Vermont’s Lake Champlain Cleanup Plan, Explained

Published by Vermont Public Radio

With a surface area of 435 square miles stretched over a length of 120 miles, Lake Champlain is one of the largest lakes in North America. Its waters support aquatic ecosystems, recreation, agriculture and public water supplies.

Percent phosphorous reductions required for each lake segment: The proportional percent of phosphorus reduction required for a lake segment may be quite different from the volume reduction required. For example, in a segment with low phosphorus loads, a small volume may represent a large percentage of that segment’s reduction — and vice versa.

But high levels of phosphorus in the water threaten all these uses of the lake. A plan to clean up Lake Champlain proposes limiting phosphorous runoff, which causes potentially toxic blue-green algae to proliferate. The plan is called the Total Daily Maximum Load, or TMDL.

The limits apply not just to farms and developments (although those are the leading contributors of phosphorus to Lake Champlain), but also to wastewater treatment plants, back roads and even forests and streams. Runoff from all these sources throughout a 8,234-square-mile watershed in Vermont, New York and Quebec ends up in the lake.

A new proposal, referred to as Total Maximum Daily Loads (TMDL), is a choice between scenarios that allow different amounts of pollution from various sources to enter specific parts of the lake. It’s a long and technical document; this series of interactive graphs and charts explains the basics of the official plan — which is not without controversy.

// See the data project.

// Read the story the data accompanied.

Huge Money, Small Oversight: State IT Spending In Vermont

$1 Billion+ ... The most accurate available information shows that the state could spend this amount on IT projects over the next five years.
$1 Billion+ ... The most accurate available information shows that the state could spend this amount on IT projects over the next five years.
Illustration: Amanda Shepard/VPR. Data source: Vermont Department of Information and Innovation.

story by Taylor Dobbs, data by Hilary Niles / Vermont Public Radio

The use of technology in Vermont state government went from a background concern to a political flashpoint throughout the troubled rollout of Vermont Health Connect, the state’s online health insurance exchange. None of the state’s IT projects receive the same level of public scrutiny, but information technology in state government is ubiquitous and makes up a significant — yet unknown — portion of the state’s budget every year.

A Vermont Public Radio investigation has found that it’s nearly impossible for Vermonters to know how much of their tax money goes toward IT operations in the state, how successful IT projects are in meeting state needs, or how well state agencies follow defined protocols for state contracts.

Using available records, interviews and dozens of documents released in response to multiple records requests, VPR built a comprehensive data base of IT projects across state government. The documents and interviews showed:

  • Despite efforts to improve transparency, there is no way for state officials or the public to track the total amount of money spent by the state government on information technology. The most accurate available information shows that the state could spend nearly $1 billion or more on IT projects over the next five years.
  • The state has increased oversight for IT projects in recent years, allowing the Department of Information and Innovation (DII) to monitor and even cancel projects from the time a department launches the procurement process to the finished product.
  • Although increased oversight provides more opportunities for DII officials to identify problems with an IT project, there’s still no way to know how successful these projects are in meeting their stated goals.
  • Specific protocols for state purchasing have been in place since 2008. Yet the state agencies tasked with ensuring those protocols are followed have never used their authority to audit compliance, making it difficult to know if agencies are following best practices as defined by the state itself.

// Listen Here and Read More

What Explains It: The Cost of Medical Supplies

Published in Vermont Business Magazine (print edition)

*

If you’ve heard that Tylenol in a hospital may cost 100 times more than it would if you bought the pills yourself, you heard right.

If you’ve read that hip replacements or cardiac surgery cost more at some hospitals than the procedures would at others, you read that right, too.

And if you know that private insurers pay more for services than Medicare or Medicaid, and that uninsured patients (except those on charity care) pay even higher rates for the same treatments, this may aid your understanding of the Tylenol phenomenon, which plays out in different ways on virtually every facet of health care costs.

Alternately referred to as cost-shifts or cross-subsidizations, the transactions leave charges for health care, including medical supplies, all but untethered from their line-item costs. Like a prism spinning in a window on a sunny day, what shows after financial models are applied to medical services looks like anything but the surface costs they’re comprised of. What’s refracted, instead, is a menagerie of ever-shifting, oddly shaped rainbows — but much, much less pretty.

