Special Series: A Closer Look at The Balsams Redevelopment

Jul 13, 2016

The Balsams Resort in Dixville Notch is one of New Hampshire's historic grand hotels. The expansive property sits on about 11,000 acres which include a downhill ski area, an 18-hole golf course and miles of Nordic trails.

In 2011 the struggling, outdated hotel finally closed and was sold to two businessmen from the North Country. Their efforts to revive it failed and in 2014 Les Otten, former head of the American Skiing Company, stepped in to take over the remote resort's redevelopment effort.

It is a hugely ambitious project and holds the promise of hundreds of jobs and an economic boost not seen in the struggling North Country for decades – if ever.

However, there remain major questions about the project’s environmental impact, the state’s role in its financing, and the long-term viability of The Balsams as an economic stimulus for the region.

In partnership with Business NH Magazine, NHPR is taking a closer look at the issues around the proposed redevelopment of The Balsams in this special three-part series.

Click here to see the stories in Business NH Magazine

Click the headlines below to read and listen to NHPR's stories, reported by Chris Jensen

Balsams Promises Jobs, The Problem Is Finding The Workers

Does New Hampshire Really Need Another Ski Resort?

Should The State Back A $28 Million Loan for The Balsams?

Click here to see NHPR's ongoing coverage of The Balsams project.

 

Balsams Promises Jobs, The Problem Is Finding The Workers
The Balsams resort shut down in 2011
Credit Chris Jensen for NHPR

If the Balsams resort reopens it will immediately need about 370 employees.  But developer Les Otten acknowledges finding them in the North Country will be a challenge.

“It’s a very big concern,” he says. “It is a very big concern. “Finding qualified staff, good staff, that is going to be a challenge. We’re going to have to work very hard at that.”

He needs everything from managers to chefs and people to clean rooms.  And he admits many of them won’t be from Coos.

Listen to the radio story:

“This won’t succeed without an in-migration,” he says.

Otten has learned what employers throughout the North Country have known for years: they can’t find good local workers.

“Politicians are talking about creating jobs in the North Country.  Most employers I know struggle to find employees,” says Chris Diego, the general manager of the Mountain View Grand in Whitefield.

“If you are going to try and bring a company to the North Country to stimulate the economy, you can’t because you won’t be able to find employees.”

This sign hints at the former grandeur of the Balsams, but this photo was taken at an auction at the hotel after its closure.
Credit Chris Jensen for NHPR

The Mountain View Grand would one day compete with the Balsams. During the winter it has about 180 employees, including about three dozen foreigners. In the summer Diego typically needs another 100 workers and most of those will come from overseas. That’s despite tactics including offering training programs to introduce young people to the hospitality industry.

Otten predicts if the Balsams expands as he hopes in eight years it will have 1,400 employees.

Diego can’t imagine that happening.

“The only way that could happen is if they built employee housing and have people come from some other place. I’ve been in the resort business for 30 years and I can’t wrap my mind around it,” he says.

In May, state officials counted about 570 people in Coos as unemployed. That’s four percent, compared to the statewide average of 2.7 percent. And state officials predict the workforce in Coos will shrink, says Steve Norton, the executive director of the New Hampshire Center for Public Policy Studies.

“In Coos County they are projecting a 25 percent reduction in the population aged 20 to 64 over the next 20 years,” he says.

Norton says for employers to find enough workers people will either have to go to the North Country for qualify-of-life reasons or employers are going to have significantly increase wages to attract people.

Finding workers has been an ongoing issue in Lancaster at Trividia Manufacturing Solutions, which makes and packages a wide range of products including over-the-counter dietary supplements. The company, formerly known as P.J. Noyes, was founded in 1868 and it has about 80 employees.  Wages on its assembly line range from $12 to $17 an hour. There’s also health insurance and a retirement fund.

But even with those benefits the company struggles to find people who want to fill jobs. 

Anne Paquin, who’s in charge of human resources, says in some cases that means a worker who will just show up for work on a regular basis.

“The key thing is the soft skills, the work ethic, the willingness to come to work every day with a smile on your face.”

Developer Les Otten
Credit Chris Jensen for NHPR

Otten says he’s well aware of the challenge but the Balsams will draw workers.

“This is a great opportunity for people who want to come up and migrate into the region,” he says.

In addition the Balsams will do some training.

