Ski resorts balk at auditor’s suggestion to review leases of state land

Editor’s note: This article is by Tommy Gardner, of the Stowe Reporter, in which it was first published Feb. 12, 2015.

Vermont ski resorts have a message to officials who want them to reconsider their leases on state land: Get back to us in about 40 years.
Stowe

Skiers cruise down the slopes at Stowe Mountain Resort as the sun peaks over the mountains. File photo by Aaron Rohde/Stowe Reporter

Last month, state Auditor Doug Hoffer issued a study that found the 50- to 100-year leases the state penned with ski resorts in the mid and late 1900s are dated, inconsistent, and benefit the resorts more financially than they benefit the state.

Hoffer said the original leases to seven Vermont ski resorts — including Stowe — cover roughly 8,500 acres of public land, and were meant to help the resorts grow while bringing in money for the state parks and forests.

But now ski resorts have grown into four-season playgrounds, lift prices top $100 a day at some places, and add-ons such as restaurants and golf courses and acres of lodges and condos bring more and more money into resorts, Hoffer noted, and some — such as Stowe Mountain Resort, owned by New York-based Chartis — aren’t even locally owned anymore.

Inside the ski resort leases

Stowe Mountain Resort’s lease with the Vermont state government covers more than 1,400 acres of Mount Mansfield State Forest and extends until 2057.

That will be 90 years after the resort signed its first state lease in 1946. Back then, the company was called Smugglers Notch Lift Inc. The current lease was signed in 1972, with the Mount Mansfield Co.

Under the lease, at the end of each year, the resort pays 5 percent of gross receipts from lift ticket sales and 2.5 percent of gross receipts from sales at its restaurants and retail outlets that were built on state land. A full-price Stowe lift ticket is $108 at the ticket office, $89 online.

On the other side of the Notch, Smugglers’ Notch Resort leases more than 2,500 acres of Mount Mansfield State Forest in Cambridge, Morristown and Stowe. It pays the same percentage of lift ticket sales as Stowe does. A Smuggs lift ticket costs $70 at full price.

The original Smugglers’ Notch Resort lease was signed in 1962, and the current lease runs from 1987 to 2058.

Other ski resort current lease terms:

• Killington: 1960-2060
• Jay Peak: 1976-2056
• Burke: 1974-2054
• Okemo: 1963-2053
• Bromley: 1982-2032

— Tommy Gardner

 

“The dramatic changes in the resort industry over the past half-century suggest the need to review the current leases, which stretch back to the presidency of Dwight D. Eisenhower,” Hoffer said on Jan. 20.

Sen. Tim Ashe, a Chittenden County Progressive who chairs the Senate Finance Committee, threw more fuel on the fire when he wrote a letter to the seven Vermont ski resorts with long-term leases, demanding that the companies renegotiate their agreements with the state. Ashe alluded to options for increasing taxes on ski areas, such as eliminating the tax exemption on snowmaking equipment, as an alternative. Some lawmakers were perturbed by the letter, perceiving it as a threat to come down harder in taxing the resorts if they don’t voluntarily renegotiate their leases.

Rep. Heidi Scheuermann, R-Stowe, who grew up in the shadow of Mount Mansfield, was not impressed with Ashe’s letter, and called Hoffer’s report flawed.

“The income generated by ski resorts isn’t just for forests and parks, but all through the state of Vermont,” Scheuermann said Monday. The auditor, she said, “had a belief that tourism isn’t the economic driver we think it is.”

Parker Riehle, the association’s president, told the Vermont Press Bureau last week that the leases are a “very good deal for both parties and very favorable” to the state.

“In light of the numerous revenue benefits to the state, we certainly don’t see a need to look for any additional tax burden on the ski areas,” Riehle said. “We certainly don’t want to see anything like that hanging over our heads.”

No traction, slippery slope

Bill Stritzler, a local from Cambridge who has owned Smugglers’ Notch Ski Resort since the 1980s, said Hoffer’s and Ashe’s requests came as a surprise.

He said the state gets twice as much money from the ski resort leases as the federal government would receive in similar arrangements, 5 percent versus 2 percent.