Cost shifts and cross-subsidization

1chart_salnonsalThe so-called “cost shift” at the heart of much debate over health care reform typically refers to disparities among different kinds of payers. The theory is that private payers (mostly insurance companies, on behalf of their subscribers) reimburse hospitals at higher rates than Medicaid and Medicare, to make up for the government payers’ lower rates.

Not all economists buy the cost-shift theory of price variation among payers. Some studies in recent years indicate that wildly divergent reimbursement rates are more a function of marketplace competition and negotiating prowess, and less about private burdens amplified by government underfunding. Reimbursement rates, after all, vary not just between public and private payers, but also among different insurance companies servicing the same market.

But whatever the reason, one thing is clear: Different payers pay different rates for the same service.

A related transaction that’s undisputed, if not widely understood, is when hospitals up-charge for basic procedures to recover their losses from more complicated care. Such “cross-subsidization,” as it’s known, extends beyond services to the gamut of medical supplies, from pills to gauze pads to knee braces.

Amy Vaughan is Director of Revenue, Finance and Reimbursement at the University of Vermont Medical Center. When asked to explain the relationship between a hospital’s costs and the charges passed along to patients, she laughed.

“Well, it’s —,” she stopped and tried again. “That’s complicated,” Vaughan said.

Vaughan explained that medical supplies get marked up not just to cover the regulatory overhead associated with each one, but also to help make up for what the other cost shifts and cross-subsidizations don’t.

In the case of the Tylenol phenomenon, made notorious in the 2013 TIME Magazine article “Bitter Pill” by Steven Brill, the drug costs patients outrageously more than it costs hospitals not only because there’s a lot of work and red tape associated with administering it. The hospital also up-charges one patient’s Tylenol, for example, because it’s losing money on another patient’s psychiatric services. 

Specific profit-drivers and loss-leaders vary from hospital to hospital, and their algorithms are far more complicated than to imply a one-to-one ratio anywhere within the mix. But the concept is simple: Hospitals mark up medical supplies to help make up for losses elsewhere in their business models. This rings true in profit- and non-profit facilities, alike.

Cory Gustafson, Director of Government and Public Relations for Blue Cross and Blue Shield of Vermont, said it takes a paradigm shift to understand the proposition.

“It doesn’t make sense when it’s lined up against our own common sense of supply and demand,” Gustafson said. But pricing in a highly regulated environment like Vermont isn’t determined by classical free market principles, he said. This is, in part, because hospitals are obliged to provide complex services on-demand, even when the demand for those services is not sufficient to sustain the business. 

A small hospital’s emergency room is a good example, Gustafson said. “The community needs that ER, so (the hospital) ends up needing to make revenue in other places to subsidize it,” he said.

This is why BCBSVT, in its rate negotiations with hospitals, doesn’t fixate on how much it’s asked to pay for a knee brace, for example. The insurer agrees to pay the price it does because it knows the knee brace is carrying part of the facility’s overall financial weight, he said. Making sure the hospital is adequately funded is the insurer’s way of making sure the whole health care system is there when members need it.

Cross-subsidization: seen, not touched

2chart_nonsalcats-revised2The fact that you can’t hold a rainbow doesn’t make it any less real. Likewise, cross-subsidization is a very definite part of the health care cost equation, though its exact size and shape are all but impossible to quantify.

Vaughan said she doubts the UVM Medical Center could even figure out how much of its hospitals’ revenues are comprised of reimbursements for medical supplies, because reimbursement for services is so divorced from any system of line-item charges. 

The UVM Medical Center and Central Vermont Medical Center, the health network’s two hospitals in Vermont, are both designated by the Centers for Medicare & Medicaid Services as “prospective payment system” hospitals. This means billing — at its most basic level for inpatient care — is based not on the cost of specific services provided to any particular patient, but on that patient’s diagnostic code. (Reimbursement works somewhat differently for some of Vermont’s smaller, more rural hospitals.) 

For example: Imagine if two patients, we’ll call them Ginger and Fred, both had the same health care plan with the same insurer, and were admitted to UVM Medical Center for an appendectomy the same day. Ginger stays only three days, while Fred stays six (but with no complicating factors that result in a second diagnostic code). Ginger and Fred’s insurance company would pay the hospital the same amount for both patients, even though clearly more medical supplies (and labor) would have been used in the process of caring for the patient who stayed twice as long. 

