PAGENO="0001" OUTDOOR RECREATION AND SKI PERMITS ON NATIONAL FOREST LANDS HEARINGS BEFORE THE SUBCOMMITTEE ON THE ENVIRONMENT AND LAND RESOURCES OF THE COMMITTEE ON INTERIOR AND INSULAR AFFAIRS UNITED STATES SENATE NINETY-FOURTH CONGRESS FIRST SESSION ON S. 2125 A BILL TO PROVIDE FOR THE ISSUANCE OF PERMITS ON PUBLIC DOMAIN NATIONAL FOREST LANDS FOR COMMERCIAL OUTDOOR RECREATION FACILITIES AND ACTIVITIES, AND FOR OTHER PURPOSES ASPEN, COLO., OCTOBER 4, 1975 DENVER, COLO., OCTOBER 6, 1975 WASHINGTON, D.C., NOVEMBER 17, 1975 0 Printed for the use of the Committee on Interior and Insular Affairs U.S. GOVERNMENT PRINTING OFFICE 67-5120 WASHINGTON : 1976 PAGENO="0002" COMMITTEE ON INTERIOR AND INSULAR AFFAIRS FRANK CHURCH, Idaho LEE METCALF, Montana J. BENNETT JOHNSTON. Louisiana JAMES ABOUREZK, South Dakota FLOYD K. HASKELL, Colorado JOHN GLENN, Ohio RICHARD STONE, Florida DALE BUMPERS, Arkansas GRENvILLE GARSIDE, Special Counsel and Staff Director DANIEL A. DREYFUS, Deputy Staff Director for Legislation WILLIAM J. VAN NESS, Chief Coun.sel D. MICHAEL HARVEY, Deputy Chief Counsel OWEN J. MALONE, Senior Counsel HARRISON LOESCH, Minority Counsel SUBCOMMITTEE ON THE ENVIRONMENT AND LAND RESOURCES FLOYD K. HASKELL, Colorado, Chairman HENRY M. JACKSON, Washington JAMES A. McCLURE, Idaho FRANK CHURCH, Idaho MARK 0. HATFIELD, Oregon LEE METCALF, Montana CLIFFORD P. HANSEN, Wyoming JAMES ABOUREZK, South Dakota DEWEY F. BARTLETT, Oklahoma JOHN GLENN, Ohio DALE BUMPERS, Arkansas STEVEN P. QUARLES, Counsel THOMAS B. WILLIAMS, Professional Staff Member HENRY M. JACKSON, Washington, Chairman PAUL J. FANNIN, Arizona CLIFFORD P. HANSEN, Wyoming MARK 0. HATFIELD, Oregon JAMES A. McCLURE, Idaho DEWEY F. BARTLETT, Oklahoma (II) PAGENO="0003" CONTENTS Hearings: Page October 4, 1975 1 October 6, 1975 191 November 17, 1975 337 S. 2125 Executive communications: Department of Agriculture 16 Office of Management and Budget 23 SATURDAY, OCTOBER 4, 1975, ASPEN, CoLo. STATEMENTS Accetta, Anthony T., first assistant attorney general, consumer affairs, State of Colorado 30 Bates, Ray, Aspen Skiing Corp., Aspen, Cob 177 Blake, Tom, general manager, Snowmass Resort Association 145 Bbomquist, Allan, county manager, Pitkin County, Cob 62, 66 Brendes, Ralph, attorney, Roaring Fork Citizens, Inc 123, 129 Brown, D. R. C., president, Aspen Skiing Corp., Aspen, Cob 139 Carlson, John, attorney, representing Aspen Skiing Corp 158 Christensen, David, rancher, Pitkin County, Cob 149, 150 Green, Stephen, vice president, Western Ski Vacations, New York, N.Y__ 144 Haskell, Hon. Floyd K., a U.S. Senator from the State of Colorado 1,24 Irwin, Ed, marketing director, Bank of Aspen, Cob 153 Jaffee, Wilton, Sr., Aspen, Cob 152 Jaffee, Wilton, Jr., W/S Ranch, Aspen, Cob 154 Kalish, Charles, member, Basalt Town Council 121 Kashinski, Ray, Aspen, Cob 174 King, Peter, representing the Sierra Club, Aspen, Cob 135 Kinsley, Michael, county commissioner, Pitkin County, Cob 59 Klein, Herbert, counsel, Roaring Fork Citizens, Inc 112, 116 Lemos, Don, Independent Ski Instructors Association, accompanied by Jill St. John, Aspen, Cob.; Maggie McMahon, Professional Ski Instructors Association; and Charlie Paterson, past president, Rocky Mountain Ski Instructors Association 68, 70 Lucy, John, administrative director, Roaring Fork Citizens, Inc 110 McMahon, Maggie, Professional Ski Instructors Association, Aspen, Cobo__ 107 Mahoney, Dr. Philip S., city manager, Aspen, Cob Strang, Michael, vice president, Bosworth & Sullivan, investment banking, Aspen, Cob 156 Michaels, Jerome, attorney, Roaring Fork Citizens, Inc 120 Miller, C. W., executive director, Aspen Valley Improvement Association__ 138 Mojo, Francis A., Jr., director of transportation, Aspen, Cob 46 Monaghan, James E., Jr., assistant for natural resources to Governor Lamm 26 Moore, Betty, Aspen, Cob 172 Moore Kenneth, Aspen, Cob 178, 180 Moran, James T., attorney, representing Aspen Skiing Corp 163 Paterson, Charlie, past president, Rocky Mountain Ski Instructors Association 109 St. John Jill, Aspen, Cob 105 Sheilman, Dwight, Jr., chairman, Board of Commissioners, Pitkin County, Cob 51 Silverman, Rick, Telluride, Cob 188 (III) PAGENO="0004" Iv Standley, Hon. Stacy, mayor, city of Aspen, Cob., accompanied by Dr. Philip Mahoney, city manager; Yank Mojo, director of transportation; Page Larry Simmons, economist, and Steve Wishart, city councilman 32 Stapleton, Don, president, Aspen Chamber of Commerce, Aspen, Cob 169 Thomas, Sim, representing the Aspen Ski Club, Aspen, Cob 175 Turner, Wava, coordinator, school programs, Aspen Skiing Corp~ 171 Whitaker, Francis, on behalf of the Aspen Skiing Corp 178 1,Vishart, Steve, city councilman, Aspen, Cob 45 MONDAY, OCTOBER 6, 1975, DENVER, CoLo. STATEMENTS Bowlds, Lou, president, Rocky Mountain Division, U.S. Ski Association, Denver, Cob 241 Croak, Tom, county commissioner, Summit County, representing the Northwest Council of Governments 204, 206 Dorworth, Dick, professional ski instructor 321 Farny, David, president, Little Annie Ski Corp., Aspen, Cob 320 Goetzman, Richard, president, U.S. Ski Association, Los Angeles, Calif____ 239 Haskell, Hon. Floyd K., a U.S. Senator from the State of Colorado 191 Hastings, Merrill, publisher, Colorado magazine and Colorado Business magazine, Lakewood, Cob 245 Hill, Robert, assistant attorney general of antitrust division on behalf of Hon. J. D. McFarlane, attorney general, State of Colorado 192, 198 Hubbard, Graydon D., Jr., audit division, Arthur Andersen & Co., Denver, Cob 283, 287 Jennings, Rex, president, Denver Chamber of Commerce, Denver, Colo.__ 332 Kennedy, Wade, investment banker, Boettcher & Co., Denver, Cob 302 Kidd, Billy, former Olympic champion, Colorado 314 Martin, Tod, executive director, Colorado Ski Country, U.S.A 253, 256 Oppenheimer, Gladys, Parker, Cob 328, 330 Patch, Hans, Denver, Cob 334 Perl, Dr. Lewis, vice president, National Economic Research Associates of New York City 207, 210 Peterson, Richard L., chairman, Board of Trustees, Colorado Ski Country, U.S.A 250 Ranney, Sally, representing the Wilderness Society, Denver, Cob 310 Schafer, Charles, on behalf of the Sierra Club, Denver, Cob 317 Spiegel, Richard, president, LaMaur, Inc., Minneapolis, Minn 326 Swanson, Tom, vice president, United Bank of Denver, Denver, Cob 297 Vanderhoof, Gov. John, president, Club 20, Grand Junction, Cob 249 Walsh, Dr. Richard G., professor of economics, Colorado State Uni- ~ versity 224, 226 MONDAY, NOVEMBER 17, 1975 STATEMENTS Adams, Sherman, representing Loon Mountain Recreation Corp., Lincoln, N.H 364, 369 Allen, Donald R., counsel to the U.S. Ski Association 447,453 Branch, James R., president, Association of Ski Area Consultants, Fran- conia, N.H Butler, Gilbert, vice president, Trusts and Investments Division, Morgan Guaranty Trust Co., New York, N.Y 360 Clusen, Charles M., Washington representative of the Sierra Club 427, 431 Corcoran, Thomas A., president, Waterville Co., Inc., Waterville Valley, N.H 388, 390 Fry, John, editor in chief, Ski magazine, New York, N.Y 442, 445 Haskell, Hon. Floyd K., a U.S. Senator from the State of Colorado 337 McGuire, Hon. John R., Chief, Forest Service, Department of Agriculture; accompanied by Melvin Loveridge, Forest Service 339, 354 Norton, William A., president, National Ski Areas Association, Inc., West Hartford, Conn 371, 376 APPENDIX Additional statements and communications submitted for the record 471 PAGENO="0005" OUTDOOR RECREATION AND SKI PERMITS ON NATIONAL FOREST LANDS SATURDAY, OCTOBER 4, 1975 U.S. SENATE, SUBCOMMITTEE ON THE ENVIRONMENT AND LAND RESOURCES, OF THE COMMITrEE ON INTERIOR AND INSULAR AFFAIRS, Aspen, Cob. The subcommittee met, pursuant to notice, at 9:30 a.m., in the audi- torium, Aspen Institute, Aspen, Cob., Hon. Floyd K. Haskell presiding. Present: Senator Haskell. Also present: Steven P. Quarles, counsel; and Harrison Loesch, minority counsel. OPENING STATEMENT OF HON. FLOYD K. HASKELL, A U.S. SENATOR PROM THE STATE OP COLORADO Senator HASKELL. The hearing before the Committee on Interior and Insular Affairs, Subcommittee on the Environment and Land Re- sources, will commence. Ladies and gentlemen, I think you all realize the importance of skiing, from both the recreational and commercial standpoints. This is true in Colorado, but it is by no means confined to our State. It's signi- ficance is nationwide. In the West, particularly, ski facilities are located on lands owned by the U.S. Government. Of course, there are certain obligations that accrue to a holder of a permit to develop ski facilities on Federal lands-lands owned by all the people-_that would not accrue did the permit holder own the land in fee simple or rent it from private indi- viduals. The obligations, of course, are to the public generally and also to the communities upon which the ski facilities have an impact. I introduced S. 2125 as a working paper. There is nothing written in concrete. I am sure there are sections in there that should be elim- inated. I am also sure there are provisions which are not in there that should be added. The purpose of hearings, of course, is to receive comments from anybody who is interested directly or indirectly and to obtain ideas. As sometimes occurs in the drafting of legislation, this bill orig- inated from a specific incident and several problems involving a limited number of constituents. We sought to resolve these problems through informal procedures, but found them to be indications of a more fundamental issue which could only be addressed by legis- lation. Early this year numerous citizens of this county and elsewhere in Colorado brought to my attention a proposal of three Colorado ski (1) PAGENO="0006" 2 areas to simultaneously increase by 20 percent the daily adult tow ticket rate. Skiing in Colorado is already a very expensive form of recreation and I was concerned that so large an increase would put skiing beyond the reach of many Coloradoans. Therefore, I wanted to be sure that the requested increase was justified. But I found it was virtually impossible to make such a determination. The Forest Service does not hold public hearings on requested rate increases nor does it release the financial data upon which the permittee's request and the agency's decision are based. I was astonished to learn that the decision on any rate increase request is the province of the local forest supervisor and that he is given no objective formula or criteria for making that determination. It appears absurd, at least to me, that forest supervisors, usually untrained in economic matters, are asked by the Forest Service to make such decisions on apparently purely subjective grounds. In the case of this particular rate increase request, one set of rates was ultimately denied by the forest supervisor and another was compromised. Yet even today. several months later, neither the industry nor the public knows in detail what criteria Forest Service personnel used in determining whether the rate increases were justi- fied or unjustified. As I began to explore the Forest Service's system of granting and administering ski permits. I discovered that the lack of uniform objectives and specific standards pervades the entire system. For example, ski permits are often saddled with stipulations and con- ditions which differ both among and within the national forest regions. This absence of uniform standards can play havoc with the financial planning of permit applicants and holders and may jeopardize their existing and planned investment. It clearly frus- trates any public review of the adequacy of Forest Service decision- making. I also learned that the statutory basis for the present permit system is so full of holes that the Forest Service has adopted a numbe.r of questionable practices to meet the public demand for outdoor recreation facilities. Perhaps the most serious of these practices is that of issuing to a single ski operator a 30-year permit for 80 acres-the statutory limit-then supplementing it with a large number of 1-year special use permits for additional acreage. Of course, the maximum of only 80 acres is simply too small for ski operations today. I am reminded of the history of the Alaskan pipeline. After much litigation over the adequacy of the environmental impact statement, the entire pipeline project was brought to its knees by a minor provision in the Mineral Leasing Act of 1920 which lim- ited the width of rights-of-ways which could be issued by the In- terior Department. In that situation the Department had attempted to use special use permits to sidestep the statutory width require- ments. The courts found invalid that use of special use permits. I see no reason why, given that finding, the courts would not also question the legality of using special use permits to avoid legal roadblocks to the issuance of permits for ski areas. PAGENO="0007" 3 In short, after investigating the Forest Service permit system for ski and other recreation facilities. I am convinced it needs reform- ing. The system is based on two very antiquated laws: The Organic Administration Act of 1915 and the Term Permit Act of 1915. The latest amendment to either of these laws occurred in 1956. The nature of the industry is far different today than when those laws were first enacted and last amended. Before this hearing begins, however, I want to emphasize two things. First: The bill before us is a rough draft only. On introducing the bill on July of this year, I said that it was a draft bill to be criticized and reworked during the hearing process. And I am still of that opinion. I've already expressed my doubts concerning the appropriateness and workability of a number of the bill's provisions and have suggested provisions which might be added in supplement. Second: I would particularly like to clarify the underlying pur- pose of the legislation. I have heard described as the purpose of this bill the regulation of the ski industry as a utility and the forced reduction of the rates that industry may charge the public. This is patently wrong. What I hope to achieve by the enactment of this measure is not necessarily an increase in Forest Service regula- tory powers, but rather the exercise. of existing powers in a uniform, objective manner. If this is not clear in the provisions of the draft bill, let's try to rewrite those provisions to meet that purpose. I would like to introduce the gentlemen who are with me. Mr. Quarles is the counsel of the subcommittee, and Mr. Loesch is counsel for the minority. I will insert at this point in the record the text of S. 2125, depart- ment communications and my remarks upon introducing it on the Senate floor. [The information referred to above follows:] PAGENO="0008" 4 94i'ir CONGRESS 1ST SEssioN . 2 1 25 IN THE SENATE OF THE UNITED STATES JULY 16 (legislative day, Jurx 1O~, 1975 Mi. 1L~sKELL ifltrO(luCed the following bill; which was read twice and referred to the Committee on Interior and Insular Affairs ABILL To provide for the issuance of permits on pubhc domain na- tional forest lands for commercial outdoor recreation facili- ties and activities, and for other purposes. 1 Be it enacted by the Senate and house of Representa- 2 tires of the United States of America in Congress assembled, 3 Thal (a) The Congress hereby finds that appropriate de- 4 velopment and maintenance of commercial outdoor rccrea- 5 tion facilities and related services within the forest reserves 6 created from the public domain may be desirable to meet 7 the projected increasing demand for public recreation; and 8 that enhancement of these opportunities for recreation and 9 protection of environmental quality require prudent devel- 10 opment and substantial amounts of capital investment. It is II PAGENO="0009" 5 2 ~ the policy of Congress that, where such facilities and serv- 2 ices are determined to be advisable, by the Secretary of ~ Agriculture based upon longrange planning conducted by ~ the Forest Service and upon consideration of the views of ~ the relevant State and local governments and the public, 6 private development and management of such facilities and ~ services, on a competitive basis where appropriate, shall be 8 encouraged through issuance of permits. As the facilities and ~ activities authorized by any such permit, which has as' its pur- 10 pose the provision of essential public services on public lands, are affected with a public interest, such permit `shall provide, 12 consistent with the policy and provisions of this Act and 13 subject to conditions which protect surrounding land, air, 14 and water and other public uses, for payment of reason- 15 able fees which reflect a primary objective of maintaining a 16 high quality of outdoor recreation facilities and i~elated `serv- 17 ices at reasonable prices for the public. 18 (b) For the purpose of this Act- 19 (1) "forest reserves" or "forest reserve lands" 20 means lands of that portion of the national forest system 21 which has been created from the public domain; 22 (2) "Secretary" means, the Secretary of Agrieni- 23 ture; and 24 (3) "permittee" means the holder of, a permit issued 25 pursuant to this Act or holder of such other permit PAGENO="0010" 6 1 as set forth, but subject to the exceptions, in section 7 2 of this Act. 3 PE1IMTT ATJTIIOIITTY 4 SEc. 2. The Secretary in isis discretion, is authorized 5 to permit any peisori, association, paitneiship, or corpora- 6 tion to use and occupy areas within the forest reserves which 7 are needed to provide commercial outdoor recreation facili- S ties and services for the use and enjoyment of the general 9 public. 10 PEIIM1T TEEMS, FEES, AND CONI)ITTONS 11 SEC. 3. (a) The area of land to be covered by a permit 12 issued under the authority of this Act shall in each case he 13 determined by the Secretary, taking into consideration pre~- 14 ent and future public needs for all the multiple uses of the I S forest reserves: Poorided, That- 16 (1) any permit under this Act for commercial out- 17 door recreation activities and facilities other than ski 18 activities and facilities shall not exceed eighty acres 19 of forest reserve lands; 20 (2) (A) Any permit under this Act for commercial 21 outdoor recreation ski activities and facilities designed to 22 nt.ilize more than one thousand two hundred and eighty 23 acres of fOrest reserve lands shall not l)e approved until 24 sixty days (not counting days on which the louse of 25 Representatives or the Senate has adjourned for moie PAGENO="0011" 7 4 i than three days) after the Secretary has submitted to 2 the Committees on Interior and Insular Affairs of the 3 house of Representatives and the Senate the proposed 4 permit, together with his detailed findings as to the terms 5 and conditions he proposes to impose upon the permit ap- 6 plicant, and only then if neither committee has adopted 7 a. resolution stating that the committee does not approve 8 of the issuance of the permit. Each committee by rŰsolu- 9 tion may waive the waiting period. 10 (B) Any permit under this Act for commercial out- 11 door recreation `ski activities and facilities designed to 12 utilize more than five thousand acres of forest reserve 13 lands shall not be approved until after (i) the Secretary 14 has submitted to the Committees on Iiiterior and Insular 15 Affairs of the I-house of Representatives and the Senate, 16 the permit, together with his detailed findings as to the 17 terms and conditions he proposes to impose upon the 18 permit applicant., and (ii) each committee has adopted 19 a resolution stating that the committee approves of the 20 issuance of the permit. . 21 (C) Within thirty days after the adoption of a. res- 22 olution disapproving the issuance of a proposed permit 23 puirsiTant to clause (2) (A) of this subsection and after 24 one huiidred and eighty days from the date of submis- 25 sion of a. proposed permit pursuant to clause (2) (B) PAGENO="0012" 8 5 of this subsection, which permit has not re~eived resolti- 2 tions from both Committees on Interior and Insular 3 Affairs approving its issuance, the Secretary, should lie 4 continue to deem the facilities and services to be advis- 5 able, shall submit to the Congress proposed legislation, 6 together with a report thereon, authorizing the issuance 7 of a permit for such facilities and services. 8 (h) Within six months from the date of enactment 9 of this Act, the Secretary shall publish in the Federal Reg- 10 ister and submit to the Congress proposed regulations 11 containing guidelines to be employed by him in determin- 12 ing whether a permit for commercial outdoor recreation ski 13 activities and facilities shall be issued to a particular permit 14 applicant or for a particular area. Such regulations, among 15 other things, shall require consideration by the Secretary 16 of all facilities to be developed by the permit applicant, all 17 housing, recreation, and commercial development which 18 will likely occur as a result of the development of the aIJ- 19 phicant's facilities, and all public services necessary for such 20 development, both 011 forest reserve land and private land 21 in the proximity thereof. Such consideration shall include 22 an assessment of the extent and nature of such development, 23 its compatibility with other uses for and the protection of 24 the resources on such forest reserve and private lands as 25 determined through Federal, State, or local planning prop- PAGENO="0013" 9 6 1 essos, and the authority and capability of the relevant 2 State aiid local governments to zone or otherwise regulate 3 such development to insure such compatibility. Such regula- 4 tions shall also set forth a specific procedure for consultation 5 with the relevent State governments prior to the issuance 6 of any such permit. Such regulations shall not be promul- 7 gated piior to sixty days from the (late of submission thereof 8 to the Congress. 9 (e) (1) The perniittee shall J)ay `to the United States 10 an annual fee for the use and occupancy of forest reserve 11 lands covered `by any permit issued pursuant to this Act. 12 Such fee shall he computed `so' a's to provide a reasonable 13 return on equity investment. In all case:s, fees and charges 14 shall be in accord with the principles set forth in title V of 1~ the Jiidepeiideiit Offices i~1)P1'0'P1~iations Act of 1952 (65 16 Stat. 290, ~i 1. U.S.C. 483a 17 (2) Within six month's from the date of `enact.mciA 18 of this Act, the Secretary shall coiiduct; a study aiid `submit 19 to the Congress a report on the results thereof of fees `charged 20 for permits issued pursuant to this Act and for permits for 21 commercial outdoor recreation activities and facilities on the 22 forest reserves prior to this Act. Such report shall be ac- 23 companied by a discussion of the `steps the Secretary `shall 24 take, and of any legislative action which lie de'ei'n~ necessary, ?~ to est&)hish o, single p~ hod 01 formula, `to,' i~ ~pphied uni~ PAGENO="0014" 10 7 1 forinly throughout the forest reserves, for the detennination 2 of annual `fees for the use `and occupancy `of forest reserve 3 lands covered by any peim~it issued pursuant to this Act. 4 (d) The Secretary is authorized, in his discretion, to 5 issue permits under authority of this Act for such periods as 6 he deems desirable, but not to exceed fifty years. The See- 7 retary may terminate any pei~mit authorized by this Act for 8 breach of its terms after giving the permittee due notice and 9 a reasonable opportunity to conform with permit require- 10 ments, or if :~ll his judgment, in the public interest, the lands 11 are needed for another use: Provided, That, if any permit is 12 terminated by the Secretary for another use, the TJnited 13 States shall be obligated to pay an equitable consideration 14 for the improvements or for removal of the improvements 15 a.iid damage to the improvements resulting from their 16 removal. 17 (e) IDevelopnicnt, management, and operation of the 18 facilities and services covered by the perunt shall be the ic- 19 spoiisibility of the pcrniittee, subject to such teriiis and con- 20 ditioiis as the Secretary may prescribe, consistent with the 21 ` policy and provisions of this ActS 22 (f) Withiii any area covered by a permit issued under 23 this Act, the Secretary may permit other uses not incon- 24 sistent with the purposes of the permit. 25 (g) The Secretary shall not issue more than one permit PAGENO="0015" 11 8 1 pmsllallt to this Act for identical outdoor commercial recrea- 2 tion activities or facilities within an area of less than five 3 thousand eighty acres unless each such permit, irrespective 4 of the acreage involved, is issued in accordance with pro- 5 cedures provided in section 3 (a) (2) (B) or (C) 6 PERMITTEES' CHARGES TO TIlE PUBLIC 7 Si~c. 4. (a) ~ any other pl'o\Tision of law, 8 the Secretary shall make available for public inspection any 9 and all memoranda, (lata, financial statements, or other in- 10 formation or materials furnished to him or any official of ii the Department of Agriculture in support of or in opposition 12 to proposed increases or decreases in charges to . the public 13 for use of facilities of perinittecs. 14 (b) Thirty or more days 1)r~or to the graiiting or deny- 15 ing of a request by a peiinittee for any increase in ally 16 charge to the 1lllblic for usc of the perinittee's facilities, the 17 Secretary or his designee shall hold a. Public hearing on such 18 request iii a location in the proximity of the area described 19 in the permit. 20 (c) Within six months of the date of enactment of this 21 Act, the Secretary shall publish in the Federal Register and 22 submit to the Congress proposed regulations which set 23 forth in detail the criteria the Secretary or his designee shall 24 employ to determine whether to peiinit or reject any request 25 by a permittee to increase or decrease any charge to the pub- PAGENO="0016" 12 9 1 lie for use of the permittee's facilities. Such regulation shall, 2 among other things, require that the standard for any such 3 determination shall be reasonable return on the permittee's 4 equity investment. Such regulations shall not be promul- 5 gated prior to sixty days from the date of submission 6 thereof to the Congress. 