Auditor Says Vermont Should Charge Ski Resorts More For Use Of State Lands

Jan 21, 2015
Originally published on January 21, 2015 2:57 pm

Some of the state’s largest ski areas owe their success to lease agreements that allow them to use land owned by the state of Vermont. But State Auditor Doug Hoffer says the state ought to be charging higher rates for use of this pristine mountain land.

Back in the middle part of the last century, when local legends like state forester Perry Merrill were trying to bring skiing to the masses, the state of Vermont made what would prove to be a critical decision.

In exchange for a cut of lift ticket revenues, the state would lease to private companies the high-elevation mountain land they’d need to sustain any kind of profitable ski venture.

The deal ended up working out pretty well for everyone involved.

But more than 70 years after that first lease was signed, the terms of the agreements remain largely unchanged. And Hoffer says the money the state gets out of those lease payments – about $3 million this year – doesn’t reflect the value it’s giving away to resorts now owned in some cases by large, out-of-state corporations.

AIG, for instance, owns Stowe, and the real estate investment firm, CNL Lifestyle Properties, owns Okemo. The other five areas leasing state-owned lands are Smuggler’s Notch, Jay Peak, Killington, Burke, and Bromley.

The leased land totals about 8,500 acres, and spans 10 towns.

“The industry developed and grew and has become a very important part of the state’s economy,” Hoffer says. “Having said that, can we justify a lease payment established 50 years ago? Are we getting a fair return? And I think the answer is probably no.”

Business is booming at ski areas, where slope-side real estate development far outstrips profits coming from ticket sales. And Hoffer says the value of condos, restaurants, golf courses and other amenities being constructed in ski towns derive their value from one main asset.

“A considerable portion of the value of those holds in is because of their proximity to the leased land,” Hoffer says. “There’s lots of mountains in Vermont. But I don’t see million-dollar condos going up unless there’s that infrastructure.”

But because the lease payments are tied largely to ticket sales, Hoffer says the state isn’t seeing revenue increases commensurate with the growth in the ski resort industry. Adjusted for inflation, lease payments have actually declined over the last decade.

Mike Fraysier is the lands administration director at the Agency of Natural Resources, which oversees the leases. Fraysier says the state analyzed the lease structure in 2007, right before it signed a 30-year lease extension with the owners of Burke.

“You know Vermont ski leases, even though they’re old, they’re dated, they’re not necessarily consistent, they generate generally more revenue than other publicly administered ski leases,” Fraysier says.

Commissioner of Forest, Parks and Recreation Michael Snyder, meanwhile, says he’d love to figure out a way to renegotiate higher lease payments.

“And we’re interested in making those as big as they can possibly be, reasonably and legally,” Snyder says.

Unfortunately he says, the leases aren’t up for several decades, and, according to the lease contract, the state can’t alter the terms of the lease without explicit permission from the ski areas.

And Snyder says it’s important to note that economic development generated by the ski industry has resulted in tax revenues, job growth and business creation that far exceed what lease payments bring in.

“There’s other benefits that we enjoy, and have enjoyed, through the development of these ski areas,” Snyder says.

Parker Riehle, head of the ski trade group Ski Vermont, says Vermont taxpayers have enjoyed direct financial benefits as a result of ski area expansions that have “triggered development off of the state-land portion of the ski areas."

“That in turn has benefited the state enormously through the collection of rooms-and-meals tax revenues, and sales tax revenues, adjacent to those state land leaseholds,” Riehle says.

Hoffer says tax revenues derived from ski resort operations don’t come from the companies that own those resorts, but from the individuals that patronize them.

“You go and buy something, whether it’s a drink at the bar, you stay at the hotel overnight, it’s you that pays the tax, not the ski area,” Hoffer says. “The only question left is, are the taxpayers of this state receiving fair value for an incredible public asset?”

Hoffer says hopes the report will start a conversation in the Legislature about how to convince ski areas to revise the terms of their leases prior to their expiration nearly 40 years from now.

Hoffer says there are other issues the Legislature may want to consider, beyond the issue of lease payments, such as the ownership of equipment and infrastructure constructed on leased state land. While at most of the ski areas, that equipment belongs to the resorts, at two ski areas, the equipment belongs to the state, which means local towns therefore can’t collect municipal taxes on that infrastructure.

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