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Adjudicatory Hearing Round III – Day Two

June 3, 2011 by · Leave a Comment 


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By Dan McClelland, Tupper Lake Free Press

Round III Day 2 of the Adirondack Club and Resort adjudicatory hearings at the Tupper Lake Train Station
Thursday, June 2nd, 2011

Those present: New today was Brian Houseal, executive director of the Adirondack Council, sitting with Allison Buckley of Piercefield, staff member. Mayor and Supervisor will be attending later. Many of the same players as yesterday. Trustee Leon LeBlanc, Fred Schuller, Don Dew Jr. Peter Littlefield, Elaine Yabroudy to come later. Jessica Collier, whose birthday was yesterday, arrived late.

Cross examination resumes of the Preserve Associates panel: Terry Elsemore, a professional in fractional housing sales which is one of the sales programs at the ACR, Jim Martin, planner and economic development specialist with LA Group which is the planner for the developers and Scott Pierce, construction estimator with Delaney Construction.

First cross examiner Kirk Gagnier, attorney for town and town and village planning board.

Questioning Scott Pierce, who has to leave mid-afternoon.

Kirk: In terms of estimates, you testified you used prevailing wage estimates, even though it’s a private project.

Scott: We use prevailing wage rates in our estimates.

Kirk: If didn’t, would lower costs?

Scott: Yes. We are able to hire non-union employees.

Kirk: Any estimates during construction involve hiring independent monitors?

Scott: Yes.

John Caffry (Protect the Adirondacks preservationist group): On page 2 of pre-file do estimating for site construction, etc. Infrastructure?

Scott: Yes. Don’t estimate for buildings. Our company does do some building.

John: Once contractor hired, follow your procedures?

Scott: Always follow our approval.

Caffry: If sub worked for you before, would pass the test?

Scott: Yes.

Caffry: Subs wouldn’t necessarily hire local labor?

Scott: Can’t answer that.

Caffry: Your estimates include all phases, including ski area?

Scott: Covered all phases infrastructure, ski area but not buildings such as lodge.

Caffry: Stuff you put in ground?

Scott: Yes.

Caffry: page 3 of pre-filed testimony, talk about construction costs and how they changed over time. Does increase our supervision costs? Your firm will be retained?

Scott: Not anticipating we’ll be chosen. But if were, if schedule went beyond 15 years our overhead costs (of supervision) would increase somewhat.

Caffry: Using prevailing state wages. State wide number?

Scott: County by county wages.

Caffry: Numbers state requires municipalities to pay through their contractors?

Scott: Yes.

Caffry: Apply to IDA projects?
Scott: Don’t believe it does.

Caffry: DOT projects?

Scott: Yes.

Caffry: Do contractors pay prevailing wages when not required by law?

Scott: Some do, some don’t- depends on hiring practices.

Caffry: Are local wages lower?

Scott: Can’t say percentage-depends on trade- but certainly significant.

Caffry: If company paid market rate, not state rate, lower the costs?

Scott: Can’t say will affect overall costs….
Caffry: Amount paid to workers would be substantially less?

Scott: Not necessarily…wage is wage and benefits…total package would be lower.

Caffry: Would effect multiplier effect?

Tom Ulasewicz (TU): object.

Caffry: Save question for Mr. Norden.

Caffry: What’s your spread sheet and date?

Scott: June, 2010 was latest.

Caffry: No further questions.

Dennis Zicha (Lake Simond Road resident) questioning Scott Pierce.

Zicha: Page 2 line 24 of pre-file $72.8 million infrastructure estimate?

Scott: Yes.

Zicha: earlier $35 million. Can you explain difference and how two documents the same date has 49% difference.

Scott: Can’t answer…can’t speculate. $72 million might be applicants’ costs added.
Think one of added items is waste water plant. Looks like base lodge added in.
This number is number we gave our costs and applicant added own infrastructure costs.

Zicha: Thought base lodge not included in the number?
S .

Arrival of Dan Plumley representing Adirondack Wild.

Judge: Do you have questions

TU has no redirect.

Scott Pierce excused.

Kirk Gagnier questioning Terry Elsemore: Five hour range?

Terry: If right product exits, project will be successful.

Kirk: Talked about different types of houses, fractional homes would be more popular?

Terry: Lead with product type will be most successful. You learn from your buyers when you start the marketing. Collect all data…great camps most logical group because dealing with a socio-economic group that can afford to buy. You could operate two or three product types at same time.

Kirk: Talk about amenities coming along in time…typical?

Terry: More amenities seen, makes products more successful. Amenities include thing like lakes. More amenities, services offered, the better.

Kirk: Will great camp lots help create amenities?

Terry: Starting at top end sort of sets the tone of the project. Get several notable people is helpful. Did project at Okemo…four star fractional in 98. Launched 34 lots built with ski bridges…$275,000 to $400,000- all sold in one day. Most inexpensive home built on them was half a million dollars.

Kirk: Top down marketing is viable approach?

Terry: Yes. Conditions haven’t come back, but will. Great Camp buyers are still available.

Terry talking about recent project: Started with Whisper campaign. Couple of people on ground first year. Collected 1,100 names and had some travel displays. Every three weeks to month get out info to them. As process progressed, learned project had merit. Filed operating plan and set up lottery launch. Had 118 people attended after contacts by sales people. Released 30 buildings and offered early buyers a discount. I’m advocate of pre-selling. What we were selling was service…had nice parties, service. 114 people bought that day. 104 closed on them. That gave us the momentum…Dec. 2, 2008. Sold $48 million properties that winter

Kirk: This project develop that type of momentum?

Terry: Economic conditions dictated that momentum. Conditions improving. Higher density stuff I’d wait on for more of a recovery.

Kirk: In your experience, are we moving to recovery?

Terry: Stuff see on TV geared to residential market. Taxi drivers in Los Vegas pooling their money to buy houses. Vacation ownership market different animal. Dealing with top 3% wage earners. Still propensity to buy…everyone looking for best value, best buy. Everyone looking for best deal. Some apprehension exists.

Kirk: You discuss some conclusions reasonable to assume future demand for lots will occur. Your answer…

Terry: Interesting part of Adirondacks there isn’t the competition. Haven’t done comparison of demand in Lake Placid.

Kirk to Jim Martin: Spoken with people of town?