7 TITLE TO IMPROVEMENTS; COMPENSATION 8 SEC. 5. Any structure, fixture or improvement which 9 is not owned by the United States and which is covered by 10 a permit issued pursuant to this Act shall not be deemed to 11 be the property of the United States. The permittee shall be 12 deemed to be the owner thereof, and may remove the 13 property and assign, transfer, encumber, or relinquish the 14 title thereto. Said title shall not be extinguished by expira- 15 tion or other termination of the permit and shall not be 16 taken for public use without just compensation: Provided, 17 That the use or enjoyment of any structure, fixture, or irn- 18 provement shall be permissible only so long ns the owner 19 thereof has a permit covering the area on which it is located: 20 Provided further, That within six months following either 21 the expiration or other termination of such permit, the 22 Secretary may order the removal of such structure, fixture, 23 or improvement and the restoration of the site, and upon 24 failure of the owner to comply with such order, lie may bring 25 an action for ejection and recovery of costs incurred by the PAGENO="0017" 13 10 1 Goveriiment in such removal and restoration: Provided 2 further, That in the event the Secretary does not order the 3 removal of such structure, fixtures or improvements and 4 permits the continued use thereof either by the United States 5 or by some party other than the permittee then the Secretary 6 will, before allowing such use to become effective, take such 7 action as may be necessary to assure the perinittee of just 8 compensation therefor, unless other arrangements for the 9 disposition of such facilities are mutually agreed upon be- 10 tween the Secretary and the permittee. 11 RECORDKEEPING; AUDIT AND EXAMINATION; ACCESS TO 12 BOOKS AND BECO~DS 13 SEC. 6. Each permittee shall keep such records as the 14 Secretary may prescribe in the permit to enable the Secre- 15 taly to determine that all the terms of the permit have been 16 and aie `beiiig faithfully peilorined, and the Secretary or 17 his duly authorized representatives shall, for the P111P0Se Of ~ audit and examination, have access to said records and to 19 other books, documents, and papers of the permittee per- 20 tinent to the permit and all the terms and conditions `thereof. 21 The Comptroller General of the United States or any of his 22 duly authorized representatives shall, until expiration of five 23 calendar years after t.he close of the `business year of each 24 permittee, have access to and the right to examine any 67-512 0 - 76 - 2 PAGENO="0018" 14 ii 1 peitiiiciit books, docuniciits, papers, aiid recorcTs of the per- 2 mittec related to the permit involved. 3 EFFECT ON OTHER LAWS~ APPLICABILITY TO EXISTING 4 PERMIT HOLDERS 5 SEC: 7. This Act shall be construed as supplemental to, 6 and not in derogation of, the provisions of the Act of 7 March 4, 1915 (38 Stat. 1101, as amended, 16 U.S.C. 8 497) ; the Act of June 4, 1897 (30 Stat. 34, as amended, ~ 16 U.S.C. 551) ; the Act of April 24, 1950 (64 Stat. 84, 10 16 U.S.C. 580 (d) ), or any other Act authorizing special ~ usc permits, except that this Act shall be construed as the 12 sole authority for approval of new permits for the authori- 13 zation of ski activities and facilities. Existing special use 14 permits or permits for commercial outdoor recreation ifl"- 15 p~~s issued uiider such Acts, and pcrniits issued hereafter 16 pui'snaiit to this Act to holders of sudi existing peiii~~ts, 17 affecting areas of forest reserve lands the existiiig use of which 18 is for commercial outdoor recreation ski purposes, shall be 19 subject to all provisions of this Act except the acreage limita- 20 tion and review provisions set forth in subsections (a) and 21 (1)) of section 3 of this Act: Pro~ided, That the holder of 22 any such existing permit may apply to the Secretary 23 for cancellation thereof and issuance of a permit under this 24 Act~ PAGENO="0019" 15 12 1 UTILITY SERVICES FOR CONCESSIONERS; REIMBURSEMENT 2 SEC. 8. The Secretary may furnish, on a reimbursement 3 of appropriation basis, all types of utility services to conces~ 4 sioners, contractors, permittees, or other users of such scrv~ 5 ices, within the forest reserves: Provitleci, That reimburse- 6 ment for costs of such utility services may be credited to the 7 appropriation from which the expenditure was made. 8 APPLICABILITY TO OTHER LANDS IN TIlE NATIONAL 9 FOREST SYSTEM 10 SEC. 9. (a) The provisions of this Act with respect to 11 forest reserves shall be applicable to all other lands now or 12 hereafter administered by the Secretary, through theForest 13 Service. 14 (ii) The provisions of this Act shall not be applicable to 15 any existing or future application for a permit for commer- 16 cial outdoor recreation ski activities and facilities on forest 17 reserve land in Mineral King Valley, Sequoia National 18 Forest, and shall not affect in any manner any litigation 19 pertaining thereto. PAGENO="0020" 16 DEPARTMENT OF AGRICULTURE OFFICE OF THE SECRETARY WASHINGTON, 0. C. 20250 November 14,, 197~ Honorable Henry M. Jackson Chairman, Committee on Interior and Insular Affairs United States Senate Dear Mr. Chairman: As you requested, here is our report on S. 2125, a bill "To provide for the issuance of permits on public domain national forest lands for commercial outdoor recreation facilities and activities, and for other purposes." The Department of Agriculture recommends that 5. 2125 not be enacted. S. 2125 would supplement authorities available to the Forest Service of this Department relating to the maintenance and development of commercial recreation facilities on all lands administered by the Secretary, through the Forest Service. It would, however, become the sole authority for approval of new permits authorizing ski activities and facilities. The bill would establish a procedure for the review and action by the Committees on Interior and Insular Affairs of the Senate and House of Representatives on proposed ski area permits involving more than 1,280 acres. It would also provide for the issuance of detailed regulations containing guidelines to be used by the Secretary, in determining whether a ski area permit should be issued. The bill would provide for a study of fees charged for any permit issued pursuant to the Act and provide a detailed review procedure of permittee user charges. The Secretary would be authorized to issue permits for terms up to 50 years. If a permit is terminated by the Secretary for another use, the bill would provide that the Secretary compensate the permittee for any permittee owned improvements. Finally, the bill provides that it shall not be applicable to any existing or future permit for lands in Mineral King Valley of California. Under the Act of June 4, 1897 (30 Stat. 35, as amended, 16 U.S.C. 551) the Secretary of Agriculture is authorized to regulate occupancy and use of the National Forests. Under this Act, we have authority to issue a permit for any proper and lawful use. Such permits are revocable at the Secretary's discretion. In addition, the Act of March 4, 1915 (38 Stat. 1101, as amended, 16 U.S.C. 497) authorizes the Secretary of Agriculture to issue permits for use and occupancy of suitable areas of land within the National Forests for the purpose of constructing hotels, resorts, or other recreation facilities. Permits may cover areas of land not exceeding 80 acres and may be issued for periods of not more than 30 years. We use both the 1897 Act and the 1915 Act as authority for the issuance of permits. PAGENO="0021" 17 Honorable Henry M. Jackson 2 Our recommendation that the bill not be enacted is based on a number of considerations. First, we have adequate authority under the Acts of June 4, 1897, and March 4, 1915, to issue permits for commercial outdoor recreation purposes including permits for ski areas. In addition, the bill contains a number of the provisions which appear unnecessary and duplicate or conflict with existing procedures established under other 1 aws. For example, the provisions of section 3(a) and (b) which provide for Congressional review and publishing of regulations appear to be directed at a concern that proposals for major ski developments be subject to open public review and complete analysis of potential beneficial and adverse effects prior to issuance of the permit. Such proposals are now subject to detailed agency analysis and public review. Under guide- lines issued pursuant to the National Environmental Policy Act, proposals with significant environmental impacts are subject to a complete review and analysis including the preparation of environmental statements. Through this process officials of State and local government, interested agencies and individuals are kept informed and given an opportunity to review and comment on proposed actions. We view this review process as providing the needed input by all interested parties in the consideration of proposed ski developments and that the additional Congressional review proposed in H.R. 2125 would likely not be necessary to insure full public review. The provision of section 3(c) which provides direction for establishment of annual fees is duplicative and partially conflicting with Title V of the Independent Offices Appropriations Act of 1952 (65 Stat. 290, 31 U.S.C. 483a) and Executive direction issued pursuant to that Act. As part of the supplemental statement to this report, we have included a description of the existing Forest Service system of determining annual fees. This system applies to all our concession operations, and we believe it provides for a fair return to the Federal Government while providing the permittee reasonable profit opportunity on his fixed assets investments. In our supplemental statement, we also raise a number of additional concerns with regard to the provisions of the bill and provide additional background on our present permit system. The Office of Management and Budget advises that there is no objection to the presentation of this report from the standpoint of the Administration's program. Sincerely, ]~eputy Under Secretary PAGENO="0022" 18 USDA SUPPLEMENTAL STATEMENT ON S. 2125 ADDITIONAL CONCERNS ON PROVISIONS OF 5. 2125 Congressional Review We believe that present agency procedures provide an opportunity for full public review of major ski development proposals and that the additional Congressional review proposed in 5. 2125 would not be necessary. In addition, we object to the provision of subsection 3(a)(2)(A) which would allow either Committee on Interior and Insular Affairs by a disapproval action to prevent the issuance of certain permits and the provision of subsection 3(a)(2)(B) requiring the adoption by both Committees on Interior and Insular Affairs of a resolution stating the Committees approval of the issuance of permits involving more than 5,000 acres. The Department of Justice has consistently found that legislative proposals which provide for disapproval or approval of actions of the Executive Branch by concurrent resolutions, one-House vetos, or committee vetos are unconstitutional. The Department of Justice testified against such provisions as recently as May 15, 1975, in appearing before the Senate Subcommittee on Separation of Powers of the Committee on the Judiciary in a hearing concerning Executive Agreements. Annual Fees We are concerned that sections 3(c)(l) and 4(c) would base the annual fees and allowable charges on "equity investment". Our present fee system is based on a relationship between sales and gross fixed assets. This method of fee determination was adopted after detailed study. Development of a fee system based on equity investment would require a major revision of our present system. We are not aware of any advantages which would result from such a revision. We strongly urge that the present fee system be retained. We also believe the study schedule set forth in subsection 3(c)(2) would provide inadequate time to establish new fee schedules and evaluate existing and new fees. Term of Permits Section 3(d) would increase the maximum term for a commercial recreation permit from 30 years to 50 years. While this would have some beneficial effects for commercial developers in arranging longer term loans, it would, however, make the task of analyzing the long-term impacts of a proposed use more difficult. We believe the present 30-year term has been satisfactory. Permi ttee Charges Section 4 provides that all data supplied by a permittee relating to a proposed increase or decrease in charges to the public be made available PAGENO="0023" 19 2 for public inspection. We believe the broad disclosure of all financial information required in section 4 could act as a deterrent in securing further private investment in developing needed public recreation facilities. The Freedom of Information Act as amended now applies to the availability to the public of such information. We strongly prefer that information on all permits be handled under the existing law. With regard to the review of permittee charges for services and use of facilities, the terms of existing permits specify services to be provided and provide for our approval of charges and inspection of the quality of service. We view this approach as sufficient to protect the public interest. Mineral King Valley We do not support the provision in section 9(b) which would exclude the Mineral King Valley from the provisions of the proposed legislation. We believe all areas should be subject to the same basic law. PAGENO="0024" 20 3 BACKGROUND ON NATIONAL FOREST CONCESSIONER RECREATION PERMITS General The Forest Service is responsible for the development and administration of public recreation facilities within the National Forest System, which covers 187 million acres of public land. These facilities are provided through: (1) special-use permits granted to concessioners; (2) agency maintenance of camp and picnic grounds; and (3) the granting of permits to State and local governments. At the present time, the Forest Service has about 1900 concessioner permits currently in force for the construction and/or operation of recreational facilities and services. Of this number, almost 200 relate to ski activities and facilities. In addition, the Forest Service maintains about 8,500 recreation sites. The Forest Service has granted approximately 50 permits to State and local governments for.the operation of picnic areas and organizational camp sites. Payments to the Federal Government from such permits are nominal. Concessioner facilities and services include hotels, motels, trailer sites, restaurants, stores, gasoline and oil stations, boat docks, ski improve- ments and wayside stands. Generally, the type of clientele using these concessions include families and individuals camping, picnicking, swimming, hunting, fishing, boating, sightseeing, and enjoying winter sports. During 1974, the National Forest System received 193 million visitor days of recreation use. Concession operations accommodated almost 12 million of these days. It is estimated that these operations yielded $8 million of profit from $146 million of gross sales. Concessioners' investment in improvements totaled over $270 million and receipts to the Treasury from fees was about $2.8 million. Based on present trends we estimate that up to $200 million of concessioner investment could be made in the next 10 years to meet anticipated demand for recreation use on the National Forest System. Fee System In the past, fees paid tothe Federal Government have been based on a percentage of net sales. In some cases these fees were converted to a single flat fee. Some of the old permits require that fees be reviewed and adjusted at 5-year intervals. During the early 1960's we determined that the application of a single percentage rate against sales developed inequitable fees. After an exhaustive study of concession operations a new system of determining fees was instituted in 1968. The new system was applied to winter sports operations in 1972. It considers the amount of sales that are PAGENO="0025" 21 4 generated in relationship to the concessioner's gross fixed assets in structures, fixtures, and equipment needed to generate income. Minimum rates have been set which are applicable to all permits. Starting with a minimum, rates progress upward as sales rise in comparison to gross fixed assets. Rates as established give the concessioner an opportunity to realize approximately 15 percent profit. This level of profit has been calculated based on national averages and would apply to a concessioner of average operating efficiency experiencing a normal season. The system neither guarantees nor limits the profit of an individual concessioner. It does, however, return a reasonable land rent to the landowner commensurate with the value of the use authorized. The current Forest Service fee system encourages added investment. Increased investment results in lower rates being applied to sales until such time as the anticipated increase in sales generated by the increased investment is realized. The full text of our policy on fees is contained in chapter 2715 of the Forest Service Manual and can be made available to the Committee upon request. Public Information The Forest Service requires an annual statement of sales from each concessioner, and standard business records which can be audited at the discretion of the Forest Service. Financial information is included in these records which if disclosed could cause substantial harm to the competitive position of the perniittee. Some of this information is exempt from disclosure under the Freedom of Information Act. This information is needed by us to maintain an equitable fee system. Permittee Charges The concessioner is subject to the approval of rates and services and to inspection of service quality. The general specifications for services and facilities to be furnished are provided by the Forest Service. Improvements and Termof Permit Structural improvements made on Federal lands are the property of the permittee and may be sold on permit termination or be removed by the permittee. Many Forest Service permits have experienced a change in ownership and in nearly all cases a permit was issued to the new owner. In a few cases, improvements have been abandoned and have become the property of the United States. Under present authorities, no extension or renewal beyond the permit term is stated or implied. However, on expiration of the permit, if the use responds to a continuing public need and is consistent with established land use objectives for the area and if the permittee has fulfilled his obligations, a new permit is normally issued to the owner of the improvements. In those situations where it is necessary PAGENO="0026" 22 5 to terminate a permit during its term for another use, the Federal Government obligates itself to pay an equitable amount for the privately-owned improve- ments. This obligation is expressed in each permit issued under the Act of March 15, 1915. We have seldom found it necessary to terminate a permit during its term except by mutual consent. PAGENO="0027" 23 EXECUTIVE OFFICE OF THE PRESIDENT OFFICE OF MANAGEMENT AND BUDGET WASHINGTON. D.C 20503 November 17, 1975 Honorable Henry M. Jackson Chairman, Committee on interior and Insular Affairs United States Senate 3106 New Senate Office Building Washington, D. C. 20510 Dear Mr. Chairman: This is in response to your request of October 22, 1975, for the views of the Office of Management and Budget on 5. 2125, a bill "To provide for the issuance of permits on public domain national forest lands for commercial outdoor recreation facilities and activities, and for other purposes." The Office of Management and Budget concurs in the views of the Department of Agriculture in its report on 5. 2125, and accordingly recommends against enactment of the bill. Sincerely, /James M. Frey / Assistant Director for Legislative Reference PAGENO="0028" 24 [From the Congressional Record, Wednesday, July 16, 1975] S. 2125. A BILL To PROVIDE FOR THE ISSUANCE OF PERMITS ON Pm3LIC DOMAIN NATIONAL FOREST LANDS FOR COMMERCIAL OUTDOOR RECREATION FACILITIES AND ACTIVITIES, AND FOR OTHER PURPOSES Mr. HASKELL. Mr. President, I introduce today a bill to reform the system of issuing and administering permits for ski facilities on national forest land created from the public domain. The present system serves no one well. Users may be paying unjustiflably high charges for the use of skiing and other recreation facilities. Permittees may be paying unjustifiably low fees to the public which owns the national forest lands, considering the privileges the permits grant. In any event, the public is certainly witnessing the unnecessary degradation of the productivity, environ- mental quality, and value of its lands. The permittees are concerned about the security and stability of their existing investments which, in turn, influence their ability to make new investments. The Federal Government finds itself criticized for a permit system which it should have reformed long before now. That system is shrouded in secrecy. It lacks a coherent set of standards and it fails even the most basic tests of uni- form application. Mr. President, I began investigating the present outdoor recreation permit system for national forests last February when many of my constituents brought to my attention a proposal by three Colorado ski areas to increase by 20 percent the daily adult tow ticket rate. Skiing is already too expensive for many Cob- radans. I was concerned that so large an increase would put skiing beyond the reach of many more people, especially families. I wanted to be sure the increase was justified. As no public hearing is held on proposed rate increases, I asked the Forest Service to delay its decision on the rate hike to permit a careful review by all parties concerned. At the same time, to facilitate that review, I asked the Forest Service to provide me the financial information the three ski areas supplied in support of their requests. The Forest Service did subsequently deny the full rate increase request and reportedly offered instead a compromise increase. Yet, any meaningful review of even this compromise proposal was frustrated by that agency. The Forest Service denied access to the information I requested claiming that, under terms of leases with ski areas operating in the national forest, such information is confidential. Mr. President, it is inconceivable that a Government agency can base a deci- Sion which so fundamentally affects the leisure lives of citizens on information which it refuses to make public. Not only is there no way for the public to ade- quately review a proposed rate hike, but any appeal process from a Forest Serv- ice decision to grant that increase would be a sham. On May 16, 1975, I announced that the Subcommittee on the Environment and Land Resources, which I chair, would hold hearings in Colorado in the fall on the issue of ski permittees' charges to the public and public participation in the determination of charges. I stated: "Tow ticket prices have risen to the point that. it's very difficult for a family to ski on any kind of regular basis; yet the public does not know whether fees charged by companies operating on public land-for private profit- are justified. It is absolutely essential that all of us have access to this infor- mation-and that includes profits ski areas may be making, whether those profits are too high, too low or just right. Further, I believe public hearings should be held before any rate increases are granted. If, as the Forest Service contends, present law provides for the confidentiality of financial information submitted with rate increase proposals, then the law must be changed." As any Senator would be, I was very gratified with the strong public support which greeted this announcement. However, accompany this support was a sur- prising number of communications on the matter from the public, skiers and other users, and ski operators and other permittees. They detailed numerous ad- thtional inefficient, inequitable, and financially or environmentally costly faults in the Forest Service's system of issuing and administering outdoor recreation permits. Among these ~re the lack of standards to determine whether to issue or deny permit applications by particular applications or for specific areas and to subse- PAGENO="0029" 25 quently determine the fees to charge the applicants for the permits which are is- sued. The absence of standards further frustrates public review of the adequacy of Forest Service decision. Furthermore, the lack of standards inevitably leads to a lack of uniformity in permit application and fee decisions both among and within regions of the national forests. This lack of uniformity plays havoc with the financial planning of permit applicants and holders and can jeopardize exist- ing and planned investment. Substandard services to the public can result. Our present permit system is so inadequate that the Forest Service is con- strained to adopt a number of questionable practices to meet the public's dc- mand for outdoor recreation facilities. Perhaps the most serious of these prac- tices is that of issuing to a single ski area operator a 30-year permit for 80 acres and a large number of 1-year special use permits for additional acreages. Existing law permits a maximum of only 80 acres for a recreation permit-an area decidedly too small for most ski operations today. To circumvent this antiquated requirement, the Forest Service is forced to per- form the charade of issuing the speŰial use permits on a yearly basis. The result of this charade is that the operators are faced with serious threats to their in- vestments. Certainly, annual permits do not provide sufficient security, especially as the legality of those permits has been questioned, most prominently in the well-known Mineral King litigation. Mr. President, this long and growing list of problems with our present permit system has convinced me that the fall hearings should not simply be oversight hearings but should focus instead on concrete legislative proposals. The legisla- tion I introduce today is designed to bring about the necessary reforms in our outdoor recreation permit system for the national forests. Most of the provisions of this bill were drafted by staff under my direction. The staff has also substan- tially reworked the provisions submitted to me after my May announcement by the ski area operators, environmentalists, and other interested parties. The bill, however, should be regarded only as a draft to be critiqued and reworked during the hearing process. First, the bill lifts the 80-acre limitation for permits for ski facilities. How- ever, permits over 1,280 acres would be issued only if neither Interior Committee passes a resolution Of disapproval within 60 days of the submission of the permit to the committees. And permits over 5,000 acres would be issued only if both committees pass resolutions of approval. Furthermore, the bill would require the Secretary of Agriculture to submit permits over 1,280 acres in the form of au- thorizing legislation should they not pass the committees' review and would pre- vent issuance of two or more permits for contiguous areas without congressional review. Most important, the bill would require the Secretary to submit to the Congress and the public within 6 months proposed guidelines to be employed by him in determining whether a ski facilities