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PRIVILEGED INFORMATION

part 2 of 2
The WPRA's deal with the Arlberg Club came as part of a flurry of activity that occurred after Gerald Groswold took over as president in 1975. An attorney and former division manager for Transamerica Title Insurance Company who grew up skiing at his father's Arlberg digs, Groswold wasted no time putting the city's resort on a fast track to expansion.

"He's always smarted over the fact that Winter Park is not really a resort area like his friends' in Vail and Aspen, and he always wanted to break into that league," says Barnes. Groswold, an imposing figure who stands six feet, six inches tall and is known for his mercurial temper, had little trouble taking control of the board, a largely subservient body that pays him an annual salary of $218,377 plus pension benefits. (For several years, Groswold also got to live in the "manager's residence," a 4,600-square-foot, fully furnished house maintained by the resort that sits adjacent to the ski jumps. He now lives in a $150,000 condo in Fraser; the manager's residence is apparently used to house visiting VIPs.)

Groswold's hefty compensation package from the board has allowed him to traverse the slopes in a BMW and to nurse his penchant for collecting classic 1932 Ford automobiles (he has two). But for Groswold, who did not return calls from Westword, building an empire on the mountain has proven to be a more difficult task. His first big push came in 1979, when the WPRA persuaded Grand County to issue $7.5 million in tax-free revenue bonds to finance additional improvements at the resort. According to Grand County Attorney Jack DiCola, the lender on the bond issue was the First National Bank of Denver, which simultaneously loaned the ski area an additional $5.25 million. The bank was happy to make the loan but also anxious to secure the resort as collateral. In order to nail down the long-term financing, Groswold and the board got the city itself to gold-plate the loan; in a new agency agreement signed by then-mayor Bill McNichols, the WPRA was given the right to control real estate development on the city's original ninety-acre parcel until the year 2078. In return, the city got the promise of a 12.5 percent cut of any profits the WPRA might make in the land business.

The next year the resort renegotiated another highly favorable deal, this time with the Moffat Tunnel Commission. Again to satisfy First National's need for security on its loans and open the doors to long-term development, Groswold and the board convinced the commissioners to extend the lease on the state land to the year 2078--and to continue not charging the WPRA a penny in rent. (That sweetheart deal is now the subject of a lawsuit in Grand County District Court, in which the current panel of tunnel commissioners is seeking to void the freebie lease and force the resort to pay fair rental for the state land. The WPRA, in turn, is trying to have the tunnel commission disbanded.)

Despite Groswold's carefully laid plans, land development at the resort proved to be a risky business. The real estate collapse of the 1980s hit hard, and the only significant project completed at the ski area was the troubled Vintage Hotel, which wound up in the hands of both Silverado and the federal Resolution Trust Corporation before being sold at a fire-sale price to Utah hotelier John D. Cahill in 1991. (The hotel reportedly is now profitable.) The city's 12.5 percent piece of the Vintage lease turned out to be just $7,000 per year.

These days, however, Groswold is convinced the time is again ripe for development. And, true to the spirit of the original Arlbergers, he's trying to attract "desirable" people to the resort: namely, wealthy skiers likely to drop large amounts of cash during their stay.

The WPRA laid the groundwork for its latest real estate campaign in 1990, when it filed for a planned-use development with the town of Winter Park. That "base village" concept, recently updated by the resort in a meeting with the town's planning board, has little to offer middle-class day-trippers from Denver. "The thing that's really nice about what they're proposing is, they're proposing a very upscale kind of experience for the ski visitor," says Mark Marchus, the town's community-development director. "The person they're catering to is an upper-level-income-type person."

In order to build the village, the WPRA needed to obtain title to U.S. Forest Service land that sat at the base of the ski runs. Apparently without consulting the city, it began buying up prime real estate in other mountain areas and negotiated a swap with the government for the base property. But Groswold's inventive use of city assets led to trouble when the resort prepared to close the deal, notes Barnes. When the government asked in whose name the base land should be titled, he says, "the WPRA just said `Put us down. It's our land.'" But title insurance companies balked when they realized the resort was actually just an agency of the city. That, says Barnes, is what got the WPRA to the table during the negotiation of last year's new agreement with the city--negotiations that, ironically, pitted an agent of the city against the city itself in a discussion of what to do with a city asset.

