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Mercersburg, Pa., leaders vote to buy Whitetail

April 08, 1999|By DON AINES

MERCERSBURG, Pa. - After deals with Dauphin and Northumberland counties fell through last year, Whitetail Ski Resort has found a buyer much closer to home - the Mercersburg General Purpose Authority.

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Following a special Mercersburg Borough Council meeting Tuesday, the authority members voted unanimously to authorize issuing up to $42 million in bonds to purchase the ski resort and a golf course that is under construction.

"I'd been following the process with Dauphin County and then Northumberland County," Councilman Thomas A. Suddeth said Wednesday. "I wondered why we couldn't do it."

The borough of 1,700 people is about six miles north of the ski resort in Montgomery Township. Its General Purpose Authority was created in 1994 and is governed by a five-member board appointed by the Borough Council, according to Borough Manager Jim Leventry.

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There are two vacancies on the board, Leventry said. The five council members at the special meeting voted unanimously to endorse the bond issue, he said.

The resort, which opened in 1991, is being purchased for $18.5 million from the Whitetail Resort Limited Partnership and the Whitetail Land Partnership, according to Suddeth. The price is based on a February appraisal of the property.

The golf course is being bought from the Dauphin County General Authority, according to the announcement. It had previously bought some of the land for the course from Whitetail and began construction on April 1.

Authority Chairman the Rev. Michael Brendle said the authority will pay the Dauphin County Authority the $2.6 million it had already invested in the course. Development and construction will cost another $6 million.

The Dauphin County General Authority last year tried to purchase the ski area as well, but a lawsuit from a competing ski resort company killed the deal.

Although the authority is independent, the Dauphin County Board of Commissioners said it did not want the authority investing in projects outside that county.

"It became a hot potato with a couple of them," Suddeth said.

The Northumberland General Authority decided against buying the ski area after announcing last year that it would.

The deal to buy the ski resort and golf course won't cost borough taxpayers, or put the borough at financial risk, according to Leventry. Unlike general obligation bonds, tax-exempt revenue bonds are not guaranteed by the borough or authority.

"The risk, basically, would be to the individual bondholders," he said.

The authority will pay for the deal by issuing the bonds, with principal and interest being paid from revenues generated by the resort and golf course.

Any excess revenues could be used by the authority to pay for education, recreation, economic development and other public purposes, Brendle said.

"In a worst-case scenario the bondholders could take over" and manage the resort, but the borough and authority would face no financial liability, Leventry said.

The 30-year bond issue is being sold to institutional buyers, such as mutual funds, Brendle said.

Plans for the golf course included a hotel and convention center but Suddeth said "That's going to be a different bond issue if and when that occurs."

The bonds will also pay for $1.7 million in capital improvements and maintenance to the ski area.

"They had a rough last three years and it was scheduled maintenance that wasn't done," Suddeth said.

The bonds will be used to fund a $4.4 million reserve fund to cushion the resort against another string of warm winters, Brendle said. As an additional cushion, the bond issue will pay $500,000 for two years of weather insurance totaling $6 million.

"Three consecutive warm winters, and lack of reserves, helped force the current owners to sell the ski property," according to the announcement.

About $6.9 million is being set aside for debt and interest service, Brendle said. Another $1.8 million will pay the estimated cost of issuing the bonds and real estate closing costs.

Brendle said the bonds will go on sale in the next week.

Settlement on the properties is expected by the end of April, Suddeth said.

Brendle said the authority has handled bond issues totaling several million dollars in the past to help Mercersburg Academy finance a new library and other improvements at its campus.

Along with keeping the resort under local control and the possible revenues it will generate for public projects, the resort will stay on local tax rolls, Brendle said.

Authorities are not subject to taxes. Had another authority bought the properties it could have chosen not to pay real estate taxes to the school district, county and township.

The 40 year-round and 845 seasonal employees of the ski resort will become employees of the authority.

Whitetail General Manager Don MacAskill will run day-to-day operations for the authority, the announcement said.

While the ski resort's financial fortunes are partly controlled by the weather, having the golf course will make the project a more viable four-season resort, Suddeth said.

Whitetail Land Partnership will continue to develop housing on lands it owns around the golf course and ski area. The partnership is planning to build as many as 1,200 units by 2010, according to the announcement.

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