“We have outreached to several colleges in hopes of running intern programs. We are going to make a very strong effort to reach out to the military community and bring in vets and train them.”

“If you can give someone an entry-level job and an education at the same time - which is our goal – we believe people will flock to work for our company.”

One person who will be looking carefully at who fills the jobs at The Balsams will be Jack Donovan. He heads up the Business Finance Authority.

The BFA will scrutinize Otten’s request that the state guarantee a $28 million loan, a key element in the project moving forward.

Lots will be considered. The strengths, the risks. But Donovan says there is one thing the project must do for the state.

“Preserve, create or whatever jobs. If we are not doing that, then there is no role for the state in this. There’s plenty of skiing. There is no shortage of skiing.

“The real question is how many of these jobs are going to be filled by local people? It doesn’t make a lot of sense to create jobs if there is nobody there to fill them or as in many of the ski areas they end up using a lot of seasonal, foreign exchange students It doesn’t help the local economy.”

He says one of the things the BFA is studying is the quality of the jobs to be created. They have to have good pay, good benefits.

Otten says there won’t be enough locals to fill all the jobs but Coos will still benefit.

Workers who move to the area will buy or rent homes, purchase the things they need to live and pay taxes in the North Country.  And that boosts Coos’ economy.

Mike Daley is the president of the North Country Chamber of Commerce.

He agrees Otten will have trouble getting enough good workers. But he says having more people in the area spending money could save some of the businesses that have been struggling.

“If you can revitalize those businesses as well as add a few new ones that is a bonus for all of us,” he says.

Otten has yet to submit an application to the BFA and he still lacks funding. When the agency makes its recommendation it will go to the Executive Council and Gov. Hassan.

 

Les Otten's Plan: To Prove N.H. Really Does Need Another Ski Resort
The ski area would be expanded from 135 acres to as many as 1,800, including 800 acres of glade skiing, according to Otten's plan. Map courtesy of The Balsams.

It’s been about 35 years since anyone has done what Balsams developer Les Otten is trying: build a year-round resort from scratch.

And there are good reasons, says Mike Berry, the head of the National Ski Area Association.

“Part of the issue is just the process, which is to say these things are not simple in today’s world to get the approval, to get the financing. It takes some incredible effort and some incredible initiative,” he says.

Indeed, Otten is well aware of the challenge he faces.

“It is scary and intimidating. Let’s not mince words. One does not go lightly into something of this magnitude without recognizing you are doing something that no one has done for 35 years,” he says.

But Otten has a long history in the ski industry. In 1980 he bought Sunday River, a tiny, struggling ski area  with an uncertain future.

Skeptics argued skiers would never drive all the way to Bethel, Maine. That’s a point now being raised by Balsams’ doubters.  But Otten proved them wrong, making improvements and turning Sunday River into a success.

In the 1990’s he stunned the industry by assembling  a nationwide chain of nine ski resorts, typically making huge improvements in facilities and snowmaking.

But ambition exceeded revenue. In 2001 his American Skiing Company owed about $400 million and Otten resigned. Those who bought stock when the company went public in 1997 - and held onto it - lost their money.

But Otten says he’s applying the lessons learned from American Skiing Company as he develops the Balsams. The biggest is the need to make the Balsams a sustainable business by creating a year-round resort where revenue does not solely rely on skiing.

Developer Les Otten, right, listens as Jeff Rose, the commissioner for the Department of Resources and Economic Development, praises the project. Photo by Chris Jensen
Credit Chris Jensen for NHPR

“I think lift tickets make up about 20 percent of our revenue on an annual basis as we are projecting things going forward," he says.

Other revenue will come from hotel rooms, restaurants, a culinary school and recreational activities in summer, spring and fall.

Otten sits back and goes into the list of attractions: “Great skiing, great snowmobiling, great four-wheeling, great food, great fishing, great biking, great hiking, rafting if you go 10 miles. If you are offering all those things as a vacation destination experience you are not singly focused on somebody coming in and buying a lift ticket.

“We have an economic advantage that we never had with any of the properties with American Skiing Company.”

One of the people who watched American Skiing implode is financial analyst Bradley McCurtain, who is based in Maine. He says he hasn’t followed the Balsams’ plan but Otten is “a brilliant marketer and also a guy who knows how to get things done.”