Jim Martin: many times.

Kirk: About tax information. With great camp lots projections that’s just for lots themselves?

Jim: Lots themselves.

Kirk: Those lots not part of PILOT program

Jim: Those lot won’t be in PILOT program.

Jim: Table shows prices. My recollection sale of those lots also included in that projection.
By 15th year, projecting total assessment over $77 million.

Kirk: With regard to great camp lots…if sold at 100%- generate approx. $18 million. At 24.97 of assessed value. About 450,000 in tax revenue.

Jim: Did interim analysis in scale of what might expect. First phase $35 million. About $240,000 in new tax revenue to town.

Kirk: If lots sold and no PILOT, what happens to tax dollars?

Jim: Can’t answer

Kirk: If no IDA bonding, taxes come to taxing jurisdiction?

Jim: Go to taxing jurisdiction.

Kirk: $450,000 to taxing jurisdiction.

Jim: Yes.

Kirk: Great camps not on public road or not on sewer and water services?

Jim: Some great camp lots on municipal services.

Kirk: On the sale of those vacant lots, even if nothing built, immediately tax generated?

Jim: Yes. Sale price lot higher than current assessment. Significant increase in tax revenue just upon sale of property, even before building begins.

Kirk: Looking at fiscal summary, closing of property, $106,000 in increase in tax revenue?

Kirk: $550,000 in tax revenue generated from great camp lot without any kind of infrastructure?

Jim: That’s correct.

Kirk: Let’s talk about early part of project…talk about pace…if pace slower you discussed infrastructure would also be build on slower pace? Not intention to take all bonds and build all infrastructure, correct?

Jim: Yes. Phasing is designed in…infrastructure not neat and tidily built with each phase. Builders only extend infrastructure to first homes. Don’t build entire infrastructure for phase 1, let alone whole project. Infrastructure paced with sales.
In practical matter, not going to suit the developer to have lot of roads, water and sewer out there until sales.

Kirk: Wouldn’t be bonding for future infrastructure?

Jim: Praise Steve Erman of APA who helped design infrastructure phasing.

Kirk: Closing happens, land purchased, increased assessments, bonding for Lake Simond View. properties sold won’t be effected by bonding in LS View?

Jim: Correct.

Kirk: It appears as development progresses from great camps to other products, demands on municipal entities would grow?

Jim: Yes.

Kirk: If pause in development or it slows down, those demands would slow down?

Jim: Yes. Projection is they maintain. In each phase there is positive net position…very important aspect of this project.

Kirk: Master HOA. Discussion of payment to highway department. Who will HOA members be…lot owners and developer?

Jim: Yes

Kirk: Developer paying HOA fees?

Jim: Yes.

Kirk: Developer contributing share to HOA payments?

Jim: yes, but only for unplated lots…no road going to them.

Kirk: Talk about ski slope infrastructure. What is operating plan between closing and Year 3?

Jim: To have ski area fully operational and important point is that ski area integral part of entire project. This project is important to ski area, because history of ski area has shown that ski area proven difficult to operate as a stand alone. This project will allow it to operate for decades. Our aim to get working capital in first couple of years to make improvements. Ski area will be full operational from start.
This is truly unique circumstance for this region…this is four season resort…equestrian area, golf, lake, marina…truly will be four-season resort.

Kirk: With multiple amenities…if any limited…see dramatic effect on sales.

Terry: Not logical to bring all amenities up to speed at start. Ski areas generate income from real estate. Not financial feasible for them to borrow money to produce all amenities. I would recommend they ramp up.

Questions by John Caffry, attorney for Protect the Adirondacks: Start with Mr. Martin. Scott Pierce’s answers about wages and multiplier effect.. Fair to say if workers paid less than prevailing wages, limit the multiplier effect?

Jim: Possibly. But way my estimates used Franklin County wage statistics. so in my estimate both non- and prevailing wages.

Caffry: You didn’t use same numbers for wages?

Jim: I used a mix of wages.

Caffry: You used different numbers?
Didn’t ask for a thesis…just your answer.

Judge: Can be taken up during redirect.

Caffry: Asked question by Mr. Jones about ski lifts and which ones would be used?
Five brand new lifts or use some of older ones.

Jim: Replacement anticipated and cost associated with that. Replacing three existing lifts at $3.6 million. Can’t say if that number supports new lift or reconditioned. In my experience with purchasing used lifts, defy you to tell difference…interconnect at Gore.

TU: Objection…Jim already said he doesn’t know which lift was new or used.

Caffry: to Terry Elsemore…expert on residential resort sales?

Terry: yes.

Caffry: What many of us refer to as time shares.

Terry: Both developer and marketer. Work with lot of development groups, not of ski resort…introduced them to development. Do everything but construction. Train staff. My speciality is pre-sales so mitigates the risk.

Caffry: Getting unit on contract?

Terry: Yes. Need to sell half units before developers will build it.

Caffry: Worked on fiscal impact update in 2010?

Terry: Briefly…couple of conversations and one visit.

Caffry: Testified about Cushman and Wakefield residential…said overly optimistic?

Terry: Yes. Market now versus 2006 is different. Study done when anyone could sell anything. Also though lot of it was boiler plate.

Caffry: Projected volume of sales…optimistic?

Terry: Can’t say. Thought overzealous in lot of categories.

Caffry: What about prices compared with 2005 and 2006?

Terry: Depends on areas.

Caffry: Comparing apples and apples. Prices today versus 2005?

Terry: Prices will be lower. Residential market taken bigger hit than resort markets. Some resorts haven’t dropped that much.

Caffry: Ranges that prices dropped?

Terry: Ten to 30% drop in prices in resort.

Caffry: Amount of sales dropped?

Terry: My project in western New York. We sold 300 of 395 fractions in first year. Second year opened. Sold another 50. May have hit some saturation. Can’t say.

Caffry: When sold 50 fractions…how many fractions per unit? APA looks at unit

Terry: 79 units in buildings…so 50 is ten units.

Caffry: What year market peaked?

Terry: Probably 2006.

Caffry: All my questions to him relate to the resort market.

Caffry: Market peaked couple of years ago…ever hit those levels again?

Terry: Probably not. Some products the prices may come back to 2006 levels, not sure the volume of sales will.

