'Always a week or two or three' from cash crisis, Duluth's Spirit Mountain tries to avoid bailout

DULUTH – The city and its beloved ski hill are taking the first steps toward a "long-term, sustainable solution" for Spirit Mountain's finances.

"No cash reserves and no capacity to borrow means you're always a week or two or three away from a cash-flow crisis," said Jim Filby Williams, Duluth's director of public administration. "The city needs to be more engaged in charting a path to restoring Spirit Mountain to financial health."

More details of that path forward will come together over the next few weeks, he told the city-owned recreation area's board Thursday night.

The Duluth City Council approved a $235,000 bailout for the mountain earlier this month after a blizzard caused the cancellation of a Snocross event, leaving Spirit Mountain on the verge of closing its doors. The money came from a reserve of tourism tax dollars, which is the main way Duluth supports the 45-year-old recreation authority on a yearly basis. The emergency assistance was in addition to the $1.1 million in tourism tax proceeds Spirit Mountain received this year for operational support and lease and bond payments.

Spirit Mountain's executive director, Brandy Ream, said she has helped turn the organization around during her tenure, including investing $1.5 million in the recreation area.

"We made a commitment to guest service, safety and deferred maintenance, and that is exactly what we have done over the last five years," she said.

Ream said the negativity surrounding the recent financial emergency has been hard on staff.

"So much good has happened here," she said. "All the hard work is overshadowed. We have to be able to bring that energy back."

While some board members thought a private line of credit could help avoid another cash crisis, Dave Kohlhaas said the solution needs to be "deeper."

"That just kicks the can down the road," he said. "That could be an answer, but I don't think it's a solution."

Spirit Mountain budgeted a $388,500 loss for this season, including depreciation, in its $6.3 million budget approved by the Duluth City Council in April. Last season's net loss was estimated at more than $500,000.

More tourism tax dollars could help the recreation area catch up on its deferred maintenance and better shield against emergencies, though securing those funds may mean performing an economic impact study to show how the public benefits from investing money in the business, board members said.

"If this was a private business you'd see lift prices jacked up and skier days would undoubtedly go down," said board member Eric Viken. "The purpose is not to make a bunch of money but to fill up our resorts, hotels, lodges and restaurants."

"You do things differently if you're a business only accountable to the bottom line," Board Member Cory Salmela added.

In the 2016-2017 season, the highest lift ticket price was $49; this season the undiscounted adult price is $65.

Prices remain competitive considering what the recreation area offers, board members said, though skier visits have been falling, according to Duluth's annual financial disclosure. Ream said season passes and walk-up sales are on the rise, however.

Filby Williams said the message from the council and administration is that Spirit Mountain remains a "bulwark of our economy and quality of life."

"There is often opportunity in crisis, and that is so in this case."

Brooks Johnson • 218-491-6496