“As stewards of the land, we have several responsibilities that go beyond just paying that fee,” Stritzler said. He added, “We’re in direct competition with Western resorts.”

While Hoffer and Ashe gripe that the 5 percent of lift ticket sales, and 2.5 to 3 percent of restaurant and retail receipts, bring the state only about $3 million a year, others say it’s $3 million a year in revenue the state wouldn’t otherwise generate.

“The forests, parks and recreation department is basically funded by those leases,” said state Sen. Rich Westman, R-Lamoille County. “Those leases have done exactly what they were meant to do.”

Westman also sits on the Senate Finance Committee.

“Nothing’s going through the finance committee, and I do sit at that table,” he said.

Stritzler offered another option: Sure, open the leases, but allow Smuggs to bypass Act 250 environmental requirements for future development projects.

“That’s not gonna happen,” Stritzler said.

 

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  • Michael Lippold

    Yes. They could very easily pick up these mountains and leave.

    Be nice if they would just be good Vermonters (but I get that some don’t live here) and want to help their fellow Vermonters. Unbelievably selfish attitude. Even state employees agreed to give something up to help out Vermonters just a few years ago.

    Open up the leases already. Or by all means, do hoist up those mountains and run.

    • Carl Werth

      I sure hope they don’t pick up the mountains when they leave – ’cause we need to cover those mountains from top to bottom with industrial wind turbines when they vacate them.

    • Ralph Bollard

      State employees didn’t agree to give up anything. The union allowed across the board cuts to keep the number of employees up. This equates to more dues. What shoud have happened is job cuts.

  • Dan Carver

    “While Hoffer and Ashe gripe that the 5 percent of lift ticket sales, and 2.5 to 3 percent of restaurant and retail receipts, bring the state only about $3 million a year, others say, well, there’s $3 million a year.”

    Such a narrow measurement of the positive financial impact the ski industry has on Vermont tax revenues.

    First I would question the 2.5 to 3 percent of (the state’s? certainly not the town’s.) restaurant and retail receipts. Why dismiss the impact on room & meal taxes?
    Misters Hoffer and Ashe also remiss in not including the favorable impacts of our employment-related and property tax receipts.

    Employment: The ski industry and the adjacent tourism-driven towns certain provide more than $ 3 million in receipts when you think of payroll taxes and their financial contributions through benefit plans. They contribute to the premiums of private health plans for their employees. The health insurance premiums and payroll taxes paid by the ski tourism businesses significantly subsidize our health insurance system by more than $ 3 million–maybe each week.

    Property taxes: Tourists come to experience and enjoy our natural landscape regardless of the season. They buy vacation homes and are taxed without representation to support one of the most expensive public schooling systems in the country! They come to play with nature, not to see our solar arrays and wind turbines.

    I’m positive Mr. Hoffer could provide sound estimates of the financial benefit the state receives from the ski industry through:

    (1.) room and meal tax receipts, (all inns and restaurants within a 30 mile radius of each ski resorts on state land.)

    (2.) employee benefits – income taxes, insurance premium payments for health, dental, worker’s comp, and medical; 401(k) contributions (future income taxes).

    (3.) Aggregate property tax receipts for all vacation homes (within the same 30-mile radius of each ski resorts.)

    The favorable impact to the state, is far beyond what was imagined by the lease signers representing the state, so many decades ago; they are to be commended.

    This article has provided me with a better understanding as to why the state balks at investing in private industry: They do not comprehend all the benefits to be gained. They must think good employment and state revenue generation – just happens for no logical reason.

  • Ann Meade

    Page 21 addresses ticket sales, looks like they are doing pretty well
    http://accd.vermont.gov/sites/accd/files/Documents/travel/vermont-tourism-benchmark-study-2013.pdf

  • Dave Bellini

    Where’s the Governor and his close chums? Why aren’t they demanding that the ski areas just give them money? The Governor has no problem demanding to renegotiate the 2 year contract he personally signed with state employees. He doesn’t have the stones to take this approach with a 40 year old contract? With a wealthy entity? Don’t go demanding money from state workers,,,,,again.

    • Krister Adams

      See 4 posts up.

