Financial woes burden Wintergreen

Wintergreen Resort in Nelson County is facing financial trouble.

A letter from the chairman of the board of directors for Wintergreen Partners Inc. to 1,800 members said a combination of the mild winter, a default on Wintergreen’s line of credit with Bank of America and the necessity of reaching a settlement over a conservation easement audit led to the problems.

The letter was e-mailed anonymously to the Nelson County Times. Dana Quillen, vice president of sales and marketing for the resort, said details were confidential until today, but confirmed that the resort sent the letters to all of its 1,800 members.

The board and resort management held an informational meeting on the financial situation Saturday, open only to Wintergreen members. Two county supervisors said they had not received the letter but had heard about it and the informational meeting.

In the Jan. 30 letter, L. Allen Bennett, chairman of the board of directors, goes into detail on the contributing factors.

He writes that in December, Wintergreen Partners was $2 million short of its revenue target and for January it expected revenues to be below budget by $1.5 million, which will likely lead to “an additional $1.0+ million cash deficit relative to the budget.”

The numbers for snow production in December were a lot lower than in 2010, including far less water used to make snow. The number of snowmaking hours was cut in half.

In order to make snow, the temperatures must be below 32 degrees Fahrenheit.

December’s financial results caused the resort to miss one of the agreements it had with Bank of America on its line of credit.

“This in turn has placed the resort in default in terms of the credit agreement,” the letter says.

The board of directors and management are requesting Bank of America take no action right now, so the resort can continue operations during the resort’s busiest time, according to the letter.

The third factor contributing to the problems is the outcome of a conservation easement audit by the Virginia Department of Taxes.

Wintergreen sold tax credits based on an appraised value of the easement that was greater than the current appraisal.

In 2004, the Crawford’s Knob conservation easement was assessed at $11.5 million. This appraisal led to $4.6 million in tax credits for the resort.

In November 2008, the resort was required to pay $2 million to Bank of America to reduce the approximate $10 million debt owed to the bank. Wintergreen Partners sold the tax credits for net proceeds of about $3.55 million, which was used to pay the bank.

The land was reassessed by the commonwealth’s appraiser last summer for about $3.15 million, which implies that some of the tax credits sold in 2008 were “improper/invalid,” according to the letter.

After the death of the original appraiser, a conservation easement expert advising the board through the tax situation hired a third appraiser, who assessed the property’s worth to be closer to the commonwealth’s estimate than the original.

Negotiations between Wintergreen and the Department of Taxation are ongoing, according to the letter.

The letter also says that the resort’s senior leadership team has developed a revised business plan that recommends operational and staffing changes to reduce the fixed cost structure by $1.5 million annually. It does not list specifics about the plan.

In the letter, Bennett also asks the members for support in raising $6 million, with a minimum investment of $5,000, in “a second private placement debt.” The money would be used to “1.) self-finance our working capital (line of credit) needs; and 2.) underwrite the operating losses incurred during this exceptionally warm winter.”

He warns members of the possibility of “emergency dues” and asks them to participate in the debt offering and to make as much use of resort and member facilities as possible.

Bennett also wrote, “If we fail to heed this call, the future of WPI (Wintergreen Partners, Inc.) is extremely uncertain, and the negative impact that a financial failure of the resort might have on the value of the significant real estate investments we have made here is difficult to estimate, but doubtless substantial.”

Last year the resort accounted for about 40 percent of the real estate taxes in Nelson County and 35 percent of the meal and lodging taxes, Maureen Kelley, director of economic development and tourism for the county, said in a previous interview.

About half of Wintergreen’s full-time staff of 350 employees is from Nelson. During the ski season, the staff size increases to more than 1,000, with about 50 percent of the employees from Nelson, Quillen said in an interview in December.

Wintergreen also brings about 200,000 visitors to Nelson from mid-December to mid-March, Quillen said.

The two county supervisors also said the resort had not approached the county for financial assistance. They noted the importance of the resort to the county.

“Wintergreen is an important part of the county and we certainly feel very sympathetic to their plight,” said Allen Hale, the East District representative on the Board of Supervisors. “But I don’t think the county has a role, just like I don’t think the county has a role with other businesses that are struggling these days.”

Tommy Harvey, chairman of the Board of Supervisors, said, “They’ve got the best management up there and if anyone can pull them through it, they can.”

Koerting reports for the Nelson County Times.