permit should be issued to a partic- ular applicant or for a particular area. The guidelines are not to be promulgated until 60 days after their submission. They are to take into consideration the effect of planned and unplanned growth precipitated by the proposed recreation facilities on adjacent non- Federal lands and provide a procedure for consultation with affected State and local governments prior to any decision on a permit application. Second, the bill would extend the life of ski permits from 30 to 50 years. This provision, as well as removal of the 80-acre limit, was requested by the ski area operators who saw the time and acreage limitations as threats to their invest- ment. I can certainly understand the detrimental effect the inadequate acreage allowance and the legally suspect methods of avoiding it have on the financial environment of permittees. But I am not yet convinced of the need for extending the permit period to 50 years. I have placed this provision in the bill, however, in order to encourage the ski operators to provide me with detailed justifications for this provision. Third, the bill would require that annual fees for commercial outdoor recrea- tion permits be passed on a standard of a reasonable return on equity investment Furthermore, the bill would require a 6-month study and report to the Congress by the Secretary of Agriculture on permit fees. The report would include steps the Secretary plans to take, and legislation necessary, to establish a single method or formula to be applied uniformly throughout all national forest lands to determine fees from commercial outdoor recreation permits. Fourth, the bill would require public disclosure of all financial data pertinent to determination of permittee's charges for public use of his facilities. And it PAGENO="0030" 26 would require public hearings on any permittee's request for increase in those charges. A second 6-month study would be required of the Secretary, this one to determine criteria to be used by the Secretary in rejecting or accepting pro- posed rate hikes. Among the criteria would be that of reasonable return on equity investment. Finally, the bill contains several other provisions dealing with disposition of permittees' improvements upon expiration or termination of permits; record keeping audit and examination; and provisions to prevent the mooting of the Mineral King litigation. Mr. President, the holders of permits for commercial outdoor recreation facili- ties are granted the privilege of pursuing private gain on public lands. But the ultimate purpose of such permits is to provide high quality service at a reason- able cost to the public which owns the land. Any business which holds such a permit is uniquely affected with a public interest. It must expect vigorous en- forcement of that interest. And that is achieved when the public is allowed to participate. At the same time, permittees are entitled to reasonable assurances as to the security of their investment, not only for their protection but to insure that serv- ices are provided. to the public. The legislation I introduce today attempts to modernize the permit system in accordance with these principles. Senator HASKELL. We have, to say the least, a formidable list of witnesses, and I would ask that, except for those people who are elected officials or represent elected officials, all witnesses would con- fine their remarks to 5 minutes each. If you have written testimony and it is going to go longer than 5 minutes, it will be received and reproduced in the hearing record in full. Furthermore, if anybody would like copies of the hearings, if you will just give one of the ladies at the desk just outside, your name and address, you will receive a copy of the hearings. Now, it is a great pleasure to welcome as our first witness Jim Monaghan, who is representing Governor Lamm. STATEMENT OF JAMES E. MONAGHAN, JR., ASSISTANT FOR NATURAL RESOURCES TO GOVERNOR LAMM Mr. MONAGIIAN. Thank you very much. It is an honor to be able to represent Governor Lamm here today at these important hearings. I might mention I appear here at Aspen because our staff is on the western slope for the next few days. Senator HASKELL. Furthermore, Aspen is a very pleasant place to be. Mr. MONAGHAN. It is tough to make ourselves come here. We are actually dealing with energy during the next few days but many of the public interests remain the same. With respect to 5. 2125, we would like to strongly commend you for introducing legislation which mandates further~ public input to the management of our public lands. The issues surrounding use of the public domain are complex and vitally important. It is absolutely proper in our minds to facilitate this public scrutiny. The pricing of lift tickets is an issue of specific concern to the State of Colorado. We strongly feel that public input to this rate-setting process is extremely healthy. We would like to note that the ski industry in Colorado is a very important aspect of our economy and also way of life in the Rocky Mountain West and we would hope that the proposed bill and PAGENO="0031" 27 subsequent hearings would contribute to the health of that industry and would diminish the misconceptions surrounding it. I note that a number of people come to the hearings today to dis- cuss various specific points within that piece of legislation. I would like to beg your indulgence, however, to simply state some of the prob- lems that occur with respect to the surroundings. And for purposes of illustration, I would like to discuss the State's position on the develop- ment of the Beaver Creek area by indicating why the State entered that discussion, what the substance of subsequent negotiations have been, as well as the status of that situation. Upon taking office on January 14, 1975, Governor Lamm was faced with a pending decision by the Forest Service to designate Beaver Creek as a winter sports site. Although the previous administration only 2 hours before mid- day inauguration had approved such designation, there remained half a dozen State agencies, many of which were responsible for issuing re- quired permits, who not only opposed the development, but in fact predicted that the permits would not be forthcoming. In examining the course of events which led us to a January 14 decision to oppose designation, we must be highly critical of the State itself. It is clear that there was no State system for dealing with ski area proposals. The developers were required to run from State agency to State agency. The policies and standards which the State applied over and above statutorily defined ones were unclear and ever changing. This being the case, however, it must be said that the U.S. Forest Service should not escape criticism. Although the State was allowed an opportunity to comment upon the completed Environ- mental Impact Statement, the State of Colorado was in fact never a partner to the decision to develop Beaver Creek, a decision that had obvious State implications. Despite the fact that the air pollution con- trol division and the water quality control division of the State of Colorado felt that they would not be able to issue the necessary per- mits to develop Beaver Creek, the Forest Service pushed ahead with designation of the area as a winter sports site. In addition, we felt that the existing State laws were simply not adequate for dealing with the possible offsite impact of the development. However, again Forest Service officials, rather than yielding to the State's concern, judged for us the adequacy of our own State laws and moved ahead with desig- nation. During the time in which we were appealing the designation to the Chief Forester, we began a series of negotiations with the devel- opers-Vail Associates, Eagle County officials, and the Forest Service. *The purpose of these negotiations was to resolve our differences sur- rounding the Beaver Creek controversy. Our intention was never to precipitously stop Beaver Creek, but to insure that all impacts would be manageable. I'm happy to report that through the good will of Vail Associates, the cooperative spirit of the Eagle County people and what I would characterize as a new and very cooperative attitude on the part of the Forest Service, we are now very close to resolution. So that we will never again be caught at the 11 hour attempting to respond after the decision has been made, the State of Colorado has created a Citizens Advisory Board on Winter Sports Development to PAGENO="0032" 28 work with the various State agencies and actually develop a State winter sports development plan. This group was given two basic tasks: First of all: To develop a system by which a developer can go to one agency in State government and receive a fast and fair indication as to the status of his project. Second: The board is charged with recommending a set of State policies which will be applied within the decisionmaking processi When this is completed, all parties will know by what measure they are being evaluated, by whom, and within what time frame. Senator, I have taken the time this morning to describe the Beaver Creek situation because in our estimation there were inherent flaws in the decisionmaking structure of both the Forest Service and our own State government which aggravated the situation. More importantly, however, if these structural and procedural problems within the For- est Service are not corrected, it will render the State's new mechanism for dealing with ski area development impotent. I must hasten to add while debate has been raging on this issue, we have come a long way. Mr. Bill Lucas, Regional Forester, has been extremely responsive to our suggestions that Forest Service regulations be modified. It is safe to say that we are on the road to agreement in defining discreet points of entry by State and local government into that decisionmaking process. Upon reflecting this entire Beaver Creek episode as well as working with our Citizens Advisory Board, which has been in existence for a few months now, we would like to make the following recommenda- tions with respect to the use of the public domain. First of all: The Federal Government must recognize that its ac- tions have a profound impact on land outside of its primary jurisdic- tion. It must assume a responsibility for this offsite impact. The For- est Service must be assured that when approving an activity on Federal land that this offsite impact is manageable and acceptable. Second: The Forest Service must recognize that all levels of govern- ment, local, regional and State, have responsibilities, concerns, laws, and regulations which cannot be overridden. All levels of government must play a full role in these decisions surrounding the Federal land. The issuance of any special use permit must be preceded in our esti- mation ~by the concurrence of local and State government. I quickly note that this arrangement could be misused and obviously the respon- sibility is on our part to see that *a fair system of evaluation is provided. Third: The Forest Service must provide early notification as well as meaningful and formal entrance into the decisionmaking system by local, regional, and State governments. It is simply not enough to~ al- low these units of government to respond to a final environmental im- pact statement which in fact simply ratifies a decision that was made many years ago. At this point in time, we also need to know well in advance what areas are presently beingeonsidered by the Forest Serv- *ice for potential development. We need to know what those priorities are. I would like to give you a couple of very specific examples of what I mean when I talk about the State's entry into the decisionmaking process, because we have spent a great deal of time talking about this. PAGENO="0033" 29 First of all: We feel that a very early decision has to be made in the development of a ski area with respect to maximum skier capacity, because, indeed, the number of skiers we put on that hill determines the economic influence. It is the economic determinant for the stir- rounding development. This ski area capacity agreement should be stipulated in a special use permit we feel and should be implemented by cutoff points in the sale of tow tickets. The second example: After the parties, local government and Forest Service, agree on maximum ski area figures, we feel the base area really should be identified in more precise terms than it is nowadays. That is the land that's immediately affected by the development on that hill. At the present time, the area considered the base area by the Forest Service is only that which is owned by the parties developing that hill, but as is obvious the primarily affected areas many times is much broader than simply that small area. Finally: Once the base area has been designated, the Forest Service should see that a conceptual land-use plan of the affected area is drawn and approved by local and State officials prior to the issuance of the special use permit. These changes in procedure, we feel, are straightforward and fair. To the credit of the Forest Service, many of these are being seriously considered by them at this time. These changes are extremely import- ant to us because they will allow us to expedite, not delay, the exercise of a rightful State role in the decisions surrounding. ski area develop- ment.. This process must be streamlined and made more intelligible. l,\Te feel that's only fair to the developer and public. In conclusion, let me say that the ski industry is very important to us all in Colorado. With the proper changes on the part of the State as well as the Forest Service, the State of Colorado can take ourselves out of a totally responsive role we find ourselves in and begin to de- velop ski areas and those areas for that type of development. Thank you, sir. Senator I{ASKELL. Thank you, Mr. Monaghan. I have a couple of questions and a couple of observations. As you are undoubtedly aware, the permit system is now based on two Federal statutes. One-the Organic Administration Act-was enacted in 1897 and the other- the Term Permit Act-was enacted in 1915. The latest amendment to either ocurred in 1956. I think times have changed since then. The Forest Service will testify, of course, at the Washington hear- ing, but in informal conversations that I have had with Chief Mc- Guire, I am delighted to say that I find a responsive and receptive attitude on behalf of the Forest Service, just apparently as you have found in dealing with the Beaver Creek situation. I am particularly pleased that in your testimony you emphasized that as a condition precedent to issuing a permit there would have to be a land-use plan adopted by the localities to be affected, because ob- viously the effect of any ski area anywhere in the Nation goes far beyond just what the folks involved own, and I think that would be a great step forward, because there are certain areas in other States where there has been virtually no planning. I am delighted to see here in Aspen, officials of the city of Aspen and Pitkin County have been very forward looking in this regard. 67-512-76--------3 PAGENO="0034" 30 If you have, Mr Monaghan, any suggestions on statutor~ language, we would appreciate recei~ ing them The hearing record will stay open for 2 weeks, if that's adequate So if you ha~ e any suggestions, we would appreciate. receiving them. Mr. MONAGIIAN. We do, and we will certainly tender those. Senator HASKELL. Thank you very much indeed for coming. We ap- preciate it very much. Just as a matter of interest, to show how important skiing is to our State, the staff has given me the figures that there are 178 special use permits issued by the Forest Service for skiing nationwide and 24 of these, or 14 percent of the total, are issued in Colorado~ so I would undoubtedly say that there were more issued in Colorado certainly than any other State. Our next witness is Mr. Tony Accetta, first assistant attorney gen- eral for consumer affairs, and he appears here on behalf of the Honor- able J. D. MacFarlane, attorney general of the State of Colorado. STATEMENT OF ANTHONY T. ACCETTA, FIRST ASSISTANT ATTOR- NEY GENERAL, CONSUMER AFFAIRS, STATE OF COLORADO Mr. ACOETTA. Good morning, Senator. At the outset, I would like to congratulate you for the interest you have taken in this business, and to applaud you for continuing down the road toward a regulatory plan and for continuing an interest which ultimately a lot of people feel will go along as long as local problems can go on an ad hoc basis, as the State has liked to approach and I think is going to be necessary. I was encouraged a moment ago to hear you talk in terms of the National Forest being responsive and being sensitive to the problems. I regret to say, however, that however true that may be, I doubt very much that that national attitude has found its way to Colorado and to a local situation here. The issues which bring us here together go far beyond the bound- aries of Aspen, Cob. They reach, certainly, across this State, and ex- tend to every State in which ski corporations are permitted to do business on public lands. Our concerns are not just with whether a lift ticket will cost a dollar more this year, or whether a corporate monopoly will punish people who dare to speak against it by with- holding favorable season pass privileges-although these issues are certainly in the forefront of all the concerns to be discussed here to- day-the more fundamental issue, the reason that corporate managers enjoy virtually complete economic and social power, is the ineffective- ness of an agency of the U.S. Government, the U.S. Forest Service. As representative for Attorney General J. D. MacFarlane, it has been my privilege to meet with officials of the city of Aspen and to discuss the testimony they propose to give. As this testimony is pre- sented, Senator, I think you will find that the concerns and frustra~ tions which will be~ expressed and neither parochial nor specious. The testimony of the city of Aspen, I think I can assure you s represent'i tive of the experience of many, both across the State of Colorado and in other States. As you know, Senator, the Forest Service is the ultimate authority for decisions on the uses to which our public lands will be put. The personnel in charge of decisionmaking, I am sure, are dedicated men. PAGENO="0035" 31 But dedication alone is not enough. What is the way to use that ex- pertise which will professionally, competently and effectively make informed judgments concerning the impact Forest Service decisions will have on the economy and demography of Aspen or other ski area communities? I suggest, sir, that such expertise, if it exists at all, is~ not being applied in Colorado. I find it outrageous that an agency of' government, an employee of the people, can arrogantly and callously' deny citizens directly affected by their decisions a public hearing on. the issues. That an audience with Forest Service officials was granted at all last winter was the result of the courage and tenacity of the Aspen community, and certainly not the expression of a public con- science by the Forest Service. Perhaps this is understandable since those in authority within the Forest Service in this area have been here so long and have developed such obvious sympathies for the' problems of the ski corporations they are supposed to regulate that. it is humanly impossible for them to forget the early years of skiing and to recognize that they are now the overseers of a multimillion dol- lar industry in which financial manipulation is sophisticated, in which economists, accountants, auditors, financial analysts and en- vironmental experts are more relevant than are persons whose careers have been spent in forestry. The day must be past when the regional forester can deny a proposal from a concerned citizen on the ground that, "Darcy will never sit still for it." The issue is not whether Darcy or anyone else likes regulation-the issue is whether the Forest Serv- ice can be made capable of making rational decisions based on the objective facts presented in a record for all to see, and whether there' can be standards and criteria, which are known and predictable, upon which decisions can be reached. The day of seat-of-the-pants regula- tion must end, Senator, and we urge you to help end it by this bill and by further regulation of public lands by an enlightened, and not an anachronistic, Forest Service. We cannot, and, I submit, ought not, rely on private industry to regulate itself, since, by definition, the ski corporations are designed for, and try to, earn maximum profit. An illustration of this which might be of interest to you is a feature of the current ski-price con- troversy which has been largely forgotten; that is, during a year which resulted in record profits, the Aspen Ski Corp. represented to the Forest Service that it had need for an interim~ approximately midseason, price increase. I-Tow such need could possibly be justified at that time is beyond me, and to the credit of the Forest Service, the re- quest was denied. I have no way of knowing whether the promise of a lawsuit by the State of Colorado effected that decision. hut I do know that the record supporting that request was replete with claims of increased costs but was curiously devoid of information as to in- creased revenues. No, I don't think we can rely on private industry to be on the lookout for ways to make skiing cheaper for Mr. and Ms~ Colorado Skier, nor be able to expect that anything short of reason- able regulation will produce a rate structure which will be based on anything but the principle of maximum profit. `We urge cooperation among Federal, State and local authorities. Beyond that, we urge mutual respect and we ask that the Federal Government become more sensitive to the needs of the people. Above PAGENO="0036" 32 all, I believe, we ask for open, honest government where the cards are on the table for all to see, where there is reason based on fact and not Tesult based on whim, fancy, or ignorance. We ask nothing more than to participate in government, to keep government open and accessible ~to all and to insure this we ask the Congress for detailed procedures, :for due process of law, for at least, in the final analysis, a fair shake. Senator HASKELL. Thank you very much, Mr. Accetta. As you :know, S. 2125 provides for publishing of financial information as it r~iates to ski operations and also it would provide for public hearings ivith citizen and interest group input on the fairness of the rates, the structure of the rates and that type of thing. I would gather that the attorney general's office would support that concept ~ Mr. ACCETTA. Yes, sir; we certainly would. I know I can speak for the attorney general that the present process of making decisions and the present appeals processes which exist are a sham, because without the underlying information upon which those decisions are made no one can seriously or legitimately challenge a decision reached, and I applaud your bill and I support it. Senator HASKELL. Thank you, sir, very much indeed. I might just observe at this point from region to region and State to State there seems to be varying practices which I think is a mis- take. I think there ought to be some kind of uniformity. There ought to be some kind of guidelines that you can count on in arriving at a decision, and that's one of the purposes for the bill. I might say to you, as I did to Mr. Monaghan, if you have any sug- gested statutory language I would be pleased to receive it. Thank you~ sir~ very much. We will now have a panel of individuals of elected officials of the city of Aspen. The Hon. Stacy Standley, mayor of the city of Aspen, accompanied by Mr. Philip Mahoney, the city manager, Mr. Yank Mojo, director of transportation, Larry Simmons, economist, and Steve Wishart, city councilman. STATEMENT OP HON. STACY STANDLEY, MAYOR, CITY 0]? ASPEN, COLO., ACCOMPANIED BY DR. PHILIP MAHONEY, CITY MANAGER; YANK MOJO, DIRECTOR or TRANSPORTATION; LARRY SIMMONS, ECONOMIST, AND STEVE WISHART, CITY COUNCILMAN Mr. STANDLEY. Good morning, Senator. I think we in Aspen are very pleased you have decided to launch your public investigation in support of your bill in our community since we feel in some ways we are perhaps one of the elements that inspired you to introduce such legislation to the Federal Government. Today, I would like to direct my comments to the impact upon the local community of Forest Service decisions of the use of public lands and ski area pricing. I am speaking as the mayor of the city of Aspen, the community that provides the service base for 25 percent of the skier visits of Colorado. The most important element to recognize is the fact that local of- ficials are excluded from significant land use policy decisions. We merely react to the land use decisions made by the Federal Govern- ment. This is a result of the fact in part that 80 percent of Pitkin PAGENO="0037" 33 County and 66 percent of western Colorado and most other western States is federally controlled. On these lands in-State highway cor- ridors are located, oil-shale leases are secured, water diversion dams are built, mineral exploration takes place, timber permits are issued, and finally, recreation uses are permitted to become the focal points of growth. The local government officials in these impacted areas are~ given the job of ordering the elements of growth in feeble attempts to direct its impact in the most beneficial manner after the develop- ment decision has been made, not before. Verification that local com- munities frequently have not been considered is shown in a special report in the summer, 1973 issue of "Ski Area Management," wherein Chief John McGuire of the TJ.S. Forest Service stated and I quote: Together we have recognized that the impacts of development are far broader than just where and how to build a ski slope. Entirely new towns usually spring up around each new ski development, such as Vail; and existing towns have ex-- panded around the older slopes, such as Mammoth, Sun Valley and Breckenridge. Unfortunately, a number of these communities have grown in a helter-skelter manner. Transportation and utility services for them have affected land far re- moved from the resorts themselves. Determining the development of resorts and related communities requires our coordinated effort. We must become partners in resort area planning and man- agement to assure order and compatibility of uses of our mountain forest lands.