Spirit Mountain enacts new master plan

The city-owned ski hill, operated by the quasi-independent Spirit Mountain Authority, needs to replace chairlifts and snowmaking equipment. The plan also includes a snow tubing hill and a new chalet at the base of Spirit Mountain along Grand Avenue.

The number of chairlift runs will be reduced from five to three. Lifts that hold three skiers per chair will be replaced with six-person chairs.

The master plan improvements include remodeling the existing chalet, better parking and traffic flow, a campground expansion, a new parking area for large recreational vehicles and upgrading the ticket system.

Other goals involve new four-season activities: a mountain bike terrain park, mountain bike trails, disc gold, a zip-line (a ride on a pulley attached to a cable), alpine coasters (a kind of a bobsled mounted on a track), and extended hiking trails.

Milwaukee-based Johnson Controls, which is guiding the Duluth schools Long Range Facilities Plan, is the lead consultant for the Spirit Mountain master plan. Subcontractors include Applied Insights North of Duluth; the Duluth office of Hibbing-based Architectural Resources; Ecosign Mountain Resort Planners in British Columbia; and Greenfield Communications in Duluth.

The plan is in its fourth phase, finding and verifying fund sources. The authority’s finance and project subcommittees are looking at options. Their final reports are due by February 2009.

During phases I, II and III over the past year, the authority sought public input and approval from the Duluth City Council, which unanimously adopted the master plan without discussion on Aug. 25.

The authority has set “an aggressive timeline” of 18 to 24 months for developing the high-priority projects, new lifts, snowmaking equipment, tubing hill and the Grand Avenue lodge, said Renee Mattson, Spirit Mountain executive director since 2005. She said the price tag is around $15 million.

The other elements could come over the next two decades, she said. “We’re still working on prioritizing the whole list,” Mattson said.

“We might not do every component. It depends on whether we can pay for them,” she said. “We believe the tubing park will pay for the chalet and expanded campground.”

Installing a new chairlift is key to expanding summer recreation traffic, to bring people to the top of the hill for the zipline, mountain biking and other activities, she said.

She expects to approach the Legislature for aid in funding the chairlifts and snow equipment. The authority requested state bonding for the same purposes in 1999 and again in 2001, only to be rejected.

Mattson acknowledges securing financing in the current economy will be difficult. “The world’s a different place than when we started. Credit lines have dried up,” she said.

She acknowledges the state is “not in a much better position,” but hopes legislators will see the broad regional impact of Spirit Mountain investment. “You don’t ask, you don’t get,” she said.

The finance subcommittee is exploring all options including grants and federal funds.

The master plan is the first the city council has approved since the recreation area opened in 1973.

In 2003, the city council rejected a master plan proposal for adding a golf course and hotel. The golf course was controversial because it involved clearing forested land.

In 2004 then-Mayor Herb Bergson appointed two activists who opposed the golf course to the authority: C.J. Bird, who resigned in 2006, and Nancy Nelson.

Bergson also appointed Ken Buehler to the authority in March 2004. Elected its president in August, Buehler resigned from the authority two months later at its Oct. 16 meeting. As executive director of the North Shore Scenic Railroad, Buehler said he needed to focus his attention on an initiative underway to restore passenger rail service between Duluth/Superior and the Twin Cities.

Tourism tax support

The master plan does not wean the recreation area from the support it receives through the city’s special sales tax on restaurants and lodging.

Private ski hills make their profit not from lift tickets but from real estate, golf courses and other amenities, Mattson said. These options are unavailable to Spirit Mountain.

“We get a lot of heat from people who think we get (property) taxpayers’ money,” she said. “Spirit Mountain doesn’t get money from the city’s general fund, never has. Just tourism tax dollars.”

Since 2004 Spirit Mountain has received $225,000 a year from the tourism tax, which it uses for debt payment on its last major expansion in 1985, the construction of the chalet and an additional chairlift run. Outstanding debt is $900,000 and scheduled to be retired by 2012.

The city requires Spirit Mountain to use the $225,000 a year paid for by the tourism tax for facilities maintenance.

Spirit Mountain has received tourism tax revenues over the years from a high of $437,000 in 1980 to zero in 2003.

Once the city emerges from its current $5 million budget shortfall, Mattson would like to see Spirit Mountain’s share restored to the percentage intended when the tourism tax was created — about $450,000 a year today.

“We’d like to get back to formula,” she said. But for now, “it’s in no one’s best interest to make things difficult for the city.”

The master plan summary states: “It is understood that Spirit Mountain was designed from the beginning, and remains so today, a facility intended to generate regional economic impact. To accomplish that mission, Spirit Mountain has foregone opportunities such as large-scale on-site lodging that could significantly boost its revenues and internal profitability. In exchange for not pursuing such opportunities, the Mountain has received limited financial support from the state and city.”

The summary continues, “The City’s contribution comes from specially legislated lodging and food and beverage taxes generated, in good part, though the presence and activities of Spirit Mountain. General tax funds do not support the operation. While Spirit Mountain historically has generated revenue sufficient to cover operating expenses and most day-to-day maintenance costs, external financial support is essential to underwriting its physical plant. The stated Objectives reflect this financial relationship, which is critical to the facility’s ongoing success.”

For its regular operations, Mattson said Spirit Mountain is in good shape. According to the most recent sales analysis, Spirit Mountain’s major winter revenue was $3.69 million in fiscal year 2008. That’s down from a record $3.84 million in 2006, but still the second best year in the recreation area’s history.

Private development

The master plan also states that Spirit Mountain “does not control private decisions, but can help create the market to support this investment, and, offer itself as a partner.”

Private developer S.V. Bay Hill has options on several parcels of land near the base of the ski hill. The company has approached Spirit Mountain administration about possible private residential development.

“It’s all pretty preliminary,” said Bay Hill partner Mike Talarico. “The issue was they need the money from private development. They don’t have money, as you know.”

Mattson said the recreation area would benefit from the increased flow of customers as a result of nearby private development.

Bay Hill owns Bay Hill on the River, a townhouse development at 75th Avenue West and Grand Avenue. The other partners in Bay Hill are former mayoral candidate Charlie Bell, Brad Johnson and Jeff Nelson.

In January 2007 the city council passed a resolution requesting free conveyance of two parcels of tax-forfeited land at the base of Spirit Mountain to be used as part of the master plan. But it turned out that Spirit Mountain did not need the land, Mattson said.

Bookkeeping

Former Spirit Mountain executive director Rick Certano, Mattson’s predecessor, was frequently criticized for sloppy bookkeeping. A state audit of the 2003-04 ski season found $11,420 missing; two employees were charged with stealing from the rental equipment business. In 2005, $8,400 turned up missing from the vending machines. Mayor Bergson said “a weak system of check and balances” had enabled the theft.

The November 2007 Spirit Mountain audit noted a “previously reported item not resolved,” that “segregation of duties is not adequate from an internal point of view.”

State Auditor Rebecca Otto told BusinessNorth this problem is “common with entities with limited staff,” but is “significant with this entity.”

Mattson said that while she did not intend to downplay the audit report, “they call that (inadequate segregation of duties) in every audit unless you have 17 accountants.”

The state has not yet released the 2008 audit report. Mattson promised a “clean, no-notes audit this year.”