Vaughan cautions that such an example is an oversimplification, but it gets the point across: The hospital may clear a profit from Ginger’s payment, but lose money on Fred’s treatment. Either way, its budgetary goal is not for each service to pay for itself, but for all payments to cover the cost of all services, with some left over to reinvest in the organization’s people, programs and facilities. 

“We look at it in totality,” Vaughan said. “We’re looking at covering (our costs) at the global level, not from a line-item level. We’re not saying whenever we do X procedure, we need to cover X cost.”

The Green Mountain Care Board, with regulatory authority over hospital budgets, likewise focuses on the forest, not the trees. Mike Davis, GMCB Director of Health System Finances, said the board’s priority in hospital budgeting is to curb overall cost growth, not to micromanage spending.

“Whether medical supplies are going up 15 percent or down 15 percent, we don’t try to manage at that level,” Davis said. However hospitals piece together their budgets to stay within certain targets for overall growth is up to them, as long as quality of care is maintained, Davis said. 

The Green Mountain Care Board collects categorized spending projections from all of Vermont’s hospitals, so the rough outline of each facility’s equation is visible. Medical supplies, including pharmaceuticals, account for almost 10 percent of Vermont hospitals’ overall budgets. At individual hospitals, that proportion ranges from less than one percent at Mt. Ascutney Hospital and Health Center, a rural Critical Access Hospital, to 13 percent at the UVM Medical Center, a Level 1 Trauma Center. Davis cautioned that these numbers are a good place to start, but reporting nuances among hospitals complicate direct comparison.

Among the complications: Different hospitals have different overhead and different payer mixes to compensate for. Plus, the Board’s reporting instructions include general definitions for medical or surgical supplies sold, drugs sold, and other related expenses — as granular as it gets, he said. But each hospital may apply these definitions somewhat differently, and the Board has never conducted a reporting audit, he said.

Teasing apart the dollar value of cross-subsidized medical supplies also is complicated by a proprietary veil: Each hospital and insurance company negotiates reimbursement rates separately, and privately. Insurance companies get a discount off the full-price charges, but neither hospitals nor insurers want their competition to know how much (or how little) it’s worth.

The art of the bargain

3chart_medsuppercenttotalIt’s up to the Green Mountain Care Board to make sure hospitals and insurance companies set fair rates that keep health care reliable, hospitals solvent and health insurance affordable. Inside the hospitals, it’s up to supply chain managers to find good deals. 

Charlie Miceli, C.P.M., Vice-President and Network Chief Supply Chain Officer at the UVM Health Network, said medical supplies procurement has evolved from a back-office function to an integral part of the network’s financial strategy. 

“It’s not just three bids and a cloud of dust anymore,” Miceli said. “In the old days, you just went for the lowest bid. You were on a hamster wheel of repetitive, non-critical processes.” 

Today, Miceli said, physicians and nurses are pulled into the procurement process and even into bargaining sessions, both to get them invested in savings and for their expertise. He said in some cases, “procurement stiffs” can only get negotiations so far, but practitioners who work with the supplies in question can push a good deal across the finish line.

The UVM Health Network also has signed on with several “third-party decision support providers.” Miceli said the cost of these contracts is more than offset by the savings they facilitate through specialized consulting, analytical tools and group purchasing power. 

The UVM Medical Center buys about 30 percent of its medical-surgical supplies through a consortium of 116 academic medical centers that comprise about $52 billion of annual buying power. The University HealthSystem Consortium’s benchmarking data show that UVM Medical Center just makes it into the top one-third of all academic medical centers for price competitiveness on med-surge supplies. Miceli said the benchmarking data help his team identify where they could be getting better deals by giving them a sense of the prices being paid by others in the hospital’s peer group. 

And with four hospitals under its umbrella, the UVM Health Network claims a group purchasing power of its own. 

“We’ve taken over $6 million out of the system,” Miceli said, just by contracting together for a few high-ticket items, including cardiology, orthopedic implants, imaging services and pharmaceutical distribution. 

Miceli said the network is about two years away from having all its supply chain management aligned on one computer system, and that it’s already taken over supplies ordering and delivery for almost all its primary care clinics, as well. 

