Commentary

Doug Hoffer: Setting the record straight on state’s land leases to ski areas

Editor’s note: This commentary is by Vermont State Auditor Doug Hoffer.

As Vermont state auditor, my chief aim is to ensure that public assets – financial and real – are used effectively and efficiently. For that reason, I decided to evaluate the direct monetary return to the state for leasing 8,500 acres of public land to seven ski resorts.

My office released the findings of that investigation last month, and a recent story about the issue in the Stowe Reporter contained incorrect and misleading statements. I would like to set the record straight.

Rep. Heidi Scheuermann called my office’s report flawed, and she told the Reporter that the auditor “had a belief that tourism isn’t the economic driver we think it is.”

Rep. Scheuermann is mistaken. We went to great lengths to gather, analyze and present information about other revenues generated at the resorts that lease state land, and the report repeatedly touts the success of this arrangement for promoting recreational sports and tourism. Here is just one example:

“Between 2003 and 2013, private property values at the seven ski areas grew by almost 150%, and, in 2013, the seven ski resorts generated nearly $5.3 million in property taxes for the State’s education fund. During that same decade, inflation-adjusted sales of meals at these resorts grew by 40%, alcohol sales grew by 49%, and rooms’ sales grew by 61%.”

Meanwhile, lease payments over that same period fell 14 percent when adjusted for inflation. The leases were designed to capture a certain percentage of the primary revenue source, which 50 years ago was lift tickets. But, as the resorts have evolved, that revenue source has become one of many. The result is that revenues from lease payments have not kept pace with development at the resorts.

The lease fees are not taxes. They are rental fees for the exclusive use of valuable public assets.

 

The resorts’ lease payments go to a fund that supports state parks and forests. Another elected official told the Reporter, “The forests, parks and recreation department is basically funded by those leases.” In fact, lease revenues have been a declining share of the Parks Division budget over the last 12 years, dropping from 41 percent to 32 percent of the division’s expenditures, and they accounted for only 14 percent of all department expenditures in 2014.

Not surprisingly, a lobbyist for the ski resorts has opposed any proposal to renegotiate the lease terms. The Reporter quoted him saying, “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.”

First, the lease fees are not taxes. They are rental fees for the exclusive use of valuable public assets. Second, many of those other “revenue benefits” are taxes paid by visitors to the resorts, rather than the resorts themselves.

The owner of Smugglers’ Notch told the Reporter that 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 (of lift revenues multiplied by the percentage of linear lift feet on public land).

That’s not entirely accurate. The federal government uses a sliding scale that ranges from 1.5 percent to 4 percent for lift ticket revenues. The federal agreements also include revenue from ski school operations, which Vermont’s do not. While it is possible that some resorts might benefit from the federal structure, our aim was to evaluate whether Vermonters are getting a fair deal.

Smugglers’ Notch is one of two ski resorts that enjoy a lease provision that puts its ski lifts and other improvements on public land in the state’s name. Since state property is exempt from local taxes, this means Smugglers’ Notch has a tax advantage over Stowe Mountain Resort, which is required to pay local property taxes for its improvements on public land. In FY 2014, Vermont taxpayers paid more than $25,000 to the town of Cambridge for Smugglers’ Notch improvements on state land via the State’s Payment In Lieu of Taxes program (PILOT). Taxpayers also paid Cambridge for land Smugglers’ Notch uses. These payments reduce the value of Smugglers’ lease payment, which was $283,000 in 2014, or $130 per acre.

The owner of Smugglers’ Notch also suggested a quid pro quo where the ski areas agree to renegotiate the leases in return for permission to “bypass Act 250 environmental requirements for future development projects.” I think most Vermonters would agree that a developer buying the right to avoid compliance with state law is an affront to our sense of justice.

In addition to the core question about lease fees, the report addresses other issues of importance, including a number of inconsistent lease terms that concern tax exemptions, municipal taxes, state payments to towns, reporting requirements, and liability insurance.

Finally, the report was intended to inform Vermonters and start a conversation. It’s not surprising that self-interested parties want to protect the current arrangement, but my job is to represent the interests of the people of Vermont. The question is whether the terms of these decades-old leases still provide a fair return to Vermonters. And it’s a fair question.


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