~r The "we" Chief McGuire was referring to was the industry and the TJ.S. Forest Service, not the local community. His statements have of necessity been expanded over time to include~ the local community in many instances. However, this does not mitigate the fact that many communities, including Aspen, are currently suffering and will con~ tinue to suffer from some rather questionable land-use decisions that were made prior to the establishment of a coordinated land use policy by the Forest Service. In Aspen, this remedial cleanup has included a $1 million expendi- ture for an airport terminal, a $5 million hospital, the design of an $11 million transit system, the acquisition of 11 acres of parking land within the city's limits at a cost of $1.75 million, the development of a $1.2 million pedestrian mall to overcome the choking construction of our air quality by over 3,000 rental cars at any one time, the allocation of over $600,000 per year, jointly the city and county, to provide transit-related services to the Aspen community, and the expenditure of over $200,000 per year for land use and economic planning, a func- tion that was not even formalized in this valley until 1971. This is by no means an exhaustive enumeration of the impact on our local gov- ernment. It merely highlights the magnitude of pressure being placed on the local community as a direct result of ski area planning de- cisions made in a vacuum. To wit, the impact of Forest Service au-~ tonomy in the planning process. Once again, let me quote from a Forest Service official. This quote is from the 1971 winter issue of "Ski Area News" in which Gerald Horton, branch chief in charge of recreation and lands for the Wasatch National Forest near Salt Lake City said, and I quote: For instance, planning and developing a major ski area is the most critical problem we face. The problems are far-reaching; they include transportation into the region, aesthetics of the area, water quality control, erosion control, sanitation, parking. PAGENO="0038" 34 To implement these problems into a finished product, the Forest Service has found that communications is the key to cooperation between the land agency and the developer. Again, no comment, no recognition that the local community should even be considered in land-use decisions and national policy decisions regarding ski area management, the point being once again the local community is relegated to a cleanup act for ski area development. I feel that the time has come for the Forest Service, inspired by legis- lation such as the Haskell bill, S. 2125, to start making more positive and constructive contributions to the local community problems gen- erated by recreation land-use decisions. Specifically, economic assistance should be forthcoming. At present, the Forest Service revenue from the Aspen ski areas is approximately $210,000 per year. Only $37,00Q is returned to the local community in the form of payments to the county bridge and road fund. In Aspen alone, $37,000 will not support three policemen. It does not pay for the winter snow plowing costs on Main Street, Aspen. Direct impacts of an on-going nature that the Forest Service has a role in addressing should include mass transportation, land use planning, facility peak- ing. Of importance here is the fact that the skiing increased 840 per- cent from the 1960-61 season through 1973-74 season. Correspond- ingly, the seasonability of economic activity in Pitkin County in- creased over that time, implying that ski area expansion aggravates the peaking problem. These kinds of problems cannot be addressed for $37,000. They cannot be addressed for $210,000. Many of them cannot be addressed for $37,000. They cannot be addressed for $21,000. Many of them cannot be addressed with money at all. They require pre-planning by all agencies impacted by the ultimate decision, not merely the developer and the Forest Service. However, dealing with the economics of the impacts would be positive step in mitigating many of the past unilateral decisions. rFwo ways come to mind of monetarily contributing to the allevia- tion of the problems previously identified. First, there could be an increase in the concessionaire fee to the Forest Service with a com- mensurate increase in the passthrough of the fee back to the local gov- ernment. This is not only an untenable position to the ski area developer, but may be unnecessarily regressive. The approach would be far greater obviously on the least profitable areas and does not offer a real solution, but merely identifies one end of the continual solutions. A second and imminently fairer system would be the institution of a user tax on the lift tickets directly rebated to the local cities and counties. I would recommend that this be an amendment or an ex- pansion of the Haskell bill. The user then would be contributing to the maintenance and construction of the services and facilities he de- mands in the local community. This proposal was introduced into the Colorado Legislature in the last session. There through the efforts of the Colorado ski industry in the form of Colorado Ski Country and the Rocky Mountain Division of the U.S. Ski Association, the bill was defeated. Perhaps Federal legislation is a more appropriate way of bringing about the cost-sharing, of community services for tourist skiers. Let me now address the second element of the bill dealing with the establishment of the lift ticket prices. In his responsive statement to PAGENO="0039" 35 the city of Aspen's requests for administrative review, White River National Forest Supervisor, Thomas Evans, identified many elements of quality that went into his "subjective evaluation" of lift ticket prices Among these items were the following "Parking facilities, nearness to airports and highways, transit system, base area ameni- ties-town, dining, lodging, shops, night life, `status symbol' aspects." These above-identified elements are provided by the local commu- thty and, except for parking, are never produced by the ski area op- erator when functioning as an area operation rather than a developer. Yet they are identified as elements of ticket pricing by the Forest Service Clearly if these elements are going to be contributors in en- h'rncing the i, alue of a lift ticket, the cost 0▒ providing them that must be borne by the community should in commensurate part be borne by the ski* area operator. In Aspen, we feel this is not the case. The Aspen Skiing Corp. provides no parking facilities for the 3,100 skier capacity Aspen Mountain. The base area amenities are totally contri- buted by private businesses and the community at large. The county is particularly responsible for the airport and the $1 million terminal. The city and county together spend over $600,000 a year on transit systems. The ski corporations run approximately 27 buses per hour and use public parks and public streets for their right-of-way and loading stations. No revenue to offset the maintenance of these facili- ties is received from the skiing corporations. The proposed $11 million rail transit system is grudgingly and tokenly being endorsed after 8 months of negotiations by the two skiing corporations with Pitkin County officials and the final agreement is tantamount to blackmail. it requires front-end commitment of $910,000 by the ski corporations which is to be refunded by the city of Aspen and county of Pitkin in the event a lift tax is imposed. The status symbol aspects of the Aspen area are rather difficult to identify. Perhaps they include Aspen Mountain. Certainly they do not include Buttermilk. Perhaps they include the historic Hotel Jerome and Wheeler Opera House as well as the myriad of other his- torical structures within Aspen. Perhaps the very ambiance of Aspen is its status. Most certainly it is something created by the community and the people of the community, not just the skiing mountain. This is one of the elements that determines the lift ticket pricing in our community. Let me point out that skiers spend 7 hours per day on the mountain. They spend 17 hours per day. in the local community. If the Forest Service is going to grant rate increases, let's see those rate increases which are based in part on the communities' efforts show a responsive- ness to the community commitment. The responsiveness Úan take the form of season passes for locals who help create many of the quality elements identified by Mr. Evans, and they can take the form of mone- tary contribution to the maintenance of these quality elements by the local community. I think it rather obvious from my discussion dealing with very basic points of pricing that the Forest Service is entirely confused on what should be included in lift ticket prices. Further confusion has been shown in statements on what does and does not constitute "dis- criminatory" pricing. For example, they insist upon defining the product purchased as the right to unlimited skiing for a day. If two PAGENO="0040" 36 people ski different amounts during the day one can hardly claim nondiscrimination Perhaps vertical transport but per hour would be a better method. Whatever the proper method ~for pricing should be, the issue here is that there currently exists :fl░ measure that is uni- formly applied, nor does it appear that the Forest :Service. has prog- ressed toward the de\ elopment of a measure despite their recognition of needing ~one. I wish to emphasize that I am not attacking any ski corporation's right to a profit, nor am I contending that AspenSkiing Corp. or any other is earning, abnormally high profits. That is not the purpose of these hearings nor do I concur with that type of statement. However, we should not be diverted from the real issue by subsidiary comments The issue is a need for a process that incorporates the welfare of all parties in a form in which all can be assured of fair treatment. In conclusion, I would like to emphasize that Forest Service deci- sions on land use for recreation and the prices charged therefore have substantial impact on local communities that are .impr~perly con- sidered under current procedures. These errors of omission relegate local officials to the role of reaction to minimize undesirable impacts rather than enabling them to take positive action to maximize the desirable impacts. For the long-run viability of mountain recreation areas, this must change and it must change now, not in the future. Let us then continue work on the Haskell bill to incorpor'~te the concerns of the affected local communities and place the Forest Service in the position of haying to consider the well-being of all parties in their decisions. Thank you, Senator. Senator HASKELL. Thank you very much indeed, Mr. Mayor, for a thought-pr9voking statement. You brought up something that hadn't occurred to me but which I think is valid. If you have a ski company operating on Forest lands, the public facilities to support people coming there and, of course, the money for them are derived from taxes by the businesses and the residents of the community. If, on the other hand, you have a ski corporation operating on private lands, as is occasionally the case in the eastern part of the United States, the services would be supported in part by taxes on private land which was used for the ski facility purpose, and for that reason it would seem to me that your comment on some kind of greater participation from the ski permit holder to local services would be in order. This is a thought, I mean this is a situation that really hadn't oc- curred to me before your testimony, but I think it has a great deal of validity. So, I thank you very much for your testimony, and as I said to the other two gentlemen that preceded you, if you have any specific suggestions for changes, let me know, and if your associates have some comments I would be delighted to hear from them. Mr. STANDLEY. Thank you, we will. STATEMENT OP DR. PHILIP S. MAHONEY, CITY MANAGER, ASPEN COLO. Dr. MAHONEY. Senator Haskell, my name is Philip Mahoney. I am the city manager of the city of Aspen, Cob. I am here officially rep- PAGENO="0041" 37 resenting the City Council to make a statement regarding the pro- ceedings whereby the Forest Service regulates an important industry in our community. Sir, I have a terminal degree in economics. I was a professor in the Business School at the University of Colorado for 4 years. I was dur- ing this time the Director of the NARA Commission Course. This course is given to review fundamentals and review current issues in the regulatory industries. As its Director, I believe I understand the issues of regulations. I am completely confused at this point on reg- ulation occurring in the ski industry. In your introductory remarks to the Senate on Senate Bill 2125, ~`a bill to reform the system of issuing and administering permits for ski facilities and other outdoor recreation facilities on national forest land created from the public domain," Senator, you noted that the "...system is shrouded in secrecy. It lacks a coherent set of standards and it fails even the most basic tests of uniform application." We agree. Darcy Brown in a letter to Tom Evans dated April 7, 1975, stated: "The Forest Service has heretofore established no regulatory procedures or standards regarding lift rates; and absent these, we have serious doubts as to the validity of any regulatory efforts by the Forest Service, which would of necessity be ad hoc or arbitrary." We agree to this also and our statement that follows expands on these two statements. We believe these to be the heart of the issue and the other problems aired in the past are peripheral to this main issue. They can be worked out if we are provided with legislation that gives us a system and standards. It is common knowledge that the process in the past has been one of reaction to pressure and compromise by Forest Service personnel who have been ill-equipped to cope with the complex issues. For examples a ski corporation whose land sale division has been losing money due to a failing market and scarcity of funds would request relief from the Forest Sevice via a rate increase on lift tickets. Once this is allowed it is the stated Forest ServiCe policy that no ski area will be required to charge less than a competitor. A domino effect would then occur in the price of the lift tickets in all areas. Thus, prices were not established in Aspen according to any~ parameters in Aspen, but reflect poor land sales at Cooper Mountain. The process concerned a lot of meetings between area operators and the Forest Service. Compromises were struck and essentially the Forest Service acted as a "cartel agent." A canard was then presented to the public in the form of a secret ritual whereby the public was informed they were fairly represented at these luncheon meetings by the Forest Service, but that confidential information precluded the public from kn'~wing the details. The Roaring Fork citizens, the city of Aspen and Pitkin County objected to this secrecy in the spring of last year. They requested from the Forest Service under the "Freedom of Information Act" that the information used as the basis for the decision be made public. This was done this past month and the information mailed to the city of Aspen. We submit this information is a sham. It mocks us that the Forest Service would suggest that they used this information PAGENO="0042" 38 to make pricing decisions so important to this community and its industry. Let me point out that the Forest Service ws not even careful in its hoax. In a certified letter to the Aspen City Attorney, Mr. Rexford A. Resler, Associate Chief of the Forest Service, Washington, submitted the financial data used by the Forest Supervisor, White River Na- tional Forest, to determine whether or not to approve a ski lift ticket price increase for the Aspen Skiing Corp. The data entitled "Aspen Skiing Corporation Projections for Fiscal Year 1976" is attached to this testimony. There are some immediate questions that need to be answered by the Forest Service before one could begin to believe this sham. In this table, Senator, there. were a list of about 12 items that the Forest Service used to base their decision, and in this list they used some ratios. Their ratios were inverted. Senator HASKELL. Excuse me, what do you mean by a ratio being inverted, .just for my clarification? Dr. MAHONEY. Well, for example, they had debt to equity, but in presenting the figures it would be equity over debt. It should have been equity to debt, and anybody familiar with using these ratios should have picked them up, and it is questionable that it is really a meaningful part of their decision process. Senator HASKELL. Was this a table that the Forest Service stated that it had prepared as a result of information provided by the com- pany, or was it a reproduction of information provided by the company? Dr. MAHONEY. It is my understanding that they took information provided by the ski corporations and developed this table themselves. I have seen similar tables for Vail and Breckenridge. Senator HASKELL. Similar inversion? Dr. MAHONEY. Yes, the same. Senator HASKELL. Thank you. I did not mean to interrupt you. I just didn't know what you mean by inverted ratio. I see what you mean now. Dr. MAHONEY. Well, we wondered if they used these ratios to com- pare other firms in the industry. It is not a major goof. It just sug- gests that they are not equipped and were not equipped to handle it. They also used fixed assets gross. We don't know how they computed fixed assets gross. V~Te don't know if leases are capitalized into fixed assets. These, are very specific questions, but they need to be answered. Let me continue on with some of these questions. Is real estate land included in fixed assets? Do revenues gross include any complimentary passes? What is included in "total expenses"? Did the. Forest Service use accelerated depreciation in calculations of cost? Does accelerated depreciation reflect the true "waste" of the ski corporation assets? Does the Forest Service have compaTable "risk" ratios of other ski firms in Colorado? Are they compiled over time? . How does the Forest Service rate the Aspen Skiing Corp. in terms of risk? PAGENO="0043" 39 What is the Aspen Skiing Corp.'s "cost of capital"? I might point out, Senator, that in the ski industry we have one ski firm that perhaps might have a debt to equity ratio of 90 percent and in another one it would be just completely reversed. We don't know what the cost of capital is. What is a fair rate of return on equity capital for the ski corpo- ration? Should the Forest Service allow discriminatory pricing for ski tow service? Does the Forest Service believe that skiers should pay for their entire resort experience in the price of their ticket? What is the relationship between costs and sales over time? Is the market for tow tickets elastic or inelastic in terms of price? The above questions are but examples of questions that the Forest Service should have addressed and answered if they earnestly in- tended to pursue a systematic approach to regulating the ski indus- try's price. 12\Te found in discussing these issues with the Forest Service and reading their correspondence that they were confused by such terms as "return on capital ;" they were not clear whether they were using the asset concept or the liability concept. These and other errors point out that they are not equipped to handle the very difficult problem of rate regulation. We understand the economic concept~ of "break- even point." In economic terms it can be graphed using total cost and total revenue curves showing the relationship of fixed and variable cost. There are two "break-even" points-but, what does the Forest Service mean that a break-even point can be determined by a fixed relationship betwen sales and gross fixed assets? In other material that they submitted to us, Senator, they used this as a very fundamental equation to determine the products, and it is completely meaningless to me. Senator HASKELL. That a break-even point can be determined by a relationship of gross sales to assets? Dr. MAHONEY. Be determined by a fixed relationship between sales and gross fixed assets. Senator HASKELL. It's a new one on me. Dr. MAHONEY. We believe that administrative procedure first must accord with certain "rules of fair play," formally designated as pro- cedural due process of law. The essence of this process, we believe, re- quires that we be given adequate notice that a specified matter will be subject to a public hearing, and we be given an opportunity at a pub- lic hearing on that particular matter to present evidence and contra evidence. We do not believe they have afforded us this process. With respect to the Federal Administrative Procedure Act, it has been stated authoritatively that the law was designed to "~ * * afford parties affected by administrative powers a means of knowing what their rights are and how they may be protected. By the same token administrators must provide a simple course to follow in making ad- ministrative determinations. We do not believe they have abided by this act and developed a procedure by which this decision or future decisions would provide us * * * a simple course to follow * * *" In a letter from Mr. Tom Evans dated June 2, 1975, in which he refused to rescind his approval of the Aspen Skiing Corp. rates dated PAGENO="0044" 40 May 8, 1975, lie included a list of items which he considered in eval- mating a proposed rate increase for the 1975-76 ski season for areas in the White River National Forest. The Forest Service admits in this list of items that the decision was primarily based on a subjective evaluation of approximately 17 items, one of which was "Base area, ~amenities-town, dining, lodging, shops, night life." Does the Forest Service believe we have been given the proper ad- ministrative procedures and a simple course to follow when they have determined a regulatory policy based on this list? To quote the last sentence, "The above items of finance comparability and quality form the basis of.the analysis leading to approval or disapproval of rates." The decision, based on such loosely considered parameters is nothing less than impractical to measure, imprecise, and subject to ~ibiise by arbitrary decisionmßkers. We cannot but object to this aspect of your procedure. We would like to present at this hearing, Senator, what we believe to be the essentials of proper rate regulation. As stated in our objections, the Forest Service has used a method of ~allowing rates that are too subjective, perhaps whimsical, the criteria defies measurement, and there would be no way to review or object to conclusions obtained from the process. We propose that the Forest Service adopt a system similar to that developed over the years by utility regulatory agencies. A system con- -tinually being reviewed by our court system and dynamically respond- ing to changing technical and social conditions. Simply stated, we recommend that the Forest Service use a "Cost of Service" basis for regulating the ski tow industry. The basis for ratemaking is to determine what is a firm's total cost of service, or stated another way, this question asks: How much in total revenue should the firm be authorized to collect through the rates úharged for its sales or service? The cost of service of a regulated firm is defined as the sum total of: (a) Proper operation expenses; (b) depreciation expenses; (c) taxes; and (d) a reasonable return on net valuation of property. Thus, a regulated firm under a efficient and economical management, requires revenues sufficient to, (1) cover proper operating expenses, depreciation, and other expenses, and taxes that would be payable if the authorized rate of return were earned; and (2) to provide rea- sonable return on the net valuation of the property used and useful in serving the public. After the cost of service and revenue requirements have been deter- mined, the next step in the ratemaking process involves pricing the service or designing schedule of rates that are intended to produce the total revenues that the firm is authorized to collect from the public. We have noted in past correspondence with the Forest Service that the foregoing is not a simple process but one that provides a mechan- ism for reasonable men to at least understand the process and arrive ~it similar conclusions based on measurable data. The process requires that there be an understanding on what costs are to be allowed. Such PAGENO="0045" 41 costs as sales promotion and advertising, payment to affiliates for service and charitable contribution should be agreed upon as legiti- mate and necessary to the business. Also, the question of proper "rate base" is difficult to answer but there are guidelines and agreements which can be reached that would allow answers to those questions~ Finally, an additional problem of the process is to determine a fair rate of return, but we can look to the Hope Natural Gas Company case as a foundation to solving rate of return. One final comment and recommendation pertains to the Foresf~ Service's refusal to consider ski passes based on the theory that this would be discriminatory pricing. It is an underlying principle of ratemaking that relatively homogenous groups of customers, called customer classes, be established, a different schedule of rates is applied to each class and each rate schedule ordinarily offers the individuar customers within each class a graduated descending scale of rates for incremental blocks of service taken. Accordingly, the public utilities engage in "differential pricing," rather than uniform or "super-mar- ket" pricing. It should be made clear that public utility rates gener- ally are not made for individual customers but for different classes of customers and services. Thus, we have for example "student rates" on. airlines and commercial and residential and industrial rates in elec- tric utility pricing. To quote from an authority: Differential pricing is an entirely lawful and economically desirable form of public discrimination, insofar as regulated public utilities are concerned. Three conditions are necessary in . order for differential pricing to be possible: (1) monopoly or near-monopoly on the supply side of the market, (2) a . total de- mand, and (3) some means of insulating each market from the others, so that those who buy at the lower prices cannot resell to those who would have to pay higher prices. Hopefully, we have demonstrated that we think there is a better method of pricing, rather than the one which the Forest Service used in its decision of May 1975. Senator, the problem we are having in this community is directly traceable to the Forest Service. We have many strong independent entities in this valley, a strong ski industry, an equally forceable gov- ernment sector. We have conservationists, developers. We have those for the ski trade and those against it, and most of those issues we face in this community, there are certain ground rules to the game. They can he resolved in the marketplace, the courts