“Maybe you can get two more appointments in per week, because you don’t have to count sutures or supplies to order,” he said. Their strategy with supply chain management is not just to save money, but time. “It’s the time that’s even more scarce,” he said. 

The health network’s growing heft also helps when it gets into procurement negotiations with medical supply companies, many of which are undergoing their own rounds of consolidation that let them throw new weight around the bargaining table. But it can only get them so far. Case in point: One of the only major national suppliers of IV solution, Hospira, was recently bought out by Pfizer. Not interested in leveraging the product as a loss leader, as Hospira had done, the new owner — with a mandate for shareholder return, not affordable community health — is making up for lost profits. 

“I understand what they’re doing,” Miceli said. But he said the hit to UHC members alone is about $600 million from the Hospira acquisition and a change in another company’s distribution of key cancer-fighting drugs. “(A)t the end of the day, we’ve got to figure out something else. That’s why supply chain management has risen from a back-office function like it was when I started in the ’80s,” he said.

Mike Del Trecco, Vice-President of Finance at the Vermont Association of Hospitals and Health Systems, said the health care system is complex partly because of such shifting market forces as any business faces, but also because hospitals negotiate those market forces while delivering extremely specialized care to individuals with unique situations. The best way to manage that complexity, he said, lies in current efforts to reform health care delivery away from a fee-for-service system.

“You come up with an aggregate approach for paying for that population,” Del Trecco said. “The status quo is gone from our mind. It’s not even an option.”

Again, it’s a paradigm shift. One that’s already underway, where the concept of services comprised of line-item charges may mean even less than it does today.

Vermont’s Shadow Budget: How The State Forgoes $1 Billion In Taxes Each Year

1302 words, 7 charts / Vermont Public Radio

Data-driven exploration and explanation of Vermont’s $1 billion annual tax expenditures that remain on the books with little scrutiny.

By Taylor Dobbs (Vermont Public Radio) and Hilary Niles (Niles Media), with web production by Angela Evancie (Vermont Public Radio). Illustration by Aaron Shrewsbury. Graphics by Hilary Niles, based on data from Vermont Tax Expenditures Reports, 2006-2015. 

As the Vermont Legislature works to overcome a $100 million budget gap for fiscal year 2016, one of its largest fiscal liabilities remains outside the reach of the annual budget bill. The state gives up about $1 billion in tax breaks annually through policies that have remained largely unchanged in recent years, even as lawmakers struggle to balance budgets.

Vermont isn’t alone on that front. Robert Zahradnik is the director of state fiscal health for the Pew Charitable Trust, and he says the majority of states don’t tend to keep close track of these tax breaks or measure their efficacy.

Additional related reporting:

Vermont’s Shadow Budget: State Tax Breaks Get Little Scrutiny // Feb. 9, 2015 // by Taylor Dobbs

Vermont’s Shadow Budget: It’s Hard To Know If Tax Breaks Are Working // Feb. 12, 2015 // by Taylor Dobbs and Hilary Niles

Known as “tax expenditures,” the impact of these tax breaks is the same as money spent. Think of it like an instant rebate: Instead of accepting the revenue and then handing it back out in the form of subsidies or payments, the state simply never collects certain revenues. The effect is the same.

A special commission in 2011 referred to this foregone revenue as a “shadow budget” that lacks sufficient transparency. And Zahradnik says tax expenditures don’t typically get the same level of scrutiny as the annual budget.

“We looked at this issue back in 2012 and released a report called Evidence Counts that found that most states really weren’t producing the kind of information that can ensure tax incentives – those tax expenditures focused on economic development … And since that time, we’ve been working with states to put in better practices,” he said.

Tax expenditures come in the form of policies and programs such as tax credits, exemptions, deductions or modified tax rates. Common at both the state and federal levels, they’re designed to encourage certain activities or lower the tax burden for certain populations. Such tax breaks are available for individuals and businesses, and virtually everyone in Vermont enjoys at least a few.

Common at both the state and federal levels, tax expenditures are designed to encourage certain activities or lower the tax burden for certain populations. Virtually everyone in Vermont enjoys at least a few. (Data: Vermont Tax Expenditures Reports, 2006-2015. Graphics: Niles Media.)
Common at both the state and federal levels, tax expenditures are designed to encourage certain activities or lower the tax burden for certain populations. Virtually everyone in Vermont enjoys at least a few.