  • Howard Dean

    The time to renegotiate leases is when they are coming to an end, not in the middle of them. Even if we doubled the taxes, we would gain an additional $3 million which is a drop in our fiscal bucket. The industry provides thousands of jobs and huge amounts of rooms and meals taxes during a season which has been historically a difficult one for Vermonters.
    If this were an environmental issue. that would be different, but like it or not, the Vermont ski areas are our partners. The most important rule in a partnership is no surprises.

    • Michael Lippold

      Does that go for the state employee workforce too Howard? Do you renegotiate contracts mid-stream, or do you wait until they come to an end? Or do you have the same double standard as the rest of these pro-business Vermont leaders?

    • J. Scott Cameron

      Please come back and run for Governor. We miss you.

    • Doug Hoffer

      Gov. Dean

      I agree that in the grand scheme of things $3 million per year is a modest sum. But at a time when there is a proposal to cut $6 million from the fuel assistance program, $3 million seems like a lot, especially to those in need during this exceptionally cold winter.

      As for those end dates, they are not original. The only reason it seems like we’re “in the middle” is because the terms have been extended numerous times over the years, always at the request of the ski areas.

      Indeed, I think that in aggregate, the various leases have been amended at least 19 times. Those were the times when the State had an opportunity and some leverage to discuss new terms. We found no evidence that the State made any effort to do so.

  • Bruce Post

    “… and some — such as Stowe Mountain Resort, owned by New York-based Chartis — aren’t even locally owned anymore.”

    The above sentence sounds relatively benign. Yet, Chartis is much more than a non-local owner; it is part of a financial behemoth, the much-maligned, gargantuan AIG, bailed out by the U.S. government after the 2007-2008 financial crisis that AIG helped facilitate. Chartis is sort of like a financial industry cross-dresser: Sometimes, it’s Chartis; sometimes, it’s AIG. Sometimes, it’s AIG; sometimes, it’s Chartis. The links and summaries below illustrate a troubling picture of the Vermont’s “partner” on Mount Mansfield:

    “Vermont’s Stowe Mountain Resort has changed owners, if only technically. ”

    “On December 31st troubled insurance giant AIG sold the resort to it’s own subsidiary company, Chartis Insurance. Chartis was formed in the summer of 2009 to take over AIG’s property-casualty and general insurance business. After almost going under and receiving US government bailout funds, AIG announced last May that it would divest itself of certain properties, including Stowe. The company has been a principal owner since 1988 and has been involved in the resort since the 1940s.”

    http://www.skirebel.com/magazine/aig-sells-stowe-mountain-to-subsidiary/

    —————————

    “Remember the $182 Billion AIG Bailout? It Just Wasn’t Generous Enough.”

    http://www.thedailybeast.com/articles/2014/10/15/remember-the-182-billion-aig-bailout-it-just-wasn-t-generous-enough.html

    ———————

    “AIG Featured Properties:

    Spruce Peak at Stowe, Stowe, Vermont

    Spruce Peak at Stowe is an alpine village filled with slope-side development of homesites, mountain cabins, condominiums, and time-shares in Stowe, Vermont. The sustainable community includes a 35-acre pedestrian village with 400 residential units, world-class spa and fitness facilities, upscale shopping, fine and casual dining, performing arts center, clubhouses, and golf courses. The Stowe Mountain Resort and Stowe Mountain Lodge add an alluring architectural view in the heart of the alpine village. The Spruce Peak at Stowe project represents a significant collaboration with local residents, state and local governments, environmental groups, and the local business community.”

    http://www.aig.com/aig-global-real-estate-featured-properties_3171_522849.html
    ——————–

    11/20/2008: “Hank Greenberg, King Of The Mountain?”

    “Maurice “Hank” Greenberg, the former chairman of troubled insurer American International Group and an avid skier, says he wouldn’t rule out buying the Stowe Mountain Resort in Vermont’s picturesque Green mountains and now in the midst of a $400 million expansion.”

    http://www.forbes.com/2008/11/20/aig-stowe-vermont-biz-wall-cz_cc_1120stowe.html
    ————

    Back when some Vermont politicians had backbone and believed in protecting Vermont’s environment, then Attorney General James M. Jeffords shined a harsh light on Stowe, calling it “the Sewage Capital of the East.” Those days of courage, conviction and commitment, sadly, seem gone. Gone, also, are the days when damage to our mountain environments were matters of grave concern. Now, that damage is either ignored or, perversely, “celebrated” by those who, like many ski areas, profit from that destruction.

