Vail to buy Stowe?

[Jully]

Well, speaking of business climate, our Progressive Party state auditor has weighed in on the sale of Stowe to Vail. He made this comment in the Vermont Digger article about the sale:
The Stowe Mountain Resort leases some of the most iconic and valuable public lands in the state. The current lease terms are almost 50 years old and are out of date. There is reason to believe that Vermonters are not receiving a fair return for the lease of these unique public assets. According to the terms of the lease, the sale of the resort has to be approved by the State. This is a rare opportunity for the State to use its leverage to revise the lease terms.

Oh boy!! This could be real fun.

 

[VTKilarney]

What does this mean? It sounds like it means they want to charge more for the leasing of the land. If the current lease terms are almost 50 years old, that would mean there is about 49 more years remaining on the lease terms since they are generally 99 year leases, correct?

The current lease goes to 2057. The state gets a percentage of ticket sales.

The auditor thinks that it is a good idea for the state's economy to tell businesses that the state has no intention of honoring its contractual agreements reached with businesses. He has been advocating that the leases be ripped up since he released this report: http://auditor.vermont.gov/sites/auditor/files/documents/Final SAO Report on Ski Resort Leases.pdf

Because, you know... the state didn't have lawyers or anything like that when they entered into the leases.

Frankly, skiing is seen as a rich white person's sport. That's an irresistable target for the Progressive Party.

 

[cdskier]

What does this mean? It sounds like it means they want to charge more for the leasing of the land. If the current lease terms are almost 50 years old, that would mean there is about 49 more years remaining on the lease terms since they are generally 99 year leases, correct?

Some info from a "non-audit report" performed by the "office of the Vermont State Auditor" (http://auditor.vermont.gov/sites/auditor/files/documents/Final SAO Report on Ski Resort Leases.pdf)

A key element of the leases is that the sole authority to extend the contracts rests with the resorts. This
creates a situation where the ski resorts have long-term leases that range from 50 to 100 years (see Table
2). For example, Killington ski resort had an initial lease of 10 years, from 1960 to 1970, with an option to
extend the lease nine times for a maximum term of 100 years. The State has no authority to deny or amend
requested extensions absent certain breaches of contract.

Edit: And I see VTK posted the same report while I was typing up my response.

 

[benski]

What does this mean? It sounds like it means they want to charge more for the leasing of the land. If the current lease terms are almost 50 years old, that would mean there is about 49 more years remaining on the lease terms since they are generally 99 year leases, correct?

I think it means the state can block the sale of Mt. Mansfield if it wants. The state can ask for anything it wants as long as Vail will likely still make a profit. I would guess it is looking to protect either increase the rent on the land or protect Stowes employees.

 

[benski]

Frankly, skiing is seen as a rich white person's sport. That's an irresistable target for the Progressive Party.

Especially if they can slip a 15 dollar an hour minimum wage and guaranteed maternity leave into the contract. But why not go for it. AIG decided to give the state the right to stop a deal. Both parties in the original deal are complicit in letting the state rip up the old deal.

 

[VTKilarney]

A couple of things:
1) The auditor's report fails to recognize that operating a ski resort is much more expensive than it used to be. The current Stowe lease was entered into in the 1960's when snowmaking was not the massive expense that it is today.
2) The Stowe lease calls for a percentage of not just ticket sales, but also for food and beverage and certain retail sales as well.
3) The state gets paid whether the ski area loses money or not. The only risk to the state is the amount that they receive.

I'd love to see Vail tell the state that the deal is off if the lease terms are made more onerous. Something tells me that Vail won't do that.

 

[BenedictGomez]

Well, speaking of business climate, our Progressive Party state auditor has weighed in on the sale of Stowe to Vail. He made this comment in the Vermont Digger article about the sale:
The Stowe Mountain Resort leases some of the most iconic and valuable public lands in the state. The current lease terms are almost 50 years old and are out of date. There is reason to believe that Vermonters are not receiving a fair return for the lease of these unique public assets. According to the terms of the lease, the sale of the resort has to be approved by the State. This is a rare opportunity for the State to use its leverage to revise the lease terms.

Annnnnnnnddddddddddddd.................there you have it. All too predictable.

What does this mean?