Groswold brought in the big guns during those talks, facing off against the city with a small arsenal of high-powered attorneys and political consultants. Tensions ran high during meetings of Webb's advisory committee. At one gathering in February 1994, former councilwoman Donohue derided as "bullshit" Groswold's claim that the WPRA had developed Winter Park out of the goodness of its heart. "When I said those things, [Groswold and three WPRA boardmembers] really squirmed and looked at the ceiling with their faces turning red," Donohue says. The Webb administration also complained about the adversarial attitude Groswold seemed to be taking toward the city, which included penning a confidential memo asking his boardmembers to dig up any "information" they could about the members of the mayor's committee.

However, when the Webb administration ultimately signed off on the Forest Service land swap--and threw in the city's ninety-acre parcel as an added bonus--it cleared the way for Groswold to finally realize his dream of making Winter Park a "world-class" resort. And his greatest victory may have been convincing city officials to buy into his vision of Winter Park as a for-profit venture no longer designed to subsidize low-cost skiing for Denver residents.

Over the years, ticket prices at Winter Park have remained the lowest of any comparable resort in the state. But the formal objective of development at Winter Park, as outlined in the agreement between the resort and the city, is to sell or lease land now belonging to the taxpayers to private entities. The money derived from such sales or leases would theoretically flow back into the WPRA, which in turn is obligated to forward $1 million per year plus 3 percent of its total revenues to Denver. The new agreement says nothing about keeping prices in check.

"Because it is owned by the city and county and therefore doesn't have stockholders demanding higher income, it's been able to keep ticket prices down," says the parks advisory board's Tony Trampler. "If this kind of development happens, I believe it's going to be priced like Vail and Aspen. I can see a $50 lift ticket at Winter Park."

If Groswold is the WPRA's loose cannon, known for blowing his stack when he feels the resort's interests are under fire, Eugene L. Hohensee is its silencer. A Denver attorney with the silk-stocking firm of Arnold & Porter, Hohensee has been involved behind the scenes in virtually every major project the resort has undertaken in recent years, including its bold attempt to statutorily abolish the Moffat Tunnel Commission after that body challenged the WPRA's lease. Even though Denver owns Winter Park and the WPRA operates it as an agent of the city, it is attorney Hohensee who does the talking when it comes to base-area development.

Groswold and the WPRA boardmembers have decided not to speak to the press about their plans, says boardmember James A. Swanson, a Denver real estate investor. "We really have centralized all communications through Gene," he says. Even the powerhouse public-relations firm that the WPRA employs, Denver's MGA/Thompson, refers questions to Hohensee.

And Hohensee doesn't have much to say.
The lawyer won't say how much the WPRA pays him per hour for his services. He won't say which private developers have responded to a request for qualifications sent out earlier this year by the resort--or how the WPRA plans to cut them in on the deal. (The Denver Business Journal has already reported that two of them include East West Partners of Beaver Creek and Intrawest Development Corporation, the largest ski-area developer in Canada.) And he won't say who serves on the boards of the ski area's new for-profit subsidiaries. Explains the gracious Hohensee, "I'm not at liberty to tell you."

Hohensee does, however, confirm that the resort is holding open the option of forming yet another development entity in the future: a limited partnership with a private developer in which either the WPRA or the developer could conceivably serve as the controlling general partner. "We could only speculate as to who might be in which position," he says.

The resort has already set up a holding company, Winter Park Services Inc., which in turn is responsible for appointing the directors of a real estate subsidiary called Winter Park Village, Inc. The real estate subsidiary would be responsible for overseeing development of 39 acres of city land and 32 acres of Forest Service swap land.

