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With BFA loan guarantee uncertain, Balsams seeks a Plan B for financing redevelopment

BY John Koziol
Union Leader Correspondent

September 30. 2018 9:38PM
The Balsams resort is reflected Sept. 28 in the waters of Lake Gloriette. (John Koziol/Union Leader correspondent)

Joined by his dog, Sophie, Les Otten, the lead developer behind the effort to re-open The Balsams, poses on the lawn of the Hale House on the resort campus, with the towering spires of Dixville Notch behind him.

DIXVILLE — While critical of the state-defined funding path for the redevelopment of The Balsams resort, Les Otten is nonetheless keeping all options open, including the possibility of reaching an agreement with the Business Finance Authority or having Coos County originate a bond to move the project forward.

A resident of Bethel, Maine, and a former ski industry executive, Otten was recruited in 2014 to become the lead developer of The Balsams, which had closed several years earlier and was then purchased by two local businessmen who quickly realized that they were out of their depth.

Although Otten originally wasn’t interested in The Balsams, a look at a topographical map of its property later convinced him that the resort had an amazing vertical drop that could be the showpiece of an enlarged ski area and an even bigger, better Balsams.

The idea was widely hailed in Coos County, and in 2015, state lawmakers introduced and later passed Senate Bill 30, “An act relative to the establishment of redevelopment districts in unincorporated places.”

The law allows Dixville — which is so small population-wise that it does not have an elected government and is instead governed by the Coos County Commission, which acts as its board of selectmen, and by the County Delegation, which serves as its Town Meeting — to establish a Tax Increment Finance District.

According to the New Hampshire Office of Strategic Initiatives, tax-increment financing “can be a powerful tool for funding necessary infrastructure improvements and has been used successfully by larger cities and smaller communities throughout New Hampshire.”

The money in a TIF fund can be spent to make improvements within the geographic boundaries of the TIF district, and, as was the goal of Otten and The Balsams, it can also be used to pay off loans taken out by the district.

However, the Dixville TIF is possible only if the BFA is a participant via a loan guarantee and at this moment, the agency’s participation is uncertain.

In August, The Balsams, through its lead lender Service Credit Union, withdrew its application for a $28 million loan guarantee through the BFA, citing conditions by the BFA “that were unfortunately not contemplated by The Balsams and are inconsistent with its historical understanding of the proposed transaction.”

On Sept. 12, at a joint meeting of the Coos County Commission and County Delegation, Otten said the key to The Balsams project is the TIF district, adding that even as he and his team continue to work with the BFA, an alternative without the agency was also being considered.

What he called a “technical correction to SB30” would remove the BFA from the law, while allowing Coos County to be the issuer of a bond, but without a loan guarantee.

On Friday, during an interview at the Hale House on The Balsams campus, Otten and Scott Tranchemontagne, who is the project spokesman, said the development team is not asking Coos County to borrow money or guarantee any loans.

The county, at no risk to taxpayers, would float a bond, which would then be purchased by a third party, who would then be liable for it. The county would be paid an annual fee for administering the bond.

Otten said the correction to SB30 is a simple one, “a sentence,” and that draft language exists now that will be introduced to the Legislature in December.

Both Tranchemontagne and Otten pointed out that The Balsams never asked the BFA for money, only a loan guarantee, which, even if the entire Balsams project collapsed, would not affect the state’s credit rating, as the State Treasurer testified at hearings on SB30.

Confident that the Balsams will re-open, Otten nonetheless expressed dismay with how things have gone so far.

“This TIF wasn’t my idea. It was the idea at the time of DRED (the former Department of Resources and Economic Development) and the BFA,” he said, adding “we didn’t dream it up” nor should he or The Balsams be blamed for doing what the State of New Hampshire wanted him to do.

Otten said throughout the effort to secure financing, he and his team have worked steadfastly on the plans for the reborn Balsams resort, adding that he and other partners have cumulatively invested upwards of $13 million in the project.

A supporter of state incentives to foster economic growth, Otten wishes that the aid was more spread out, noting that earlier this year when a Maryland biotechnology company pledged to bring 100 new employees to the Millyard in Manchester, the Legislature quickly passed a law that grants it exemptions for a decade on two state business taxes.

Such exemptions, he said, would be a huge help to The Balsams, translating into between $2 million and $4 million annually that could be put toward debt service.

On Saturday, Paul Grenier, who is mayor of Berlin, a Coos County commissioner and, in his words, “an ardent supporter” of The Balsams, said neither the commission nor the County Delegation has met to discuss a bond for Dixville.

“My understanding of it all is we would float the bond and it would be purchased by an outside bond holder so that there would be zero financial ramifications on the unincorporated township of Dixville,” which by his count, has some 20 taxpayers living there, said Grenier.

A bond for The Balsams would be authorized by the County Commission and Delegation, but it would be “floated” by Dixville, not by the county, he said.

Grenier conceded that an unincorporated township floating a bond is “unchartered territory, even for me, so certainly, upon first blush, it appears to make a lot of sense but certainly there must be up the line two to three legal issues that would need to be addressed.”

The mayor believes that there is “still a lot of good momentum for The Balsams and behind the scenes, there are a lot of financial players that are going to make this thing work and I can’t wait.”

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