26 September 2023
DULUTH A somewhat reluctant City Council unanimously agreed Monday night to help its local convention center through a period of time when its bank balance is running perilously low.
The Duluth Entertainment Convention Center has reached a point where its leadership has grown uncertain it will be able to meet all its short-term financial commitments.
“I’m here tonight because the DECC needs your help,” said Dan Hartman, the organization’s executive director.
When the DECC’s reserves dipped to $891,000 in September, Hartman described that as “a scary place to be,” given the sprawling convention center’s large payroll and overhead expenses.
But 1st District Councilor Gary Anderson said he was somewhat taken aback by the sudden news of the DECC’s financial distress. He first heard of the potential crisis just four days prior to Monday’s vote to provide aid.
“It feels like we’re between a rock and a hard place,” Anderson said of the request. “The DECC absolutely can’t be allowed to fail,” in light of its importance to the local economy.
Indeed, 3rd District Councilor Roz Randorf referred to the DECC as an “economic engine for our region.”
In economic terms, one convention is equal to $4.3 million in economic impact, and we have over 40 scheduled this year.
“And I think we’re going to course correct,” she said. “I think we’re going to learn from this mistake, and I’m fully confident that Mr. Hartman is going to take us into the next generation. There are brighter days ahead.”
Hartman made the case for the DECC’s importance.
”Simply put, we are the largest driver of tourism economic activity in Duluth,” he said. “In just seven months, we have served over 370,000 folks. To put it in perspective, that is nearly three times what most other attractions drew during the same timeline.”
“In economic terms, one convention is equal to $4.3 million in economic impact, and we have over 40 scheduled this year,” Hartman said.
As for the decision to grant the requested $1 million credit line, at large Councilor Arik Forsman said he saw little choice.
“While this is imperfect, I recognize that there really is no alternative,” he said. Yet, Forsman also welcomed the DECC’s commitment to provide the council with better, more updated information about the state of its finances in the future.
Hartman offered his word on that count. “From this point forward, expect financials every month for the prior month,” he said.
At large Councilor Noah Hobbs also asked for better financial transparency from the DECC and tighter financial controls, as it works to right its ship operationally. “This has to be figured out, and it has to be figured out sooner rather than later,” he said.
Hartman had earlier pointed to several challenges the DECC has faced, including the recent pandemic disruption, the ensuing need to pay higher hourly wages and the costs of maintaining and repairing an aging 10-venue facility.
“The board has been and will be working alongside Dan in the coming months to work toward a more sustainable model for this incredible Duluth tourism asset,” said Laura Mullen, a DECC board and executive committee member.
Mullen noted that lines of credit are common and useful business tools to help deal with momentary cash flow challenges. But the DECC, as a quasi-governmental organization, cannot turn to a commercial lender.
“The city of Duluth is the DECC’s fiscal agent and would provide a good interest rate for the hopefully rare use of this line of credit,” she said. “I thank you for considering our request tonight and for supporting the DECC long term.”
Hartman said it’s unclear whether the DECC will actually draw on the $1 million line of credit, but said it will provide a financial safety net if needed.
Under the terms of the agreement, the DECC must repay any outstanding balance on its credit line by Oct. 1, 2024. It also will incur interest on funds it borrows at a 5.25% interest rate.
The DECC’s commitment to abide by that timeline and those expectations will be key, 2nd District Councilor Mike Mayou said.
“I still worry that we cannot be back here again next September,” he said.
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