Vermont is one of many states, Zahradnik says, that has taken a renewed interest in tax expenditures in recent years.

“There wasn’t always an opportunity for them to be reviewed in the same way that other programs are,” he said. “And I think on top of that, when you had the Great Recession and the fiscal crisis, our sense is there was just much more attention being paid to every dollar that state governments spend, and how do you make sure you’re making decisions that are based on evidence and that are based on an actual review of which programs are working and which ones are not?”

Vermont is ahead of some other states, he said, in that the state has defined measurable goals for all of its expenditures. But the state has not yet put significant effort into measuring progress against those goals or modifying policy to better reach them.

These tax “preferences,” as they’re also sometimes called, are divided into five broad categories based on which tax revenues are foregone: sales and use, income, property, motor fuel and vehicle and banking and insurance.

And unlike state spending, most of the tax breaks are permanent – unless they’re amended. They’re not voted up or down annually like the budget. But every two years, the state tallies how much money it’s not collecting. Here’s the latest glimpse of who gets to keep it.

Sales and Use

Vermont manufacturers don't have to pay taxes on their input materials or equipment. For individuals, there's no tax on most groceries, residential energy purchases or clothing.
Vermont manufacturers don’t have to pay taxes on their input materials or equipment. For individuals, there’s no tax on most groceries, residential energy purchases or clothing.

Sales and use taxes are the most visible form of taxation in the state. Virtually every time someone pays for goods or services, the state gets a small piece of that money. This category is also where the state gives up the most revenue in tax breaks each year, most of it (an estimated $339.1 million* in FY 2014) to manufacturers and other producers.

Manufacturers, including just about any company that produces tangible goods, don’t have to pay taxes on their input materials or equipment. So if a sock manufacturer is expanding its factory, it won’t have to pay for taxes on all the new fabrics or machines it buys. Manufacturers also don’t pay taxes on the energy they use in the manufacturing process.

The state does this to make it easier for manufacturers, which employ about 31,700 Vermonters, according to most recent estimates, to operate in the state by reducing overhead costs.

Tax breaks for individuals make up a significant portion of the sales and use expenditures as well. There’s no tax on most groceries, residential energy purchases or clothing, and those tax breaks make up $174.7 million of FY 2014’s foregone revenue from sales and use taxes.

Property

  • Total Expenditure (FY 2013): $281,080,500*
  • Portion of overall tax xxpenditures: 28 percent
  • Largest tax break: property tax adjustments for income sensitivity ($146,850,000*)
Including land such as church grounds, parcels in Current Use, and government-owned properties, property tax expenditures total about a quarter of the state's tax breaks.
Including land such as church grounds, parcels in Current Use, and government-owned properties, property tax expenditures total about a quarter of the state’s tax breaks.

Income sensitivity adjustments on statewide property tax bills also save Vermont taxpayers big, lately to the tune of about $145 million* a year — and that’s not counting tax breaks for public, religious and charitable organizations, or for landowners whose farm or forestland is enrolled in the state’s Current Use.

Including land such as church grounds, parcels in Current Use, and government-owned properties, property tax expenditures total about a quarter of the state’s tax breaks.

It’s also one of the few categories of tax breaks that’s made its way into the latest round of budget discussions. In Gov. Peter Shumlin’s third inaugural address in January, he proposed revoking farmers’ Current Use status if they repeatedly fail to comply with state water quality standards.

Income

  • Total expenditure (FY 2013): $59,744,000
  • Portion of overall tax expenditures: 6 percent
  • Largest tax break: earned income tax credit ($26,884,000)
The personal exemptions and standard deductions individuals claim on their annual income tax returns add up to more than half of all income tax breaks in Vermont. Note: Income tax expenditures from one tax year are reported for the following fiscal year.
The personal exemptions and standard deductions individuals claim on their annual income tax returns add up to more than half of all income tax breaks in Vermont. Note: Income tax expenditures from one tax year are reported for the following fiscal year.

It’s people, not companies, who find the most savings from income tax expenditures. The personal exemptions and standard deductions individuals claim on their annual income tax returns add up to more than half of all income tax breaks in Vermont.