Jim Ellis, Ben Peets, Jon Kopp Jill Abdallah, Kate Bencze arrived.

Caffry: Provided with exhibit 11. Table 5-4. Table 2-10. Tables from 2005 and 2010.
Who prepared 2005 table?

Jim Martin Part of fiscal summary done at that time. Prepared by LA Group.

Caffry: Who come up with estimated market value?

Martin: Not sure. Belief would have come from Cushman and Wakefield report. But then that’s not possible (report done in 2006)

Caffry: In discovery asked for Cushman and Wakefield. Distributed to parties. I’d like to have admitted into evidence. 118 pages.

Judge: Marked it as exhibit.

Jim: Answer is don’t recall.

Judge: Any objections to entering into evidence.

Tom Ulasewicz: No objection, but would like cover letter explaining benefits of document.

Caffry: Strenuously object including in record. It’s Mr. Ulasewicz’s spin on the document. If his letter goes in then all comments by parties should go in. Not relevant to this exhibit.

TU: Not only relevant, but explains how document fits to update. This letter is essential to accompany that document. Letter and document should be attached.
Pattern how this evolved and how fit to original document. Letter May 7, 2011- two pages. Copy to Paul VanCott included the document.

Caffry: My I respond.

Judge: Please wait.

Judge: Objections?

Don Dew Jr.: Shouldn’t all parties see this document?

Caffry :I forwarded to all parties several days ago.

Don Dew Jr.: Received document…not the letter.

Judge: Letter not sent to everyone. Going to rule on letter separately. Going to receive the Cushman Wakefield report.
Can be included with all discovery documents. Consider this letter from an attorney is an argument.

TU: Agree

Judge: Tried to make this point from beginning. Argument is different from evidentiary material.

Caffry: I had asked you where 2005 market values came from? And you said first thought Cushman-Wakefield and then realized that study done in 2006?

Jim: Correct. Don’t know where those numbers came from.

Caffry: Who in LA Group created it?

Jim: Don’t know.

Caffry: Looking at exhibit June 1, 2010, labeled residential sales. Fair to say the two tables list the different residential components on west side and sale price per until for each and the average?

Jim:Yes.

Caffry: Regarding 2010 table. Who came up with market values and sales price per unit.

Jim: Michael Foxman.

Caffry: Not from appraiser? Not from Mr. Elsemore? Not from anyone in LA Group?

Jim: No.

Caffry: Is Mike Foxman an appraiser?

Jim: Don’t know.

Caffry: Michael Foxman made up these numbers?
Objection by TU

Judge: Sustained

Caffry: Is Michael Foxman here today?

Jim: No.

Caffry: Know where he is?

Jim: Wasn’t charged with his whereabouts.

Laughter

Caffry: Looking at 2005 $28 million for all units?

Jim: Yes.

Caffy: Looking at 2010…numbers…Despite dropping four units, total gone up by 65%.

Jim: Don’t know to what degree unit configuration has changed. Lot of variables go into pricing. Don’t know if have changed.
If higher price, there’s a reason for that. Logical to assume that increased value provided in that unit.

Caffry: Assuming?
Jim: Yes.

Caffry: Looking at values, only lots?

Jim: Yes.

Caffry: Let’s look at Sugar Loaf North…some for $500,000 some for $350,000 Total value: $12.9 million. On 2010 table 34 units- total sale price $18 million?

Jim: Yes.

Caffry: 41.5% increase for same number of units?

Caffry: Any reason in application?

Caffry: Looking at West Slopeside…169 unit total value $95 million in 2005?

Jim: Yes.

Caffry: 150 units in 2010- reduction of 19. Total market value of 150 units is now $135 million?

Jim: Yes.

Caffry: Value gone up 41%.

Jim: Yes. Worth noting in 2005 table. Word ‘estimated” is used in title.

Caffry: 2010 as estimates?

Jim: Yes.
Caffry: Report complains they are some of the most valuable units developers gave up.

Jim: Not aware of that use (description).

Caffry: Page 18 of exhibit about 2010- other volume submitted in June. Do you see where it says West slopeside represents significant part of project. Value has increased even though losing 19 units.

Jim: Not aware of any reason in application they would go up.

Caffry: Sugar Loaf East. 32 units…$400,000 each in 2005. In 2010 $592,000 each or $18 million. Increase of 48%.

Jim: Yes.

Caffry: Aware of anything in record to justify higher price in record?

Jim: I am not.

Caffry: Tupper Lake View North. In 2005 at $1.1 million. Tupper View South in 2005 estimate per unit at $800,000. Gone to $920,000 in 2010. Aware of any changes made to those units?

Jim: No.

Caffry: West Face Expansion 126 units total value $76 million. In 2010 reduced to 118 units. Total $124 million in 2010. So despite losing 8 units, gone up by 63%.

Jim: Yes.

Caffry: Aware of anything in record that changed to make them more valuable?

Jim: No.
Caffry: Page 18- states that West Face Expansion are most valuable.. Despite losing 8 units, value gone up by 63%.

Jim: Yes.

Caffry: East Village. 68 units. In 2005 $350,000 each for the lots. In 2010, total value now $47 million. Double increase. Any changes aware of?

Jim: Not aware of any changes.

Caffry: Great camps. Isn’t it true between 05 and 10 layout of many was redone?

Jim: Yes.

Caffry: Regardless of that, let’s look at numbers. In 2005 there were 25 great camp lots at $2.3 million each. In 2010, 30 lots for total of …..40% increase

Jim: Yes.

Caffry: Based on numbers given to you by Mr. Foxman, increased from 21% to 97% between 2005 and 2010.

Jim: Yes.

Caffry: Based on Mr. Elsemore’s testimony, does that make any sense?

Terry: They are estimates.

Caffry: Applicant gave you no documents to support those prices.

Terry Elsemore: No.

Caffry: Aware of any project seen price increases of those levels between 2005 and 2010.

Terry: I have no knowledge of that.

Caffry: Looking at 2005 table. Total units= 704. $304 million.
Looking at 2010 table. Total units = 651 units. Total $581 million.

Jim: Correct.

Caffry: 55% increase?
Jim: Yes.

Caffry: Based tax information on 2010 tables?
Jim: Yes.

Caffry: 2005 done on peak market. 2010 figures done on not at peak?
So tax revenues decline by one third?

