Resorts agree to change leases

Seven ski resorts hold long-term leases with the state Department of Forests, Parks and Recreation, bringing in a combined $2.5 million a year that is dedicated exclusively to the state parks.

The February announcement by Vail Resorts that it would acquire Stowe Mountain Resort ski operations provided a rare chance to reopen one of those agreements.

Vail may have spent months striking a deal with the resort, but before it could finalize the sale, it also had to negotiate the resort’s lease with the state.

“This is one of those unusual moments in the history of the resorts where the state has some leverage,” Doug Hoffer, Vermont state auditor, said this week. “You don’t want to scare people but you want to let them know you have their attention.”

As an off-season bonus, the state also renegotiated a key portion of the Smugglers’ Notch lease, agreeing to hand over state ownership of the base lodge to the resort in exchange for more than 300 acres of land.

Any lease changes are subject to approval by the Legislature next year, but Hoffer says those approvals are usually perfunctory.

Uphill ski resort

Mike Snyder, a Stowe resident who’s commissioner of the Vermont Department of Forests, Parks and Recreation, oversaw the negotiations between Vail and the state this spring. He said it was an opportunity to clean up some portions of Stowe’s lease and add some new conditions.

Most significantly, that means an actual uphill ski policy, something locals have long been clamoring for. Stowe doesn’t really have one, other than new restrictions last year that forbade uphill skiers from being on certain parts of the mountain at certain times.

Snyder wasn’t a fan of that, especially in a year when the Stone Hut, the fabled overnight structure near the top of Mansfield, was rebuilt and ready a year after fire gutted it (see article). The state owns the Stone Hut, and would prefer more unfettered access to it — the last chair up is at 4:30 p.m., but Stowe’s policy outlaws uphill access on that portion of the mountain from 5 to midnight.

“I was, like, OK, now you’re (ticking) me off because you’re affecting my business at the Stone Hut,” Snyder said of the new uphill restrictions.

Vail is accustomed to people skinning or hiking up its slopes, to get some runs in before or after the lifts close, and many Vail-owned resorts have uphill policies, some more generous than others. Vail and Beaver Creek in Colorado, for instance, allow skinning and hiking access even during the day, when lifts are running.

Bobby Murphy, Stowe’s new vice president and general manager, said the resort is working out the details on its new uphill policy, but confirmed the resort will have one.

“We have uphill policies that are transparent,” Murphy said. “We’re working on how we’re going to communicate it to the community.”

Snyder said that, in the amended lease, Vail agreed to have an uphill policy, and he hopes it will be in effect for the coming ski season.

“This will be a huge step for me,” Snyder said. “That’s maybe the thing I’m most proud of.”

Base lodge beautification

Amending Stowe’s lease was automatically triggered when it changed ownership. Smugglers’ Notch Resort reopened its lease willingly.

The state owns the resort’s base lodge, at the feet of Sterling and Madonna mountains, and the building is showing its age.

Snyder said Smuggs would like to develop the base lodge from its “old and somewhat decrepit” state and modernize it. The resort asked the state if it would like to swap the base lodge for roughly 300 acres of land. Snyder said the forest land “is very developable, but it’s also a big bear habitat” that the state would like to protect.

“We said, ‘Sure, we’ll take those 300 acres, but that isn’t enough,” Snyder said.

So, the state obtained key rights of way within the resort boundaries, and Smuggs will continue to pay the state 2 percent of whatever it sells at the base lodge until the lease expires in 2058. That’s 2 percent on every burger and beer, board and boot the merchants sell.

“That’s going to produce a lot of revenue for them,” Hoffer said, and that means more for the state parks.

Smugglers’ Notch owner Bill Stritzler declined to comment on the land swap, preferring to wait until it’s made official.

The state’s take

Hoffer, as auditor, wants to ensure the state gets its share of revenue from ski resorts that use public lands.

In 2015, he issued a report saying the 50- to 100-year leases the state signed with ski resorts in the mid and late 1900s are dated, inconsistent, and benefit the resorts more financially than they benefit the state.

“These are not your grandfather’s resorts,” Hoffer said this week. “They are moving toward four-season and there is a lot of development, and none of that money goes toward the lease itself.”

He said it would be better to take the federal government’s approach, with shorter terms, chances to update the leases, and get-out clauses.

Hoffer’s recommendation didn’t gain much traction in 2015, not with the seven resorts that lease from the state, and not with many state legislators, who thought the leases were doing their job. They thought that $2.5 million to $3 million a year was better than nothing, and it was best not to bully the resort owners.

Time for changes

When one of those seven resorts — Stowe, Smuggs, Jay Peak, Burke, Killington, Okemo and Bromley — comes up for sale, the state has an opportunity to amend the leases. The state gets the right of first refusal and it gets final approval on the purchase, giving it the leverage to ask for changes.

This isn’t the first time that Stowe’s 90-year lease has been amended. It happened in the 1970s when the company switched hands, and within the past decade when parent company AIG spun it off to a subsidiary.

In a 1995 land swap, the state gave up its ownership of land on the Spruce Peak side that has since been heavily developed. The resort traded 1,234 acres of land along ridgeline and Route 108 for 155 acres it could develop. The Smugglers’ Notch State Park subsequently relocated further south.

“When people get all excited about Vail and Stowe, these big names, they fail to realize this isn’t our first rodeo,” Snyder said.

Stowe Mountain Resort leases about 1,400 acres of Mount Mansfield State Forest, and 48 percent of the resort’s lifts are on state land. The state doesn’t own anything within ski resort boundaries on the Spruce Peak side of Route 108.

Snyder said the first step in working with Vail was to make sure it had the financial wherewithal to hold up its end of the lease. After that, he had the authority to work out a lease with new conditions — including a few that will bring more money to the state government.

According to Hoffer, Stowe Mountain Resort paid $546,584 through its lease in 2014.

Under the revised terms, Stowe will contribute 5 percent of all recreation revenue. That includes summertime activities such as the zip line, treetop adventure course, and rock climbing. If the resort ever introduces mountain biking, and any of the trails are on state land, the state gets a 5 percent cut.

Stowe Mountain Resort already contributes 5 percent of its lift tickets. Hoffer wants a higher percentage, but Snyder said that would be more than the federal government collects with Western resorts, and Gov. Phil Scott didn’t want that.

Stowe also contributes 3 percent of food and beverage receipts at the Midway lodge and Mansfield base lodge.

Snyder said he was impressed with Vail’s top executives, Murphy and Vail senior adviser Blaise Carrig.

“It’s obvious they know what they’re doing, and I have a strong sense they know what they’ve got here. They were proactive about it,” Snyder said.

Jay Peak and Burke Mountain will come up for sale as soon as the dust settles on a scandal over misappropriation of foreign investment for those resorts, and Hoffer and Snyder see opportunity there, too.

One lease element Hoffer said is off the table: their end dates. Much as he’d like the Legislature to shorten the leases, it’s near impossible to nullify such contracts, even if they were written in the mid-1900s.

The 2050s are far away, and Hoffer, in his mid-60s, knows he won’t be in the job then.

“How can I send a message to the Legislature of the future?” he wondered. “I’ll have to give that some thought.”