or by the political proc- ess. We understand this process, yet in this issue, we are facing today there are no ground rules. We don't know what's going on. The Forest Service says they are regulating the use of our public land. Everyone, with the exception of the Forest Service, agree they are not. We are left with the analogy of a football game with many trying to carry a ball in an undefined area with no rules and no referee. N@ wonder we' are bickering in this comipunity. lVhat we need is legis- lation to provide us with the rules, then a referee to interpret them.. That is the solution to our problem PAGENO="0046" 42 Senator HASKELL. Thank you, Dr. Mahoney. One of the things that led me to introduce this bill that we are having the hearing on was the complete absence as far as I could find of standards applied by the Forest Service, also the fact that individual Forest Supervisors ap- Parently made decisions for their areas that weren't compatible with other areas, and, of course, the absence of meaningful information, ~which we stressed at the beginning. I would like to ask you a question to see whether you think this 4ype of solution might be desirable. It is not in the bill. It was sug- guested to me by somebody else. Let's assume that there was applied for and let's assume your first determination was, was this a truly competitive situation in that particular area, call that area A, and make further, of course, determination as to whether area A was in fact not engaging in anti-competitive practices. Now, under those circumstances, you would think that we are making that assumption it would do what competition is meant to do, and that is regulate. If you made that finding, then you wouldn't have to go any further. Dr. MAHONEY. I agree. Senator HASKELL. But if you couldn't make that finding, then you would have to go into the type of thing you are talking about. Now, it seems to me that there is some common sense to that and I just wondered how you reacted to it. Dr. MAHONEY. I agree with your statement, Senator, but we have several markets in this community, in fact in all ski area communities. We are entering the market in the international skiing market and people that participate in that market are very nonresponsive to any change in price. They will spend $1,000 to come to our community and they could care less whether the price of a tow ticket is $20 or not. They have other desires. They want good ski conditions, which our ski corporation does provide them, but we have a Colorado market and these people are very responsive to changes in price, and then we have our local community and they are extremely-they have no other recourse. Senator HASKELL. Well, I think you obviously would have to have a fair rate structure to provide, you know, across the board participa- tion, but I was thinking, for example, of Arapahoe Basin, Loveland, Berthoud, Winter Park. I would think assuming they didn't engage in some kind of price fixing it would be truly competitive. Now, it seems to me that if you have a situation where you do have honest to goodness competition, then that obviates the necessity of going that one step further. I'm just asking your reaction to the idea. Dr. MAHONEY. Yes, sir; that's true. The Arapahoe Basin, Brecken- ridge, Vail and all these ski areas that can be reached comfortably by driving a car in 3 or 4 hours are competitive with each other for the Colorado automobile skier, but for those people that can't work the Red Onion at 10 o'clock in the morning and then hop down to the Broadmoor and ski for $2.50, that's not the same market. Senator HASKELL. I understand that. I understand that completely, Dr. Mahoney. I was just advancing the general sort of theoretical philosophical proposition to obtain your reaction to it. PAGENO="0047" 43, Dr. MAHONEY. Well, I agree. Senator }IASKELL. Thank you, sir, for your excellent testimony. I appreciate it. LThe letter referred to by Dr. Mahoney follows:] U.S. DEPARTMENT OF AGRICULTURE, FOREST SERVICE, Washington, D.C., September 2, 1975. SANDRA M. STULLER City Attorney, City of' Aspen, Bo~z, V, Aspen, Cob. DEAR Ms. STULLER: We have carefully reviewed the Freedom of Information Appeal submitted by you on behalf of the City of Aspen. This appeal is identical to that submitted by the Roaring Fork Citizen, Inc., and requests the release of certain financial data used by the Forest Supervisor, White River National Forest, to determine whether or not to approve a ski lift ticket price increase for the Aspen Skiing Corporation. Your appeal has been granted, and the requested data is enclosed. The infor- mation is contained on the sheet labeled "Aspen Skiing Corporation Projections for FY `76." The projections were compiled by Forest Service personnel, and should not be construed as necessarily representing the permittee's anticipated financial situation. In the event you decide to release or make public this in- formation, we urge that you qualify or interpret it so that no misunderstanding results. As you know, the Forest Service Manual and the special use permits Speci- fically exempt the enclosed data from release. However, the judicial criteria for exempting material are specific on a case-by-case basis, and we must conclude that this case does not qualify for exemption. We trust this meets your request in full. Sincerely, REXFORD A. RE5LER, Associate Chief. Enclosure. PAGENO="0048" 44 0~ >- -J C-) U, 0 U, 0 C-, 0 0 0 0 C-) 0 C,, 0~ U) E E PAGENO="0049" 45 Senator HASKELL. Mr. Steve Wishart, city councilman. STATEMENT OP STEVE WISHART, CITY COUNCILMAN, ASPEN, COLO. Mr. WISTIART. It is awfully early in the morning. I am just going to read, a short note that I wrote yesterday, which is essentially not addressed as a city. councilman but as a. working person in this town. OK, short note about not skiing in Aspen, or how I came to love cross country. I should admit at the outset that I like big government only slightly less than I like big business, which is not very much at all. Generally speaking, both are not particularly responsive to individuals in the' society, and Senator Haskell's proposed bill, S. 2125, certainly smacks of all sort of government regulation and control,, but I support it. There are a number of reasons, but it all boils, down to the single ex- planation that continuing increases in the pricing structures of the' ski corporation in this town and discontinuance of a reasonable break for local people, local working people, has made it impossible for me to downhill ski. Greedy me. I'm sorry. Just because I live here I should be counting and handling my silver skiing, platter,, you know. Well,, not really, you know, but it is people like myself, the long- term local residents, and I am sure there are a bunch in the audience, who makes this community more or less have the ambience that draws' the people here. I don't know, I think I should be taken care, of in some respect, because I won't stay here if I don't get a ski pass. I happen to be an elected official and I will stay for my term,, but beyond that I can't. see staying here, as this is a continually rising place,.small inconveniences, housing. In.my case, you have to be skiing on Aspen Mountain. That's why I came here,. not to. ski Highlands or Buttermilk. Aspen Mountain. But for my own personal reasons, they mainly evolve around the bad me, and the less money I make, I don't ski any. more. I cross- country. Now, I want to ski in this town. I am more or less a tourist in my own town,. and I don't know, that somehow doesn't. seem right. I'm being priced out of a market that over the last 10 years I helped create through my service into this town. To make enough money to ski, to pay $11 a day, I have to work all of the time. I'm not particu- larly fond of that. That's why I became a politician. It's a Catch 22. You, are a perfect. example. If I am going to. make enough money to pay $11 a day to ski, I have to work two or three jobs, in which case I am too tired to ski. On the. other hand, if through some fiat I end up with a job with a reasonableenough wage, I have to work so.much that I don't have time to make the reasonable deals that we are getting from the Ski Corp worthwhile You know, I would end up p'~ying $1~ or $16 a day fOr my 30.. days, whatever. Somehow, I don't know, it doesn't seem right to go. This seems a little hard to take from; a. cor-~ poration that depends on the licensee to provide' a stable work force 67-512---76------4 PAGENO="0050" 46 that treats their tourists better than they can their work force as it becomes even more transient, and it will be for sure. I have lots, a lot of friends. I am sure you have, too. They have gone someplace else that is a little bit easier to make it, and you lose people like myself who are I guess generally working here and skiing. If you lose us every year, you are going to end up with people that come in every year, and you are going to have a very unstable work force and a less than desirable service pace for your community, you know. Makes sense. They are coming out for something. The other thing that bothers me is they are cutting me out of a market I can't afford and they are also doing it to my land, our land, and I think they ought to have some sort of a pricing review board, and I hate the idea of another P1IJC or FCC or whatever. I don't like that idea at all, but on the other hand I don't like them making enormous profits on my land and forcing me out of their market. Simple as that. When I came here, that wasn't the case. It was really very easy to make a living in this town. Wages were about the same as they are now. Housing was a lot cheaper. Food was a lot cheaper. You could get a ski pass. You could do something, sweep floors, whatever you could do. Now you can't. You are to the position where you really can't do it, and, you know, I'm going to stay here because I've been elected and I have to do it, ya-ta-ya, but beyond my 3 years here I can't see people like myself, and I assume a good portion of you, I can't see us staying here. It is as simple as that. We are being priced out of our own market. Senator HASKELL. Well, Mr. Wishart, you have stated a classic Catch 22-if you don't work, you don't have to go to enjoy yourself, and if you just don't work you can't enjoy yourself. Maybe that's why I went into politics too. I don't know. Anyway, thanks for your testimony. Mr. WISHART. You put the point a little bit wrong. I don't mind working, but I do mind working to the point where I can't enjoy myself. Senator HASKELL. I understand. Thank you very much, sir. Thank you, gentlemen, very much indeed. Mr. Mojo has a statement for the record. [The prepared statement of Mr. Mojo follows:] STATEMENT OF FRANCIS A. Mo~o, Jn., DIRECTOR ~F TRANSPORTATION, ASPEN, COLO. Inasmuch as it is a governmental responsibility to assist in the maximization of national social welfare through the administration of public lands, the im- pacts of administrative decisions affecting those lands must be understood, evaluated and considered. In the following testimony, I will point out those areas where, in my opinion, there exists potential impacts that have not even been identified much less understood, evaluated and/or considered by the Federal Agency charged with the administration of vast acreages of public lands and NatiOnal Forests. In the Aspen area, as in many resort areas throughout the country, a signi- ficant portion of one's real (total) income is in the form of non-monetary PAGENO="0051" 47 (psychic) income. "Psychic income" is a long held proposition in economics that is used to describe or delineate the amount of non-tangible rewards that a `worker receives for his labors. Psychic income is received by a worker instead of monetary income because there is a personal reward value placed on a job be- cause of the job, or the locale or for any other reason whereby the worker per- *ceives that he is receiving something of value to him. The opportunity to ski, or live in a certain area, or do a certain task, or live a particular lifestyle are all examples of the form that "psychic income" can take. For example, it is generally recognized that many highly educated people accept menial type labor in order to be and ski in Aspen. The environment and life style of Aspen ai~e attractive enough to induce the worker to "trade" a potentially high salary that would accrue to him in another locale for the opportunity to live and ski in Aspen. The amount of psychic income a worker receives is a personal choice and hard to calculate, but is at least estimable. In 1972, the Bureau of Labor statistics reported that the average (mean) income of a college graduate was $20,055.00. Now it is reasonable to assume that a college graduate between the ages of 21-30 should earn at least $10,000-$12,000 per year on the average. In `Table No. 1 below, 56-57% of the Aspen/Snowmass employee population has a college degree or more and yet only 11% of the Snowmass employees, and 20% of the Aspen employees expected to received $10,000 or more this year. Combine this information with the fact that Aspen has one of the highest cost of living in the entire country, which would offset any cost of living considerations for in- come substitution, and the inescapable conclusion is that some sort of "psychic income" substitution is occurring within the labor force. Although it is difficult to allocate so many dollars to environment, life style, and the opportunity to ski for a season, the evidence is clear that some workers are foregoing some amount of monetary income to have the opportunity to ski, and we can reasonably assume that the remaining 35-45% of the college educated labor force expected to receive $4,000-$7,000 in "psychic income" in the 1974-75 season. If the opportunity to ski is reduced ,(or otherwise changed) by elimination of the season pass then three potential impacts may result. First, the worker may accept the "cut" in real income. His real incOme, which is made up of mone- tary income and a level of psychic income, is reduced by the amount of psychic income that the worker allocated to skiing. If he spends' the same total amount iii a season for skiing as he has in the past, then he must accept less skiing, which is a reduction in psychic income and therefore. a reduction of real in- come. If be skis as much as he has in the past, then he must spend more of his monetary income to maintain the previous level of skiing, or put another way, he must spend monetary income to maintain a given level of psychic income, and therefore, this also represents a reduction of real income. Historically within the Aspen labor force, savings are low and dissavings are frequent. This implies an inability to ski as much if monetary income remains the same, because redu- tions in psychic income can not be adequately supplanted by reductions in sav- ings, the net result being a real decline in. real income. In any case, this worker is worse off in a welfare sense than he was prior to the elimination of the pass, and a net decrease in social welfare may have occurred because of the pricing decision by a Federal Agency to eliminate or reduce the worth of the sea- son pass. The second impact that could result from the decision to eliminate the season pass is that the worker refuses to accept the "cut" in real income and demands that the level of psychic income, be replaced with monetary income. This would increase the cost of labor to the employer who would try to pass it on to the tourist consumer. . If he were successful in passing it on, the tourist consumer would pay a higher price for a ski visit even though the Forest Service might not have allowed an increase in lift rates. This type of secondary impact is as an important a consideration as are the primary impacts of administrative de- cisions by Federal Agencies charged with `the administration of public lands for the public good. If the employee couldn't pass on the increase in labor costs, then a decrease in the employer's. profit level would occur, and in the case of a business on a close margin, may cause the failure of the business. This then has the potential of reducing the viability of the entire Aspen economy, as well as creating `potential social impacts. , PAGENO="0052" 48 A third alternative in this example is that the worker would quit the job andl a replacement worker would have to be found. who is willing to work at a lower level of total income, since his monetary wage would remain the same and his level of psychic income would have to be lower `due to the loss of skiing oppor- tunity by elimination of the season pass. This would also represent a potential decrease in social welfare. All three alternatives can occur as a direct or indirect result of a decision by the Federal agency, and yet, it is readily apparent by the lack of informa-~ tion used to reach lift ticket pricing decisions that the Forest Service has not researched these potential impacts and has basically ignored the implications of pricing decisions on any group but the concession company they are dealing with. A corollary impact to these potential changes in real income is a potential labor market distortion that could result from increased monopsony power as a result of the pricing decision to eliminate or reduce the worth of the season pass. "Monopsony" describes, a market condition in which there are many sellers but only one buyer. The buyer can then set the price of goods by refusing to pay more than a given price, and refusing to deal with those sellers who won't sell at the price set by the buyer. A large or only employer in a one-industry economic substructure is an example of a monopsony. The Aspen Skiing Corporation, by being the area's largest single private em- ployer, cannot avoid impacting employees and other employers by its employ- ment policies. In particular, the policy of granting its employees season passes, if combined with the elimination of purchased season passes, would place the ski corporation in a different position vis-a-vis other employers than it is pres- ently in. The granting of the season pass to ski corporation employees and not to other firm's employees could increase the supply of labor to the ski corporation and this could potentially reduce the monetary wages paid or could change the characteristics of the ski corporation employee, or the character of the em- ployee available to the remainder of the employers. It is possible that some of the better services personnel would become ski corporation employees to the detriment of other employers and businesses, due to the availability of high psychic. income in the form of a free season pass.. This encourages discrimination in favor of the ski corporation and. represents a wage subsidy by the public in that the costs of the passes to the ski corporation are passed on in the form of lift ticket prices. It is quite easy to postulate a situation where a request for an increase in lift ticket prices could be based on and justified by an increase in costs to the ski corporation that are derived solely from an increase in free skiing by ski corporation employees. It is obvious that the Aspen Skiing Corporation, as the area's largest private employer,, already has some monopsony power in the labor market and the elimination of the purchased season pass would likely increase that monopsony power. Monopsony power as well as monopoly power is subject to governmental control on the basis of public interest. Impacts on the labor force may not be limited to impacts on real income or employment opportunities. The following table has been compiled from the em- ployee survey that was conducted at the beginning of the 1974-7fi winter season. It is broken into two parts: the first part `deals with those characteristics that the employee brought with:him when he. arrived, in the Aspen/Snowmass area; the second part deals with those characteristics that are attributable to the employees' working situation and the result because of that. situation. The intent of this separation is to reveal, the nature of the employee as he enters' the Aspen/Snowmass economic system and then to compare the effects that" the two elements (Aspen and Snowmass) of .that system, have on him and his level of welfare. TABLE NO. 1-CHARACTERISTICS NOT RELATED TO AREA. EMPLOYMENT [Percenti' ` Snowmass group (N=45i) . Aspen' group (N=1310)' Age 21to30 Single Sex (male) College degree or better 76 69 53 57 70 63 52' 56 PAGENO="0053" 49 CHARACTERISTICS RELATED TO AREA OF tMPLOYMENT Snowmass group (N=451) Aspen group (N=1310) Percentage: More than 1 year in Roaring Fork Valley Seasonal employees Live 10 miles or more from work Live in or around place of work Drive to work Type of work (primary): Bar and restaurant Lodging Retail Professional 36 or more hours per week of work ~Average annual income: Bar and restaurant Retail Lodging Overall Percentage: Monthly wages: $200to $600 Over $600 Annual expected incomes: $8 000 or less $8,000 to $10,000 $10,000 or more Average rent (per month) 51 60 38 51 63 31 31 11 5 78 63 63 7 81 54 24 14 16 L~ 76 $5, 816 4,808 5,284 5,953 $5, 881 6,518 5,203 7., 500 72 24 80 9 11 56 40 68 12 20 $245 $246 Without delving into a detailed analysis at this point it is obvious on the face of the chart that there is not much difference in the characteristics of the employee as he enters the working population of the two areas, but once he enters that population he is easily differentiated by how much he makes, where he lives, how far he must commute, if he is seasonal or not, and what kind of establishment he works at. The point here is that we are dealing with two ski areas, ten miles apart, administered by the same Forest Service District, run by the same ski corporation, with access to the same labor market, subject to the same price schedules by suppliers, and yet the characteristics of the labor force are significantly different. Why? Why is the cost-of-service to one area as rep- resented by wage levels different from the cost of service to the other area? ~What impact does one area have on its .labor force that the other doesn't? More important, what impact do the different labor forces have on the gen- eral viability of the economy in terms of income multipliers, consumer spend- ing patterns, local, state and Federal governmental spending decisions, et cetera? Are the characteristics of the Snowmass population a prophecy of the character- istics of Aspen area labor populations to come? How much and what kind of changes in the labor population characteristics can we expect as a result of the decision to remove or reduce the season pass? These are but a few of the many ~basic economic questions that must be answered in any analysis of price de- cisions affecting the utilization of public lands. A cursory review of the pricing decision data and criteria reveals that none of the basic questions have even been asked, much less answered. There are a variety of other impacts outside the economic sphere that must he considered in pricing decisions. True to the concept of systems, these im- pacts are invariably expressed as secondary or tertiary components, elements and/or constraints of the economic sphere, but have significant consequences for other spheres. Table No. 1 points out that the potential for significant impacts on traffic congestion, land use patterns, air quality and social patterns. For example, 38% of the employees at Snowmass travel 10 miles or more to work while only 7% of the Aspen group must commute that distance. Along this same line, 51% of the Snowmass group live in or around their area of employ mostly in an em- ployee housing project or employee quarters, while 81% of the Aspen group live in or around the Aspen area. The important consideration here is that if the Aspen group were to exhibit the same characteristics as the Snowmass group the end result would be approxima~tely 500 additional people commuting more PAGENO="0054" 50 than 10 miles and an out migration of about 400 people from the Aspen area to surrounding residential complexes within 10 miles. The resultant consequences would be approximately 500-600 additional commuting vehicles added to the' peak commuting traffic flows and that would have to be accommodated and stored in town. Given the present shortage of existing parking spaces and the already over capacity traffic loads that the area street and road system must accommodate, the impact on the Aspen area would be of a severe magnitude.. On cold wintery mornings the added pollutants would increase the already ominius smog layer that greets the traveler from the northwest as be ap- proaches the Aspen area. A recent report by the Air Pollution Control Division. of the Colorado Department of Health indicated that a car operating in high mountain valleys, such as the Roaring Fork Valley, bad a pollution impact eight (8) times that of a car operating in Denver. In terms of pollution impact, this means that the additional generation is in the order of 4,000-5,000 vehicles. The environmental strain that this type of impact would place on the Roaring Fork Valley is surely worth some type of environmental impact analysis. A cor- relary impact to the additional vehicle generation is that the Federal High- way Administration may have to allocate funds to up-grade or four-lane highway 82. It would be an interesting situation indeed if the decision of one federal agency in favor of one firm of the private sector forced another federal agency to expend public sector funds to rectify an unintended and unconsidered conse- quence of the former agency's decision. Referring to Table No. 1 again, it can be seen that while the SnowmaSs em- ployee works approximately the same amount of hours be is paid less on a weekly basis, and his annual income expectation is significantly less. If only those areas of high tourist utilization (bar and restaurant, lodging and retail) are considered the wage differential is about 11% with only the Snowmass lodging category surpassing the Aspen wage level. .This is not surprising since lodging is the major component of the Snowmass economy and therefore the lodges must bid competitively in order to maintain their accommodations in rental revenue generating condition. It is interesting to note that the overall annual income level in Aspen is about 25% greater than that of Snowmass, while the average rent that each group must pay for living quarters differs by only one dollar per month. This is significant in that since the Snowmass em- ployee tends to commute more and over longer distances, be must bear the corn- muting expenses without the benefit of wage or cost-of-living differentials signi- ficantly in his favor. If the Snowmass labor force characteristics are indicative of characteristics of future Aspen area labor forces then there could