As construction of new homes stagnated in Duluth, it accelerated in nearby Hermantown.

And the situation is cause for concern, said Dale Lewis, president of the Duluth Economic Development Authority and president of Park State Bank. "As you build new houses, it creates new wealth in a community,'' she said. "Selling older homes over and over again is not the same thing.''

Much of the increased value in Duluth's property base during the past decade resulted from rising home prices. Hermantown has seen a similar increase, but it also has witnessed a sharp rise in its inventory of housing.

Census figures released Monday showed that 25 percent of Hermantown's housing units in 2000 were built within the past decade.

In contrast, only 6 percent of Duluth's housing units in 2000 were less than 10 years old.

While the pace of new construction in Duluth was markedly slower than in Hermantown, it still gained more total homes. Duluth added 2,081 new housing units in the 1990s, compared with 708 in Hermantown.

To put that number in perspective, however, it must be noted that Duluth is more than 10 times larger than Hermantown.

"What you're seeing is urban sprawl, and we'd like to stop it,'' said Mike Conlan, Duluth's director of Planning and Development. "It can destroy cities as we know them.''

He explained that sprawl left unchecked can eat away at a city's tax base.

"Duluth in some ways is several decades behind larger metro areas,'' said Larry Knopp, a professor of geography and urban regional studies at the University of Minnesota Duluth, noting the recent flight of development to surrounding areas.

Knopp said Duluth is right to be concerned. "There's a finite amount of capital circulating, and when more money goes to the suburbs, less goes to the city. It can result in a strained tax base.''

Nevertheless, Gerald Kimball, a former Duluth city planner, said the city will continue to benefit from the growth in neighboring areas, even if it loses out on some development.

"Hermantown's growth is still good for our retail,'' Kimball said. " People will still shop in Duluth, and the city will continue to get the advantage of that in the form of sales tax.''

Case in point is Patty Wheeler, who recently gave up her Duluth house for a home on Fredenberg Lake that she's expanding.

Wheeler said she isn't likely to alter her shopping patterns. "To me, I don't think any of that is going to change.''

Yet Duluth's relatively weak performance in the creation of new housing disturbs Lewis. "It definitely doesn't bode well for the future economic growth of Duluth,'' she said.

"It's a symptom of the lack of business growth in Duluth and a symptom of the negative attitude toward development here,'' Lewis said.

Jeff Gilbert, who is in the midst of building a 50- to 60-house subdivision in Hermantown, agreed that Duluth has a reputation as a difficult place for development. "It can take more time and effort to get a project approved than it does to go out and build it,'' he said.

But Gilbert said the other challenge to development in Duluth is that the most obvious sites for residential housing have already been claimed.

Hermantown City Administrator Lynn Lander said his community has both embraced and expedited growth. The city streamlined its permitting process by creating what Lander calls a "fast-track committee,'' providing developers with single-meeting access to planning and zoning staff, administrators, engineers and the public works department.

In contrast, Lewis said many developers have come to expect delays in Duluth. She cited the reluctance to develop green space as a key factor driving development into neighboring communities

But Mike Furtman, an officer of the Izaak Walton League's Duluth Chapter, said, "It's a fallacy to say the lack of new development can be blamed on environmentalists. Many of the same rules apply to development in Hermantown and Duluth.''

Furtman said he and others involved in efforts to protect the environment dislike urban sprawl as much as anyone. Instead, he advocates building more infill housing in already developed parts of Duluth.

Conlan said the city has worked hard to promote the redevelopment of property in Duluth. He offered several examples including Village Place, a recently proposed 72-unit residential development at the corner of Fourth Street and Sixth Avenue East; the 28-unit West Gate Townhome project on Thompson Hill; and efforts to renovate the Bridgeman-Russell building on First Street.

If Duluth ignores the issue of sprawl and its tax base erodes, Conlan said, "It could challenge our ability to provide basic services.'' He said funding for schools, public safety functions and infrastructure maintenance could all suffer.