Executive Summary
In 2014, the Vermont State Auditor’s Office initiated an inquiry of the State’s land leases with seven ski resorts. The central aim of the investigation was to evaluate the direct financial return to the public for its unique land assets.
The 50- to 100-year leases stem from agreements made in the mid-20th century. The leaseholds include a total of roughly 8,500 acres of public land on some of Vermont’s most famous mountains, such as Mount Mansfield, Jay Peak, and Killington Peak. Since the State began leasing land to ski resorts, a key goal of these arrangements has been to develop and promote recreational sports and facilities in Vermont. To this end, the arrangement has been very successful.
The leases were crafted to help the resorts grow on and around state land, while generating revenues for state forests and parks. Over the last half-century, locally owned resorts with several lifts and a few facilities have transformed into year-round enterprises – some of which are now owned by large out-of-state corporations. Today’s resorts feature new lodges, hotels, condominiums, retail stores, golf courses, waterparks, and other high-end amenities. Between 2003 and 2013, development at the seven resorts spurred increases in sales of goods and services, property values, and revenues from excise taxes.
Meanwhile, lease payments over this decade fell 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 as measured by the sale of goods and services, property values, and revenues from excise taxes.
Since state lands are not subject to local property taxes, Vermonters pay for land and facilities used by the ski areas through the Payment in Lieu of Taxes programs. These payments for property used and developed by the resorts reduce the value of the lease revenues to the State.
The leases were written in non-standard terms and are inconsistent across key criteria, such as lease lengths, indemnity clauses, remedies for a breach of contract, and audit provisions. The lack of uniformity between the leases has produced a system that is difficult to administer and generates added costs for taxpayers. One of the most problematic of the inconsistencies is the variation in assigning title to property on state land, which obstructs two towns’ power to tax and gives some resorts a tax advantage because property that belongs to the State is tax-exempt. The dated liability insurance language in the leases also poses potential risk for the State.
Finally, when the State negotiated the lease agreements, it made a crucial error by not stipulating regular opportunities to update the agreements, as the federal government does in its standardized 40-year permits with ski areas. Despite this impediment, the State and the ski resorts could work together to update and improve the leases.