Although I have not written much about the Duluth Entertainment and Convention Center this year, I have been attending board meetings. The meetings take place on the second floor of the DECC, in the Sam Solon Boardroom. It is by far the most luxurious boardroom that I visit in town. People have to shout to be heard from one end of the massive table to the other. The chairs make you feel like taking a nap. Leftover goodies from some event are often set out nearby, and board members (and media observers) chow down.
One major project currently taking place at the DECC is a capital maintenance project. The welds of its steam heating system need to be repaired.
“What you have are these gaskets in these welds that are holding the pipe together,” DECC executive director Dan Russell explained to the DECC board on July 29, 2014. “It’s been a problem for a long time—they dry out, they fail, we get a leak. So then when you turn off our whole system to fix that leak, more will dry out […] So it would be a serious problem anywhere, but what makes it worse here is it’s all hidden by sheet rock and, you know, it’s very tough to get at.”
Unlike some other entities in town, the DECC is able to pay for the project, and other projects, because they have money set aside for capital maintenance. The efficiency and advantage of this is obvious: the DECC has the flexibility and means to respond to major expenses and repairs on very short notice, and to make long-term financing decisions with money in hand.
Speaking of major expenses, the pedestrian lift bridge that connects the DECC with Canal Park has been a pain in the neck for a decade. It looks cute, but it’s not—what with cables snapping, machinery malfunctioning, and the deck getting stuck in the up or down position every few days, the pedestrian bridge has needed expensive repairs on a regular basis.
This year they’ve been using new, heavier cables that are “twisted the right way,” according to Russell. They have a new wind-meter. And they “treat [the bridge] with kid gloves,” raising and lowering it very slowly, and stopping at the first sign of trouble.
Russell forgot to mention the crossing-your-fingers-and-hoping-really-hard part of dealing with the pedestrian lift bridge, but this year, their approach seems to have worked. “We went through the whole season without any issues,” Russell told the board.  It was their “best year in ten.”

Spirit Mountain

The ski hill has gotten off to a pretty good start this season—the weather has been good for snowmaking and not cold enough to scare away skiers. Executive Director Brandy Ream and her team are planning for brisk holiday business.
Financially, things are tight. Ream has been reducing expenses and adjusting revenue projections to reality. Her actions seem to be exerting a positive upward pressure on Spirit Mountain’s bottom line. There seems to be a sense of team spirit among the employees who attend board meetings.
On the cautionary side, Spirit Mountain has fully drawn down its $1.2 million line of credit from the city. Barring another increase in the line of credit by the city council, no more funds are available for the ski hill from that source.
Capital expenses are having an impact. On December 18, 2014, the Spirit Mountain board took out a loan for $202,200 to buy a 2014 Piston Bully snow groomer. It had to be done; the old groomer was falling apart. The loan is structured through Beacon Bank and carries an interest rate of 3.5 percent.
The water project, which is a system of pipes and pumps that will draw water from the St. Louis River and use it for snowmaking on the ski hill, is proceeding. The overall project consists of five separate contracts, overseen by the Duluth engineering firm of Foster, Jacobs and Johnson; low bidders for four of the contracts have been identified.
The current estimate for the water project (which will undoubtedly change more in days to come) is $6,570,907. This is $270,907 more than the $6.3 million that has been allocated to the project. The $6.3 million comes from the state ($3.4 million), the city ($2.1 million) and a handful of smaller grants from other agencies. Board member Todd Torvinen suggested that whatever extra money Spirit Mountain needed for the project be added to the city’s bond issue.
“You can always add a couple [hundred thousand], if you want,” Torvinen, a one-time city finance director, told the board.
Spirit Mountain general manager Jody Ream reported that contractors he had spoken with assured him that the new water infrastructure would be built to last “at least twenty years.”
Brandy Ream said that she had met with the city’s chief administrative officer, Dave Montgomery, and that he was looking forward to the savings that Spirit Mountain would realize when the new water system was turned on (an event that may still be as much as two years in the future). Currently, Spirit Mountain spends about $180,000 to $200,000 on city water for snowmaking. By drawing their own water from the river (and with somebody else paying off the bonds), Spirit Mountain’s savings could be considerable. With those savings, Ream said, Montgomery hoped that Spirit Mountain might be able to start a capital maintenance fund.
That’s a very good idea. The sad part is that Spirit Mountain used to have a capital maintenance fund, back in 2010. The city required Spirit Mountain to set aside $225,000 each year to repair and replace things. Then everybody got together and decided that it would be better to use that money to build an alpine coaster, so they did that. And now there is no capital maintenance fund.
But wouldn’t you know it—things just keep breaking down.
The moral of the story is that when you need to buy a new Piston Bully, an extra $225,000 comes in handier than an alpine coaster.

The library

The Duluth Public Library will be torn down and a new one built. This, at least, is the hope of the library’s Citizens Steering Committee, which met on December 16, 2014, to discuss options for the library’s future. In the end, they couldn’t decide whether they wanted a new library that was gigantic or one that was merely huge, so they scheduled another meeting for mid-January to settle the point.
Present in the library’s Gold Room were four city employees, three library employees, one consultant (Stephen Bellairs, of Meyer, Scherer and Rockcastle), and five members of the public who had been picked for the job by city staff. Jane Brissett, chair of the library board, was also present as an observer.
Some committee members seemed dismissive of a smaller library. “You’d probably have a harder time rallying community support for building a smaller library,” commented Jeremy Osgood, a library employee. “I don’t think library supporters are going to be as eager to support getting less than what they have.”
A new library could cost as much as $32 million, depending on the size it ends up being. According to city planner Keith Hamre, the project “will probably require a referendum.”
“We’re going to have to have champions for the project,” Hamre said. “I think the mayor’s vision is probably to have the community as a champion for this project.”
So we’re going to hear a lot more about this. I’m dreading it already.
One reason that the current library is in bad shape, of course, is because capital maintenance was endlessly deferred and the building’s support systems just wore out. When private companies build large buildings, they put capital maintenance funds in place to care for the buildings. The library should, too.
I respectfully suggest that a new library only be approved if a permanent, funded savings account is created at the same time to pay for capital expenses twenty or thirty years down the road. Depreciation expenses, I think they’re called.
This is the only financially prudent course to take.