Minnesota’s Economic News — W/E 9/24/21
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The losses just keep piling up for Spirit Mountain, the City of Duluth’s ski chalet. So what’s new? Back in 2015, the city transferred $300,000 from the tourist tax fund to keep Spirit Mountain solvent. After that, the city abandoned all pretenses of Spirit Mountain generating enough revenue to at least break even, permanently allocating $250,000 in tourist taxes annually to the heavily subsidized slope.
The numbers for this winter just got crunched–and so did city taxpayers, according to the Duluth Tribune. Revenue plunged almost 10 percent from the previous ski season, while expenses spiked more than 6 percent.
Yet rather than reconsider whether government should be in the ski business in the first place, Spirit Mountain’s executive director Brandy Ream focused on the lousy skiing conditions.
“The 2015-2016 season was the worst winter season in over 35 years for the Midwest as a whole. The scary thing is that when statistics come out for the 2016-2017 season, which is what we just finished, it’s going to be worse than last year,” Ream said.
“We here in northern Minnesota were in better shape than our friends in the lower Midwest. So we definitely feel fortunate. But we certainly have had a rough few winter seasons,” she said.
On paper, Spirit Mountain reports a $15,500 net operating profit. But the bottom line is that the city-operated recreation facility anticipates a net loss of $771,000 for fiscal year 2017, when depreciation and amortization get added in.
Duluth City Council President Joel Sipress questioned why Spirit Mountain’s expenses exceeded its budget, even though it reported fewer days of operation than anticipated.
Ream noted a few key drivers, including wages, salaries, benefits and electrical bills.
She said three full-time year-round management positions went unfilled for part of fiscal year 2016 but were fully staffed in 2017.
Ream also talked about the hill’s increased snowmaking capacity, thanks to a new system that draws water directly from the St. Louis River.
“Whereas we’re saving money on the water side, when you’re making snow in very marginal conditions at full capacity, we’re certainly using much more electricity to try to pull events off such as our Snocross and then also to get open for the winter season,” she said.
Nevertheless, Spirit Mountain management looks on the bright side. Ream projects a $175,000 net operating profit next year. Not counting hundreds of thousands of dollars in losses due to depreciation and amortization, $500,000 in grand chalet bond payments still outstanding, $145,000 in Adventure Park bonds and a million dollar credit line provided by Duluth taxpayers.
To date, Ream said Spirit Mountain has been unable to begin paying down a $1.2 million line of credit it received from the city to continue operating through lean times.
“We’re holding steady on the line of credit. We have not been in a financial situation to be able to start making payments back on that line of credit,” Ream said. But at the same time, she noted that Spirit Mountain has not asked for that line of credit to be increased since 2014.
But Ream could be back seeking more taxpayer support before long, depending on the weather.
“At this point, I am optimistic that we will be OK. But it would be a very different story if we have a Memorial Day weekend where it rains. If we miss those three to four days of that opening weekend revenue, we’re going to be in a very different position. As much as I want to be able to sit here and say that we’re not going to have to go back to the city and we’re not going to need to ask for more support, there’s no way I can guarantee that,” she said