Duluth City Council approves $10 million Lakewalk funding despite budget woes

DULUTH – The City Council voted 7-1 Tuesday to approve a $10.1 million contract to fortify and rebuild the Canal Park portion of the Lakewalk, a move that sparked conversations about what the city's pandemic-fueled budget shortfall could mean for taxpayers down the road.

After storms battered Duluth's shores in 2017 and 2018, the city received federal and state emergency dollars to fund the restoration of the Lakewalk, the popular trail that stretches along more than seven miles of Lake Superior.

That money is covering more than 75% of the three-phase $20 million project. Duluth is expecting to chip in $4.2 million, an amount $1.7 million higher than city officials had initially billed their share of the costs.

That increase happened because city officials realized some renovation costs, such as lighting and concrete work, would not be covered by federal or state assistance. The city is planning on funding its contribution with general obligation bonds with a projected annual debt service cost of $300,000.

City Council Member Derek Medved, the lone vote against the contract at Tuesday's meeting, expressed concern about city administration's plans to use a property tax levy increase of less than 1% to cover that expense.

"We can't afford it. And we can't at all ask the taxpayers of Duluth to pay more for the Lakewalk at a time like this," Medved said.

Such an increase would cost a residential home valued at $225,000 an additional $9 per year, a city spokesperson said.

Other council members pledged to work on finding ways to make sure the project's cost doesn't fall on taxpayers as Duluth budgets for 2021 this fall. The city has said it is facing a potential $38 million hole in its budget this year because of the COVID-19 pandemic.

Council members and city staff warned that pushing off the Canal Park portion of the Lakewalk restoration — the project's third and final phase, which began earlier this year — would harm a tourism industry already devastated by the pandemic. It would also leave the area vulnerable for another season of fall storms.

They also said moving forward now could allow the city to take advantage of historically low interest rates and provide jobs during a time of unprecedented unemployment.

"It makes sense to get it done now for the community," Council Member Zack Filipovich said.

Duluth has also asked for money from the state's bonding bill to fund separate Lakewalk renovations and replace aging sea walls that protect its shores. A city spokesperson said those projects will be put on hold if Duluth does not receive funding from the bonding bill, which the Legislature is expected to take up again in its special session in June.