Turnaround Towns: International evidence 15

Case Study 3: Duluth, Minnesota

Situated at the south-west corner of Lake Superior, Duluth has a population of 86,000.
The town has been a major seaport on Lake Superior’s western shores since the mid-
1800s. Even today, Duluth is the busiest port on the Great Lakes: iron ore and wood
from northern Minnesota, grain from North Dakota, coal from Wyoming, and wind
turbines from around the world pass through Duluth on their way to and from US and
international ports.18

What the situation was18 There were also fiscal troubles. In 2008, when
Mayor Don Ness took office, Duluth had a $4.4m
Duluth’s current turnaround story begins in budget deficit. Revenues were flat or declining,
2008, following economic shocks throughout and on the expenditure side, retiree medical
the decades, in particular during the 1970s and costs accounted for almost 15 per cent of the
1980s. However, Duluth’s turnaround has been town’s general fund budget and were projected
facilitated by specific actions that have been to rise $1 million per year. Moody’s put the town’s
taken to transform the town since the mid-1950s. bond rating on a negative outlook in 2009, citing
structural imbalances in its budget.21
A 1997 book described Duluth as: ‘A frontier city
surrounded by open space, [it] has the warmth
and charm of an older city, the comfort of a What it became
small town, and the economic problems of a steel
city.’19 Thirty years ago, it was, like Flint, Michigan, In 2000, Duluth’s population was older than
and Gary, Indiana, one of the most distressed that of the state’s as a whole. Now it is getting
towns in America. Many industries collapsed younger and wealthier. Between 2000 and
due to international competition. For 60 years, 2010, the number of people between 20 and 34
a steel production facility, fed by nearby mines, years old rose to 15%. Mayor Ness has said this
employed up to 5,000 people. The facility closed younger spirit has been needed in a town ‘on
in 1979, leaving behind a 640-acre contaminated the fringes of the American economy’. 22 Despite
site. Downtown businesses shut their doors. By the recent recession, Duluth continues to do well,
the early 1980s, unemployment in the town with industries including aerospace, engineering,
was nearly 20%. Duluth’s population peaked education and health care. New building and
at 106,884 in 1960, then dropped by 20% over economic development proposals come on a
the next 30 years as employment opportunities regular basis. In the first half of 2015, the town’s
in steel and heavy manufacturing declined and tourism revenue increased by 11.6%, which put it
residents migrated to Minneapolis, Saint Paul, on course for a record year. The town’s finances
and beyond.20 have stabilised and the economy is strong. No
draws on reserves were required in the 2014
budget, and bond ratings are up, with AA from
Standard & Poor’s and Aa2 from Moody’s.23
18 Once A Troubled Rust-Belt City, Duluth Turns Its Finances Around,
Mark Ruff, Government Finance Review, Dec 2014 21 ibid
19 Cityscapes and Capital: The Politics of Urban Development, By 22 On Top of the Hill With Don Ness, Twin Cities Business Magazine,
Michael A. Pagano, Ann O’M. Bowman, 1997, Johns Hopkins September 30th 2015
University Press
23 ibid, Duluth finds the right formula: Natural beauty, strong
20 Once A Troubled Rust-Belt City, Duluth Turns Its Finances Around, workforce brings in the business, Minnesota Real Estate Journal,
Mark Ruff, Government Finance Review, Dec 2014 March 23rd, 2015
16 Turnaround Towns: International evidence

How it happened a clear plan, strong political leadership, and good

communication. Perhaps most important in a
In 1956, Duluth citizens voted to radically reform strong mayor system, under Mayor Ness Duluth
its old form of ‘commissioner’ government, had a mayor committed to addressing the 2008
where the mayor’s position was not much more fiscal crisis while continuing to transform the
than public relations. They turned to a ‘strong economy and nurture tourism.
mayor’ system. There are two primary forms
of local governance structures in American A clear proposition
towns and cities: strong mayor systems, where The town has told a clear story about itself, as
the mayor is directly elected by citizens; and a place that has been ‘battle-tested’, and has a
weak mayor systems, where mayors are elected clear relationship both to its history and its future.
from within the council. Strong mayor systems Mayor Ness commented:
centralise executive power – the mayor oversees
the daily operation of the town, directing the People see our industrial heritage as
administration and appointing and removing something that makes Duluth feel authentic...
department heads. While the council has We’ve never turned our back on [it]. That’s
legislative power, the mayor has veto power. In something that’s core to the feel of our city.
weak mayor systems, the council is powerful, with
both legislative and executive authority, and the Young people are coming to Duluth to live and
mayor has limited power. work, pulling employers that want to attract
the talent in their wake. Mayor Ness appealed
The advantages of a strong mayor system can be to a young demographic that he targeted in
seen in turning around a fiscal situation like that rebuilding the town’s image by promoting music
faced by Duluth. Hard choices on both revenue (Duluth is home to a large number of bands), the
and the expenditure sides of the budget required arts, and the town’s parks and trails for hiking,
 Turnaround Towns: International evidence 17

biking and other outdoor activities.24 Homegrown worldwide. Epicurean saw 15% growth last year,
entrepreneurs reflect this ‘new’ Duluth. A and Loll Designs grew 30%. Though Duluth isn’t
growing number of business start-ups are drawn the most central location for a growing midsize
to a town that lets them build a business while business, the 100 employees enjoy the outdoor
enjoying nature, culture, and a more casual lifestyle and easy commutes. ‘You can have
lifestyle than that found in a big city. Flavoured success around the country and globally,’ Greg
gins, vodkas and aquavits are distilled in the Benson, one of their principals, says. ‘[Being in]
town, complementing new craft breweries. Local Duluth doesn’t hinder that...’ 25
restaurants are thriving.
Efforts to diversify Duluth’s economy will
Both established companies and larger home- remain important. Today, healthcare, airline
grown businesses are making commitments in maintenance, education and tourism are all
Duluth. Clothing retailer Maurices, who have at their highest levels ever, which can help
over 900 stores across the US and Canada, compensate for other industries, such as the local
is building a new headquarters building that taconite mining industry, which may be likely to
will stand 11 stories and take up an entire city experience a more challenging economic future.
block. Meanwhile, a homegrown group of But while it’s an important part of Duluth’s
companies, Good Sheet, includes Loll Designs, a economy, particularly for its banking, legal and
manufacturer of outdoor furniture from recycled engineering sectors, Duluth relies much less on it
plastic, and Epicurean, which makes cutting than 30 years ago.26
boards and other kitchenware from wood fibber
and other recycled materials. Established in 2002,
Loll and Epicurean sell Duluth-made products

24 First elected to the Duluth City Council at age 25, at one point in 25 On Top of the Hill With Don Ness, Twin Cities Business Magazine,
2011 Mayor Ness enjoyed an 86% approval rating. Duluth Mayor September 30th 2015
Don Ness won’t run again, Star Tribune October 12th, 2014 26 ibid