”

More than 50% of the tourism tax revenue is already evidenced by the city’s binding commitments to repay bonds related to the Amsoil Arena, the St. Louis River Corridor and Spirit Mountain improvements, a loan to repair the Minnesota Slip Lift Bridge and the necessary ones Spending to meet its marketing obligations.

Broadly speaking, Terese Tomanek asked if the council could expect to hear a report on Belmont Partners’ performance before approving an additional $1.8 million in tourism tax funding to use the company’s services in marketing Duluth as a Destination to keep next year.

Schuchman said the council can expect to see a report from Belmont and Visit Duluth in November.

Tomanek also inquired about funding the $50,000 tourism tax proposed to help Duluth International Airport market a new flight service to Denver next year.

A similar sum was earmarked for 2022, but Carlson said those funds have yet to be spent due to a delay in hiring an airline to fly direct to Denver. In addition, she said that if the airport failed in its attempt to bring services to Denver, any tourism tax money set aside to support it would remain in the tourism tax fund and be available for other uses.

Schuchman stressed the importance of the city’s continued support, saying, “This money is part of the overall package that an airline is bringing to Duluth to provide the route would not happen.”

Larson said the city has taken a conservative approach in forecasting next year’s tourism tax revenue, which is estimated at about $12.4 million. That’s only about 3% more than the city budgeted for this year.

“We believe the industry will tell us and research will show us that we are having a very good year. However, we anticipate that next year may not hold and that is due to inflation and its impact on the industry. It doesn’t depend on how we do,” she said.

In addition to spending $12.4 million on tourism taxes it expects to collect over the next year, the city is also proposing to supplement that with about $937,000 in unrestricted funds it has accumulated . Even so, Carlson expects the budget will allow the city to hold about $700,000 in reserves — equivalent to 5% of the tourism tax pie.

Some tourism tax money goes into Duluth’s general fund, but only to cover certain expenses related to hosting big events like Grandma’s Marathon and to sustain local parks and trails like the Lakewalk.

“It’s pretty drilled. It’s for places, spaces and services that definitely correlate with tourism,” Larson said, explaining that the city has to follow strict rules. “These are legally restricted dollars. They must be used to support tourism-related investments. This may include marketing and special events. It can include attractions. But it can’t just include regular services made available to all people, it’s focused.”

Among the tourism tax funds the city is expected to receive are $77,300 for the Parks and Recreation Department and $520,000 for a Lakewalk dam project.

Some organizations and events would receive tourism tax funds for the first time under the mayor’s proposal, including $20,000 for the Duluth Amateur Hockey Association.

“They have made excellent arguments for the number of tourists they bring to tournaments throughout the year and why their organization’s support helps, in part, expand tourism and fill hotel rooms and other things,” Larson said.

Other proposed first-time tourism tax recipients include:

• $50,000 for the Minnesota Land Trust.
• $30,000 for the Catalyst Content Festival.
• $25,000 for FinnFest.
• $25,000 for Ecolibrium3’s Main Street Lincoln Park.
• $50,000 for the Duluth Public Arts Commission.
• $30,000 for the NCAA Women’s Hockey Final Four.