DECC 101: Explaining Duluth's harborfront complex

DULUTH — Next time you mention the DECC to someone who's not from Duluth, try pausing for a moment, and ask if they know what you're talking about.

You may find they're relieved to be able to admit they were just smiling and nodding, wondering why an artist who usually plays arenas has booked a gig on some kind of deck near the Aerial Lift Bridge.

Even lifelong locals may find it hard to explain what, exactly, the Duluth Entertainment Convention Center is and how it works. That has become more relevant in recent weeks, as the DECC has announced layoffs and secured a $1 million line of credit from the city to cover a potential shortfall in cash flow. (The DECC has not, as of yet, drawn on that credit.)

As conversations about how to ensure a sustainable future for the complex continue, DECC Director Dan Hartman and board Chair Peter Singler joined a video call with the News Tribune to explain the basics of the DECC's organizational and physical structure.

The Duluth Entertainment Convention Center is a facility with 10 venues under its management: Amsoil Arena, Bayfront Festival Park, the DECC Arena, City Side Convention Center, Harbor Side Convention Center, Marcus Duluth Cinema, Paulucci Hall, Pioneer Hall, Symphony Hall and the William A. Irvin.

Organizationally, the DECC is a quasi-governmental authority created by the Minnesota State Legislature in 1963. It's run by a volunteer board of 11 members: seven appointed by the mayor and four appointed by the governor.

While the DECC operates independently on a day-to-day basis, city and state governments ultimately share responsibility for its operation and financial well-being, with the city acting as the DECC's fiscal agent. Spirit Mountain Recreation Area, which has faced similarly complex financial challenges, is another local example of a quasi-governmental authority.

The city owns the land on which the DECC sits. The DECC's facilities are a mix; some are owned by the authority and some are owned by the city. Bayfront Festival Park is a city park, managed by the DECC as an event venue.

Government bodies create entities like the DECC to provide public services. In Duluth's case, that meant building and running new facilities for public events — including hockey games played by UMD, a state university.

That original 1963 legislation empowered the DECC board "to advance, enhance, foster, and promote the use of (an) arena-auditorium and its facilities for activities, conventions, events, and athletic and cultural productions." The Duluth Arena Auditorium — now known as the DECC Arena — opened in 1966. Over the decades, new venues have been added.

"From a public perspective, our mission is to drive economic impact," said Hartman, adding that the DECC also has a mandate to host events that provide less readily quantifiable community benefits. "We drive all these conventions that come here, which have great economic impact, while at the same time, we have a curling club facility that I think is a good community asset. And so that's a different mission."

Over 450 people work for the DECC in some fashion, said Hartman. Most of those, however, are part-time employees. "If you were to look at just full-time staff," he said, "we're probably between that 30 and 40 number."

The most employees who would ever be on-site at one time is about 250, Hartman said.

DECC employees have a wide array of jobs, but most are "on the event production side," said Hartman. That includes many of the staff you see when you attend an event but also includes people you don't necessarily see: custodial workers, convention services ("the folks who literally put the tables together"), building services ("the folks who make sure that your tech is working during your convention or hockey game"), facilities staff ("the ones who are making sure that the sidewalks are snowplowed") and other staff, up to and including the people who build the scary rooms inside the Haunted Ship.

Then, there's the building administration, including people who handle marketing, sales and human relations.

The DECC technically receives about $4 million each year in governmental support, said Hartman, but most of that — all but about $700,000 — goes directly to pay debts accrued from past building projects. That public investment was not made lightly, with Amsoil Arena (2010) being built only after a yearslong struggle that included Duluth voters overwhelmingly approving a sales tax increase to help fund the project.

The DECC makes up the remainder of its approximately $10 million annual budget largely through earned revenue, said Hartman.

"If we have a convention, and they pay us to have a convention here, that earned money from that event helps this place stay afloat," he said. "When you buy your hot dog at a Bulldog hockey game, that's helping us stay afloat. When you come to a concert and you park in the lot, that helps us."

Where the DECC doesn't make as much money as you might think is from ticket sales.

"Most concerts that happen here, we get very little of the ticketing revenue," said Hartman. Much of a typical ticket price goes to the artist and the promoter.

Nor is hockey the cash cow you might expect. While Hartman emphasized that the money those games make for UMD is "a good thing," he explained that "the public gets confused. They think when they come to a Bulldog hockey game, all of that (spending) goes to us."

In fact, UMD gets much of the revenue from hockey games, including a share of the money spent on alcoholic beverage purchases.

"Payroll is always going to be our biggest (expense)," said Hartman. "This is a very labor-intensive operation."

Beyond payroll, the DECC also incurs the kind of bills you'd expect for a sprawling, aging multi-venue entertainment complex in a famously frigid city.

"Our electric bill is massive, as you would imagine," said Hartman. "Our heating bill is incredible." On top of that, the DECC is also responsible for ongoing maintenance and repair costs, which can be substantial.

It would cost over $1 million each year for the DECC just to sit empty, said Hartman, "which was the problem they ran into during COVID." With events shut down and no money coming in, the DECC's electric bills piled up.

Only in September, said Hartman, did the DECC finally pay off its pandemic-era electric debt.