It means leftist politicians who "did" nothing to "earn" anything, want to dip their hands into the pockets of businesses that create jobs and earn revenue, and extract even more money from them.

Make no mistake, EVERY other business who seeks to invest in Vermont and bring jobs to Vermonters, not just in the ski industry by the way, will read those words and be afraid to invest in Vermont. You can set your watch by this crap.

Frankly, skiing is seen as a rich white person's sport. That's an irresistable target for the Progressive Party.

This too of course. The crooked politicians will threaten to attack and demonize them if they don't "play along".

 

[VTKilarney]

I picked up on something interesting that the auditor said, which is this:
According to the terms of the lease, the sale of the resort has to be approved by the State. This is a rare opportunity for the State to use its leverage to revise the lease terms.

Notice what he didn't say. He didn't say that if the resort is sold the lease states that the terms of the lease will be re-opened. So it appears that all the state can do is to approve or disapprove a sale. Presumably, this was to avoid a ski area being sold to an entity that did not have the financial or institutional capacity to effectively run a ski area. Vail is about as rock solid an operator as you can get.

So the auditor wants to use the state's ability to disapprove a sale as mere blackmail to renegotiate the terms of the lease. How classy. If I was Vail, I would tell them that the lease is not subject to renegotiation.

 

[BenedictGomez]

If I was Vail, I would tell them that the lease is not subject to renegotiation.

Better yet, kill the deal and buy in New Hampshire instead.

Then announce the expansion and creation of New Hampshire jobs, and blow $50,000 on an ad campaign (advertising is relatively cheap in Vermont) in Vermont explicitly stating why it's New Hampshire getting this infusion in $$$$$ and jobs and not Vermont, and naming the Vermont politicians that screwed this up.

 

[benski]

Annnnnnnnddddddddddddd.................there you have it. All too predictable.

Vail has a reputation for poor treatment of workers and AIG has been investing a lot so the state is risking hurting there economy be allowing the deal.

 

[BenedictGomez]

Especially if they can slip a 15 dollar an hour minimum wage and guaranteed maternity leave into the contract. But why not go for it.

Do you have any clue what $15 an hour would do to lift ticket prices?

Vail has a reputation for poor treatment of workers and AIG has been investing a lot so the state is risking hurting there economy be allowing the deal.

 

[benski]

Do you have any clue what $15 an hour would do to lift ticket prices?

Not much. The 3-4 lifties at a lift only collectively make $480 a day at 15 dollars an hour. 120 per 8 hour day for janitors, groomers and parking attendants . The rest are uninfected. I think the marginal costs from all of those come out to less then 2 dollars per skier visit assuming those are kept to the minimum necessary avoid lines, filth and ice.

 

[EPB]

It means leftist politicians who "did" nothing to "earn" anything, want to dip their hands into the pockets of businesses that create jobs and earn revenue, and extract even more money from them.

Except the oil and gas industry. The state did the noble thing a few years ago and banned fracking - despite the fact that there is no evidence any oil exists under Vermont... This really is rich though. It's as if the state aspires to become the first in the union to survive with no business bigger than a mom & pop shop. As suggested earlier, this should be a blessing for a state that could use all of the tourism and property tax $$$ from a Vail-operated resort.

 

[Jcb890]

Not much. The 3-4 lifties at a lift only collectively make $480 a day at 15 dollars an hour. 120 per 8 hour day for janitors, groomers and parking attendants . The rest are uninfected. I think the marginal costs from all of those come out to less then 2 dollars per skier visit assuming those are kept to the minimum necessary avoid lines, filth and ice.

I don't think people realize the effect of a $15/hour minimum wage. They just see a raise to the lowest common denominator and lose their minds about how great it is.

A company like McDonald's sees that and realizes there is no way they can compete in the current market at current prices. So, they either raise prices for their goods or services, or they get rid of the cost which is going up (human help) and replace it by automated kiosks. Instead of a few people being employed (at a job which was never supposed to support a family anyways), you now have higher prices and/or less people employed and replaced by computers/automation.

So, you tell me, how does $15/hour minimum wage help? If the cost of goods/services goes up while only the lowest common denominator is making more money, the other classes of income get screwed and even these lower wage workers get screwed because companies will cut corners and go out of their way to not pay these people $15/hour.