Jim: Rather do analysis before answer.

Caffry: If over valued by half. Then tax revenue would decrease by one third?

Jim: perhaps.

Caffry: Referring to Cushman-Wakefield study. Why used in 2005 but not used in 2010 update?

Jim: Don’t know.

Caffry: Exhibit 193 that was admitted yesterday.

Judge: Mr. LaLonde’s testimony?

Caffry: Fair to say document prepared by your group and provided to TL planning board on October 2010 by Kevin Franke. Responses to Tupper Lake planning board questions?

Jim: Yes.

Caffry: First answer to question: Organizational diagram?
Was updated in 2010?

Jim: Don’t think it was.

Caffry: I didn’t see this document from Mr. Ulasewicz. Follows under discovery. Request first we receive it and have time to review it. Mark it as continuing problem of applicant withholding discoverable documents.

Judge: Mr. U. you will provide copies.

TU: Will provide.

Caffry: Want opportunity to ask questions on it.

Bob Sweeney: Update plan has been acknowledged.. Has evolved. Same ownership information on current plan.

Caffry: Ownership changed?

Sweeney: Ownership has not changed

Caffry to Terry Elsemore about pre-file testimony: First of all who wrote the questions?

Terry: Myself and TU.
Caffry: Who wrote answers?

Terry: I did.

Caffry: Talked about past projects…one single building…fractional homes or time shares?

Terry: Yes.

Caffry: Say been involved in resort development?

Terry: Started in 1980…in Maine. Mostly in east, also Colorado and Utah.

Caffry: Projects include…?

Frank Bencze arrive.

Caffry: Offering plan with Albany attorney? Partner of Robert Sweeney (developer’s attorney)?

Terry: attorney…partner of Mr. Sweeney.

Caffry: Paid on commission basis for sales?

Terry: Generally I draw a salary through closing and total is based on fixed percentage.
Month ago Mr. Foxman asked me to look at project. No discussion of fees…general conversation.

Caffry: He might retain you for portion of project?

Terry: Possibly.

Caffry: How paid for time here?

Terry: Hourly.

Caffry: Talking about potential buyers. For those people on lake- great camps?

Terry: Yes.

Caffry: How many great camps have waterfront?

Terry: Don’t know.

Judge: Break to dig out map of project.

Tom Ulasewicz: What are they looking for?

Caffry: Talk about great camp on a lake.

Terry: Some have water views, some have water access, all have property rights to lake.

Caffry: Let’s stick to great camps on lake. Only one or two?

Terry: Yes.

Caffry: Marina has 30 to 40 boat slips?
If great camp owner couldn’t get slip, have to use the state boat launch site?

TU: Objection. Relevance?

Judge: allow it.

Terry: Don’t understand question.

Caffry: You say great camp purchases have significantly higher incomes.

Terry: Some could afford to spend several millions to buy a lot. Difficult to say.

Caffry: Income of purchasers who could buy higher density lots on mountain.

Terry: $100,000 to $400,000 per year.

Caffry: What market areas ACR will explore….5-hour drive time? What specific metropolitan areas?

Terry: five hour radius. Albany, Syracuse, Montreal, …people who would normally come to Adirondacks. If here often enough, justify buying a place here.

Caffry: Talking about potential buyers for great camp lots…all 39?

Terry: All the lots…larger ones and smaller ones.

Caffry: Talking about phasing. Price range of semi-detached homes?

Terry: Too many variables…sizes of structures, views, etc.

Caffry: Page 30. Fair to say, not counting great camp lots, 28 of first phase are semi-detached and balance single family (about half)?

Terry: Yes.

Caffry: Page 4, discussing amenities required to attract buyers. Skiing and golf most popular. Many resorts have these?

Terry: Some of them have few amenities…this one has more and more comprehensive package. Lake Placid has horse shows…those people have tons of money. Try to attract that group.

Caffry: Question 6, future phases decided as project progresses. Developer may not follow phasing plan?

Terry: Not sure. Not sure about permitting conditions. Start with great camps and move to next logical steps.

Caffry: Refer to market for project, given affiliation with Orvis, aware current value written contract with Orvis Co.

Jim: Believe there is but not sure.

Caffry: Don’t know if any legal contract?

Terry: Believe in discussions with Orvis.

Caffry: Major campaigns aimed at major markets. Underway?

Terry: No. Are planned. It’s a logical marketing approach.

Caffry: Just hypothetical at this point?

Terry: Yes.

Caffry: Your testimony said project achievable?

Terry: Yes.

Caffry: Which numbers based on: 2005 or 2010, which are 55% higher.

Terry: Haven’t done that analysis.

Caffry: When said numbers achievable, not sure of which numbers used.

Terry: Not sure.

Caffry: Testimony said project achievable in 15 years?

Terry: Yes, assuming market recovers.

Caffry: How long do cycles last?

Terry: Entered business in 1988- lot of financial problems (Savings and Loans crisis, etc.) Enjoyed considerable success at SugarLoaf Maine.

Caffry: You testified about cycles in economy. In your experience, how long do these run?

Terry: Five years, from bottom to health.
One ended in 2006 ran pretty good for ten years.

Caffry: Crash in another 10 years?

Terry: I’m not crystal ball.

Caffry: When perceived bottom of this current recession?
Terry: Not economist, but bottom probably now.

Caffry: So another five years?

Terry: In my business need to be an optimist.

Caffry: In discussion about pricing, providing priced competitively. Compared this development with competing developments?

Terry: I have not. Looked at Lake Placid for places with similar amenities.

Caffry: Bottom of page 4, talking about equity or stock markets, say will flatten out?

Terry: When markets going up, people keep money there. When market is flat, take dollars out of market and put it into real estate. If not going to make money in market, might just as well as have something my family will enjoy.

Caffry: Baby boomers have requirement to have vacation home.

Terry: More of a want than requirement, yes.

Caffry: One of biggest deterents at this time is lack of a rise in real estate market?

Terry: People lost equity in their primary residences. Often use equity lines from their primary homes to buy vacation homes. Shakes their confidences.

Caffry: Question 15. If Cushman-Wakefield study obsolete. Who said that to you.

Terry: From my attorney, but I agree with that.

Caffry: You say development will remain price competitive. Other projects in mind?

Terry: Whiteface Club, several others.