    • William Hays

      The Mount Mansfield Company (and AIG Insurance) have leased parts of the Mount Mansfield Forest since the 1940s. All development, since the CCC whacked a few trails to benefit FDR’s unemployed, have been done by the “Mountain Company”, including all capital expenditures for lifts, lodges, snowmaking, etc.. Spruce Peak is not a part of the state forest. Never revisit the leases. Even 40 years is too soon.

      • John Greenberg

        ” to benefit FDR’s unemployed”

        Why not HOOVER’S unemployed?

  • Jim Christiansen

    Interesting report, but I’m not sure this subject should really be the priority.
    I’d much rather see the audit of VT Health Connect expedited as the impact to our States finances is much greater.

  • such as Stowe Mountain Resort, owned by New York-based Chartis — aren’t even locally owned anymore.

    • here is the entire comment.
      “such as Stowe Mountain Resort, owned by New York-based Chartis — aren’t even locally owned anymore.”
      As Bruce pointed out Chartis, is a AIG company. Back in 2010, AIG announced the sale of Stowe Resort to Chartis, probably due to the fallout from the “credit default swap” fiasco and the $180 billion Govt. bailout. There were no details of the selling price, probably because there wasn’t any since essentially AIG sold Stowe Resort to itself.

      • Also the terms of the bailout in 2008 were that AIG had to sell off it’s non-core holdings in order to pay back the $180 billion. The core of AIG’s business has been insurance. I guess transferring Stowe Resort to Chartis somehow qualified as “selling” a non-core holding.

      • Krister Adams

        Jerry, Bruce, if you think for a minute that the purchase of SMR was even remotely worrisome to AIG you are seriously naive. Meaning the price paid was not even pocket change.

        • What price? What sale? It was a transfer within the AIG group.

  • Tom Sullivan

    Maybe Senator Ashe should focus on his inability to control spending rather than threaten Vermont businesses with excessive taxation for refusing to renegotiate contracts. Can you imagine what a ski pass would cost if Senator Ashe got his way? Are you really going to let Senator Ashe get away with this Chittenden county voter?

    • Peter Liston

      This has nothing to do with taxation.

      This is about corporations using public lands and profiting off the use of the lands. And deciding what the fair compensation is for that use.

  • J. Scott Cameron

    Remember the story you heard as a child about the goose that laid golden eggs? Our mountain ski resorts are like that damn goose. While you may wish she would lay those golden eggs more often, you won’t find any by cutting her open.

    The leases provide a good, base income stream to the state which keeps coming in year after year. In addition, the folks who come to ski (and who are now coming for 4-season activities on the mountains as well) drop mucho additional dinero in Vermont, buying and renting second homes and hotel accommodations, rooms and meals taxes, equipment rentals and purchases and visits to emergency rooms for the odd broken bones. They also do a lot of local shopping.

    Yes, lift ticket prices have increased and some things have changed since the leases were first negotiated. But from what I read we get a percentage of those increased prices; the lease costs are not fixed. Keep in mind that ski resorts have to make incredible capitol investments to keep things running, and they hire a lot of people too.

    Do not kill the geese that lay the golden eggs. Be patient, not greedy, and enjoy the benefits that flow from moderation.

