One of the five priorities of the Whistler 2020 plan is Partnering for Success.
On Monday a majority of Whistler council interpreted Partnering for Success to include giving Whistler-Blackcomb a tax break of up to $200,000 annually for five years. The tax break was requested for the $51 million Peak to Peak gondola that Whistler-Blackcomb has proposed. The mayor suggested that to not grant the tax exemption would have jeopardized the municipality’s relationship with Whistler-Blackcomb.
Whistler-Blackcomb is, of course, critically important to Whistler the resort and Whistler the community. The success of Whistler-Blackcomb goes a long way toward determining the success of everyone else in Whistler. When the company decides it wants to invest more than $50 million in a lift that will add to the year-round visitor experience, that is a positive sign for the whole community. And Whistler is fortunate that people like Hugh Smythe, Dave Brownlie and Doug Forseth, senior people at Whistler-Blackcomb and parent company Intrawest, not only live in Whistler but care deeply about the community.
But for the municipality, which lobbied for nearly a decade for additional streams of revenue, to forego $1 million in taxes over five years from one of its partners is wrong. Whistler-Blackcomb isn’t the only partner Whistler has.
The municipality can offer the tax break under recent amendments to the Community Charter, which permit exemptions up to five years to companies undertaking major improvements. The motivation for the amendment was driven by the idea that companies need encouragement to reinvest in major improvements. It may also stem from a general feeling among the business community, the B.C. Chamber of Commerce and others that too often local governments have lived high off the hog of one primary business or industry, hitting that industry with exorbitant taxes. That is not the case here.
When the Peak to Peak gondola proposal first surfaced 18 months ago there was no suggestion, at least in public, that Whistler-Blackcomb needed a break on taxes to make it happen. The company was looking for a joint venture partner to make the project a reality. That Whistler-Blackcomb now appears to be able to finance the project almost entirely on its own is good news. But the thinking seems to be: since the Community Charter has been changed why not see if we can get a tax break?
While Partnering for Success is one of Whistler’s five priorities, Whistler also needs to recognize that its partners’ interests are not always identical to Whistler’s interests. To repeat, Whistler is fortunate to have Whistler-Blackcomb and its senior staff as partners. But management of Whistler-Blackcomb also has to report to parent companies whose interests and priorities are not necessarily the same as Whistler’s. Some recent actions suggest where those priorities may lie.
Intrawest laid off 150 employees last month while at the same time giving responsibility for all Canadian and U.S. mountain resorts to two senior managers, Brownlie and David Barry. Is this a move to create greater efficiencies and reward outstanding managers, a sign of trying to squeeze more from less, or a bit of both?
Intrawest, of course, is now a private company, owned by Fortress Investments. There are five principals in Fortress, Wesley Edens, Peter Briger, Robert Kauffman, Randal Nardone and Michael Novogratz, and as TheStreet.com columnist Brett Arends outlined in a Feb. 28 column entitled Plundered Fortress ( http://www.thestreet.com/_tscs/funds/investing/10341308.html ), making money is the priority for these five men. Between January 2005 and last month, when 8.6 per cent of Fortress was offered publicly, the five principals cashed out $1.04 billion. That doesn’t include the $888 million they made by selling a stake in Fortress to Japanese bank Nomura.
Arends wrote: “By the time the owners opened the doors to the investing public this month, the company wasn’t just out of cash — it had negative book value. Liabilities actually exceeded assets by $507 million.”
The money raised in the IPO made up for that cash shortfall, but the five principals are also in line to claim 85 per cent of future tax benefits to Fortress Investments. In cash. That could be billions more.
As Arends also points out: “Edens and his partners have done nothing illegal. Let’s even go as far as saying they did nothing unethical.”
Whistler-Blackcomb’s tax break is many levels removed from Wall Street and the New York financial world of Fortress Investments. But in agreeing to waive taxes, who is Whistler partnering with, Hugh and Dave and Doug or Wesley, Peter, Robert, Randal and Michael?