Caffry: Familiar with Front Street project at Gore Mt?

Jim: Yes. MY firm has worked on.

Caffry: 200 units at base of ski area?

Jim: Model been completed.

Caffry: How many sold so far?

TU: objection…not this project.

Caffry: Lot of testimony about market, how things will sell and how will help town?

TU: Objection…my understanding…

Caffry: How many sold?

Jim: None. Problems getting permitting, waste water treatment. Got permit in 2006.
Not really on the market yet.

Caffry: Why still trying to do something with lake water.

TU: Seeking amendments to permit so permit process not over. Questions about sale pace not pertinent.

Judge: Objection noted.

Jim: Model units,,

Terry: If launched when did (2006), launched at crash.

Caffry: Aware of that.

Caffry: Belief winter skiing will be ancillary to other seasons. Why say that?

Terry: Believe summer and fall will be more popular. More amenities available here in warmer seasons. Tupper has nice potential, but have to drive by lot of nice ski areas to come here.

Caffry: Based on 22 years of experience?

Terry: Yes. He admitted he was a skier.

Caffry: You say it’s hard to see if project will grow skier visits?

Terry: Larger ski areas nearer to major markets. Ski area nice amenity to the resort.

Caffry: Any competing ski areas equipped with more modern equipment?

Terry: Not aware. Many people like smaller areas like this one. Where they don’t lose their kids…not intimidated by smaller ones.

Caffry: Top of page 11 in your pre-file, you talk about potential for real estate will dwindle in Lake Placid. Do know for fact?

Terry: I have not studied market extensively to give you an answer. My assumption is Lake Placid is built out.

Caffry: An assumption?

Terry: Yes. As Saranac Lake grows, Tupper Lake will be next to grow.

Caffry: What documents did you look at to prepare your pre-filed testimony.

Terry: Used information provided by TU and other pre-filed testimony, the application, Cushman-Wakefield. All associated with this project. Did not do any additional market research.

Continuing after lunch break

Caffry: Like to discuss PILOT in her pre-file.

Jim Martin: Don’ recall testifying anything about the PILOT.

Caffry: Walk through proposal. If project approved, developer will buy land from Oval Wood Dish Corp.
Jim: Yes.
Caffry: All of land leased to IDA?

Jim: Don’t know.

Caffry: Don’t know about title or legal arrangements?

Jim: Yes. Understand expert witness testifying next week.

Caffry: Anyone in your firm familiar?

Jim: These are legal issues…we’re planners. Aspect that is a legal issue.

Caffry: Is any part of project eligible for Empire Zone benefits.

Jim: Understand EZ ended. No longer viable!

Caffry: Your fiscal analysis calculations, were properties in Empire Zone taken into consideration.

Jim: In 2010 update, program in final weeks. So diminished its involvement.

Caffry: If Empire Zone not in effect, would affect numbers of fiscal analysis?

Objection from TU.

Jim: Change numbers slightly.

Caffry: Familiar with HOAs? Understanding some of lots not part of an HOA?

Jim: Yes…don’t know reason.

Caffry: Who would?

Jim: Mr. Franke, perhaps.

Caffry: Mr. Foxman?

Jim: Don’t know.

Caffry: Referring to projects you worked on…residential projects? Questions about various ones.

Jim: Yes.

Caffry: Worked on another project at Gore in parallel with Front street. Has since ceased.

Mayor Mickey Desmarais in attendance with Bob Fuller.

Caffry: “I conducted analysis in 2005 and updated in 2010,” referring to his pre-filed testimony.

Jim: Four additions to 2005 report. Did substantial portion of second one in 2005 and then supplement done in Oct. 2006- fiscal analysis- part of completeness at that time. The project went into mediation for several years. In 2010 asked to do another update to 2006 supplement.

Caffry: When said conducted analysis, what?

Jim: Much of information from government web sites. I keep some notes. Some information provided by TU last fall.

Caffry: You have notes you gave TU last November. Did he provide them to me?

Jim: I think he did.

Off the record.

Caffry: Reviewed my file of what applicant’s attorney gave me. Find none of these notes. Request these documents be found and provided to me.

Judge: Any information not with you.

Caffry: All of it is here.

TU: I will look. I’ll report my research tomorrow.

Caffry: Any other documents that may be eligible for discovery?

Jim: didn’t get his answer.

Caffry: Did other consultants or groups assist you. Your answer no other consulting groups but individuals.

Jim: Yes.

Caffry: Mr. Elsemore?

Jim: No.

Caffry: Did Mr. Foxman play a role?

Jim: Primary area was residential sales.

Caffry: What other areas.
Jim: draft presented to client and team. Revisions added. Mr. Foxman was involved in that process. Could have varied from grammatical areas to substantial changes.

Caffry: When see notes from Mr. Foxman, what form?

Jim: Written in margin. Don’t keep records of changes in drafts?

Caffry: Possible any exist?

Jim Martin: No.

Caffry: Discussing visitors to the resort. On 9/17 projection says 100,000 visitors on annual basis.

Jim: Skier visits. Footnoted in the report. Skiers only.
Not 100,000 different people. Lift ticket sales.

Caffry: Visitor numbers less?

Jim: Could be more…people coming in summer too.

Caffry: But this is winter number?

Jim: Yes.

Caffry: Skier days include locals?

Jim: Yes. Factors used account for day trippers (and locals).

Caffry: On line 22 have projection that 70,000 square feet of commercial space? Include commercial space at resort?

Jim: Represents only commercial space needed to accommodate that number of visitors.

Caffry: Some may be accommodated at resort base?

Jim: Could be.

Caffry: On page 17 discuss potential economic benefits, ie projection of construction. Briefly, was number for construction come from dollar value of construction?

Jim: Derived from dollar value of project. Subtract out land values.

Caffry: What if units sell for one third of price?

Jim: Probably not…because construction tasks still there. May involve lesser quality materials but jobs still needed.

Caffry: When you calculated construction jobs…used 2010 numbers?

Jim: Yes.

Caffry: If had used 2005 numbers- one third- fewer jobs?

Jim: Respond in two parts.

Caffry: Why won’t jobs be significantly less if used 2005 figures?

Jim: Would have gone to 2006 when value was higher than in 2010…699 units and over $600 million project. Numbers of jobs would have been consistent with that. Four fiscal documents provided in application.