be signi- ficant, economic, environmental, and social costs that would accrue to these labor forces as a result of a shift in labor force characteristics that is perpe- trated by a pricing decision by a federal agency that has all but ignored the welfare of any group other than the Aspen Skiing Corporation. The impacts on land use patterns can only be hypothesized at this point, but it is not unreasonable to assume that as a result of out-migration and changing commuter patterns that employee related complexes will proliferate in the down valley areas leaving current long term housing open to the short term market which when utilized as lodging increases the peaking of demands for City serv- ices and decreases the support, base during off season. This has the effect of creating blocks of empty units during the off season which in a time of re- source shortages is an atrOciously poor utilization of resources and creates the potential for increased crimes against property. The net result is increased economic, social and environmental costs to the skiing public and labor force populations, not to mention the permanent residents of the valley. An alternative hypothesis to this down valley migration pattern is an out-~ of-valley migration pattern. In essence. the ski oriented employee could leave `the valley citing high costs and low real incomes as the motivating factors. This would create a void in the labor force. Historically, voids in the low income labor market have been ified with culturally denrived or newly emigrated groups. The social impact of integrating a culturally different working popula- tion into a rural mountainous area is certainly a consideration that should be explored. Even if history were not to repeat itself in the Roaring Fork Valley, some type of labor force would have to be recruited. The probability that the new or replacement labor force has different recreational demands and patterns is fairly high Given that the majority of Pitkin Coimtv is federally admini~ tered National Forest and recreational' areas, it would appear on the face of it that this potential change would 1~ave a large impact on Forest Service man- agement decisions. If the "down-hill" skiing work force was replaced by a PAGENO="0055" 51 "cross-country" skiing or snowmobiling work force, then the potential impacts on critical winter ranges and wilderness areas surely warrants investigation. I have alluded to many potential impacts that may or may not result. They may be beneficial or they may be detrimental in the short or long run. It has not been my objective to analyse or pass judgment on these impacts; but to raise the issue of their potential presence and my concern that it does not ap- pear that they have been addressed in the recent pricing decision by the Fqrest Service relating to the Aspen Skiing Corporation's request for lift rate in- creases and elimination of the season pass. In a recent letter from the Super- visor of the White River National Forest, the following items were listed as the basis for analysis leading to approval or disapproval of rate proposals: (I) Financial, (2) comparability of areas, and (3) quality of area. In essence, my point is that there are many other important factors, elements, and impacts that must be evaluated, analyzed and considered. The narrow scope of the pricing decision parameters listed above is not in the best interests of the public, and must be expanded to maximize the social benefits derived, from the effective administration of public lands. The current Forest Service procedures and criteria do not reflect any concern or consideration for any group other than the instant concession company and they are constructed and used in a way that ignores the short and long im- pacts of their pricing deci~ions. An agency of the Federal Government that is charged with the beneficial administration of public lands for the people must consider the benefits to be derived by all the people and not just their partners in the ski industry. The current pricing procedures and criteria benefit only the stockholders of the various ski area operations and, in my judgment, work to the detriment of the general public. Senator HASKELL. Our next witnesses are Mr. Dwight Shelirnan, Chairman of the Pitkin County Commissioners, and Hon. Michael Kinsley, County Commissioner, and Alan Blomquist, Pitkin County Manager STATEMENT OF DWIGHT SHELLMAN, 3~R., CHAIRMAN, BOARD OF COMMISSIONERS, PITKIN COUNTY, COLO. Mr. SIIELLMAN. Senator Haskell, I don't think anybody said "wel- come," but we would like to welcome you. Senator HASKELL. Thank you. Mr. SHELLMAN. And we would like to thank you for the support you have given this community in some of our very important specific projects. For the record, then, Senator, my name is Dwight Shellman. I am the Chairman of the Board of County Commissioners of Pitkin County. Our governmental responsibility is to provide a government and government services in the unincorporated area of the county, which includes the entire county except for `Aspen, Cob. My colleague, Joseph Edwards, and I are both attorneys. We ran on a platform of getting control of runaway second-home construction before the pur- suit of windfall development profits~ destroyed `the valley and the recreation and lifestyle amenities which we, and the majority of our residents, treasure. I would like to just summarize `the recommendations I make' and then treat them in more detail. ` `I am ,here to commend your perception ~in incorporating section 2(b) of S.2125, which requires the Secretary~ to' promulgate regula- tions requiring assessment and co˝sidÚration of:' First: All facilities to be developed by the applicant. ` ` " Second: All housing, recreation and commercial developments' which will likely occur as a result of the ski area `development. ` `Third: All public services necessary for such development. PAGENO="0056" 52 Fourth: Assessment of compatibility with other uses of adjacen~ private lands. Fifth: The authority and capability of State and local governments to zone to achieve such compatibility. That is an enormous insight on your part because many, if not most of these ski areas occur where governments are by definition extremely weak and do not have plan- fling capability. I want to commend you specifically for that. Sixth: Consultation with relevant State governments. I would hope that would includelocal governments. Senator I]IASKELL. Yes, it would, and would include local govern- ments, plural. Mr. SHELLMAN. Right, I noticed they were used together in one case and in the other case the reference was only to the State governments. Senator HASKELL. Right, that's probably an error. Mr. SI1ELLMAN. I hope that you will retain and enlarge this section to include the following: First: The language of the National Environmental Policy Act, including requirements for standard EPA circulation, hearing, and mitigation processes, since I believe that the present language may be read as excluding assessment of social impacts, that is the single economic class community which Vail is, and Pitkin County is be- comm~r expressly grant comity, that's c-o-m-i-t-y~ to State and local regulations where they are more stringent than Federal regulations and a requirement for consideration of the offsite economic impacts and the tax and private sector capital-ready cash flow-lag. This is something we have very recently become aware of in our oil shale when we could calculate what capital needs might be. We failed to calculate when the cash for those capital needs might mate- rialize, and there are some studies in Colorado dealing with that aspect in the shale industry. In other words, one is lags which occur in the activities on the Forest. Second: Acknowledge the standing of local governments to par- ticipate in and contest the issuance, material modification, including ski lift rate changes, extensions and termination actions by the Secre- tary judicially. I put in "termination" because were that to occur here, obviously the community would have a very significant interest. Third: I wanted to request that the act not grant 50-year, or even 20-year, permits, but rather follow the Federal Communications Com- mission procedure of frequent renewal evaluation after shorter peri- ods, perhaps 5 years, after testing for community responsiveness. Senator `HASKELL. I might `comment there. if I may, Mr. Sheliman. The bill has 50 years in it; I think 30 would be more like it. But the problem is it seems to me that if you are going to put in a ski lift you have got an immense capital investment, and I don't know whether you can finance it, if you might be disposed to, in 5 years. That's the problem. Mr. SITELLMAN. I was aware of that as a consideration. I think that's quite valid. That was one of the reasons I used the FCC anal- ogy. It seems to me that the Federal Communications system, regard- less of enormous investments made in the cOmmunications industry, Tlevertheless, subject their permittees to at least the possibility of term- ination on shorter periods of time. Senator HASKELL. You would limit it more to a community re- sponsiveness? PAGENO="0057" 53 Mr. SIIELLMAN. Yes, I want to mention also that your bill does tend to treat what happens when the permit is terminated, and I `think you `have a mechanism for evaluation and reimbursement. That might be the `appropriate way to deal `with the `risk created by shorter eval- uation periods. The point of the shorter evaluation period, and I am not necessarily asserting that ski area permits be 5 years of duration, but rather `than the permit conditions acknowledge that few planning assumptions remain valid for `longer `than 5 years~ I guess I am more likely `to talk about `a need for reevaluation periodically, but a mean- ingful reevaluation, regardless `of the term. I `just `wanted `t'o throw that `out and the FCC "analogy, because I thought that `was very in- teresting in a somewhat'similar situation. Fourth: I want'to on our behalf commend this legislation generally for adoption. Fi'fth: Recommend that this subcommittee be an agent in `modify- ing the attitudes reflected by Forest Service personnel and manage- ment practices locally; and that would really be the balance of my remarks, and, sixth: In the preliminary outline although the bill ap- pears `to relate `to new permits, it should apply the same `criteria to' present permits to `allow mitigation of past `Federal management over- sights, `such as those being experienced in this rather mature skiing community. Senator HA5KELL. If I could stop you there, this bill as it becomes law perforce would `apply to existing ski areas, not the things that they do when they begin, but the publication requirements, because right now the Forest Service issues permit for 80 acres and 30 years and Then the balance of the acreage is issued to the ski areas on a year-to-year basis. So these provisions `would be applicable. Mr. SHELLMAN. I see. Just by way of recent history, and perhaps' we are too introspective here, but I think we all want you to know what's been going on in this community, I would just like to deal with that in a summary fashion and most' of it is from a Ski Corpora- tion Commission study at Colorado University called "Quality Skiing in Aspen." I won't give you all the citations, but I will quote from that. The increase in skiing activity in Aspen is the primary source of economic change and a predictor of employment levels, retail sales and total personal income. While it may seem that Aspen is profiting from the economic boom caused by the ski industry, the community is also realizing that it is becoming solely dependent on recreation and is now facing the long-term problems of en- vironmental pollution, traffic congestion, shortages of low and moderate income' housing, land speculation, inadequate services such as hospital and airport fa- cilities, and specializing itself as a young wealthy community. In addition, a fear exists that the ski slopes are becoming overcrowded since the number of' beds for tourists already exceeds the physical capacity of the ski area, particu- larly at Aspen Mountain. An immediate solution of these problems sought by a majority of the com- munity is a mandate to control growth. This is reflected by the election in l97~ of two county commissioners who based their platforms on ~ontrolIing growth. Therefore, a majority of the community seems to favor little or no expansion of the ski area at `the present time. This position reflects the community's fears' that an expanded ski area will attract a larger skier population and will con- sequently cause an expansion of base facilities and further deterioration of the environment. That is the conclusion of that historic quotation. PAGENO="0058" 54 In 1973, the county commissioned and obtained a report; from the Denver Research Institute, which is affiliated as you know with Den- ver University, entitled. "The Evolving Political Economy of Pitkin ~County. Growth Management by Consensus in a Boom Community." It was written by John S. Gilmore and Mary K. Duff. This study concluded: First: Skier day increases, that is uphill capacity increases, were direct "drivers" of all other major elements of the local economy, and direct control over skier-day growth should be attempted. It was recommended that the county consider a NEPA suit against the For- est Service for their transfer of the Snowmass permit to the Aspen Skiing Corp. and their rather secretive permit practices. Second: The study concluded that rapid skier day growth rates, ranging between 15 and 20 percent per year, have already resulted in rapid growth rates in all other service and facility demands and had thrust local governments through major capital facility thres- holds, requiring abandonment and replacement, or creation of new high-cost facilities. Senator, I have attached table I, which is an attempt to give you fairly good data in terms of a number of local capital facilities rang- ing from rail transit, sewer, water, hospital, local bus, open space, ~moderate income housing, transportation, and Snowmass county road improvements, which I would like you to read at your leisure, but it `is a bona fide attempt to try to show what the offsite impacts are. Senator HASKELL. Thank you, sir. Mr. SHELLMAN. Table I demonstrates that unless something is done quickly, the Federal, State and local shares of the capital facility shortfalls-as updated by current consultant estimates-total the following: Federal 20.6 million; State 24.0 million; local 36.7 million. This is capital only and only a partial list. [Table I follows:] TABLE l.-PITKIN COUNTY, COLO.-CAPITAL THRESHOLDS PASSED BY 1975 (To meet current demand levels and 3 percent growth per annum to 1990) [In millionsj Capital facility Federal State Local Total Note Skier rail transit 1 New sewer and water facilities Hospital replacement Local bus transit Open Space purchase Moderate income housing Airport expansion 1 Highway 82 expansion1 Snowmass county road improvement 1__ Snowmass runoff correction Total $9. 6 3. 0 0 0 0 0 2. 0 6.0 0 0 0 0 0 0 0 0 0 $24.0 0 0 $2. 4 2. 0 5. 0 . 8 6. 0 13. 5 3. 0 0 2. 0 2. 0 $12. 0 5. 0 5. 0 . 8 6. 0 13. 5 5. 0 30.0 2. 0 2. 0 (A) (B) (B) (B) (B) (C) (B) (C) (C) (C) 20.6 24.0 36.7 81.3 I Better airport access plus rail transit could reduce Highway 82 costs from $30 million (Interstate 4-lane) to $2.5 million (improved 2-lane sufficient to meet reduced loading caused by aggressive rail transit diversion). In addition the installation of rail transit could eliminate the Snowmass county road improvement of $2 million. The $2.5 million State Highway request has been made each year since 1973 and has been made again for 1976 to the State Highway Commission. The State High- way Commission receives on'y a 20 percent match from the Federal Government because of the secondary highway status of Highway 82 and professes to be without sufficient funds to meet the State's share of 80 percent. A=Applied for. B=Built or installed. C=Consultant estimate. Note-This is a partial list only. See Transportation Implementation Program on file with March 12, 1975, Memo in U.M.T.A. application. All public costs of operations of capital facililties and increased public services in perpetuity have been excluded but are significant. PAGENO="0059" 55 Mr. SHELLMAN. The continuing study indicates that rather than adding to the increased prosperity of the valley, further skier in- creases result under the present system at least in subtle fund trans- fers which have the effect of placing windfall dollars in the hands of land speculators; placing skier profit dollars in the hands of the ski corporation; adding additional cash flow to the retail community; moderately increasing Forest Service revenues of the magnitude of ~approximately $20,000 per year; and then thrusting approximately $81.3 million of major capital improvements on Federal, State and local governments without their knowledge. `While the precision of the figures can be disputed, as can their al- locations between the various governments, their magnitudes are significant and roughly accurate. The problem is more confounding when it is considered that local governments must assume the opera- tional costs entirely from local funds in perpetuity. for operating these increased capital facilities, as well as providing increased levels of traditional government services, all at the cost of the local tax- payer, sheriff and the like. What we. have done is to have to take. some rather regressive actions in the private sector to deal with these problems. Although skier days were identified early as the driving force in the economy, we began the process of growth control by (a) request- ing help from the Forest Service, but (b) concentrating our efforts ~first in the private sector through use of local zoning and land use regulations. This took the form of an alleged $30 million downzoning and rigorous application of strict development standards that resulted in the further denial of approximately $10 million of proposed new condominium construction in the first 18 months of our administra- tion. While we did not experience bankruptcies or financial collapses of highly leveraged developments-because they were not built-as. our neighbors did during the economic slump, this was clearly treat- ing the accommodation investment symptoms rather than skier day causes and added nothing for the financing of capital improvement needs which were already known and which are summarized in table I. These actions were essentially negative, and we submit that the private sector has made substantially all of the contribution it can to `preservation of the local environment, although further zoning ad- justments are probably in order to correct for several growth miscal- culations which were made at the time of initial downzoning. I think ~they have made their contribution is our point. Our attempts with the Forest Service were considerably less sue- cessful. The Forest Service has always given considerable lip service to local government cooperation, but has consistently demonstrated an `attitude which is locally regarded as a "sweetheart relationship" with the local ski corporations. As. observed in the previously, referred to ski corporation study "Quality Skiing," I am quoting again: It can be argued that this is a result of the Forest Service being caught be- `tween the goals of full development desired by the Ski Corporation and protec- `tion of the environment by inhibiting development desired by the town. More- over, the Forest Service has developed a close rapport with the Aspen Skiing `Corporation by working with them on any physical land management problems, particularly on sites of new ski facility construction. As a result, the Forest PAGENO="0060" 56 Service personnel believe that the corporation is making every effort to maintain. and develop a quality ski area. In contrast, this type of rapport does not exist between the Forest Service and the town (add county). Finally, it is apparent that the Forest Service is in need of new management guidelines and a realistic, explicit, long-term statement of goals for the development and use of the Forest area for skiing. Senator HASKILL. If I might observe there, and of course I will re- ceive the official testimony in the Washington hearing, but I must state that in my conversation that I had with Chief McGuire on this entire problem there seems to be a recognition, even t.hough a belated recog- nition, of the effect on local governments. Mr. SHELLMAN. Thank you. Going on, and I am going to give you a little more history of our relationship with the Forest Service, I will just go ahead and read it. I submit that after several initial disillusionments, the local gov- ernments are rapidly moving into a position of opposition to the local Forest Service managers. I would like to identify that as being probably related to this area only. One: Our repeated requests to obtain copies of ski area permits for examination for growth control purposes have never been hon- ored. I must amend that to say we got it yesterday. That's after 21/2 years. Two: In 1973 we asked the Forest Service not to approve a transfer of the Snowmass permit until it contained explicit mitigation meas- ures by the permittee for needed employee housing. skier day growth phasing at reasonable growth rates, and provision of skier transporta- tion and constraint of ski area parking lots to encourage use of that transportation. We appeared to be making progress through the local forest ranger, John Burns, until he was abruptly "promoted" just as he appeared to be requiring the skiing corporation to confront the issue. Parenthetically, I would encourage an examination of the swing in negotiations after his "promotion" if that record still exists. I would also encourage an examination of a transfer of the forest ranger who was abruptly removed from the Marble ski area when he began to require the proposed permittee to address similar problems. Senator HASKELL. Excuse me, would you be able to provide the' committee with specifics? Mr. SHELLMAN. I have the- Senator HASKELL. Names, dates, letters, newspaper articles, the specifics of this? Mr. SHELLMAN. Yes. I will. Senator HASKELL. Thank you. Mr. SHELLMAN. Again continuing the parenthetical comment, the Marble ski area was subsequently shut down by the Colorado Land ITse Commission. It is most charitable to say that the Forest Service apneared throughout this entire debacle to be an interested observer. Three: In December of 1973 we were advised that "Darcy wouldn't sit still for" the above considerations, that is the relationshrns to the t.ransportation phasing and housing. and as you know Mr. Brown is the president of the Aspen Skiing Corp.~ and that the permit would be transferred without such conditions, that it was "too late." I elab- orated on this transaction in my transmittal letter to Frank I-Terr- inger, the UMTA administrator, March 15, 1975, and in the accom- PAGENO="0061" 57 panying memorandum incorporated in that application at page IV-46, UMTA Pitkin County Light Rail Transit System, CO-03--008, in the context of a Federal impaction observation. The permit was presumably transferred without any such conditions in December of 1973. Four: In 1974 the county signed an intergovernmental cooperation and consultation agreement with the Forest Service, which has been materially breached: (a) The Forest Service and the permittee re- fused to obtain locally required building permits and special review zoning approval for lift and parking lot expansions, either as a mat- ter of comity or as a legal requirement. This is contrasted with the assurance of the Forest Service that permittees would be required to meet "all local regulations," and that's supposed to be set forth in these permits, which may or may not be there; (b) the Forest Serv- ice failed to consult with local governments in connection with the proposed 1976 lift rate increases, and when confrOnted by local gov- ernments, refused to take into consideration that the Vail permittee was voluntarily contributing substantial funds to skier transporta- tion, while tl.ie Aspe.n permittee refused to do so, but would receive the same rate increase. Five: The matter came to a head this summer when the county manager, the city manager and I confronted Tom Evans, the Forest Supervisor, White River National Forest, with what we regarded as his history of evasion and insensitivity to impacts being caused by ski area permit activities and suggested that unless the Forest Service became far more responsive to these needs, we would officially request his reassignment and the reassignment of Mr. Lucas, the Regional Forester. Mr. Evans again professed himself powerless to intervene. Perhaps he was, but our experience had been different with Mr. Burns before he was abruptly "promoted" in the midst of the Snow- mass transfer proceedings. I submit that this is not a history of intergovernmental corpora- tion, or has even fleeting attention been given to compliance with the National Environmental Policy Act on questions of major social and economic impacts affecting this community. On the contrary, it is a history of intentional noncooperation, deflection, and evasion. Neither the county commissioners nor the elected officials in the city adminis- tration are novices in the governmental processes, State or local. We know very well when we are being cooperated with, and we know very well when we are required to file written interrogat.ories in order to ask specific questions and obtain specific answers. I would like to comment again or at some length, if I may, on the relationship of the Skiing Corp. I have not and will not join in the chorus of local people or others who have attacked the local ski cor- porations, particularly the Aspen Skiing Corp. I might add our re- ]ationshi.ns have never been very good, hut I don't want to join that chorus. I have not done this because I have no illusions that any business organized for profit is going to protect the public interest. That duty rests with the Forest Service. unpopular as it may seem at the moment, I would like to commend the Aspen Skiing Corp. for what they have done. They have shown far more sensitivity to their local impacts than the Forest Service has, and it can be argued that PAGENO="0062" 58 they have far less obligation to do so. The Aspen Skiing Corp. has loaned the local government some of their top management personnel to assist us in formulating a transportation plan, and have now agreed, voluntarily, to share in the funding of the transit system with substantial front-end capital contributions and equally substan- tial long-term operating cost commitments. The same comments apply to a somewhat lesser extent in the case of