  • Rich Lachapelle

    The legislator critters are on a real tear this session grappling for creative sources of revenue since they have already scoured all the low-hanging fruit and refuse to embrace the foreign concept of spending reduction. This year they are going after farmers by threatening penalties and cutbacks to Current Use and going after store owners and small scale bottlers with a sugar tax proposal.
    Mr. Hoffer, some of us taxpaying, working Vermonters might like to know how much we are spending to roll out the red carpet for our beloved opioid junkies, who unlike the ski areas, contribute little to Vermont’s quality of life and tax base, while some may argue seriously detract from it. Nurturing crime-prone junkies is a relatively new area of unsustainable spending by our State and takes the form of serial trips to very expensive in-patient rehab, increased judicial and corrections costs, supplying long-term maintenance drugs such as methadone and buprenorphine and of course our program of distributing lifesaving naloxone for those who step a bit too close to the heroin abyss. Would the Auditor dare to release what would surely be some eye-popping figures or would it prove too politically damaging for HIS PARTY. Bottom line: ski areas are an INVESTMENT in Vermont’s economy and provide opportunities for quality recreation. Spending money on junkies is for the most part a bottomless money pit in lieu of demanding a higher level of personal responsibility from people with inadequate impulse control.
    Show us the numbers of how we are feathering the nests of the rehab and Big Pharma industries please. I hear much ado from Progs/Democrats about the outrageous profits of evil Big Pharma yet we are contributing huge sums.

    • Philip Beliveau

      Rich, the USA has the largest percentage of our population incarcerated than any other country in the world. From all I have read it is cheaper to provide rehab and medical care for our “junkies” then incarceration, if that is what you mean by “demanding a higher level of personal responsibility from people”.

      • Rich Lachapelle

        I condone incarceration if serious crimes have been committed and I dont consider addiction to be an excuse. I support the free choice of people to decide what substances they wish to consume, legal or otherwise. My idea of personal responsibility is not allowing your use, intoxication or financing methods to bring harm to others. Examples of this harm include premature infants born to tobacco users, heroin addicted newborns and the physically abused children of junkies that have been showing up in the news lately.
        For serious criminals, incarceration may be expensive but it’s priceless if it prevents your door from being kicked in at 2am.

    • Dear Mr. Lachapelle:

      Last year I was walking down the street with Mr. Hoffer and he shared that he doesn’t report to the legislature, the Governor but to us the taxpayers. I will never forget that conversation. Mr. Hoffer is the most non-partisan person elected to statewide political office, aspires to no higher office and simply is focused on doing the people’s work. Whatever connection you have to the “junkies” in our state and Mr. Hoffer is misplaced as the State Auditor cannot control the social issues that include mental health and substance abuse costs which are not just a problem for Vermont but all of America.

      Indeed, you raise good questions but its a national discussion not just a state one. Additionally, did it ever occur to you to consider other factors like the widening gap between the rich and poor, the fact that the majority of American’s live week to week, if that and have more challenges day to day just to survive than the top 1% combined.

      Best wishes.

  • Ralph Colin

    The lack of business-like acumen on the parts of Sen. Ashe and state auditor Hofer is not at all surprising. What they seem not to recognize is the fact that an agreement between two entities for a specified period of time (“the Term”) is not arbitrarily or unilaterally modified if one of the two entities thinks it should be reconstructed for whatever reason unless, of course, there is a provision in the agreement that it may be recast under specific circumstances or conditions.

    Progressives have a difficult time understanding and/or accepting these concepts. They appear to feel that if they don’t like the basics to which they or the entities they are elected to represent have previously agreed, they have an option to modify the provisions at any time and for any reason during the Term. Were that to be the basis on which the world was to be run, the rest of the universe would be as chaotically managed as certain of our Vermont governmental organizations operate. Everyone would do whatever they wanted to do whenever they wanted to do it.

    Gee, if that was the case, could the voters who weren’t comfortable with the way their elected officials were representing them during the period of time to which they had been elected to serve, arbitrarily throw them out of office? That certainly would be a unique interpretation of our election laws. Perhaps it deserves some serious consideration. To hell with agreements!

    • Mr. Colin:

      I would encourage you to read the Auditor’s report and most recently Mr. Hoffer’s extensive commentary (see URL link below) which made clear that he was only seeking to ask fair questions on behalf of the taxpayers of our state and start a discussion. More concerning were the political labels mentioned in your comments as Mr. Hoffer is the most non-partisan of all office holders elected to statewide office, aspires to no higher office and is simply doing the people’s work who elected him.

      http://vtdigger.wpengine.com/2015/02/18/doug-hoffer-setting-record-straight-states-land-leases-ski-areas/

      Best wishes.

  • Connie Godin

    Whose rent hasn’t gone up in 45 years? Resorts need to pay a lot more and build a lot less. I chuckles at anti wind when I see what skiing and electric transmission has done to “our” mountains and ridgelines.

