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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  • Now if we could get all the non profits in Vermont on the PILOT program. That would ease the tax burden on the majority of Vermont residents.

  • nick spencer

    So the problem is. the lease payments aren’t keeping up with the staggering pace of the increases in the ancillary property taxes, rooms and meals taxes and liquor taxes that are generated because a ski area is operating there? 1960’s, 45 ski areas in Vermont. 2015, twelve left. They single-handedly support the budget of the Agency of Natural Resources based on the fees they pay for anything they develop while Agriculture dumps sediment in the river 10x and gets a free ride. Without these dozen risk-taking businesses operating and contributing to our tax base(and they had horrible numbers last weekend, based on the weather) our State is simply a colder version of Mississippi.

  • Jim Christiansen

    Still waiting for that promised VTHealth Connect audit.

    • Mr. Christiansen:

      How long do you think it takes to do any audit? Please note, State Auditor Hoffer has a very small staff as compared to the increasing demands of his office to perform such audits. Nothing in life happens with the flick of a switch but rest assured when the audit you refer is completed it will be overwhelmingly thorough and in the best interests of our great state.

      Best wishes,
      Thomas

      • Jim Christiansen

        Agreed that audits take time.
        However, given the impact on Vermonters, the dollars pledged and spent, as well as the ongoing difficulties and extensions, I would have expected the VT Health Connect audit to be a priority.

  • Interesting that the ski area suggests by passing ACT 250 requirements for a payment-our environment for sale. Well where do you think they got that idea? Just look at how Lowell Mountain has been destroyed above 2500 feet with nearly 500 foot tall, rotating, noisy, blinking light structures. The utilities used their lobbyists more effectively then the ski lobbyists. What a joke and tragedy our “environmental” groups and legislators have brought to us. This is the precedent they have set. What will be the next industry that wants to buy out of ACT 250 be? The Governor can use the revenue to balance his failed budgets. This is what we are becoming, what a shame.

    • Richard Ratico

      “Lowell Mountain has been destroyed above 2500 feet.” This is an extraordinary exaggeration.

      For context please view:

    • Jan van Eck

      The skewing of motivators, or “incentives,” for the bulk production of RE by contracts with tax credits and price subsidies was on full display yesterday morning, as I drove N. on I-89 from White River Junction to Royalton, where the Vermont Council on Rural Development was hosting a “summit” on “confronting climate change.” There it was, a commercial PV farm, with acres and acres of those panels right nest to the highway. They looked great! All covered in a thick blanket of snow, untouched for weeks, elegant mute testimony to the folly of RE programs designed to enrich “developers” with credits for installation, and that have nothing to do with actual power production.

      There it was, a nice bright sunny day, and the total power production from this very expensive installation was – precisely zero. The power production over the previous several weeks was – precisely zero. And at the Summit, the 450 participants cheered on the Panelists who declared that we had to go build more!

      These “solar-farm” owners cannot be bothered to hire some flunkies with brooms to go clean off their panels. That places in crystal-clear contrast the true economics of these PV industrial farms.

  • Benedict Gomez

    In Doug Hoffer’s own words, “using public assets effectively and efficiently” entails spending taxpayer money and valuable FTE hours investigating contracts that literally dont come due for decades.

    In other words, he’s probably a perfect government employee.

    • Ms. Gomez:

      With all due respect, its sad that you would take Mr. Hoffer’s comments out of context for the purposes of seeking to associate Mr. Hoffer with your description of a “perfect government employee.” As your agenda is unclear other than to derogatorily go after our dedicated State Auditor I will simply wish you the best and encourage appropriate research before taking statements out of context to derogatorily diminish the one public official in Montpelier who is truly working hard, everyday, on behalf of the Vermont taxpayers.

      Best wishes,
      Thomas Joseph

  • William Hays

    As “Brooklyn Bernie” would say: “Fuggetaboudit, Doug”. The ski area leases are a ‘done deal’. Come back in 40 years, if the Progressives are still around. Stop biting the hand that feeds you.

    • Mr. Hays:

      I’m not sure what your agenda is but its certainly not in the best interests of all Vermonters. By the way “labels” such as Democrat, Republican or Progressive are misleading. There are good and bad apples in all three parties.

      As a former whistleblower in probably the biggest fraud the State of Vermont has suffered, I can assure you the only state official who was immediately engaged, willing to investigate or acknowledge me was State Auditor Hoffer.

      Best wishes,

      Thomas Joseph
      http://www.brattlebororetreat.info

  • Jamie Carter

    “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.”

    Doug,

    The simple answer to your question is it’s irrelevant. The state signed a legally binding lease agreeement. When it is over then can renegotiate said agreement. Until then the point is moot. While Vermonters don’t like taxes and would love a pot of gold to show up, what they like even less is an untrustworthy oath breaker, which is why the governor and state legislature have such a hard time.

    • Doug Hoffer

      Actually, it’s not irrelevant.

      As I noted above, “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.”

      In my view, the State should invite the ski areas to discus the need for making the lease terms consistent, which would make it easier for everyone. This could be done without addressing lease fees.

      If you read the report, you will better understand the need for this.

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

      • Mr. Christianson:

        I’m not sure where you are in proximity to Montpelier but Mr. Hoffer is very accessible and you might seek out his assistant Angela Lee ([email protected]) to see if you might schedule time to speak with Mr. Hoffer directly so that you can be assured that VT Health Connect is a priority.

        Best wishes,
        Thomas

  • Ritico’s response to everything that has to do with ridge line industrial wind is it must be the Koch brothers, all is well with the mountains that have been destroyed, destroy to save, is important. My guess is he has spent very little time in the Northeast Kingdom and doesn’t view these tragedies every day. I have flown over Lowell mountain several times and when I saw his picture video it is very similar to what you see from a couple hundred feet above Lowell mountain. No it’s not as extreme as Appalachia, which I’ve flown over many times too, but what it is is the “right sizing” of the plundering for the enrichment of the Vermont money men. It is environmental destruction, period. No Ritco I’m not in the employment of the Koch brothers, I just think our mountains, citizen’s and communities health, and wildlife are more important and then the almighty dollar.

  • Steven Farnham

    It’s extraordinary, in these times, to have a public officeholder actually doing his job, and defending the interests of the people – not big business.

    Thank you Mr. Hoffer.

    • Mr. Farnham, well said. Mr. Hoffer is an extraordinary public servant who aspires to no higher office but works everyday on behalf of all Vermonters regardless of party. When I discovered fraud at the historic Brattleboro Retreat, Mr. Hoffer was the only official elected to statewide office who would acknowledge me or welcome me into his office. I can attest personally to just how extraordinary and special State Auditor Hoffer is.

      Best wishes,

      Thomas Joseph
      http://www.brattlebororetreat.info/

  • Connie Godin

    Sounds reasonable that 40 year old leases are looked at and made equitable for all the ski areas alike. I think Mr Hoffer is an excellent State Auditor.

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