A move by the Jay Peak ski area management to slash the resort’s taxable value could cost the small Northeast Kingdom town of Jay more than $1 million a year.
The resort and several related properties are now valued at roughly $121 million, generating about two-thirds of all property taxes paid in town — about $2 million.
Resort officials and their attorney argue that the current assessed value is way overblown. They want the town to reduce it to $58.5 million, which would cut their property tax bill by more than 50%. Local residents would pick up the difference.
The Jay Peak resort management team is mounting a similar challenge for Burke Mountain, which also was part of the EB-5 fraud.
The move to reduce the valuations of both resorts has spurred blowback from local officials defending the property values. The dispute could set up a legal battle that would ultimately be resolved by the Vermont Supreme Court.
Both requests come as the court-appointed receivership works to sell both Jay Peak and Burke Mountain. The receiver, Michael Goldberg, was assigned to run the two ski areas after the former resort owners were charged by federal regulators in a $200 million EB-5 investor fraud scandal.
Just last month, Goldberg received approval to accept $3.2 million in federal money through the Paycheck Protection Program to help keep the resorts afloat during the Covid-19 pandemic.
William Roger Prescott, an attorney with the firm Downs Rachlin Martin who represents Jay Peak, told Jay’s Board of Civil Authority Wednesday night that arguments over tax valuations can become contentious.
“It’s sort of a you-against-us situation,” he said of his experiences in other towns handling tax appeals.
“That is certainly not the case here. “ Prescott told the panel. “Jay Peak takes great pride in being the largest taxpayer in the community, takes great pride in being an engine for economic development in the community, and it takes great pride in being a good neighbor.”
He then told the board, “We’re not happy being in this situation, but the fact of the matter is the property is not worth $121 million. It’s worth less than half that.”
Prescott pointed to efforts to sell the resort. After it was on the market for more than a year, the highest “expression of interest,” a nonbinding offer, he said, was about $70 million.
William Krajeski, president of New England Municipal Consultants, spoke on behalf of the Board of Listers and the town’s assessment at the hearing Wednesday night.
Last month, the listers rejected Jay Peak’s bid to lower its assessment, prompting the appeal hearing Wednesday night before the town’s Board of Civil Authority.
“I think we all sort of jokingly used to refer to it as the Disneyland of the Northeast Kingdom,” Krajeski told the board Wednesday night of the Jay Peak properties he referred to as “spectacular.”
He said the resort’s value is much higher than the $58.5 million pitched by Prescott.
“They rejected $70 million; they don’t think it’s sufficient,” Krajeski said of resort officials. “That’s telling you the owners of the property don’t believe that’s a sufficient number to be paid for this property.”
The indicted Jay Peak developers, Ariel Quiros and Bill Stenger, collected $282 million from 564 EB-5 immigrant investors from 2006 through 2013 for six major developments at the resort. Three hotels and two condo complexes were built by the time the Securities and Exchange Commission filed 52 counts of fraud against Quiros and Stenger in 2016. A third condo project was recently completed.
The new construction projects, however, did not significantly increase the value of the resort, according to an SEC economist who in 2016 estimated the Jay Peak Resort was worth $41.6 million. Quiros illegally purchased the ski area with EB-5 money in 2008 for $25 million. He used $50 million to fund a lavish lifestyle; another $108 million was invested in margin loan bets that lost money, according to federal regulators.
The Jay board made no decision this week on the resort’s value. Instead, panel members will inspect the properties next week, and the board will then hold a follow-up meeting.
A look at the numbers and the differences between the town and resort show:
- Jay Peak Inc., assessed by town at $80,847,600. The parcel includes the ski area itself, a couple of hotels, a tramway building, a water park, a theater and rock climbing facility, golf complex and wedding barns, parking decks, a number of condos and cottages, administrative and maintenance facilities, and about 2,488 acres of land. The resort wants the value dropped to $38,900,000.
- Jay Peak Hotel Suites, assessed by town at $9,280,800. It is part of the 85-room Stateside hotel complex. The resort wants the value dropped to $4.5 million.