  • Michael Stahler

    Wow, I am not sure which is scarier here–the attitude that we can just break contracts whenever you please or that people want to go after what is the last major industry in Vermont that is doing anything for state coffers (tourism).

    As to the contracts, as the sidebar shows these leases will not come due for some time. They were negotiated and renegotiated a long time ago. The ski areas and the State all agreed to that deal; the ski areas made investments and business decisions based on that deal. We all received the benefits of this partnership. I think a fair number of commentators here came to Vermont for skiing and other recreational opportunities that these public/private partnerships created. And though the article says that the State receives $3 million from ticket sales and the leases, that is a drop in the bucket compared to the other “revenues” that the State collects (property, sales, meals, lodging taxes). I think if you measured the economic impact it is VASTLY more than $3 million; in fact the VSAA has this data handy I’m sure. So before folks rip up the contracts they should stop and think about what is at stake here. Sure there are now a lot of real estate developments on private land near ski resorts and overall the industry is doing relatively well, but things could have gone sideways–in fact a lot of ski areas no longer even exist (Google NELSAP). Both the State and the ski areas took calculated risks when entering into these agreements and the fact that now some folks in State Government want more money is not a legitimate reason to renege on a legal contract.

    Second, I think that folks need to understand that while it may appear that ski areas are rich and turn major profits, the fact is that they are very capital intensive businesses with very little return. The old joke with the industry is, “you make a small fortune in the ski business by investing a large one.” Factor in taxes, land costs, utility costs, labor, equipment, liability insurance, water for snowmaking, infrastructure, and then throw in unpredictable and often tempermental weather and one should see that this is a very tough business. Just ask Win Smith at Sugarbush. So this attitude of “we’ll just take from them because they are rich” is naive at best. One person made a remark about ski areas picking up and moving. Trust me, a lot would if they could (Killington tried to secede). But a lot more have simply gone out of business (again, check out NELSAP).

    Vermont’s identity is tied with skiing, like it or not. Since a guy in Woodstock threw up a rope tow on a hill in 1934 people have come here to ski and the State has promoted that sport and the industry.

    Of course if the most dire forecasts for global warming do come true then there will be no more ski industry in Vermont and folks will have point to another source of “revenue” to encircle like a pack of hungry sharks. I think that the attitude has to change from “where can we get money to give to the State to fund our grand ideas” to “what should we be doing to make a sustainable economy that offers opportunity to everyone?” Just a thought there.

  • Michael Stahler

    …and I hate to tell Mr. Hoffer, but Stowe Mountain Resort has NEVER been locally owned. It was founded by Messrs. Palmedo and Starr of NYC. The former went on to start MRG; the latter ran a company called American International Group (that’s AIG) and Stowe was his darling.

    • Walter Cooper

      Excellent points Michael–your two key thoughts struck me equally.

      The ski industry is doing okay right now, but like airlines it’s a famously mercurial business. The long term leases take one variable and fix it for a time, making planning and investment a bit easier. Ski operators lose money probably half of the time.

      Much, MUCH more of a problem is the idea of violating contracts and contract law by government fiat. I’m sorry Montpelier just renewed leases over the years without looking at them, but that’s Montpelier’s fault. Don’t reneg after the fact–that’s Third World stuff.

      Apparently we have learned from doing business globally–one could envision the PRC canceling your contract because gov’t circumstance have changed; now Vermont wants to behave similarly. Actually, I know a Montpelier landlord who likes to jack rents the moment his tenants’ businesses starts to make money…

      And please, let’s not blame the Greedy Flatlander Businessmen for any of this. Folks like CV Starr and his friend Tom Watson, Jr. (IBM) brought businesses to Vermont that have lasted generations. They arrived when Vermont business was close to dead. They equally loved Vermont An earlier generation of more competent Montpelier lawmakers appreciated and encouraged this.

    • Doug Hoffer

      Thanks

      FYI: We never said that about Stowe. The article suggests that we did, but we didn’t.

      I encourage you to read the report.

      http://auditor.vermont.gov/sites/auditor/files/Final%20SAO%20Report%20on%20Ski%20Resort%20Leases.pdf

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