Having minimum wage go up is fine. It needs to every once in a while as inflation and cost of living goes up. However, $15/hour minimum wage would represent ~50% or higher raise in many states. If you look at research and support for the $15/hour mark, there is a lot less support from economists compared to a $10/hour minimum wage. Of course, some cities can support more. However, to expect some places to support $15/hour is kind of crazy.

 

[Jcb890]

Annnnnnnnddddddddddddd.................there you have it. All too predictable.

It means leftist politicians who "did" nothing to "earn" anything, want to dip their hands into the pockets of businesses that create jobs and earn revenue, and extract even more money from them.

Make no mistake, EVERY other business who seeks to invest in Vermont and bring jobs to Vermonters, not just in the ski industry by the way, will read those words and be afraid to invest in Vermont. You can set your watch by this crap.

This too of course. The crooked politicians will threaten to attack and demonize them if they don't "play along".

Better yet, kill the deal and buy in New Hampshire instead.

Then announce the expansion and creation of New Hampshire jobs, and blow $50,000 on an ad campaign (advertising is relatively cheap in Vermont) in Vermont explicitly stating why it's New Hampshire getting this infusion in $$$$$ and jobs and not Vermont, and naming the Vermont politicians that screwed this up.

Couldn't agree more. Business love having things signed and agreed upon and then having states turn a 180 and try to raise taxes/pricing. I'm sure that'll lure a lot of big business into VT. :smile:

 

[snoseek]

California minimum wage is steadily marching to 15 an hour. Raises all around at Kirkwood pretty much every season. Not sure what the bottom line will be but its nice to see people actually making better wages out there.

 

[benski]

Couldn't agree more. Business love having things signed and agreed upon and then having states turn a 180 and try to raise taxes/pricing. I'm sure that'll lure a lot of big business into VT. :smile:

Couldn't a business do the same thing if it negotiated the rights to block a of a lease?

 

[jaybird]

Better yet, kill the deal and buy in New Hampshire instead.

Then announce the expansion and creation of New Hampshire jobs, and blow $50,000 on an ad campaign (advertising is relatively cheap in Vermont) in Vermont explicitly stating why it's New Hampshire getting this infusion in $$$$$ and jobs and not Vermont, and naming the Vermont politicians that screwed this up.

This would only hold true if there was anything in NH of the same caliber as Stowe.
Les Otten's enterprise has a long slog ahead of it .. and building brand doesn't happen overnight.

State of VT would better off sanctioning this deal .. praying for an uptick in tax revenue from F&B.
Renegotiation of lease terms with MTN won't present any obstacle. Balance sheet is easy on that.

VT and it's ski industry/political connection will soon be in a difficult position.
The Quiros debacle will likely spill over on high level VT officials.
State may now realize that their 'oversight' is of limited value.

Only question I see is what will be the price of a Stowe Epic Pass ?

 

[VTKilarney]

Couldn't a business do the same thing if it negotiated the rights to block a of a lease?

The right to block the sale was most certainly put in there to prevent a sale to an operation that wasn't up to the task of running a ski area. In other words, the state put the provision in the lease to protect its ability to generate revenue pursuant to the lease, but not to renegotiate the terms of the lease itself.

So yes, technically the state can block the sale to Vail solely for the reason that they want to increase the percentage of sales they get under the lease - although I think that an aggressive Vail could argue in a court of law that the state is not acting in good faith. (It's hard to say for sure without seeing the actual lease.) But IMHO it's an extortionist tactic and nothing more. And whether or not it is technically allowed, it certainly sends a message to other businesses that the State of Vermont is not to be trusted when it comes to the spirit of their contractual agreements. Just because you can do something does not make it the right thing to do.

If the state does intervene, this is going to be a major headache for the Jay/Burke receiver. Both of those resorts are subject to state land leases. If the state upped the payments under those leases, the sale price for the resort would presumably reflect this which means that the state would be taking money away from the very investors that the state had already screwed over with its empty promise of "oversight".

 

[benski]

State of VT would better off sanctioning this deal .. praying for an uptick in tax revenue from F&B.
Renegotiation of lease terms with MTN won't present any obstacle. Balance sheet is easy on that.

It might. Is known to treat there employees worse than other operators. Vermont might kill the deal to keep AIG under the assumption its better for Stowe employees.