- Jay Peak Hotel Suites Phase II, assessed by the town at $26,379,100. It is part of the Jay Peak Hotel and Conference Center, with 140 hotels rooms as well as retail and conference spaces. The resort is moving to reduce the value to $12.7 million
- Jay Peak Lodge and Townhouse LP, assessed by the town at $4,600,400. It includes three condo-style buildings with a total of 30 units. The resort wants the value dropped to $2.4 million.
Attempts to sell Jay Peak
Ethan Kopp of the firm Houlihan Lockey is working on the sale of Jay Peak; he testified by phone at the hearing Wednesday. He provided a bit of an inside look at the secretive process to sell the ski area, though Kopp said he couldn’t disclose the names of anyone interested.
Kopp told the board he started in March 2019 to contact parties who might be interested in buying the ski area, including other ski resort companies and private investors.
A total of 142 entities were approached, he said; 48 of them signed nondisclosure agreements that allowed them to get an inside look at the resort’s financials.
Eventually, Kopp said, the field narrowed to about 10, with a handful submitting credible “expressions of interest,” or nonbinding offers, ranging from $38 million to $70 million for the resort.
“In your opinion, is the resort likely to be sold for more than $121 million, based on what you know now?” Prescott asked Kopp.
“I do not believe so, based on the marketing effort that we conducted and the indications of interest we received,” Kopp replied. “There was no buyer at $121 million or more.”
While the names of interested parties have been kept confidential, a Jay Peak official, speaking at a public municipal meeting last summer, identified a few companies that had expressed interest, including Alterra Mountain Company.
Alterra, a Denver-based company, also owns Tremblant ski resort in Quebec and Stratton in Vermont. Late last year, Alterra purchased the Sugarbush ski resort in Warren.
Christopher Stickney of Colliers International also testified Wednesday about an appraisal he conducted for the resort. He told the board he took an “income” approach to determining the resort’s value, particularly looking at revenue and expenses over the past several years.
“The real property value, the value that would be the taxable amount, equates to $58.5 million,” Stickney said of his findings.
Krajeski countered that the income approach didn’t take into account all the value of the resort at its “highest and best” use.
He said even if the 300 condos and suites there sold for $150,000 apiece, which he said would be a “fire sale” price, the resort would take in $45 million alone.
“Are you trying to tell me that the Jay Peak ski area, water park, two hotels, an ice skating rink, 2,500 acres, and rock climbing and theater building are worth only $10 million?” he said, based on the resort’s request.
“That doesn’t even come even close to capture the value of the remaining property,” Krajeski added.
As for the $70 million cap on potential sale offers, Krajeski told the board, “I don’t think they found the right person at this point.”
Goldberg has overseen the ski areas as receiver since investor fraud allegations were leveled at the resorts’ past owner Ariel Quiros and Bill Stenger, Jay Peak’s former president, in April 2016.
Those federal and state civil enforcement actions, brought more than four years years ago, involved hundreds of millions the two men raised through the federal EB-5 immigrant investor program to fund massive upgrades to the ski areas.
Last year, the two men and two other business associates were indicted on federal criminal fraud charges tied to a separate failed development they headed in Newport to build a $110 million biomedical research facility, AnC Bio Vermont.
Jay Peak’s new hotels and condos, water park and ice rink were funded by hundreds of millions of dollars from hundreds of foreign investors who put up at least $500,000 each; their goal was a green card — permanent U.S. residency if their investments met certain job-creating requirements.
At Burke, a 116-room hotel and conference center also opened in 2016, funded with $67 million from more than 120 EB-5 investors. Quiros and Stenger purchased the resort in 2012 with $7 million in commingled EB-5 monies.
A hearing on the Burke appeal is set for Aug. 17. The town values that property at $18.7 million. The resort’s proposal to trim the valuation has not been made public. However, it has said the ski area has been losing money in recent years.
“The current tax assessment simply does not take into account the operating history of Burke Mountain or its prospects for future profitability,” the letter stated. “There is no factual or legal basis supporting the $18.7M assessment.”
Goldberg, the court-appointed receiver overseeing both Jay Peak and Burke, could not be reached for comment.