And Otten is universally recognized as a guy who really knows skiing. He sees huge potential at The Balsams, something he says previous operators missed. The old resort had about 135 acres of skiable area. In the first phase Otten will add 250 more acres along with six new lifts.

Ultimately 1,000 skiable acres may be developed, along with 800 acres of glade skiing, sliding among the trees. Otten wants the Balsams to be the biggest ski resort in New England. But he has left himself some room to maneuver, saying it is a multi-year development and expansion is “dependent on market conditions."

Developers hope to begin work this year but it’s a huge job. A key is pumping water for snowmaking ten miles from the Androscoggin River, a plan that has upset some environmentalists.

At a meeting last year in one of the last habitable buildings at The Balsams, Otten explained his vision to state and local officials. Photo by Chris Jensen

They are also unhappy with Otten’s plan to clear up to 325 acres of rare high-altitude habitat.  Fish and Game has protected such habitat in the past, fighting a wind farm’s effort to clear only 58 acres.

But the agency has okayed Otten’s plan to clear it for ski runs, a move that shocked some environmentalists and dismayed employees of Fish and Game.  Executive director Glenn Normandeau says the benefits to the North Country and the state outweigh the loss of the habitat.

It is a grand plan, but just like Sunday River, skeptics note the Balsams’ relatively remote location. It is 75 minutes past Bretton Woods and just over two hours farther than Loon. And that assumes good weather.

Visitors from Canada will also pass the temptation of major resorts.

“I think he is banking on the fact they are going to be such a strong destination resort with so many options that is what is going to draw people. And, time will tell,” says Sean Doll, the head of Mountain Recreation Management at Lyndon State College.

But any new ski resort also faces a challenge drawing skiers away from other resorts, says Brian Fairbank, an admirer of Otten who is also a competitor. He owns Cranmore, Bromley and Jiminy Peak.

“Trying to steal from your competition isn’t easy. You have your friends there. You know where you park your car. You know the restaurant you like. You know how to get there. You don’t have any strange hassles,” he says.

Otten is counting on the Balsams being new enough to intrigue skiers and so special it will keep them.

Otten doesn’t yet have all the money he needs and Fairbank says the recent warm winter that hurt ski resorts such as his own could make securing money harder. He says he had to ask his banker to provide “a letter of credit to get through to next year, some of the terms of it to be changed and modified.”

But Otten says he’s close to having the financing worked out and while everything has taken longer than he expected, he has the experience and the expertise to make it all work and while there are doubters and questions there are also many people in the North Country – as well as state officials - rooting for him.

 

Should the State Back a $28M Loan to Finance The Balsams?
Months after closing late in 2011 almost all of the furnishings were sold. Photo by Chris Jensen

Developer Les Otten has been working on reopening the Balsams Resort for about two years.  And now he’s coming to an incredibly important step.

It’s a $143 million project and within the next few months the state is expected to consider whether to guarantee a $28 million loan that Otten says is crucial - and he expects to be approved.

The state has been one of the project’s biggest boosters.  And NHPR’s Chris Jensen joins me now to discuss the decision regulators, the Executive Council and Governor Hassan will make.

Why is the state so enthusiastic about this project?

Well, officials hope it will be the previously elusive solution to the economic problems Coos County has faced since the paper mills closed.

Here’s what Jeff Rose, the commissioner of the Department of Resources and Economic Development, says:

“This is one of the most significant business recruitment efforts in our state, not only today but over the last few decades.”

“This is the kind of opportunity that you desperately seek as a state.”

So, that level of enthusiasm helps explain why the state is helping with permits, spending $2.8 million to fix a road to the golf course and Rose hopes the Business Finance Authority will agree to guarantee a $28 million loan.

Jeff Rose, the commissioner of the Department of Resources and Economic Development, says the proposal to reopen the Balsams is a rare opportunity for economic development. Photo by Chris Jensen

If this project is so terrific, why does Otten need a loan guarantee from the state? Wouldn’t private investors be clamoring to get a piece of it?

Well, that’s being asked. But I talked to business professors from Harvard and Columbia and they said it’s not unusual for a state to provide some help if it sees a benefit – which in this case includes hundreds of jobs.

In this case the state would guarantee the loan, which would come from a bank. But states often give automakers millions of dollars to persuade them to choose them for new plants.

