Doing Business in Nelson County: October 31, 2007

October 31, 2007

Joint Meeting of the Nelson County Board of Supervisors and Economic Development Authority
October 31, 2007

Supervisors Present: Mr. Tommy Bruguiere, Mr. Tommy Harvey, Mr. Harry
Harris, Ms. Connie Brennan and Mr. Allen Hale

Authority Members Present: Mr. Alphonso Taylor, Mr. Greg Kelly, Mr. Natt
Hall, Ms. Barbara Powell, Mr. Erwin Berry, Mr. Stu Armstrong, Mr. Steve
Crandall

Chairperson Tommy Bruguiere called the meeting to order for the Board of Supervisors.

Chairperson Alphonso Taylor called the meeting to order for the EDA.

WINTERGREEN ECONOMIC STIMULUS GRANT - Mr. Phil Payne reviewed the draft grant agreement, noting that the draft is the original draft from March,
2006 with changes as requested by the attorney representing Wintergreen
Partners, Inc. (WPI). Mr. Payne presented 11 issues for the Supervisors to
consider as follows:

1. "Establish a term for the validity of the overall agreement, including a date for the commencement of construction, and possible extension provisions if agreed upon." Mr. Payne noted that, as written, the county could enter into the agreement next week with the project not starting for years.

2. "Include provisions for a sliding scale for the tax rebate based on an annual comparison of actual new tax revenues and projected new tax revenues." Mr. Payne said that the revenue projections provided by WPI are estimates. He said that if the actual revenues are substantially lower, the county could reduce the rebate accordingly, noting that if the revenues were 10% under projections for example, the rebate could be lowered by 10%.

3. "Revise and clarify the effective date of the Grant Item 2(b) on page 4 of the Agreement. As presently formulated, the 100% phase of the Grant can begin with the Land Transfer, but the 30 month limit does not being to run until the Hotel's opening." Mr. Payne explained that if WPI transfers the hotel property or Crawford's Knob property to Wintergreen Hospitality Partners, LLC (WHP), the property becomes taxable. He said that the point of this Grant Item is to keep the property transferred tax neutral until the hotel opens at which time the rebate time period begins. (Note o Clarification: Any property owned by WPI is not subject to county taxes under existing legislation.)

4. "Include as an attachment to the Agreement a definitive project description and a description of the land to be included as "Hotel Property, Item 1c on page 2 of the Agreement. Also revise WPI's commitment accordingly in Item 4(b) on page 5 of the Agreement." Mr. Payne said that it seems logical to have a much more detailed description of the project attached to the Agreement so you know what you are getting for your rebate. He noted that there is no commitment on WPI's part to do any particular thing and that before taxpayer dollars go into economic development, the county should know what that economic development will be.

5. "Remove 'or complete or partial hotel condominium' from the 'Hotel Property' definition Item 1c on page 2 of the Agreement and from the definition of 'Opening Item 1(g) on page 3 of the Agreement." Mr. Payne said that this item is related to #4 above.

6. "Remove all references to the Crawford's Knob land transfer from the Agreement." Mr. Payne said that Crawford's Knob was to have had a conservation easement put in place for the tax credits but that that has not been finalized. He explained that when WPI added Crawford's Knob to the
Agreement, they wanted to make sure that that property remained tax neutral. Mr. Payne noted that given the development rights transferred to that property, the tax bill could be staggering and Crawford's Knob should not be a part of this agreement.

7. "Establish the actual Grant period term, 54 months (original proposal) or
66 months (current proposal). Item 2(b) on page 4 of the Agreement."

8. "Request the over-all project financing strategy including potential CDA
(Community Development Authority) creation and utilization of a Conservation
Easement." Mr. Payne said that more detail is needed to see if the project is realistic before taxpayer dollars are handed over.

9. "Remove 'assist Nelson County in her efforts to obtain legislation allowing for equalization of the local transient occupancy condominium tax and the transient occupancy room tax' from 3rd paragraph on page 2 of Agreement." Mr. Payne noted that the legislation has been enacted and this requirement is no longer needed in the Agreement.

10. "Remove 'Occupancy Tax' definition, item (f) on page 3 of the Agreement as WPI is no longer seeking rebate of the increase in occupancy tax rate. Same as #9 above.

11. "Proposed Wintergreen Tax Payments to Nelson County use a Real Estate
tax rate of $.0072; changes to this rate related to the upcoming re-assessment will have an effect on these numbers." Mr. Payne noted that the financial projects are based on the current tax rate and noted that the tax rate could change based on reassessment and affect the financial projections dramatically.

Ms. Brennan, noting Mr. Payne's comments about "handing over taxpayers'
dollars," pointed out that the land is not taxable now so the county is not considering handing over taxpayer dollars. Ms. Brennan then asked about the
restrictions on Crawford's Knob in a paragraph in the Agreement that reads,
"Whereas, the capital improvement program also involves the transfer of
approximately 1400 acres of land (commonly known as Crawford's Knob) from
WPI to WHP and either the subsequent grant of an conservation easement or
the imposition of nature heritage preserve restrictions (collectively, the
'Land Use Limitations') by WHP over such land." Mr. Payne explained that
Recitals in the Agreement are not a commitment. Ms. Brennan said that there
could be an agreement and WPI could still develop Crawford's Knob and Mr.
Payne said that they could. He said that a restriction on development of
Crawford's Knob could be tied into the Agreement.

