Golf continues at Superior National at Lutsen as improvements are under way. This white sand from Ohio has golfers very excited. It is now in place in newly shaped bunkers and several holes have been seeded and topped with erosion control straw.
When the Cook County/ Grand Marais Economic Development Authority (EDA) appeared before the county board on Tuesday, August 26, 2014, asking the board to schedule a public hearing on the EDA’s proposal to have the county issue tax abatement bonds for $2 million to fund continued improvements at Superior National at Lutsen (SNL) golf course, the county board agreed to set a hearing for 10 a.m. on Tuesday, September 23. However, commissioners stressed that the townships of Lutsen, Tofte and Schroeder had to be on board with the plan to use West End lodging tax dollars to pay the bonds if golf course revenues fall short. On Tuesday, September 16, EDA Treasurer and interim Golf Course Manager Scott Harrison gained the final okay from the township of Lutsen.
After significant discussion on September 9, the township of Schroeder passed a unanimous motion to support the proposal. The town of Tofte passed a motion as well at a special meeting on September 2. The town of Lutsen was the last hurdle.
Harrison first asked the town board if it would once again serve as fiscal sponsor for the golf course’s receipt of a $300,000 grant from the Iron Range Resources and Rehabilitation Board (IRRRB). The township has served as sponsor for previous grant funds for the golf course. Lutsen Treasurer John Groth said being fiscal sponsor is no problem. “The money comes to us electronically and we cut a check,” he said. The board agreed to once again be the government entity to accept the funding.
“The next request is a little more complicated,” said Harrison. He gave a brief history of the funding for Superior National, beginning back in 1986 when George Nelson donated the land for the course. Harrison said it took special legislation, but with the help of then-Senator Doug Johnson, the county established a lodging tax for the townships of Lutsen, Tofte and Schroeder, with a portion of that lodging tax earmarked to pay for the general obligation bonds to build the golf course.
Those original bonds, said Harrison, have been “100 percent paid off.”
In 1999, when an additional nine holes were added to the golf course, Harrison said the EDA/Superior National issued revenue bonds, which relied only on golf course revenue for repayment. Harrison said those bond payments were approximately $180,000 per year. “Those bonds were fully paid by golf course operations in 2014,” he said.
Now that the golf course is expanding/renovating, Harrison said the EDA asked its financial consulting firm Ehlers Investment Partners to seek proposals from bonding firms. He said Ehlers issued 13 notices and received two replies, with interest rates ranging from 5 ½ to 6 percent.
“So we asked the county to consider issuing tax abatement bonds at a rate of about 2 percent. That would be a savings of $1.4 million over 20 years,” said Harrison.
“But that also means you have to convince the county that you’re not risking taxpayer’s money,” said Harrison, going on to explain the “line of defense.”
Harrison said each year’s debt service would be approximately $165,000, pointing out that the payment is less than what the golf course was paying on the 1999 revenue bonds. “So the first line of defense is the golf course revenue. If that failed, the second line of defense is the lodging tax. Each year the full amount of debt service must be in the bank, under Auditor Braidy Power’s control.
“The third line of defense—if things really went haywire—if golf course revenue and lodging taxes were gone—would go to the taxpayer,” said Harrison.
In that case, the “worst case scenario,” said Harrison, the property taxes collected from properties around the golf course would be applied toward the golf course bonds. The reduction in taxes from those properties would ultimately have to be made up by an increase in the general tax levy.
“So the county is making us re-pledge lodging tax dollars,” said Harrison. He added that the Lutsen- Tofte Tourism Association (LTTA), which manages the lodging taxes, agreed to pledge a portion of its lodging taxes with a board vote of 9-0—as long as it was given the authority to manage the golf course.
However, Harrison added LTTA does not have the final say—the townships do. “This is actually a township tax, collected by the county.”
There was brief discussion and Lutsen Treasurer Groth asked, “So before the need for money got to the county taxpayer, the golf course would have to go in the hole and lodging would have to go broke?”
Harrison nodded and District 5 Commissioner Bruce Martinson interjected, “The total lodging tax collection for the West End in 2013 was $626,701.21. The economy would really have to tank for the lodging tax not to cover $165,000.”
Lutsen Supervisor Tim Goettl asked who would be running the golf course under the new management plan. Harrison said there would be three representatives from LTTA and two from EDA.
Fred Schmidt said he was a fan of Superior National and said he would “fight for the golf course forever,” but he asked Harrison to consider lowering rates. “It’s getting to be so high that locals can’t afford to golf there. Don’t you think if they lowered prices, they’d get more people and more would be spent on amenities?”
Harrison said it doesn’t work that way. An increase in numbers at lower fees doesn’t equate to increased revenue— but it does lead to more wear and tear—and expense at the golf course, he said.
Lutsen Supervisor Andrew Beavers said as a member it is frustrating to pay the same price for fewer holes and no putting green during construction.
Supervisor Ginny Storlie added that some signage is needed at the SNL entrance. She said with all the construction going on, it doesn’t look like the golf course is open. Supervisor Beavers agreed, “This summer has been horrible for all of the businesses in the Highway 61 corridor. But it would help to have something in place to let people know that despite construction play is in progress.”
Lutsen supervisors ultimately joined their township colleagues and passed a unanimous motion supporting the tax abatement bond proposal.
Harrison said if the county approved the proposal at the upcoming public hearing, bonds would be issued in November 2014.
Cook County Board of Commissioners Public hearing
to consider issuance of tax abatement bonds for expansion/renovation of Superior National at Lutsen
Tuesday, September 23
10 a.m.
Cook County Courthouse
Commissioners room
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