Aspen Highlands Skiing Corp. Indeed a case can be made that these businesses have demon- strated more tangible evidence of sensitivity to local problems caused' by skiing activity than the Forest Service has. Unfortunately, had the Forest Service had this sensitivity when requested, they couki have suggested these contributions officially long ago. Why is it that the Forest Service is not able to recognize these concerns when these' for-profit corporations are Unfortunately, the failure of the Forest Service to require the various parties to address the problems of housing, growth phasing, and transportation may well have jeopardized our ability to otbain an U.M.T.A. grant, solely because of the delay in reaching agree- ment with the skiing corporation. Hopefully Senator Haskell's recent recommendation of our application, and his good offices will permit us to see U.M.T.A. this fall and salvage the application. In conclusion then, I suggest that section 2(b) of the proposed bill be retained and enlarged to include clear references to the National Environmental Policy Act; require compliance with it in case of issuance; material modification and termination; and that the bill provide an opportunity for local and other governments, to discipline the process, judicially if necessary. I further suggest that the history of administration of these mat- ters does not justify 20- or 50-year permits. Rather, processes similar to those used by the Federal Communications Commission requiring' periodic and not less often than 5 years community assessment, miti- gation, and revision should `be adopted, and others wishing to provide the service should be given an opportunity to make their proposals' for use of the permit facilities. I further suggest that the concept of "Federal impaction" applies' as equally to communities containing Federal ski areas as it does in the case of those containing army bases. Under this concept, reim-~ bursements are made to local governments to defray the `ocal govern- ment cost created by these Federal activities. Without intending to suggest any particular mechanism, I would recommend consideration of a requirement that accurate cost-benefit analysis must be made periodically, and I would suggest by the, Forest, Service and the per- mittee, and that the permittee be expressly required to mitigate en- tirely as many of the housing, transportation, and other offsite capital impacts as possible. To the extent thatthese costs cannot be mitigated directly by the permittee. the Forest Service should either retain the Forest revenues for reimbursement of local, StateS and Federal-State support costs [see table I] before it remits any other revenues into the National Treasury; or that local, State, and Federal governments allocate the Forest revenues at the same ratio that they have contrib- uted to providing the capital demands created by the activity. PAGENO="0063" 59 I would further suggest that it is essential to have full and open disclosure of the ratemaking process and the data on which it is based; that this process should include questions of whether addi- tional mitigation costs justify rate increases; and that this process be subject to traditional administrative and judicial discipline. I suggest that your influence might help to mitigate the 2-year rotation of forest rangers, not to mention abrupt promotions and~ transfers of those whom we have successfully seduced into going- native with us. Finally, I suggest whatever revisions of Forest Service personnel and management attitudes are necessary to eliminate the appearance that ski area permittees are acting out of charity when they volun-~ tarily make contributions to mitigate their own impact. It is much more forthright to have the Forest Service require them to acknowl- edge these costs as a cost of doing business and to pass them on to- the consumer wherever possible. Where passing these costs on to the consumer would result in Un- justifiably high rates, a serious look should be taken as to whether the expansion of the recreation facility can be justified in the face of such enormous local, State, and Federal support costs. I again commend your attention to table I, which contains fairly hard cost figures as to what the Pitkin County community is facing to meet its perceived need today and accommodate approximately a 3 percent growth rate per annum until about 1990. I appreciate very much the attention you have given to these ex- tended remarks. I hope you have enjoyed your experience in Pitkin County and it has impressed you sufficiently to take whatever steps necessary for the enjoyment of subsequent generations. Thank you, sir. Senator 1-TASKELL. Thank you very much for a thoughtful presenta-~ tion. I think I have interrupted you as we went along and asked most- of the questions I wanted to ask, so I will simply thank you very much. Mr. SHELLMAN. Thank you, sir. Senator HASKELL. Our next witness will be the Honorable Michael Kinsley, county commissioner of Pitkin County. STATEMENT OP MICHAEL KINSLEY, COUNTY COMMISSIONER,. PITKIN COUNTY, COLO. Mr. KINSLEY. This is the first time I have been called honorable so~ far. My name is Michael Kinsley. I am a Pitkin County commis- sioner. I have only been in that position 3 months. Previously to that I was the director of the IRoaring Forks Citizen, whi~h was the or- ganization which at least in part precipitated these proceedings,. which I think maybe that description indicates some of my biases. I am going to address primarily section 4(c) of 2125, which deals- specifically with rate increases. My concern here is that the criteria which will be set forth in the regulations promulgated by the Secre- t.ary of Agriculture which deal with rate increases include that any- proposal for rate increases take into consideration the impact of th~ increase upon all the~ commuiuity that shall be specified therein and that such regulations be subject to the approval of this subcommittee. PAGENO="0064" 60 Further, I propose that the regulations be circulated for review and comment by the public. I guess what this comes from is my fear that the regulations. could be designed to do what they have been doing all along and so that this review process would mitigate that possibility. The purpose of these changes is to provide a mechanism for the consideration of reasonable prices for residents in communities di- rectly impacted by ski area operations. These reasonable prices should be in the form of season passes available to everyone. I might add here that if you look at it on its face,. especially pos- sibly if you do not live~ in this community, it may seem unreasonable to say that there should be a break given to local people, that these people are saying they don't get much in wages and therefore they should be given a break. Well, first of all, to say that in mitgation of that is for the wages to be raised really denies what is reality. When these people are will- ing to do the kind of jobs that are being done, service jobs which necessarily require very low wages for them to be viable with those businesses, it is an inherent situation that these people be paid lower wages and in addition to that these people are buying in a monopoly ski market. That is there are four ski areas they are dealing with and that is in effect a monopoly for the people in the local area. I might add, too, that the people who created this, I think who probably precipitated these proceedings, the kind of spirit and energy that did that, is the kind of spirit and energy which is what Aspen is and which is at least in part what attracts people to this community, which is why people come here and sit at Cooper Mountain or Vail, or wherever, that this is a unique community and they create that uniqueness. Senator Haskefl said, in introducing his bill, "Any business which holds such a permit is uniquely affected with the public interest," and what I am submitting is that this effect is most unique and most sig- nificant in the community which serves the ski operation. A ski com- munity is, in effect, a company town. It is. affected by the ski opera- tion as dramatically as any community in the vicinity of a military installation, for instance, in the vicinity where Federal assistance is given. The impact of the ski operation upon the local community is unique and therefore pricing with regard to that community should be uniquely considered. The ski operators should be particularly responsible to the ski community which is probably where I diverge from Mr. Sheilman in his opinion. I think that the ski operator is particularly responsible to the people of the community and I am also generalizing in saying ski community rather than saying Aspen, because I think this applies probably to many if not most of those 170 ski areas on public lands that you described, and that possibly those communities haven't come up with the kind of opposition as has happened here just because of the uniqueness of this community that has been precipitated by the spirit and energy which I was talking about before. The reason that I suggest that the bill snecify consideration of local community impact and public review of the regulations is that the Forest Service locally has a history of excluding the public. That PAGENO="0065" 61 us (1) excluding the public fiom its decisions, and, (2) ignoring off site impacts, and this is maybe a little bit redundant based on some of the previous testimony, and I haven't really experienced some of the responsiveness that the Governor has and the U.S. Senator has with Chief McGuire. The Forest Supervisor at first refused to write an environmental impact statement on a proposed major ski area at Marble, Cob. After finally formulating the EIS, he refused to hold public hearings. In addition, the EIS totally ignored offsite impacts. In this case, it would have included the expansion of the population of the town from less than 100 to 25,000, which I submit is significant. Senator TiA5KELL. Do you happen to know when that EIS was prepared, what year? Mr. KINsLEY. 1972, April, I believe. I can give you- Senator I{ASKELL. This bird just plain ignored the law if lie didn't take into consideration offsite impacts. Mr. KINSLEY. Yes, sir, it is interesting if you read NEPA in the very broad manner, I think you could put together a case to say in this particular case of a rate increase an EIS would be required be- cause NEPA applies to both social impact and offsite, and the court has sustained the need for EIS's in both social impact situations and offsite impact situations. It has not, however, yet sustained any case for both-well, for an offsite impact which is only a social impact, so that may or may not be the case here, which is marginal. Continuing this history of unresponsiveness of the Forest Service, the supervisor again refused public hearings on this particular con- dition and when we went to see him, the Roaring Fork Citizen went to see him, he said at that time, "This is not a voting situation." That's how he responded to what he thought about a public hearing, and what I would submit is that it is a voting situation, but the only people who got to vote were the ski operators, simply the local com- munity is not being represented, and I think this is a really funda- mental issue and really appropriate to come up at the time of the Bi- centennial. Do the closed decisions of a bureaucracy and a corporation control the community or does the community control itself? And I think that's what they were asking 200 years ago, and I suggest that your bill answered the question the way it was answered 200 years ago-creating government decisions which are responsible to the community. The Aspen Skiing Corp. has cited increased costs and overcrowding as reasons for rate increase. In an initial letter to the Forest Super- visor from the president of the Aspen Skiing Corp. dated December :31, 1974, however, only rising costs are cited. There was no mention of overcrowding, and I submit that the overcrowding was only an excuse that was later put in in a response to the public outcry. Clearly, increased profit was the reason for the rate increase application, which is fine.. You know, certainly I wouldn't oppose reasonable 1)rofits. In addition, I do not deny that there is a very real need to deal with overcrowding, but then the question for me becomes do we .need mar- ket restraints to reduce pressure on these public lands and in doing so exclude the user who can least afford it, or do we use mechanical re- straints and allocate the resource equitably? 67-512--76---5 PAGENO="0066" 62 The question is no different here than with any valuable limited resource. Oil or skiing, each is in limited supply with great demand. DO we simply raise the price, excluding those who can least afford it and allowing a few corporations to reap the profit from those con- ditions? Skiing can be rationed. It is done elsewhere. The North Star Ski Area in California allocates a certain percentage of their ski capacity each day to season pass holders, the balance is provided for the visi- tors. This specific operation is on private land, but I submit that the Forest Service can provide a similar program on public lands. This is only a suggestion as one possibility of a mechanical type of restraint. The regulations promulgated by the Secretary of Agriculture as de- scribed in section 2(c) should includeS mechanical restraints on skier use. Thank you. Senator HASKELL. Thank you. I might just mention, Mr. Kinsley, that any regulations that would be published would require publica- tion and a hearing under the Administrative Procedure Ac.t, and whoever this guy was that did this Marble situation was just plain ignoring the law. I appreciate very much your statement and your suggestions, with particular emphasis on local impact, which I think has to be taken into consideration, so thank you, sir. Mr. KIN5LEY. Thank you, Senator. Senator HAsKELL. Our next witness is Mr. Allan Blomquist, Pitkin county manager. STATEMENT OP ALLAN BLOMQUIST, COUNTY MANAGER, PITKIN COUNTY, COLO. Mr. BL0MQuIsT. Senator, I will vary some from my prepared re- marks to cut it down. Senator HASKELL. And your prepared remarks will be included in full in the hearing. Mr. BLOMQUIST. Yes. Basically, the goal that I am going to direct my attention to is a possible mention of shifting some of the burden of cost -for the various impacts on this particular community more to the user. The burden often today is carried by the resident taxpayer to a less than desirable extent, and in doing this I am going to first recognize that Congress has recognized responsibilities of the United States for what the Congress has variously been calling "Federal impact," particularly as applied to tax exempt military bases, public housing and so on, and in those cases the Congress has provided in various enactments for payments in lieu of taxes for obvious cases of Federal impact on Federal installations. A second part of what appears to be Federal policy is that the Congress tends to avoid the issue where it is asked to consider and help alleviate the impact of Federal land without improvements. In that case, the local response is the relatively weak association of public land counties and their unanswered plea for significant payments in lieu of taxes for the impact of Federal lands without improvements. This is not to deny that Congress recognizes that timber cutting, skiing, mining, grazing and other U.S. Forest Service permit activi- ties by enterprise should and do pay something to local government, PAGENO="0067" 63 but to~ argue that~ it only provides a very low level of inadequate tokenism represented by certain U.S. Forest Service payments to local government. The third aspect of Federal policy is that the Congiess authorizes the second-home condominium phenomena as a tax writeoff, also as a method of accumulating capital for projects, and this is a stimulant to frenzied construction in delicate mOuntaiim valleys such as ours, the result often remaining vacant for many months at a time. Fourth, the Congress owns the hills and has left the valleys in pri- vate ownership in most of the mountain counties. The effect there is to arbitrarily create a finite supply of private land upon which the law of supply and demand can then go to work. And, fifth, there is in various Federal criteria, particularly for the categorical grants, very often discriminatory language against moun- tain resorts and national recreation resource areas. It is substantial, but, for example, the criteria on poverty in effect say that if the in- come is such and such, then you have met the criteria, and does not include provision for the effect as in Aspen of having the highest cost of living in the Continental United States, which obviously has an effect on what the local social problems might be and whether Or not we should be eligible for particular Federal grants, so that there seem to be at least five areas where a place like this particular valley finds it is facing a combination Of some five policies or activities of the Congress whiCh seem to be working at times with and against each other to create part of the chaos we have been talking about this morning. I noticed just in the Federal Register that these policies are as- sumed to be somewhat modified to the extent that the Office of Man- agement and Budget proposes to amend Circular A-95 to encourage ~gencies, federal agencies granting licenses and permits affecting area development or the physical environment, to "consult with the local and State clearinghouses on applications for such licenses or permits." I think it is significant that that 0MB circular does not propose to require such activities and avoids consulting directly with each local government, for it is the local government that provides the services, has to raise the taxes, not the clearinghouse, but it is a start. Now, let me just describe an example of what most people don't want to talk about, and that's the indirect impact. For the last 7 years I have been taking 35 college students in my urban studies institute class in a bus over the mountains to look at Vail and Aspen which for years had been heralded as new towns surrounded by greenbeits. This was supposed to be several years ago the solution to all the urban crises, a greenbelt town. In this case, these two towns, the only two good examples in Colorado of this type of planning phenomenon nat- urally are surrounded by a greenbelt of public lands, in this case U.S. Forest Service lands. I then showed the students a vibrant economy based on the combina- tion of the Forest Service ski area permit and the condominium tax write-off and other phenomena associated with that arbitrary growth mechanism. I then showed them the effects of that Federal action on land prices, how the law of supply and demand nushes the site for one house in some cases to the $50 and $75,000 level, and the situation PAGENO="0068" 64 is not near what it was 7 years ago, as most people in this room can testify. There has been change taking place. . Then I drive the student body through Minturn and Redšliff, where the Vail worker lives. Finally, we drive to Aspen, through Basalt and El Jebel and other places in the adjacent counties where the Aspen workers live. As we drive the Highway 82, the student experi- ences the only way, the daily dangers he has to face on this valley, and observing this now every year for 7 years has been a most inter- esting experience as change has been moving through the valley, and I cite this as an example of an indirect impact which very often we choose not to want to address. Next, the 1975 Pitkin County. budget is at the 4.5 million level, and of that the four ski mountains pay approximately $30,000 in property taxes. This is toward the county budget. I am not including the pay- rnent.s toward education and so on. About $12,000 to $15,000 in sales taxes and an unknown percentage of the some $50,000 in U.S. Forest Service payments. My difference in the numbers from the ones Stacy gave is that I am including some mining figures and so on, and this comes to an ab- solute maximum of some $92,00 total, but probably more likely $70,000 to $80,000 when the Forest Service payment is discounted from min- ing, lumber, grazing and so on. That total is less than 2 percent of the county's $4.5 million budget, and we call*that federally sponsored tax avoidanceby our largest industry, biggest payroll and user of the biggest parcel of real estate and so on, and we know, of course, that the bulk of this re.a.l estate for the ski industry is on tax exempt property. .. My conclusion and principal . recommendation for amending the bill is that more than consulting or~ discussing or giving notice or token payment should be required in the issuance of any permit for a ski area. First, no permit should be issued or renewed by the U.S. Forest Serv cc unless and until all impacts have been identified and not just the environmental impact. Physical impact analysis on the full spectrum of local government services be inchided t.o be thorough and complete, and not include just the direct impact like the parkinglots, but also the indirect impact such as the price spiral on land. Senator 1-JASKELL. Such as what? Mr. BL0MQUIsT. The price spiraling on land, which I am using as an indirect impact. Second, no permit should he issued or renewed by the U.S. Forest Service until and unless it has passed all local plannIng and subdivi- sion tests and is specifically authorized by the local government hav- ing jurisdiction. The State winter resources planning effort that's going on now and others have indicated that the development process starts at the local level. This is where the first thing occurs. Then there. should probably be a second level checkout at the State and finally a Federal action at that point: later in the stage, rather than before. This references the ti mi rig problem. Third, no nermi.t should be issued by the USFS until and unless all direct and indirect fiscal impacts have been evaluated and local government levy in lieu of taxes has been added on the permit fee PAGENO="0069" 65 structure. This structure should be in an amount or at a rate suf- ficient to reasonably cause the permittee to help defray an equitable proportion of the local government expenses attributable to the iden- tified direct and indirect impacts.. I use the words "levy in lieu of taxes" because in the bill you pro- vide for "fee," but that immediately works into the Forest Service formula whereby the fees collected from all their permits are merged into a general fund for the entire forest, then I believe reallocated back to the counties in proportion to the acreage of the forest in each county, rather than in proportion to the impact or equipment or in proportion to the location of the source. of those fees, and so just dealing with the fee alone automatically adopts the existing formula for the distribution of those funds, which is really what I am talking about at. this point. Fourth, it seems to me that the bill should make the local, State and Federal governments co-equal partners in the permit process~ not just in the study statement, hut also in the decisionmaking process itself, and here I see a very serious weakness in the bill as it currently stands. It does not seem to strengthen our federalism and the partner- ship concept in as strong a way . as I would like to see it.. In other words. I . think the business of co-equal partnership at the permit table would be to avoid much of this delayed reaction like the Beaver Creek thing coming so late in the process, and one weakness. I felt in the bill was that by sending it to the Congress immediately on the two large area provisions that went for a 60-day period~ I think what would happen is that it will get there. You might allow it to pass without saying anything or you might possibly say t is a crood proleet and it would he too early in the process and all of a sudden Beaver Creek and Marble would erupt later, and if you are the local Senator you would feel embarrassed at that point. I think there is a way of getting a staging of review process so as the senior elected of- fic~al in the chain of t.l~e Congress is really in a position to have the full case before it before it were to be involved in such a process. In conclusion, lOcal government is called upon to nrovide all man- ner of services to rnitigat.