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Duluth, Fond du Lac Band poised to settle years of legal battles over taxes

After years of legal battles, the city of Duluth and the Fond du Lac Band of Lake Superior Chippewa may finally be poised to call a truce. On Wednesday morning, Mayor Emily Larson and Band Chairman Wally Dupuis announced the makings of a settleme...

After years of legal battles, the city of Duluth and the Fond du Lac Band of Lake Superior Chippewa may finally be poised to call a truce.

On Wednesday morning, Mayor Emily Larson and Band Chairman Wally Dupuis announced the makings of a settlement agreement that would provide the city with $150,000 per year as a payment in lieu of taxes on the operations for the Fond-du-Luth Casino, which is located on property that has been designated sovereign land not subject to taxation.

“This amount is not randomly assigned. It’s equivalent to property taxes, food and beverage sales and other municipal costs of doing business,” Larson said.

Although the band is not required to pay taxes or follow city code, Dupuis said: “The band has always said that we are willing to pay our fair share for services we receive from the city, like any other business. The band is also willing to adopt and enforce as band law, the city planning and zoning requirements for trust land we have in the city.”

The agreement already has been approved by the Fond du Lac Reservation Business Committee, the band’s governing body.

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But it still must be approved by the Duluth City Council before it can take effect. A special council meeting has been called for noon Friday to take up the matter.

The city and band have been at legal odds since 2009, when band leaders decided that a long-standing casino revenue-sharing agreement that had been pouring about $6 million per year into Duluth’s coffers did not pass legal muster.

The city of Duluth took the band to court, alleging breach of contract and seeking to restore the flow of funds it previously received from the casino.

A protracted series of suits and countersuits followed, but the band essentially prevailed, following a finding by the National Indian Gaming Commission that the revenue-sharing agreement with Duluth violated the National Indian Gaming Act.

As the casino revenue case played out, another legal battle began after the band’s 2009 purchase of the Carter Hotel at 17-27 N. Second Ave, adjacent to the Fond-du-Luth Casino.

The band then sought to designate the property as sovereign Indian land that, like the casino, would not be subject to property taxes. This touched off another round of litigation, with the band again prevailing. The city had appealed that decision by the Bureau of Indian Affairs but will now drop its objections, assuming the settlement agreement is approved by the Duluth City Council, as anticipated.

The pending agreement is expected to run for 10 years before it would be revisited.

The $150,000 annual payment prescribed in the agreement could be subject to adjustment if additional development occurs on the Carter Hotel property or at the casino.

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“Should, in the future, Fond du Lac choose to build a hotel or motel, the agreement stipulates that they will make an additional financial contribution to the city equivalent to that of taxes paid by other operating hotels and motels,” Larson said.

In response to a question about what the band plans to do with the Carter Hotel property, as the cloud of legal uncertainty lifts, Dupuis said: “Now that this cloud has been lifted, we can start making a plan. We have not made a plan as of yet.”

However, Dupuis has confirmed the first step will be to tear down the abandoned and deteriorated structure.

Mayor Larson said the city and band must work to mend relations and move forward.

“For seven years, the city of Duluth and the Fond du Lac Band have been engaged in a series of litigations. Today, after five months of conversations, meetings and negotiations, we announce a settlement that allows us to put this chapter behind us and begin writing a new story, together,” she said.

Larson stressed the value of fostering collaboration between the city and the band.

“Our communities gain by putting a contentious and painful litigation-based relationship to rest. And together, Duluth and Fond du Lac gain by pressing restart. Already, we have met and reviewed options for a skywalk connection. Our economic development teams have started meeting. Lines of communication are now open, and I am hopeful that is a reflection of what is to come,” she said.

As for what it will take to fully repair relations, Dupuis said: “It’s off to a good start, but it will take a little while.”

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Dupuis said he and Larson began meeting with one another shortly after the new mayor took office.

“We were able to connect and get this thing going right away. And I think the relationship is going to build from there. That’s evidenced right here,” he said.

Larson said the time for finger pointing has passed and noted that both the band and the city went to court to protect the interests of their respective communities. But now the courts have spoken.

“It’s important to remember that the litigation between our governments represent the business-to-business aspects of the relationship. Both sides have taken the appropriate legal actions to assert their position, and both sides have done exactly what it is you need to do when you are working towards a desired outcome,” she said.

Peter Passi covers city government for the Duluth News Tribune. He joined the paper in April 2000, initially as a business reporter but has worked a number of beats through the years.
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