Into the Fray

The hottest topics are not tackled by the faint of heart. The current topic of the DECC expansion is one of those topics. It seems if you come out publicly in support of this project, you are hailed as a visionary, forward thinking, civically minded, pro-business, happy, fun-loving, intelligent shining star. If you oppose it, you are a nitwitted, negative, pessimistic, inflexible thwarter of all that is good.

As is usually the case in Duluth, the reality is lost in the shuffle of politics and nobody truly wants an objective look at the facts. I'll do my best to do just that but be fore-warned, I am on the side of the naysayers.

Duluth has a long and jaded history of broken promises, propaganda campaigns to promote less than prudent projects, tax increases with sunset provisions that never seem to arrive and fiscal mismanagement on a mind boggling scale for a city this size. The broken promises started way back in the late 60s. A one percent sales tax was proposed and implemented with a sunset of three years. That tax was eventually made permanent and is now used entirely in the general fund, not it's intended purpose. The second one percent tax was also imposed with a very short sunset provision. It has become permanent. The third half percent was imposed in the late 90s to fund the last DECC expansion.

That tax has been further pilfered to help fund the embattled Great Lakes Aquarium. This is a very brief history of local option sales taxes in Duluth. In addition to the local option sales taxes currently "collected" (more on this later) and paid by local businesses, there is between 6.5 and 9 percent State sales tax also imposed.

Proponents of the current increase needed to fund the DECC expansion, minimize it's impact, reducing the obligation to pennies on a hypothetical lunch or dinner bill. The problem with this argument is the increase is quite substantial relative to the current tax burden and will put Duluth bars and restaurants at a greater competitive disadvantage as the tax rates for them become some of the highest in the U.S.

The proponents have made a concerted attempt to separate the DECC expansion and related tax increase from the other financial woes and previous debacles hamstringing Duluth's future. Unfortunately, the money comes from the same pool. Whether it is the "tourism tax", sales tax, property tax from the City, County, State, School District and various taxing authorities or the food and beverage tax, the money comes from us, the taxpayers. Proponents are also using the argument that a large portion of the money will come from tourists, when the reality is, the majority of local receipts come from you and me.


Finally, the argument that carries the most weight among the starry-eyed is that 33+ Million will come from "The State" and that this is money we need to bring back to Duluth, lest we become the red-headed step child of the Bonding Bill. Last time I checked, this money also comes from taxpayers. Regardless of the form, we ultimately pay it back through State and local taxes...with interest.

There are a few very important points to understand before you vote this Tuesday, February 28th. First, the projections provided to Duluth from Dan Russell for the amount of money the tax increase will generate are based on growth in the food and beverage receipts. The fact is, last year, one of the most favorable for weather and events, food and beverage receipts, adjusted for inflation, were down. If this trend continues, the projected revenue will fall short.

What happens if the revenue from the food and beverage tax increase falls short of making the bond payments? We will have to take it from the general fund. Just to refresh your memory, the City Council heard recommendations from a task force formed to address the unfunded retiree health care issue. Included in those recommendations are a 9% per year increase in property taxes for at least four years in a row. Added onto your base tax rate currently, coupled with annual increases in assessments, your house payment stands a 100% chance of going much higher. Couple that with proposed utility increases and your personal bottom line just got substantially smaller.

These taxes will become prohibitive to all but the most affluent and inflation-proof house-holds. More importantly, they will hit employers especially hard. What do employers do when faced with dramatically higher costs? They cut the greatest cost of all, payroll. This translates in to job loss.

Add this all up and you end up with the non-tourist season, or 75% of most years, a very substantially decreased pool of disposable income and a corresponding reduction in food and beverage receipts. What do you cut out when you have less mulah in your wallet? You guessed it, dinner out. Now, if that dinner bill is going up right along with all your other taxes, your willingness to go out and spend your hard earned and increasingly scarce dollars on dinner in Duluth will certainly decrease.

The bottom line here is that Duluth is on a spending spree that is coming to a disastrous end and a few people are all too aware of it. The possibility that our bond ratings will drop is almost a foregone conclusion making those much sought after dollars, extremely difficult to come by. Why now? Why so rushed? Why the hurry to get this done and before the Governor so quickly? If we don't do it now, in all likelihood, it won't happen and should not happen until Duluth gets it's fiscal house in order.

With a positive vote on Tuesday the 28th, this project still has a very long and difficult road.

For the record, I'll be voting no.