Vermonters get income tax breaks for a wide range of things, from low income families’ spending on daycare ($61,000 in FY 2013) to saving for college ($1,777,000 in FY 2013).

Corporate tax breaks make up a much smaller portion of this category, though they vary dramatically year to year. Note: Income tax expenditures from one tax year are reported for the following fiscal year.
Corporate tax breaks make up a much smaller portion of this category – just $5,238,000 in FY 2013, though they vary dramatically year to year (they totaled less than half a million dollars in FY 2009). Note: Income tax expenditures from one tax year are reported for the following fiscal year.

Corporate tax breaks make up a much smaller portion of this category, though they vary dramatically year to year.

Lately, most savings for corporations comes from either the Vermont Employment Growth Incentive (a cash incentive for high-paying job creation) or the Research and Development Tax Credit (designed to encourage innovation in Vermont).

Banking and Insurance

  • Total expenditure (FY 2013): $29,231,800
  • Portion of overall tax expenditures: 3 percent
  • Largest tax break: hospital and medical service organizations ($14,070,800)
Most tax savings available for the banking and insurance industry go to hospital and medical service organizations in an effort to keep down the cost of health care in Vermont.
Most tax savings available for the banking and insurance industry go to hospital and medical service organizations in an effort to keep down the cost of health care in Vermont.

Most tax savings available for the banking and insurance industry go to hospital and medical service organizations in an effort to keep down the cost of health care in Vermont. And for about $10 million, some annuity considerations are exempted for insurance companies.

Banks pick up less than $4 million through other tax policies, including an incentive to invest in affordable housing.

While tax breaks in this category are expected to top $30 million in the coming fiscal year, overall they account for a small portion of total tax expenditures in the state.

 

Motor Fuel and Vehicle

  • Total expenditure (FY 2013): $28,420,000*
  • Portion of overall tax eexpenditures: 3 percent
  • Largest tax break: trade-in allowance ($24,700,000)
The vehicle trade-in allowance ensures vehicles are only taxed once (when they're bought) rather than twice (if they're traded in). Note: Diesel tax expenditures for FY2009-12 are excluded from these calculations due to unreliability of previously reported data.
The vehicle trade-in allowance ensures vehicles are only taxed once (when they’re bought) rather than twice (if they’re traded in). Note: Diesel tax expenditures for FY2009-12 are excluded from these calculations due to unreliability of previously reported data.

The vehicle trade-in allowance ensures vehicles are only taxed once (when they’re bought) rather than twice (if they’re traded in). This accounts for virtually all of the tax breaks in the motor vehicle and fuel category. Other tax breaks limit the costs of certain vehicles for religious and charitable organizations, veterans and people with disabilities.

There is also a tax break for diesel fuel used for farm equipment and other off-road uses. That tax break has been inaccurately reported in past years, but the accurate figure came in around $333,000 in FY 2013.

Editor’s note: The data presented here reflect state estimates reported by Vermont’s Joint Fiscal Office and Department of Taxes in annual or biennial tax expenditure reports since 2006. Some tax expenditures are not estimated due to unavailable data. Additionally, methodologies for estimating these values have evolved, and the details of several tax expenditures have been amended in the intervening years. As a result, the comparison over time cannot be exact, but is presented here as accurately and fairly as possible with the best available data.

* Beginning with the state’s 2015 Tax Expenditures Report, certain items are no longer reported as tax expenditures. Some FY2013 values have been estimated as an average of prior projections for Fiscal Years 2012 and 2014.

Three Years After Irene, Waterbury Complex Stretches for Higher Ground

751 words / VTDigger.org

On Aug. 28, 2011, Tropical Storm Irene began flooding state employees out of their Waterbury offices and psychiatric patients out of their beds.

Three years after eight feet of floodwater forced the state out of its historic complex in Waterbury, Vermont’s largest ever capital construction project is well underway to bring the workers back. Photo by Hilary Niles

Three years later, steel beams three stories tall with cross bars at the top prop up faded brick walls from a courtyard. A mason from Irasburg fills ground-level windows with oversized granite bricks. A Monarch butterfly rests on a swaying stalk of tall grass that sprouted next to an oak tree circled in chain link fence.