Though Hohensee won't provide their names, some directors have been named to the two subsidiaries. So far, they're all members of the current WPRA board. Trustee Jim Willard, a Denver hospital executive, chairs Winter Park Services, while Winter Park Village is run by Jim Swanson, Rick Pederson and Gerald Groswold. In an interview last spring, WPRA in-house counsel Mike Repucci said the WPRA hadn't ruled out allowing those spin-off companies to become independent entities themselves, controlled by majorities of outside directors. "It may well turn out that Winter Park Village becomes a board of those folks that are actually doing the development," said Repucci. "It's just too early to tell."

The resort also has the option, under the agreement with the city, to simply sell off the development subsidiary itself--and with it, the city land. But Hohensee says it's too soon to tell exactly what Groswold and the others will decide to do.

The attorney stresses that WPRA boardmembers are prohibited from profiting personally from resort development, and denies that the ski area is being overly secretive about its objectives at the base area. Real estate development is a sensitive undertaking, he notes, and "premature disclosure of plans or candidates for potential development partners can be damaging to the final result. Especially when we haven't made any decisions yet."

The uncertainty surrounding so much of the resort's development scheme doesn't seem to bother Webb assistant Andrew Wallach. "This is one of the few enterprises the city has an interest in that's actually in the competitive marketplace," he says. "If you asked me whether we should disclose everything going on in public works or the mayor's office, I would say, `Yeah, no argument.' Here the concerns are, at least as represented by Winter Park, that they're in a very competitive industry, and you can't argue with that."

The extent to which the ski area has distanced itself from the city's interference was made clear last year when the Webb administration signed its new agency agreement with the resort. As part of that agreement, Denver was given four new spots on the WPRA board--positions that ironically were referred to in the document as "city trustees," even though the city itself owns the resort. At the same time, the board was increased to 22 members, a move that guaranteed that the WPRA, with the power to appoint 15 members, would retain the two-thirds bloc necessary to okay any significant real estate transactions.

The function of the city trustees is to "watch out for the city's interests," says Wallach. But how closely they're watching is an open question.

One of those trustees, former Speaker of the Colorado House of Representatives and Webb campaign treasurer Ruben Valdez, reportedly plans to step down from the WPRA at the end of the month. Valdez did not return calls from Westword. The only city trustee Westword was able to contact was Augustine "Gus" Pannell, a retired ski instructor. Pannell says he doesn't view himself as a watchdog, doesn't know about the resort's development plans and has no plans to find out. He was unaware of how much WPRA president Groswold earned per year until informed by a reporter. The boardmembers are "very unselfish people" who receive no compensation other than a free ski pass, adds Pannell, who notes, "If Gerry [Groswold] tells you something, it's going to be true. He's not going to mislead you."

The 1994 agreement between the city and the WPRA does give Denver's manager of parks and recreation the right to "review" and comment upon all master plans for the base area. However, getting Denver parks and recreation manager B.J. Brooks to comment at all on Winter Park can be difficult. The new parks boss refers questions about the resort to a familiar source: WPRA attorney Eugene Hohensee.

Brooks's predecessor at the parks department, Bruce Alexander, had plenty to say about the resort. It was Alexander who sat on the city's $40,000 appraisal for eight months to allow the WPRA to delete anything sensitive. Alexander explained his action by noting that base-area development would help Winter Park evolve into a first-class resort. Alexander had good reason to take a fatherly interest in the ski area's future: He used to be the WPRA's banker at First National, and he personally signed off on the 1979 loans that were collateralized by the city. "Bruce would laughingly say in negotiating sessions, `It was the easiest loan we ever had to make,'" recalls Barnes.

True to Winter Park's history of interwoven relationships, Webb last year asked Alexander to serve as a city representative in negotiations with the WPRA. Alexander has denied any conflict of interest.

The WPRA cleared $7.8 million in cash last year, according to its latest financial report. After taking accounting charges for depreciation and amortization expenses--the declining value of aging machinery and the repayment of bank debt--the resort reported a net profit of $3.9 million for the year ending April 29, 1995.