Yes and no. It's not uncommon for cities of Duluth's size to have a government-sponsored convention center, and major entertainment venues typically involve some degree of public ownership and investment. For example, the Xcel Energy Center is owned by the city of St. Paul but operated by the Minnesota Wild's parent company.

What's distinctive about the DECC is the state's direct involvement in its founding and administration and the sheer scope of the facility.

"Our closest comparable is Rochester," said Hartman. "They have around four or five venues, depending on how you dice it up." The DECC, you may recall, has 10.

Hartman cited St. Cloud as another comparison point. That city has venues comparable to the DECC's convention center, arenas and theater, but in St. Cloud, those venues all physically stand alone and are staffed separately.

An advantage of the DECC configuration is an economy of scale. Duluth can run 10 venues with a single, albeit large, staff. One disadvantage is that the DECC remains responsible for all its venues, plus the corridors connecting them, even when they're not all operating.

"We have much higher utility costs for the same number of activities," Hartman said.

Unlike many other cities, the DECC also has to maintain ice — a lot of ice. This winter, the DECC will have ice sheets in both arenas as well as Pioneer Hall, home of the Duluth Curling Club.

"That's been one of my big eye-opening things," said Singler. "Getting to the electrical bill, which surpasses $100,000 every month, (ice) is a big chunk of it."

It depends on the type of event. A sales staff works to book conventions into the DECC, while an entertainment staff handles ticketed events. Often, promoters will approach the DECC with shows they'd like to bring to Duluth. "That's the great benefit of the 10 venues," said Hartman. "We can usually put them somewhere."

Duluth has a large appetite for entertainment, and the DECC has an even larger capacity to host it. "I wish I could tell you we were super picky, but we're not really at this point," said Hartman. "It's pretty rare for us to deny something that fits in our calendar and fits in that 1,000 to 10,000 (capacity) range."

Over the past couple years, the DECC has moved to create more of its own events, making innovative use of its many spaces and offering experiences tailored to Duluth — rather than just waiting for promoters to rent a room. That approach also allows the DECC to retain a larger share of each ticket purchase.

The recent layoffs mark a retreat from that strategy, though, with the elimination of an entertainment curator position. Hartman said that in the face of a "financial crisis," the DECC chose to make staff cuts in a way that was "strategically chosen to have the least impact on our meeting and convention business."

While entertainment revenue has been rising, said Hartman, conventions are a "silent engine" of economic impact, one that simply has to be prioritized. "Trampled By Turtles' show in July is worth about a $2 million impact," he said. "The Children's Mental Health Conference is $4.3 million."

Yes. In fact, a card-only policy has already begun at Bulldog hockey games and is planned to spread to other activities. The principal reasons for the change include cost savings and the ongoing labor shortage. Volunteers can handle cards, but cash is another matter. An additional benefit is that lines move faster, addressing a common complaint about the fan experience.

While there was fierce resistance from some commenters when the DECC initially floated the idea of going cash-free, Hartman said criticism of the policy in practice has been more muted. One concern — that children, too, would need to use credit cards for concessions — has been addressed by providing fixed-sum concession cards in exchange for cash, so kids can buy snacks without flashing the family MasterCard.

In a word, said Hartman: "Yes."

The DECC has a bank account, and there is a finite balance in that account. The fact of the DECC being a quasi-governmental authority enables it to access the city's financial resources (with the approval of the City Council) but ties its hands when it comes to other financial management strategies.

"There's a lot of businesses out there right now who are struggling," said Hartman, "but they're sitting on mountains of debt to pay for things that have happened. The DECC doesn't have that luxury. We have to get this (budget) balanced every year annually, and so that makes it a little tougher sometimes, but that also makes our challenges a little bit more upfront."

It's now been over six decades since the DECC was created by state statute. Why are things coming to a crisis now? Can't the DECC just keep doing what it's always done?

Hartman said the former status quo, such as it was, is no longer an option. For one thing, he argued, things weren't always hunky dory in the past. "The DECC really wasn't financially doing great for a long time. The staffing model got thinner and thinner and thinner and thinner and thinner, and they really weren't paying a lot of their employees very much."

What's more, the facility's infrastructure has relied on what Hartman called a lot of "Band-Aid" fixes. That Harbor Side Convention Center air-conditioning unit that broke? It was also the DECC Arena's ice chiller, because the last time the Harbor Side air conditioning went out, the solution was to connect that venue to the arena's ice chiller — "so now this one AC unit was feeding the AC for two buildings instead of one."

The biggest change, though, is the jump in wages for the DECC's staff — particularly for the army of part-time staff, whose hourly wages went from around $10 to $16-$18. That post-lockdown wage increase, associated with a nationwide labor shortage that has given new clout to hourly workers, coincided with Hartman's 2021 appointment as director.

"It's unfortunate because the costs are so crazy," said Singler, "but the revenues have grown quite a bit, and (that's) been overshadowed."

"A lot of folks I run into or that I see online," Hartman said, "think that I did something where I can just stop doing that, and then it'll all go back to what it was. Man, I wish that was true. Unfortunately, the problem is a lot harder than that."