Based on a legal opinion from the Economic Development Authority's counsel,
four members of the Authority recused themselves from discussion and voting
as they are WPI members - Ms. Powell, Mr. Berry, Mr. Crandall and Mr.
Armstrong. Ms. Corum, EDA Staff, noted that the recusal of the four members
would not affect the EDA's ability to handle any related bond issues for the
county. Mr. Armstrong stated that he does not believe that the county's
decision on this issue will impact him personally and noted that WPI is
proposing this project to increase their mid-year revenues.

Mr. Kelly (EDA) then asked Mr. Payne whether there is a mechanism to shift
revenues from existing condos and restaurants and Mr. Payne said that he
understood those revenues to be included in the projections. Mr. Kelly said
that the county needs to be able to establish revenues from individual
entities. Mr. Payne said that that could be a part of the Agreement.

Mr. Payne noted that 2. Grant (a) "The grant will become effective upon the
first to occur of the Opening of the Hotel Property or Land Transfer." looks
tax neutral but does not include the escalating rebate as the value of the
property increases during construction.

Mr. Rob Sullivan, WPI's Chief Financial Officer, said that the hotel and mountain village project was conceived to increase traffic at the resort during the spring, summer and fall seasons and to add to the inventory of rooms at the resort for the winter season. He said that the project would create financial stability with a consistent revenue stream from one year to the next. Mr. Sullivan said that in his time at Wintergreen, the resort had a $342,000 profit his first year; a $775,000 loss the next; a $975,000 loss the next and a $2.9 million loss in FY2007 for a $4.2 million aggregate loss. He said that the resort cannot sustain those kinds of losses for long and needs to pursue the hotel project to diversify, noting that the losses during the spring, summer and fall offset any winter profits. Mr. Sullivan
said that WPI has invested $1.5 million to date, mostly for drawings and fees, in this project which includes a master plan for a 190-room hotel plus retail and amenities, with the projected cost of $100 million over a 3-4 year period. He said that WPI is pursuing a financial strategy that includes equity from a joint venture partner, construction loans, issuance of CDA bonds, internal cash flow and the Crawford's Knob conservation easement and noted that WPI does have a number of serious prospects for the financing.

Mr. Sullivan said that the Economic Stimulus Grant looks at 10-year projections of $14 million in Wintergreen payments of Occupancy, Food & Beverage, Sales, Real Estate and Personal Property taxes. He said that once WPI has stabilized occupancy, usually in the third year after opening, the resulting revenues would be $1.8 to $1.9 million a year to the county with 150 new jobs created plus construction-related jobs. He said that the revenue projections for the county are not WPI's but were generated by a variety of consultants and industry experts. Mr. Sullivan said that WPI is asking the county to invest $2 million of the incremental revenue stream that would flow to the county for the hotel's first three years to help WPI lower the risk for the project. He said that WPI is asking to extend the period of the grant from 4.5 years to 5.5 years to help offset increased
construction costs. Mr. Sullivan noted that this Agreement would help WPI finalize with a developer and show the county's commitment to the project.

Mr. Hale asked whether Mr. Sullivan had reviewed the list of considerations that Mr. Payne had prepared. Mr. Sullivan said that he has and does not think there is a lot of reason for debate on those issues. He noted that WHP was created to be the development vehicle for the hotel and that part of the equity WPI plans to invest is the 2-acre parcel on which the hotel itself will sit. He explained that the goal for the 1,400-acres of Crawford's Knob was to take advantage of tax credits via a conservation easement. Mr. Sullivan said that when an easement is placed on Crawford's Knob, the value of that land decreases from $13 million to $1.5 or $1.6 million and that the difference in value creates the federal tax credit that will be passed to the joint development partner. He said that WHP will keep the state tax credit of 40 cents on the dollar on the easement value. Ms. Brennan asked whether WPI is committed to keeping Crawford's Knob in a preservation situation. Mr. Sullivan said that WHP would retain the deed to the property until such a time as it makes sense to give the property to the Wintergreen Nature Foundation or some other non-profit entity.

Mr. Hall (EDA) asked who will manage the hotel. Mr. Sullivan said that that is still under discussion. Mr. Kelly asked Mr. Sullivan if WPI would have a problem with the second consideration presented by Mr. Payne, a sliding scale of tax rebate based on actual revenues. Mr. Sullivan said that thought WPI would be okay with that. Ms. Brennan asked about the definition of a 'complete or partial hotel condominium' in the Agreement. Mr. Sullivan said that WPI is considering doing a hotel/condo hybrid to sell a certain number of units, possibly 5-6 high-end penthouse-type units at the top of the building to help offset construction costs. Mr. Hale asked whether the real estate tax projections are based on just the hotel or the whole village concept. Mr. Sullivan said they are based on the two-acre parcel with hotel only and not on the retail or other amenities.

Mr. Hale recommended sending the draft back to WPI for them to address each issue raised by Mr. Payne and for them to provide a new draft based on those
changes. Mr. Bruguiere said that he cannot support the agreement, noting that too many of his constituents feel they never received any incentives for their businesses. Ms. Brennan pointed out that the hotel revenues will create new tax dollars for the county that have not been available before. Mr. Harvey asked why Mr. Bruguiere would not be willing to give a rebate for potential new tax dollars. Mr. Bruguiere said that the county can never recoup the taxes lost because of the 1995 legislation. Mr. Harris said that the county, with this Agreement, would at least be able to recoup some taxes.

Supervisors and Authority members agreed by consensus to have WPI, Staff and
the County Attorney draft an amended Agreement that addresses the issues raised.

There being no further business, the meeting of the Nelson County Economic Development Authority was adjourned.

Meeting notes attributed to Rural Nelson, Inc.