Total revenues at the resort were $34.7 million last year, down $429,000 from 1994 due primarily to a slight dip in ticket sales. Food-service profits dipped slightly to $1.7 million, while interest income, most of it from the resort's commercial paper loans to corporate giants American Express and Ford Motor Credit Corporation, climbed to $375,000.

The resort's audited financial statements were obtained by Westword under a Colorado Public Records Law request--and over the initial objections of the WPRA. In a letter attached to the document when it was mailed to the city auditor's office in late September, Groswold instructed Don Mares not to release the report to the public. "This statement is for your use in connection with the Winter Park Resort and is not for publication or general distribution," wrote Groswold.

After Westword filed a written request for the document with the city attorney's office, Groswold sent a hand-delivered letter to Mares, Webb and B.J. Brooks. In that letter, Groswold said that he wanted to "amend" his earlier letter and "consent" to the distribution of the statements.

Hohensee says Groswold never intended to prevent Mares from releasing the document. "The WPRA and the city are working together in cooperation to attempt to present the public with information which the public has a right to know," he says.

Specific information about the WPRA's real estate investments, however, won't be forthcoming. In the agreement signed last year, the city gave the resort permission to consolidate the financial statements of the WPRA and its two new subsidiaries for reporting purposes. Hohensee says that measure was intended to make sure that the city gets its share of development revenues. However, it will also make it impossible for outsiders to arrive at accurate profit or loss figures for the subsidiaries.

Critics such as Trampler point out that the 1994 agreement, heralded by the administration as a $2 million-per-year masterstroke, is riddled with numerous other legal loopholes. The agreement puts the interests of lenders including First Interstate Bank (formerly First National) above the interests of the taxpayers. It allows the resort to miss payments to the city if it has a bad year. It allows Winter Park to skip one payment every five years--for any reason--with no penalty whatsoever. And it allows the WPRA to keep the first $3.5 million in gross revenues from the real estate subsidiary.

Assuming the base-area development does generate profits, the WPRA and a private developer would apparently split the take (how the money would be divvied up is another issue yet to be resolved, says Hohensee). According to the terms of the 1994 agreement, the city would then receive a 3 percent cut of the WPRA's share. During last year's negotiations, notes Barnes, the question came up of why the city shouldn't just sell the resort on the open market, put the money in Treasury bills and collect the interest, which would amount to well over $2 million per year and be virtually guaranteed. "I and one other person on the committee felt strongly that the city should just sell it," he says. "I always thought that a relationship between developers and the city, a public-private relationship, was headed for disaster."

But city aide Wallach says that even though the city was initially willing to sell the resort to the WPRA, it later came to the conclusion that it should hang on to its asset. Denver expects to profit in the long run not from direct development revenues, he says, but from increased skier visits generated by a glitzy new base area. The administration "didn't really talk in detail" about the nuts and bolts of how development would occur in its negotiations with the resort, he adds. But Wallach says he expects that real estate profits may be limited, anyway, given the up-front costs--roadways and other improvements--involved with any such project.

The mayor's aide also downplays the element of risk inevitably associated with land deals. "I'd say generally there's a risk in all real estate development," he says. "But I think you have to measure that against how the city is insulated from risk. We're talking about a corporation [Winter Park Village] separate from even the WPRA. So the risk to the city is just the overall risk to the asset."

Up in the town of Winter Park, however, residents still remember the string of development projects that have been snowed under at the ski area, including one fanciful plan to build a gondola from the resort to the town and another futuristic proposal to allow skiers to glide underneath the railroad tracks that straddle the ski slopes. That leads Grand County Attorney Jack DiCola to wonder whether the high-end European village to which the WPRA has hitched Denver's star will ever be built at all.

"So many things have been proposed, and not much has happened," says DiCola. "I guess I'll believe it when I see it."

end of part 2

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Andy Van De Voorde