City Announcing Potential $25-30 Million in Budgetary Loss Due to COVID-19

DULUTH, Minn. – Mayor Larson and her team announced they are expecting a growing budget gap as high as $25-30 million with the lack of tourism tax revenue a big reason why.

The “Hotel Motel Food and Beverage Tax” is expected to take a 50-75 percent decline this year which equates to a $6-9 million shortfall.

A good portion of the tourism tax revenue is put back into attractions to help promote tourism and fill hotels.

Meanwhile, revenue from the half-percent sales tax for street repairs is taking a hit.

$10 million was planned and now that will be more like $6.8 million.

The 1% sales tax that is used to finance operations like police and fire is expected to lose $2.8-7 million.

As of Monday, 45 temporary positions with the city have been laid off.

Mayor Larson expects to release more details on the budget shortfall at next Monday’s council meeting.

“It’s going to be a difficult budget year. We are in a position where we will face those financial decisions on our own and we will face them we will make the decisions we need to make and we will get to the other side financially of COVID-19,” said Mayor Larson.

Mayor Larson also announced the closing of Lake Superior Zoo, Wade Stadium, and the Park Point Beach House until at least July 1.

Those places will open only if it is safe at that time and if the city can financially support the operations with the updated safety measures.

“Providing life-saving support at the Park Point Beach House costs 75k throughout the tourism tax fund so when we are seeing collections go down so far so fast there are services at risk so that’s part of what we are monitoring,” said Mayor Larson.

The city did announce the 1200 Fund will be creating $1.2 million in fast grants for small Duluth businesses with 2-50 employees facing economic stress.

The downtown Duluth library will also be open starting next week on a curbside basis.

For the full press conference, click here.