Caffry: Regarding residential units…some wholly owned some fractural shares. Will some be rented?

Terry: Haven’t discussed any kind of rental program. No knowledge of that.

Caffry: Would they compete with local motels if there was a rental program?

Terry: Generally not.

Caffry: Pages 19 of your pre-file, projected that 524 jobs…where in 2010 report is that calculation?

Jim: There is no calculation in 2010 report. Jobs are referenced in 2010 update.

Caffry: Described elsewhere in application?

Jim: No it is not.

Caffry: You testified about skier day estimates. Refers to Scott Brandi verifying numbers. On page 21. What was source of that number?

Jim: Don’t know how he developed that number. He was my source for that number.

Caffry: He was your source?

Jim: Correct.

Caffry: Jack Johnson report in 2005 referenced 40,000 skier visits?

Jim: Recall report, don’t recall the number.

Caffry: What % of units sold as fractional units?

Terry: Not specifically but numbers could change.
If selling well, could increase that number. If single families popular, would increase that number.

Caffry: Regardng PILOT, all residences in PILOT, except great camps?

Jim: At time of 2010 report, all properties in PILOT. Learned from TU that some units (great camps) will not be in PILOT.

Caffry: Eight large ones?

Jim: Described as being discussed.

Caffry: All of great camp lot are in PILOTs in current application?

Jim: Yes.

Caffry: If lot in PILOT sold to individual, still be in PILOT?

Jim: Yes. Described as lease hold relationship.

Caffry: Owners wouldn’t have clear title?

Jim: Say restaurant. Own property and own lease to run restaurant. That type of relationship. That’s the extent of my understanding.

Caffry: Don’t know if people will have title?

Jim: Don’t know.

Caffry: Martin questions about table 2-10, Testified on Sugar Loaf North (Fairview townhouse complex) six of them valued at $233,000.

Jim: Don’t know if just buying lot or some type of fractional treatment. Or could be an error.

Caffry: Difference of $2.8 million.

Caffry: Great camp lots A through I. $16.3 million.

Caffry: On table says $18 million. Off by $2 million?

Jim: Appears to be the case.

Caffry: Sugar Load North Fairview…please do math. $8.3 million. Table says $13 million? Off by $6 million?

Jim: Yes.

Caffry: Did you do math for the table?

Jim: Can’t recall.

Caffry: Overestimated sales numbers in table by $11 million?

Jim: Based on what just went through, yes.

Caffry: Looking at Lake Simond View- single family detached. Firm filed info with town planning board last May that said 44 unit, 22 sold as fractional units?

Jim: Not aware.

TU: Objection.

Caffry: part of comments by town attorney and attached to minutes of Planning Board of May 2010. Memo from Mark Taber of LA Group. Responses to planning board comments.
Sent out by e-mail this past week.

Caffry: What’s your understanding building residential units? Who will build and sell? Developer?

Jim: It is developer, except lots only for great camps, for purpose of the projection.

Caffry: Different if not for projection?

Jim: All I know is what was instructed to me.

Caffry: Regardless of who does building, developer would cause houses to be built and they would sell?

Jim: Correct.

Caffry: Developer would choose the contractors?

Jim: Don’t know what arrangements are.

Caffry: Here yesterday when Ms. Ratner testified about contractors used. Her testimony that contractors would hire local labor?

Jim: Yes. I said had faith in local workers.

Caffry: Do you recall she didn’t have faith in local workers?

TU: Object. Asking him to recall what someone else said 24 hours ago.

Caffry: Do you recall contractors hired would likely hire non-local labor?

Jim: Yes.

Caffry: Did she say she had no faith in local workers?

TU: Object

Judge: Sustained.

TU: Whoever reads transcript can decide what she said.

Judge: Don’t see the relevancy of this.

Caffry: Trying to denigrate my witness and undermine her testimony.

Judge: Let record speak for itself.

Caffry: Done any research whether enough companies to build the project?

Jim: No.

Caffry: Nothing in application to force contractors to hire local?

Jim: Not to my knowledge.

Caffry: Typical…hard to limit?

Jim: Yes. Many factors come into play.

Caffry: APA or any board can’t make it a condition to only hire local workers?

Jim: Legal question can’t answer. Never seen it in my experience.

Caffry: Testified yesterday, work on ski lift and such not start to year 3?

Jim Martin: Table 2-12 of June 2010 update on page 39. Ski area improvements, base lodge improvements. Some activity in year two (ski area and base lodge). Majority of improvements in year 3. Total $4.5 million that year.

Caffry:: Couldn’t do until sold some real estate?

Jim: Wouldn’t say couldn’t do it…need to generate revenue first.
Could occur earlier.

Caffry: If condition of APA permit, could be moved up?

Jim: That’s a legal question.

Caffry: Testified about perceived amenity, what is it?

Terry: Perceived at point of sale, but didn’t actually use during use of unit. Eg. Equestrian facility, if never ended up buying a horse.

Caffry: You tesified about Ellicottville project you worked on?

Jim: Hour south of Buffalo.

Caffry: Anything of that size – the size of Buffalo- an hour away. No city that large within hour of Tupper Lake?

Jim: Yes. Ellicottville not in Adirondacks either.

Caffry: If hit 100,000 skiers a day can it be self-sustaining?

Jim: Don’t have enough information to answer that.

Caffry: In application?

Jim: Don’t know.

Caffry: Do you know any other member of firm who worked on that?

Jim: Don’t know.

Caffry: Testified earlier about phasing and how phases could be drawn up, as it relates to bonding, do you know if developer will split further beyond three parts of $35 million in bonding.

Jim: Possibly.

Caffry: Read pre-file testimony of David Norden? Assuming he were to testify that less real estate sold each year, say $5 million or one seventh- effect impact?

Jim: No…then changed and said Yes. As example of smaller scale, could benefit local community.

Caffry: Other than two Cushman-Wakefield reports, aware of any documents about potential sales prices of properties.

Jim: No

Terry: I am not aware of any,

Caffry: Any buyers lined up to buy great camp lots?

Jim and Terry: Not aware.

Caffry: Heard anything?

Two men: Have not.

Caffry: Owner of home lots will pay $1,000 per year to subsidize the ski area.

Jim: Yes.

Caffry: Aware 67 lots that will not pay?