The $95 million project — $125 million with design fees and other project costs factored in — started with demolition of 15 buildings a year ago.

Low-lying land near the Winooski River, where office buildings and a boiler plant once stood, now is sloped for stormwater runoff and has been seeded with grass. Pickup trucks, cranes and cement mixers track a dirt lane that soon will be built into a paved road about six feet higher.

Project manager Mike Stevens said on a tour of the site Tuesday that when the decision was made to rebuild at the same location, architects reconfigured the sprawling facility. New construction will be built closer to the quarter-mile long historic corridor, and on higher ground, to withstand a 500-year flood.

// Read More

Jay Peak loses trust of first EB-5 investors

2651 words / by Anne Galloway and Hilary Niles / VTDigger.org

A group of immigrant EB-5 investors are incensed that Bill Stenger, president and CEO of Jay Peak Resort, seized ownership of the Tram Haus Lodge and turned their half-million dollar equity stakes in the property into IOUs.

Investors had no knowledge of Stenger’s actions until five months after they were executed.

Bill Stenger (foreground, right), president and CEO of Jay Peak Resort, presides over the ribbon-cutting ceremony at the immigrant-funded Stateside Hotel and Baselodge. Photo by Hilary Niles / VTDigger

Stenger and his partner at Jay Peak, Miami-based Ariel Quiros, dissolved the company on Aug. 31, 2013, turned the investments into unsecured loans and “waived” investors’ legal rights, according to documents obtained by VTDigger. Stenger says he sent an email to investors with the promissory note on Jan. 24 of this year, but he did not mail official, paper copies until May.

After the investors sent letters of complaint to Stenger and the state, Jay Peak agreed to change certain terms of the IOU in a take-it-or-leave-it offer earlier this month.

In an interview, Stenger said he did not need to consult with the 35 limited partners in Jay Peak Hotel Suites, LP, before he dissolved the company, because Jay Peak had the legal right to do so under the limited partnership agreement with the investors.

Stenger said he regrets not communicating better with both investors and state officials, and he takes full responsibility for the “big mistake.”

// Read More

Analyst, economist weigh potential of IBM sale to Globalfoundries

1348 words / VTDigger.org

If IBM were to sell its computer chip-making unit to California-based Globalfoundries — patents and all, as the company is widely rumored to be considering — would the new owner of Vermont’s largest manufacturing plant even want to keep it?

Probably not, according to Len Jelinek, a semiconductor manufacturing industry analyst for the global information firm IHS.

IBM is Vermont’s largest private employer, with about 4,000 workers, and anxiety about the impact of the plant’s sale and potential closure is palpable.

Despite these feverish efforts to keep IBM in the Green Mountain State, there is little the state can do to prevent a potential closure of the plant. Global trends are driving behind-the-scenes negotiations between powerful industry players.

Job losses of IBM’s magnitude are easier to absorb over time, economist Art Woof acknowledged. Still, he said, the area’s financial engine is diversified and resilient enough that even such a “worst case scenario” would not kill the economy.

// Read More

Q Empire: The man behind the Northeast Kingdom’s biggest plan

3332 words / VTDigger.org

Ariel Quiros is the entrepreneurial force behind Jay Peak ski resort and the $600 million Northeast Kingdom Economic Development Initiative – one of the largest development projects ever attempted in Vermont.

Though the project is high profile, Quiros is not. The international tycoon, though sometimes seen, is seldom heard.

Ariel Quiros whispers to Gov. Peter Shumlin during a press conference at Jay Peak’s Stateside Hotel and Baselodge. Photo by Hilary Niles/ VTDigger

The first generation American stands out at press conferences for his mystique: When he’s not got the ear of the governor, Quiros is most often seen standing uncomfortably before a crowd with pursed lips, staring silently and expressionless, at nothing in particular, through ice blue eyes.

Quiros quietly presides over an integrated set of projects that together constitute the largest private investment Vermont has ever seen: expansions at Jay Peak, development of the newly renamed Q Burke Mountain ski area, the mixed use Renaissance Block planned for downtown Newport, the future site of a biotech firm in the same town, and the promise of a new and improved Newport State Airport in Coventry.

“I make the vision,” he says quietly, a touch of gravel in his voice after 20-plus years of smoking.

