Friday, August 11, 2006

Development - Hevesi Release - Developer trick: Understate economic risks

Hevesi Report: August 10, 2006

Belleayre Proposal Understates
Environmental Impacts and Economic Risks

Plan Includes Faulty Assumptions on Profitability;
Unrealistic Comparisons with Other Resort Areas

A proposal to build a major resort complex at Belleayre Mountain in New York’s Catskill Park understates the potential environmental impacts and economic risks of the project and is based on faulty assumptions regarding profitability and comparable developments in other areas, according to an analysis issued today by State Comptroller Alan G. Hevesi.

“There are simply too many unknowns in the Belleayre proposal as it stands now. Information put forth by the developer to date has not adequately acknowledged the huge environmental impacts and economic risks of this planned resort complex, and appears to have been skewed to discourage consideration of scaled-down options,” Hevesi said. “With a massive, high-impact private development in this location, there is a real risk that New York’s taxpayers will end up bearing the cost of filtration systems for the New York City water supply and other major infrastructure improvements.”

The developer has advanced plans for a 1,960-acre resort complex adjacent to the state-owned Belleayre Mountain Ski Center. The proposal encompasses two sites – one with a 150-room luxury hotel and spa, 5,500 square feet of meeting space, an 18-hole golf course and 183 time-share units; the other with a 250-room luxury hotel and spa, 24,000 square feet of meeting space, a second 18-hole golf course, 168 lodging units and 21 large homes.

A New York State Department of Environmental Conservation (DEC) administrative law judge identified a number of deficiencies in the developer’s required Draft Environmental Impact Statement (DEIS) in September 2005, and suggested that the two sites be considered as separate entities. The developer appealed the judge’s rulings to the DEC commissioner.

Congressman Maurice Hinchey, who represents the area, has advanced a proposal for a smaller development on one of the sites with the other site left permanently undeveloped. The Hinchey proposal is supported by the Catskill Preservation Coalition, an umbrella group comprised of 11 organizations opposed to the developer’s plan. The federal Environmental Protection Administration (EPA) has also indicated its support for limiting development to just one of the two proposed sites.

The Comptroller’s report examines a number of significant problems with the resort complex proposal:
  • The developer’s measurement of investment profitability at the resort site is flawed, because it compares the total cost including debt of constructing the proposed facilities with the potential income from the facilities. This ratio, the internal rate of return, is generally calculated using equity invested, rather than total cost including debt. It appears this non-traditional calculation, which erroneously inflates required income estimates, was employed to justify a large-scale development and discourage discussion about smaller scale alternatives.

  • The proposed development sites would be located in the middle of the watershed for the system that provides water for nine million downstate New Yorkers, including most of New York City. The developer indicates that his plan includes measures to limit impact on the watershed, but ultimately it would be taxpayers who would bear the financial burden of any necessary amelioration of the system to maintain water quality. In fact, New York City is currently operating under a memorandum of understanding with the EPA that requires the city to preserve the quality of the water in its watershed or, if it cannot do so, build a filtration system. The cost of the filtration system was estimated at $6 billion in 1999.

  • New York City and State officials noted that the developer’s DEIS fails to look at alternative developments for the same sites, as required under the State Environmental Quality Review Act. Such alternatives could be far less threatening to the watershed.

  • In other areas in the northeast United States where similar developments have been undertaken, one result has been significant secondary economic impact including independent motels and guest houses, outlet shopping villages and other retail venues, and other tourist facilities. This kind of impact in the Catskill Park would be likely to upset the current balance between recreational use and environmental protection, and could also necessitate major improvements in transportation infrastructure.

  • The developer’s business plan assumes that a major resort operator such as Marriott or Starwood would be interested in the facilities. However, there is no indication that these or other companies have expressed interest in the Belleayre sites, and there is no allowance in the developer’s plans for the management and other fees that such companies would likely require to become involved in the project.

  • National resort chains are generally situated in areas with easily accessible air and other transportation facilities where multiple resort facilities are clustered, such as Hilton Head Island in North Carolina or Aspen and Steamboat Springs in Colorado. Located in the middle of the Catskill Park with no major airport nearby, the Belleayre site is not easy to reach.

Link to online press release.
And a link to Hevesi's report [PDF]: "Belleayre Proposal Understates Environmental Impacts and Economic Risks"

(Note: Online stories may be taken down by their publisher after a period of time or made available for a fee. Links posted here is from the original online publication of this piece.)

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Plainfield resident since 1983. Retired as the city's Public Information Officer in 2006; prior to that Community Programs Coordinator for the Plainfield Public Library. Founding member and past president of: Faith, Bricks & Mortar; Residents Supporting Victorian Plainfield; and PCO (the outreach nonprofit of Grace Episcopal Church). Supporter of the Library, Symphony and Historic Society as well as other community groups, and active in Democratic politics.