Jim: I’m not.

Caffry: Know anything about transportation corp.?

Jim: Very little knowledge of it. Know has been proposed.

Caffry: Part of statistical analysis, any idea of amount of HOA fee?

Jim: Only partly…..reference to road improvement fees.

Caffry: They’ll pay additional fees (over ski area operation)?

Jim: Know other areas that have them. Fees can vary widely. Not necessarily a reflection of cost of residential unit, reflects amount of amenities and what is being pid for.

Caffry: If just snowplowing and mowing lawn low. But if pools, rec buildings, etc. would be more?

Jim Martin: Yes.

Caffry: Know dwellings not single family homes?
Who would manage?

Jim: Can vary by neighborhood.

Caffry: Who will operate the ski hill?

TU: object, outside scope.

Caffry: Issues deal with feasibility of project.

Jim: My understanding it will be the project that will operate the ski area.

Caffry: Regarding roads and costs, my understanding that by-pass Road and Lake Simond Road extension, not dedicated to Town of Tupper Lake.

Jim: Nine miles of road privately owned. My only relationship is how it would operate and costs. I did estimate of road maintenance.

Caffry: Table 2-6 Fiscal update. How were numbers arrived at?

Jim: Came from Kevin Franke.

Caffry: Is Mr. Franke a marketist?

Jim: No.

Resume after break….

John Caffry: Do you recall line of questioning comparing property values in 2005 and 2010 reports? Then another report?

Jim: Yes.

Caffry: In 2006 report said $601 million.?

Jim: yes…the higher numbers I was referring to….$601 million.

Caffry: Estimates in 2006. Who created?

Jim: Can’t recall.

Caffry: You wrote report. Don’t know where got numbers?

Jim: Can’t recall.
2006 numbers 50% higher than 2005 report. Expect number of improvements in various neighborhood areas…could be numerous.

Caffry: But speculating?

Jim: Yes…but seen this happen in other projects, as amenities added in midst of review as part of refinement by project sponsor. Can be significant increases in property values.

Caffry: Don’t know for sure?

Jim: Correct.

Caffry: ACR residential study refers to Cushman-Wakefield study.?

Jim: yes, read the passage under instruction from Caffry.

Caffry: Not finding reference in study that relates to numbers in application.

Jim: finding comparable sales of various areas. 2003 through 2005. Not exact prices, penny for penny, but comparables to support this type of price structure.

Caffry: For estimates, looking for comparables?

Jim and Terry: yes.

Jim: some notes about Lake Placid sites.

Caffry: Nothing in this document that gives price projections in ACR project?

Jim: Correct.

Caffry: You wrote report and put in confidential?

Jim: Yes.

Caffry: Put did not put in the data?

Jim: Yes.

Caffry: Cited same source…take as much time as he needs…take all day.

Jim: Beyond brief review that I did to support pricing subject in 2006 report, hence footnote about Cushman-Wakefield report.

Caffry: Cushman-Wakefield does not provide Tupper Lake numbers?

Jim: No, but give comparables.

Caffry: you don’t know properties?

Jim: Relying on professional qualifications of person preparing report. Don’t have to see the properties.

Caffry: Referring to table in Cushman Wakefield report?

Jim: Yes.

Caffry: Says just some select home sales?

Jim: Yes.

Caffry: Not an appraiser?

Jim: No.

Judge: Stop…let’s slow down please.

Jim: Will say comparables found are even higher, and albeit waterfront and non-waterfront- some in excess of $2 million. Reason for citation in this report. It supports our sales prices, asa resource.

Caffry: How did arrive at the figures. How use C-W report and crunch those numbers?

Jim: Don’t recall how exact numbers came about. Don’t recall exact sequence of events.

Judge: To Caffry: Stop.

Jim: Said earlier these are estimated numbers. Each report these are projections.

Caffry: Can get estimates by throwing at dart board?

TU: Objection.

Judge: Sustained.

Caffry: Where get estimates now? Where did Mike Foxman get numbers?

Jim: Don’t know.

Caffry: Think are more accurate?

Jim: Yes.

Caffry: Thrown at dart board?

Object from TU.

Caffry: Turning to page 33, appears to be more footnotes attached to Cushman-Wakefield report.

Jim: Yes.

Caffry: Numbers aren’t found there?

Jim: Yes. But based on comparables found there.
Had methodology to ….

Judge: Mr. Caffry…ask questions more objectively.

Caffry: Looking at page 34 under phase 3, see three paragraphs seeing projected numbers for sales numbers…all from C-W report?

Jim: Yes. Numbers do not appear in C-W report.

Continued line of questioning about footnotes and C-W report.

Caffry: Said comparables…does C-W call these comparables?

Jim: My term. In C-W report, there is a basis for comparing their properties with ours.

Caffry: Do comparables take into consideration age, quality, etc.?

Jim: No. Certain variables for size, styles, number of bedrooms there are some comparable considerations.

Caffry: Don’t know how came up with those numbers?

Objection from TU.

Judge: Allow question.

Caffry: May not have come from you?

Jim: Trying to explain reason why there is demarcation to this study in regard to sale pricing. Citation supportive of prices shown. Trying to explain this from five years ago.

Caffry: Came from Mr. Foxman?

Objection from Tom Ulasewicz.

Judge: Overruled.

Jim: Can’t recall.

Caffry: Started question but withdrawn.

Caffry: Number of listings 12….2006 report..two sales per year? Adequate sample size to predict prices?

Jim: Couldn’t say.

Caffry: Aren’t you statistician?

Jim: No.

Judge: Asked and answered.

Caffry: Quite a lot of units on this table in $800,000 to $900,000 price range?

Jim: Yes.

Caffry: From 2006 report, besides sales prices, number of units and sales per phase. Where did they come from?

Jim: Don’t recall.

Caffry: No idea?

Jim: Yes.

Caffry: In report you prepared predicting certain number of lot sales.

Jim: Prefer work project, rather than predict.

Caffry: Are these numbers for prices for houses or for vacant lots?

Jim: Believe it includes the house. Great camp prices did not include the home, I believe.

Caffry: Where are great camp prices found?
Average homes there, but believe lot sales?

Jim: Believe just lot sales.

Caffry: Looking at page 61 of C-W report…fair to say only 23 lot sales in 6 year period over $250,000?