And, Otten says long ago - when he was first considering the project - the state offered help with that as an incentive. Here’s Otten talking about it.

“If you say ‘Well, Les what happens if you don’t get something from the BFA, I’ll say: why have they been jerking me around for the last two years? And I don’t believe they are.’”

“Do I think the BFA is a done deal? Yeah, I think the BFA is a done deal, if on my end, I bring them everything they said they wanted when they talked to us.”

What Otten has to deliver is a solid operational plan and at least $20 million of condominium sales, not just the refundable deposits he has now. He can’t sell condos yet because he doesn’t have an okay from the attorney general.

If the state doesn’t approve the loan, Otten says it “would likely have significant effects on the interest we have in the project.”

Does Otten have any of his own money in this?

He says millions, but he wouldn’t go beyond that. He says Dan Hebert and Dan Dagesse, who own the Balsams, plan to contribute the land as their share.

Who will decide whether it is a safe bet for the state to guarantee the loan?

Well, it begins with the Business Finance Authority. It’s a quasi-governmental body with members appointed by the governor, Executive Council and state treasurer. It will review Otten’s plan and make a recommendation.

So, how will the BFA go about evaluating the risk to taxpayers?

It will rely heavily on a study of Otten’s operating plan. That appraisal was commissioned by the Massachusetts bank considering loaning Otten about $100 million. The bank wanted to make sure its money was safe.

Developer Les Otten says he has "millions" of his own money invested. Photo by Chris Jensen

Here’s how BFA executive director Jack Donovan explains it.

“They have to take all the projections in the business plan and pull those apart and look at the assumptions about room rates, what is it going to cost to run this place, occupancy levels, each week and month of the year.

“Then, they put it all back together and based on the growth trends they are projecting they have to make a determination based on the projected income, what is the value?”

Otten says that appraisal is finished and it concluded the Balsams is a good deal. It hasn’t been made public, although Donovan thinks it should be when it is submitted to the BFA.

So, what does the BFA want to see in the way of benefits for the state?

Well, it’s not more skiing. Here’s what Donovan told me.

“I don’t think anybody thinks we need more skiing in the state.”

He says what’s most important is good jobs for residents, not just for the foreign, seasonal workers that resorts often use. And the BFA has a study underway to look at the quality, pay and benefits of those jobs.

The Balsams would not be the first resort to get help from the BFA. It helped the Mountain View Grand in Whitefield get on its feet. But Donovan says the Balsams is unusual because of its size and it all has to be ready at once. 

“It is such an isolated location that you have to create enough scale, by that I mean housing, amenities, etc. to make it worthwhile to drive up there.”

He says risk can be reduced if a project is done in stages, but that’s not possible here.

What would the state’s money be used for?

Donovan says it would go for infrastructure improvements, such as a huge expansion of the ski area and upgrades to the golf course.

So, who is going to pay off that $28 million loan and what happens if it defaults?

The money comes from taxes paid by the condo owners and Otten’s share of the resort. If the bank isn’t getting its money, the state would pay off the loan.

DRED commissioner Rose says it’s a good deal.

“Trying to make a $143 million investment to the North Country is a pretty unique opportunity and if for some reason it was unsuccessful well, you would still have an asset that the state would be invested into that we could then work to try to sell to somebody else.”

What’s he’s talking about is that the state’s collateral is part of the resort. The issue would be finding someone who would want to be involved in failed resort, which Rose doesn’t see as a problem.

Keys for the rooms at The Balsams were sold at an auction held after the resort closed.
Credit Chris Jensen for NHPR

How long has the state been supporting this?

Pretty much from the start. I asked Commissioner Rose how he could have been so unconditionally enthusiastic from the beginning, promising Otten so much without seeing the hard, financial details.

Here’s what he said:

“I’ve had conversations with lending institutions, I’ve had conservations with folks in the financing sector, I’ve had conservations with others that have what I would refer to as legitimate background and experience in that industry, not the least of which is the Balsams redevelopment team.”

So, if the BFA says it too risky has Otten lost out?

Not necessarily. State officials are eager to see the Balsams reopen. And the BFA’s recommendation goes to the Executive Council and Gov. Hassan. They could overrule the BFA.

Do we have any idea when the BFA will be considering this?

Well, Otten hasn’t filed an application. But when that happens Jack Donovan figures a couple of months.