DULUTH – As $1 billion in private investment pours into Duluth's medical district — aided by more than $100 million in taxpayer support — city leaders see a once-in-a-generation opportunity to bring a vision of urban renewal to life.

"This is a rare investment," said Adam Fulton, Duluth's interim planning and development director. "We are working really hard with great partners to make sure we get it right."

Essentia Health will soon start work on its $800 million campus upgrades — the largest private investment in the city's history — and St. Luke's will spend $249 million on its own growth over the next several years.

Yet as shovels hit the ground for Essentia and work continues for St. Luke's, these side investments remain more a vision than a reality. Even the potential for the Duluth campus of the University of Minnesota Medical School to get involved remains uncertain; a spokesperson said it was discussing a role in the district but wouldn't comment further.

Even so, the blocks surrounding the health systems that anchor the east end of downtown Duluth expect to see their own upgrades, with the help of about $98 million in state money and $10 million in city assistance.

Old parking lots could make way for housing projects. New parking ramps, like one proposed for E. 1st Street, could include retail spaces. And the conglomeration of buildings that comprise St. Mary's Medical Center could be torn down or repurposed.

There is $10 million in state money set aside for demolition, but those plans remain in flux, with the hospital building scheduled to remain open through 2023.

The Benedictine Sisters Benevolent Association and Essentia Health are working together to make decisions about the future of the property, said Shannon Dahnke, an Essentia spokeswoman.

"We recognize that the parcels represent a unique opportunity for the community, and we invite comment from the community to help inform the decisionmaking process," Dahnke said.

Targeted development

Fulton says if new businesses were to locate in the medical district, the area around 4th Street and E. 6th Avenue could make the most sense. Already a new apartment complex is in the works at one corner of that intersection.

"We really want to see that corridor rejuvenated as part of this process," Fulton said.

On Friday afternoon a light lunch crowd walked the area as heavy vehicle traffic flowed through the crossroads. Combined, Essentia and St. Luke's account for about 15% of Duluth's workforce. Most workers live well outside the neighborhood and have to park in the patchwork of surface lots and garages in the district. State money is covering two new parking ramps and the expansion of another, freeing up some of the lots for potential reuse.

"I think this will attract many specialty contractors to complement what the hospitals are doing," said Brian Hanson, president of the Duluth-based Area Partnership for Economic Expansion, or APEX.

He said a major get for the area would be a large medical device maker.

"There's such a pull for the medical device industry in the Twin Cities metro and in the corridor down to Rochester," Hanson said. "We've worked on that area for many years with no real success on the attraction side — though some homegrown companies continue to grow."

Like Rochester?

It's easy to make comparisons to the Mayo Clinic-led Destination Medical Center in Rochester, and Duluth leaders can certainly draw on lessons from that project.

"It's a lot of working together and a lot of competing interests," said Rochester Mayor Kim Norton.

"There is a lot of resistance by some people who don't like the changes, who don't like in some cases that property taxes have gone up," Norton said. "It can be an easy scapegoat if you don't understand what's happening."

Transparency and consistent communication are key, she said.

Duluth Mayor Emily Larson said inclusivity will play a role as well.

"How are we making sure that this isn't a walled-off medical district?" Larson asked. Visitors to the district should feel they are part of the broader community in Duluth, she said.

Fulton, the city's interim planning director, said any mix of new housing in the medical district must include affordable units. A task force has been formed with the goal of finding money to address Duluth's affordable housing shortage.

"We're mindful of the fact that with this level of investment comes a risk of some gentrification concerns," Fulton said. "We want to make sure we are considering long-term affordability."