His accent, clearly from New York, is also infused with the Puerto Rican and Venezuelan accents of his mother and father, respectively. He speaks three languages and his English borrows sometimes a tense from Spanish or a cadence from Korean, his wife’s native tongue.

He just sees things, Quiros says. He gets a vision for what can be, ignores all obstacles, and surrounds himself with people who can make it happen.

And they do, which is why Quiros likes to keep to himself. Business risk is thrilling, but trust is a precious commodity for a millionaire. Quiros is generous with friends, but says he hasn’t fought for all he’s built to give it away, much less have it taken.

// Read More

Community fears history will repeat itself at Q Burke Mountain

3310 words / VTDigger.org

It’s the day before Q Burke Mountain opens for the winter, and Ary Quiros could just as well be preparing for battle as for business.

The new CEO is opening the ski resort for the first time since he started at the mountain the previous winter, and he’s amped. If Quiros, 36, can turn this chronically failing but beloved ski area into a stable business, he will succeed where prior, much wealthier, owners have failed.

The arc of history and local expectations give him long odds. But Quiros — and his staff — are determined.

Wearing a weathered, Army green jacket and frequently checking a watch face practically the size of his wrist, Quiros shuttles from one outpost of operations to another to check on his troops: snowmaking, ticket sales, kitchen, pub and cafeteria. Finances. Marketing. Housecleaning.

“It’s like being in the Army again,” Quiros says. The 12-year veteran of the wars in Iraq and Afghanistan is now a captain with the Vermont National Guard. He relishes intensity in the field, clarity of mission, camaraderie, and he applies his military leadership experience to Q Burke Mountain operations.

Ary Quiros served in the Army’s 101st Airborne Division in Iraq and held other posts in Afghanistan and South Korea before taking over as CEO of Q Burke Mountain ski area in Vermont. Photo by Hilary Niles/ VTDigger

“You take care of them,” Quiros says about both his military units and staff. “They watch your back, and you move forward.”

The responsibility to provide for and protect his staff weighs heavily on Quiros, perhaps even propels him.

And his military analogy for mountain operations is echoed by his father, Ariel Quiros, who purchased Burke Mountain in 2012.

Ariel Quiros says half a dozen buyers before him couldn’t close the deal because of the mountain’s high-profile history and reputation with banks and investors: Bankruptcies dating back to the 1980s. A bounced tax check to the town for $97,374.30. More bankruptcies. A public auction. Ginn Companies’ $675 million default with Credit Suisse bank.

“Boom boom boom, bombs away,” Quiros says. “Everybody’s shelling the mountain, all the banks, doesn’t wanna fund it. All the businessmen failed.”

Some of them, Quiros notes, possessed or managed wealth that far exceeds his own, built from international trade since the 1980s. Bernd Schaefers was a German movie producer who made “The NeverEnding Story” and “In the Name of the Rose.” Donald Graham founded investment firms that collectively manage upwards of $7 billion. Developer Bobby Ginn presided over real estate transactions across the country that also measure in the billions.

None of their business plans at Burke held. Some went down in flames.

And plans now are as grand as ever: to brand the mountain as year-round training grounds for elite athletes. Buildout is expected to cost about $108 million and will include four hotels, an aquatic center, tennis facility and indoor mountain biking park.

But this time, even more is at stake.

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5-cent education property tax increase needed

801 words / VTDigger.org

Statewide base property tax rates might increase again — by a nickel in 2015 — to meet the rising cost of education. But in recommending the rate bump, Tax Commissioner Mary Peterson also suggests looking for a way to get schools to curb spending.

Peterson issued her official property tax recommendation Tuesday afternoon: Base homestead property tax rates should go from 94 cents to 99 cents, she said; non-residential property tax rates should increase from $1.44 to $1.49. Peterson recommended no change to the homestead income tax rate of 1.8 percent.

The Legislature, which ultimately sets statewide tax rates, will consider Peterson’s recommendations when it reconvenes in January.

Lawmakers also might respond to Peterson’s urging that they consider ways to limit the growth of education spending from year to year. Her message echoes one she delivered to the House Ways & Means Committee at a recent pre-session meeting that focused on education finance.

Gov. Peter Shumlin on Tuesday also appealed to school boards to keep their budgets lean.

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