Jim: Correct

Caffry: But your table predicts selling 25 lots in just few years.

Jim: Approximate acreages there in C-W report, far smaller in size. Under 2006 scenario great camp lots were quite large.
Looking at table in my report, great camp sales were in $2 million range…indicative of larger size.

Terry Elsemore (fractional sale expert): May I make comment? My experience when developer going through permitting process, prices not an exact science. Will be year or two before launch a price. Many changes take place. Not unusual to start pricing lower and hope to end up higher. To give earlier buyers an incentive. You won’t come up with exact numbers until getting ready to sell it.

Caffry: Gave us numbers to determine benefit to community. That’s what have to work with. Numbers went up by over 50% between 2006 and 2010.
Did numbers go up then?

Terry: No.

Jim: Martin of the LA Group: C-Wakefield study not done in 2005 study. I’m saying those are time frames that could have had an impact and occurrences during those time periods.
Costs in 2005 may be undervalued at time. Just saying based on what I’m seeing.

Terry: Not unrealistic that developer will want to get every dollar the market will bear.

Caffry: Starting around page 50, you talk about combined current tax rate as of 2009. We’ll use those figures, okay? Tax rate is $24.97 for taxing entities. Amount paid under PILOT agreement. Part used for bonds, part for taxing entities?

Jim: Yes to all.

Caffry: How much goes for bonds, how much to taxing entities?

Jim: Not a consistent break down, it varies. Bond payment made first. Residual split between taxing jurisdictions on proportionate basis. Page 57 to 58 through to 60, that is the explanation. One aspect that affects it. Another is amount of sales that occur. As more units sold more value and more money available to bond payment and more goes to taxing jurisdiction. No fixed rate.

Caffry: Up one year, down another?

Jim: Wouldn’t go down…would stabilize as more current.

Caffry: It’s discussed on page 50 that the project properties have current assessment and developer saying upon closing they will pay tax on purchase price, stipulating to assessed values?

Jim: Correct.

Caffry: You say the total fair market value at time of sale is $6.675 million. Bring current tax revenue up by $145,000. Based on old tax rate and assessment?

Jim: Did based on 100% I think. As a projection into future, even if were 70%, next roll would be 100%?

Caffry: Applied 70% assessment tax rate to the sale price?

Jim: Yes, can’t predict the tax rate.

Caffry: PILOT payments…those estimates made using 100% assessment and $24.97 rate?

Jim: Yes.

Caffry: If town did its townwide reassessment in meantime…assessments grow by 30%?

Jim: Assessments don’t work that clearly. Not all properties reassess on same basis. What happens when reval done, older properties assessed for higher valuation…because on rolls longer. Newer buildings, values more up to date. Can’t say all properties will rise 30%. Within properties old and new adjustment made so not everyone goes up the same. Not that neat and clean.

Caffry: Agree. Not all properties go up the same. Waterfront properties may go up more because of market values. When reassess, tax base of town goes up?

Jim: Likely be some increase.

Caffry: Then communities lower tax rate, generally?

Jim: Posture against portraying too simplistically. Depends on valuation, that may have downward pressure on the rate. In New York rates going up because expenses going up. Lot of pressure in Adirondack Park to go up. Tax rate may stick where it’s at. Can’t approach as simple assumption.

Caffry: Hypothetically, let’s assume total assessed value raised by 30%. Possible town may charge same tax rate and therefore increase revenue by 30%?

Jim: Can cite anything you want. Hypothetically not practical, given what happens in reality.

Caffry: Looked at tax rates for Tupper Lake since reval?

Jim: Haven’t looked at.

Caffry: If rates gone down, valid to uses old rate for PILOTs?

Jim: Need most up to date information. Would seek actual rate, if possible. School districts under heavy pressure and increasing expenditures. Big factor in establishing tax rate. Definitely want to make sure using current tax rate…because best source of info.

Caffry: You used old numbers?

Jim: I used most current data available.

Caffry: Looking at 2010 update page 4, paragraph H, can read?

Jim: Units will pay same rate of village services as anyone else in town, was gist of what he read.
Caffry: Why called beneficial owners?

Jim: PILOT occurring is a benefit.

Caffry: Did you write the report?

Jim: Can’t recall.

Caffry: When property sold, some kind of lease held with IDA.

Jim: No. Do hold title but a lease.

Caffry: Mr. Elsemore aware of any other projects that do this?

Jim: I haven’t run into any. Some towns looking at tax abatements to get projects going.

Caffry: May this be a first?

Elsemore: First for me, in my small, little world.

Caffry: Page 16 of 2010 report, look at please? Last paragraph. Says that update of market analysis has been performed. Terry Elsemore has been retained?

Terry: Hadn’t been at the time.

Caffry: Heading residential and resort amenities?

Terry: Anticipated over 15 years spread over four phases. Total value of residential unit 581 million dollars.

Caffry: True at time of document written?

Terry: It is not…hadn’t been retained yet. Had telephone conversations but didn’t undertake study or agree to perform any type of analysis.

Caffry: Handed witness called project sponsors’ response…what that is during discovery process. Applicant produced response. Nov. 2010. Look on page 3, paragraph 4. These are my discovery demands. Other is TU response.
“All data used by Terry Elsemore and all communications”

Terry read. Applicant objects to demands as too broad and burdensome.

TU: Object. Discussing issues 5 and 6, not discovery demands. Inappropriate.

Judge: Where going with this?

Caffry: Trying to establish any work done.

TU: TU corresponded with Caffry over this issue.

Caffry: Completely unfair. May direct my witnesses not to respond. Pits me against my client!

Judge: Why relevant?

Caffry: Trying to get bottom of what’s done and what’s not. Is response number four accurate, Mr. Elsemore?

Terry Elsemore: I’m not quite sure of specific question.

Caffry: Do any studies as of this report in 2010.

Terry: Did no type of study or analysis to determine pricing any other that. Had reviewed application.

Caffry: Visited project site?

Terry: Yes.

Caffry: What’s registered resort professional?

Terry: Designation I achieved through national association. Certain performances must be completed: attend workshops, speak at meetings, do study, etc.

Caffry: From trade association?

Terry: Correct, not special license or state certification.

Reporter had to leave for another meeting…parties agreed to stay to about 6p.m.

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