~ the impacts of skiing. We do not believe it is right to ask the local homeowner or local rancher to continue to pay for all of those impacts. They have been doing that for years, and as a consequence now in Pitkin County they tell me there are only about 12 honest to goodness full-time ranchers . left in this county. They tell me that some 30 percent of the work force in this valley is living down-valley and that the number appears to he in- creasing at between 10 to 20 percent a year in terms of the move clown-valley, out of this high land price valley, and commuting from the two adjacent counties. I would submit that is not a good track record for the Aspen area ski permit imnact history. We believe it is time the user~ especially the 92 percent. who come from out. nf state for skiing. starts to pay for his impacts~ and while the 21L000 skiers that come here in a season should nay more, we are the first to admit that they are already doing better than the 1 million summertime climbers. campers. hikers and si ghts~evs. and s'i on t.h at come into this valley for shorter stays, and I would like at this point to suggest or tell you that we have not fully studied this summer rec- reation on Forest Service land and its impact and the costs related to PAGENO="0070" 66 it. It is much easier to identify the skiing at this time, but we do have studies now underway to try to determine exactly what the cost bene- fit ratios are, what the impacts are of our summer business, and the various ways in which we can begin to deal with them. In conclusion, I would like to suggest that the committee look into this question of the free summer use, and if there isn't some way, whether it be through revenue sharing or some other tack to the in~ come tax or something of that sort, to help mitigate some of the ex- penses associated with the summer visitor. We took a lady off of on& of the mountains this summer. The helicopter bill was $3,000 to re- move the body. This is not an expense associated with hiking and camping and viewing the scenery in most folks' minds, but it is the kind of expense that is associated with summer recreation, and per- haps you might want to give consideration to the public service deficits resulting from summer recreation, as well as skiing. Thank you. [The prepared statement of Mr. Blornquist follows:] STATEMENT OF ALLAN BLOMQUIST, PITKIN. COUNTY MANAGER My name is Allan Blomquist. I am the county manager for Pitkin County. I will not speak directly to the lift rate issue since our associates from the city of Aspen are addressing that matter. In addition to the lift rate issue, the Haskell bill (SB 2125) deals with other matters involving United States Forest Service permits, and it is to such other matters that I will direct my attention. Contrary to. the image created by our rich display of fall color, the roads of Pitkin County are not paved with gold. First my concern is with the relatively tax-exempt status of ski operations on Forest Service land and the extent to which the United States thereby encourages tax avoidance to the detriment of the services necessarily provided by local governments impacted by ski area development. Pitkin Countyservices 25% of all Colorado skiing, and also ranks as the largest ski resoiir in the world. It would therefore seem that if anyone can speak to the impacts of that innocent sport called skiing, we in Pitkin County can. Your decision to hold the hearing here in Aspen reflects on that fact. I could take an hour to describe those impacts, but let's go to the heart of the matter-tax avoidance as enabled, mandated, and encouraged by the Congress of the United States. First, Congress recognizes its own responsibilities for what it calls the "Federal impact" of tax-exempt military bases, public housing, etc. In those cases it pro- vided for "payments in lieu of taxes" for obvious cases of Federal impact by Federal installations. SECOND, Congress deliberately avoids the' issue where it is asked to consider and help alleviate the impacts of Federal land without improvements. The local response is' the relatively weak association of public land counties, and their unanswered plea for significant payments in lieu of ~taxes for the impact of Federal land without improvements. This is not to deny that Congress recognizes that timber cutting, skiing, mining, grazing and other United States Forest Service permit activities by private enterprise should pay something to local government, but to argue that it only provides a low level of inadequate tokenism represented'by certain U.S.F.S. payments to local government. THIRD, the Congress authorizes the second-home condominium, phenomena as a tax write-off `and stimulant to frenzied `construction in delicate mountain valleys such as ours. FOURTH, The Congress owns the hills and has left the valleys in private ownership in most of `the mountain counties. The effect is to arbitrarily create a finite supply of private land upon which the law of supply and demand can then go to work. These four policies of the Congress work with and against each other to create a local chaos comprising hundreds of subtle and expensive `impacts. I am heartened that these policies are soon to be challenged by O.M.B.-OMB proposes to amend circular A-95 to "encourage" agencies granting licenses and PAGENO="0071" 67 permits affecting area development or the physical environment "to consult with clearinghouses on applications foi such licenses or peimits NOTE-That 0MB. does not "require" and avoids consulting direct with each affected loca' government.. . . but it's a start! For the last seven years I've been taking 35 Colorado college students in my urban studies institute class in a bus over the mountains to look at Vail and Aspen as examples of "new towns" surrounded by a greenbelt of public land, in this case United States Forest Service land. I show them a vIbrant economy based on a simple U.S.F.S. ski-area permit and condominuin tax write-off rule. I then show them the effects of that Federal action on land prices- how the law of supply and demand pushes a site for one house to the $50,000 and $75,000 level. Then I drive them through Minturn and Redcliff where the Vail worker lives. Finally we drive to Aspen through Basalt, El Jebel and other places in adjacent counties where Aspen workers live. As we drive the 25 to 50 mile commute on highway 82 the students experience the daily dangers that are the only way a working man can make it if he works in Aspen and has to over- come the Federal land price impacts on this valley. The 1975 Pitkin County budget is $4.5 million. Of that, the four ski mountains pay: about $30,000 in property taxes; about $12,000 in sales taxes, and an unknown percentage of the paltry; $50,000 in U.S.F.S. payments-for an absolute maximum of $92,000 total-more likely $80,000 when the U.S.F.S. payment is discounted for mining, lumber and grazing. That total is less than 2% of the county's $4.5 million budget. We call that federally sponsored "Iaa avoidance" by the valley's largest industry, biggest payroll, and user of the biggest parcel of real estate. We note, of course, that the~ bulk of the real estate used for a profitable ski industry is United States Government tax-exempt property. My conclusion and principle recommendation for amending the bill is that more than consulting or discussing or giving notice or token payments should be required in the issuance of any permit for a ski area. FIRST, no permit should be issued or renewed by the TJ.S.F.S. unless and until all impacts have been identified. . . . and not just environmental impacts. Fiscal impact analysis on the full spectrum of local government services must be included, and be thorough and complete . . . including not just direct impacts but also indirect impacts. SECOND, no permit should be issued or renewed by the U.S.F.S. until and unless it has passed all local government planning, zoning and subdivision tests and is specifically authorized by the local government having jurisdiction. THIRD, no permit should be issued or renewed by the IJ.S.F.S. until and unless all direct and indirect fiscal impacts have been evaluated and a local government levy in lieu of taxes has been added to the permit fee structure. This structure should be in an amount or at a rate sufficient to reasonably cause the permittee to help defray an equitable proportion of the local gov- ernment expenses attributable to the identified direct and indirect impacts. In conclusion, local government is called upon to provide all manner of services to mitigate the impacts of skiing. We don't believe it's right to ask the local homeowner or local rancher to continue to pay for those impacts. They've been doing that for years and as a consequence now there are only 12 full-time ranchers left. 1/3 to i/2 of the workforce is living downvalley and commuting daily from two adjacent counties. That's not a good track record for the Aspen area ski permit impact history. We believe it's time the user starts to pay for his impacts. While the 211,000 skiers should pay more, we are the first to admit that they already are doing better than the 1,000,000 summertime climbers, campers, hikers and sightseers. The law governing U.S.F.S. payments in lieu of taxes to counties was first passed on May 23, 1908. Folks weren't doing much skiing then. We believe, commensurate with condi- tions prevailing now in the mid-seventies that it's time for a change. Thank you. Senator HA5KELL. Now, we have completed the list of public of- ficials. I would like to remind you if we can keep each individual's remarks to 5 minutes, it would be very helpful, because we do have PAGENO="0072" 68 a lot of people to hear from. Anybody who has written testimony who wants it to go in the record, please let us have it, because it will be included in full in the record. The first group is a panel of professional ski instructors, Don Lemos of the Independent Ski Instructors AssociationS Jill St. John, Aspen, Colorado, Maggie McMahon, Professional Ski instructors As- sociation, and Charlie Paterson, past president, Rocky Mountain Ski Instructors Association. STATEMENT OF DON LEMOS, INDEPENDENT SKI INSTRUCTORS ASSOCIATION, ACCOMPANIED BY JILL ST. JOHN, ASPEN, COLO.; MACGTE McMAHON, PROFESSIONAL SKI INSTRUCTORS ASSOCIA- TION; AND CHARLIE PATERSON, PAST PRESIDENT, ROCKY MOUNTAIN SKI INSTRUCTORS ASSOCIATION Mr. Lr~ios. Good morning, Senator Haskell, ladies and gentlemen. Before I start, I would like to reassure you that while there is much written testimony for tl e record, this p'tnel s testimony will be b~ ief and is directed spe˘ifically to the issue of independent ski instruction. My name is Don Lemos. I reside in Aspen, Cob., with my wife and two children on land I have owned for 10 years. I have lived here for 15 years. I am a fully certified ski instructor in both the United States and France and have taught skiing for 15 years. I am a mem- ber of the Professional Ski Instructors of Colorado. I have taught skiing in Chile. I am able to conduct ski lessons in Spanish. I am an avalanche qualified ski instructor by the U.S. Forest Service. I am an expert in the field. Senator, I want to begin by thanking you for taking an interest and holding these hearings. A bureaucratic agency tends to hang on to tradition, and I am enthusiastic about your proposed bill shaking that tradition and creating a forest bill that is truly receptive t.o our continued needs. My particular expertise regards the realm of ski instruction and.I propose a change for the better regarding that field. Presently if a ski instructor wants to conduct ski lessons, lie must be- long to a school and cannot operate on his own. This system is be- coming archaic and is holding back the ski instructor and depriving the public. I propose a change in this tradition, a change that will benefit without harming additional service, rather than a substitute for what already is. As U.S. skiing growth accelerates~ there is room and public need for an independent class of instructors as h~s long existed in several of the advance alpine skiing countries of Europe. I have proposed that the Forest Service grant independent teach- ing permits to qualified skiinginstructors under controlled cond~tious, and I will state some of the conditions. A ski instructor in order to even apply for a permit must be fully certified. He must have liability insurance. He must bring his own clientele and not solicit at the area. He will be limited to private license only up to three students. He will not hire other instructors to work for him, hut rather work as a personal tutor. He will not start his own ski school. He will display identification showing that he is a permitted independent. He will negotiate with the ski area to pay them a fee in return for a lift ticket and/or lift line-cutting privileges. However, if no terms can be PAGENO="0073" 69 worked out, he may teach providing he~ buys a ticket or pass and abides by all the rules and regulations of the area. Sen'~tor, these stipul'ttions aie designed to protect the public, not undermine the existing ski school, and upgrade the professional aspect of ski i~Sti uction I behe~ e `my fears regal ding this system to be un warranted. In Aspen there are oily about 40 fully certified ski in- structors actively teaching skiing out of maybe 300. Realistically, say ten percent of these fully certified instructors were independent, the fear of the ski areas that "We will lose our ski schools" is unfounded. My written testimony that has been submitted is quite extensive and I hope you go over it carefully to understand the issue fully and see what ski instructors have been battling for years through harass- ment and arrests. My intention however today is to provide you with a gut feeling of the issue, an issue I believe to be at the very core of what our country is all about, the issue of a right of an American citizen to earn his livelihood and his chosen profession in a free enterprise system on public land and the issue of the public's right to utilize a qualified person of their choice to help them better enjoy that land. The instructor can offer services not normally provided by the ski schools to the rank of the public and lie can provide them with a price alternative which is most certainly to the best advantage of the public. Senator, I make the analogy of the fact that the ski area may have the exclusive right to conduct certain businesses at the area like the exclusive right to operate an onsite business such as a ski rental shop, but does this preclude someone from renting skis from someone off the area? Why cannot someone rent a ski instructor to be used on the area just as rental skis rented off the area are used on the area? The Forest Service can right now without changing any of its reg- ulations institute the independent permit system, and I ask of you, Senator, perhaps you can confer with the Forest Service to work out an amicable solution. Also I urge that you include specific language- there is mention of it and I would like it to be more specific-include in your bill language that will definitely permit ski instructors to conduct ski lessons in conjunction with the existing ski schools Senator, I thank you for hearing me and if you have any questions, I would certainly be glad to answer them. Senator 1-JASKELL. Who says that, assuming I am qualified, which I am not, hut assui˝ing I am qualified, I can't teach on a ski area?. Who says that? Mr. LEMOS. Senator, there is a regulation that the Forest Service has that says in order to conduct a business on government land you need a permit. OK, I went to the Forest Service and I asked them for a permit to teach skiing. They said, "We can give you one, but we won't." Senator HASKELL. Why not? Mr. LEMOS. I would like to know. Senator HASKELL. Well- Mr. LEMOS. Senator, excuse me, they do give a reason. They say that, "We have given the ski corporations a permit to operate a ski area and included in that permit we have authorized them to conduct ski lessons and we have to protect their investment and provide them PAGENO="0074" 70 with complete control and power of everything that happens on the area." Senator HASKELL Well, it seems strange Th'tnk you very much Mr. LEMOS. Yes, sir. [The prepared statement Of Mr. Lemos and accompanying docu- ments follow:] STATEMENT OF DoN LEMOS, INDEPENDENT SKI INSTRUCTORS AssoCIATIoN, ASPEN, CoLo. My name is Don Lemos, Box 321, Aspen, Colorado 81611. Phone number: 303-923-4762. I have lived in Aspen for 15 years and have been a ski instructor for 15 years, teaching in the Aspen area. I have been a fully certified ski in- structor since 1963, a member of the Rocky Mountain Ski Instructors Assu. (RMSIA) and of the Professional Ski Instructors of America (PSl~A) I taught skiing in Chile, and am also a French Certified Ski Instructor. I attended several U.S. Forest Service avalanche training schools and am "Avalanche Qualified" by the U.S.F.S. For seven seasons, 1961-67, I worked as a ski instructor under the various existing ski schools in Aspen. In 1968, after leaving the Aspen Highlands to teach skiing at Snowmass under Stein Erickson, I was informed by Stein that because of a hassle I had with Curt in 1964, his boss, DRC Brown, the President of the Aspen Skiing Corp., and Curt Chase, the Director of the Aspen Ski School had gotten together and "blackballed" me. I continued to teach, how- ever, on my own, "underground." I did this for three years without much con- cern from anyone, other than an incident at Snowmass in Dec. of 1968 where I was told I could not ride the lift, but insisted and won, until a news item was released by the local forest ranger declaring that conducting ski lessons with out a permit was illegal. This was published in the Spring of 1970. Next, I applied for a permit to teach skiing on areas already under permit, as there is no other place to teach Alpine (downhill) skiing. I was told I could not have that permit, but could have one to teach in other parts of the Forest. I applied for that, hut when I received my copy it was so prohibitive that I did not accept it. It prohibited the teaching of alpine skiing by its restrictions, such as not being allowed to use any form of uphill transportation in connection with the permit. I then, for a year, pursued the Forest Service administrative chan- nels to re-consider and grant me a permit. This they refused to do, and a law suit was filed asking that they grant the permit. The suit was filed in Wash- ington D.C.~ transferred to Denver, Ruled adversely, upon summary judgement, and then appealed to the 10th Circuit Court of Appeals. The 10th Circuit re- manded the suit to District Court for a re-hearing on the anti-monopoly grounds, and it has not as yet been re-scheduled. I am working on not having it re- scheduled. but rather on having the suit returned to the Forest Service for re- consideration. I presented guidelines to the court and to the F.S. under which the competency of the Independent Instructor would he guaranteed, and the public protected. One of my proposed conditions is that the Independent would have to purchase insurance. The District Court held that this would be un- feasible. I enclose a copy of the insurance that I am now purchasing. Prior to the 1970-71 ski season I negotiated a deal with the President of Aspen Highlands to teach skiing on an Independent basis. This worked just fine for about one month, until he cancelled out on our deal. This led to an alterca- tion at the Highlands and a lawsuit in which I did not prevail. On Feb. 15, 1971, while skiing with three girls. friends. I was told by Pick McCriidden, an Aspen Ski School Assistant Director and head of the ski school at Buttermilk where this incident took place, to "knock off the teaching ri~ht now, or you'll be denied use of the lift." I informed Mr. McCrudden that I hail a valid season pass and to not bother me. and continued on my way. When I attempted to hoard the chair at Buttermilk West. which is entirely on Forest Service land, the lift was turned off and I was told I could not go up. I refused to move until the lift was started. Four ski patrolmen approached to physically move me. amid I asked that the sheriff he called. They backed off. however sev- eral touri~t~ removed their skis and two of them inmued m~ and a ~`niffle en- sued in which I prevailed. After 45 minutes the lift was started and I boarded. PAGENO="0075" 71 Two nights later I was pulled out of the restaurant where I worked as a wine steward by the sheriff who had a warrant for my arrest on a criminal trespass charge. I posted $100 bond and was released. The next morning I attempted to go skiing on Ajax or Aspen Mountain as it is now called, and I was arrested again. I'm still, to this day, not sure of the charge. This time my season pass was confiscated, as it was not the night before, and I was released on $1,500 bond and had to put my land up in order to be released. This all happened on the weekend, and on Monday, when I was scheduled to be arraigned and I appeared in Court, there was no judge, but only the Deputy D.A. and the Ski Corp. Attorney, James Moran. They said, "look, we want to avoid trouble around here. If you'll sign a statement that you won't teach for money or for free, we'll drop all charges and re-instate your pass." I refused to sign anything, and the charges were dropped anyway. They did not return my pass, however, but did permit me to buy a daily lift ticket at a great, double expense to my- self. I also proposed that, since I wanted to teach skiing, the Aspen Ski School permit me to do this and thus resolve our problems. Nothing ever came of my efforts to negotiate a settlement and I continued to ski for the remainder of the season by buying a daily lift ticket. I eventually hired an attorney to pursue the matter and he got me a refund of $65.15 from the Corp. as a prorated share of my season pass, after charging me $200.00 to do this. There were two other incidences in the 1970-71 ski season. One, sometime after my pass was confiscated and negotiations to teach skiing were dead, I boarded the lift at Little Nell, Ajax, without purchasing a daily ticket. When asked where my pass was, I said "call the ski corp. office, they have my valid season pass." With this I quickly sat down to ride the chair. The chair was shut off and I was once again arrested, this time by Bob Cornish the Ski Corp. Security Officer on a disturbing the peace charge. I posted $25 bond, was re- leased, and once again, no charges were pursued. The previous two arrests were by County Sheriffs. The other incident was at the Aspen Highlands, and, after buying a ticket and making a run, I was denied further access and was not even offered a refund. During the course of all my problems regarding ski teaching, I consistently pursued the Aspen Ski School to hire me. At one point, around 1969, when I had many requests for lessons, I asked Curt Chase if I could bring those stu- dents through the Aspen Ski School. He said he would hire me as a "beginning" instructor. When I informed him of the various private lesson requests that I had, and of my obligation to those students, he replied he "would think about it." I went back one week later for his decision, and he said "I haven't thought about it yet." Since the season was getting underway, this was an obvious "no" answer. Prior to the 1971-72 season I again requested employment as an Aspen Ski School Instructor with "no special deal." I was turned down. On Nov. 15, 1975 a letter was written to the Aspen Ski School requesting my teaching serv- ices. It is interesting that the Aspen Ski School, Curt Chase, replied to this letter in the negative, saying that "It is, therefore, not possible for me to ar- range for his services," and that this negative letter was written the same day I was written to, saying that I could not be employed. Is this filling the needs of the public? Once again, prior to the 1972-73 seasonT I requested employment with the Aspen Ski School, and was once again turned down. I continued to teach with no problem until I received a letter from the Corp. Attorney "demanding" that I stop. This letter was written on March 20, 1973. I complained to the P.S. that I was being harassed, and received no satisfaction. I then proceeded to seek a solution and went and spoke with Tom Richardson, the Ski Corp. Vice Presi- dent. I proposed that he intercede with Curt Chase on my behalf, and get me hired as a ski school instructor. He seemed surprised that I was willing, and said he would do what he could, and that he would get back to me. I waited a week and then called him. He said he had instructed Curt to call me. I called Curt, he was not in, and I left word with his Secretary to please return the call. The season dwindled to an end with no return call. In the 1973-74 season there were no problems, my rapport with everyone in- cluding Curt was good, and I felt that my problems were over. In the past, during the 1970-71 season, there were signs posted around saying that teaching skiing was prohibited by any one other than the Aspen Ski School. These signs had been removed after that one season, and not re-posted, further indicating that the Corp. realized that they did not, indeed, have an exclusive right to teach skiing on public lands. PAGENO="0076" 72 For several years, daily tickets and season passes were printed with "miscon- duct may result in revocation without refund." Finally, prior to the 1974-75 season, "misconduct" was defined.. Nowhere is there mention of no ski teaching. So, with no signs, and no conditions imposed against independent instruction, I further believed that I was free to pursue my profession. I purchased my season pass for the 1974-75 season in July of 1974. There were only a limited amount sold, and I did not buy one for my wife, as she in- tended to take the clinic, a course where instructors are chosen, and teach for the Aspen Ski School. The lifts opened for the 1974-75 season on Thanksgiving day, late in No- veml)er, and on December ), 1975, at about 12 noon, as I got off of the lift at the top of Ajax Mountain with my skiing companion, Jill St. John. I was ap- proaclied by Bob Cornish, the Corp. Security Officer. He told me that my season pass had been revoked, and that I must surrender it to him on the spot, or be arrested for trespassing. I told him no, I could not surrender my property just like that. He then presented a badge, as he was a deputy sheriff also, and placed me under arrest. He called for a toboggan on his two way radio, and I was taken down the mountain and to the sheriff's station where I was booked on a criminal trespass charge. My pass was taken from me, but ordered back the next day by the judge who also granted more time to the D.A. for him to in- vestigate whether or not to press charges. The D.A. did not press charges, and I believe I was falsely arrested. Once again I attempted to negotiate a settle- ment. Once again to no avail. The ski Corp. did not at first honor the pass ordered back by the judge, then they even refused to~ sell me a daily ticket. Then they made me sign a statement in order to use my pass, pending negotia- tions, then they honored my pass. I never knew from day to day what they would do. During this season there was also a four area discount ticket available, for the days that the pass was not usable, during peak times. I purchased this dis- count pass from the Aspen Chamber of Commerce, under the employee dis- count program as I am employed as a wine steward at Andre's Restaurant, and the Corp., after printing up this pass, refused to issue it to me. This prevented me from skiing not only at the Corp. areas at a discount, but from at the Aspen Highlands as well. They did sell me a full price ticket, however. At the time of my arrest, Dec. 4, 1975, my wife Jeannie was participating in the instructor's clinic. She did extremely well, and despite finishing, as we've been told, in the top 20 out of 280, she was not hired. She had two conferences with Curt Chase regarding this, and it was because of "Don's reputation" that she was not hired. Why did she receive a refund when it is specifically stated that no one would? Guilty conscience? After pursuing the hopes of negotiations for about one month, until Jan. of 1975, with the Corp. I realized that they would not even talk to me, and I con- tinued to ski for the remainder of the season with no further occurences, other than having to pay a full price ticket during those times the season pass was no good. I also continued to receive support in a cause I truly believe in, free enter- prise. The Independent Instructor would offer services not offered by the existing ski schools such as transportation, fiexiblity of schedule, choice of areas, choice of techniques not to mention a choice of pricing. The existing ski schools are oriented to class lessons, not private lessons, and there are indeed, peak periods in Aspen when a member of the public cannot obtain a private lesson instructor as they are all busy with classes. I also include in my testimony an Aspen Ski Instructor pay scale. The top instructor makes $9.55 per hour. This is based on a four hour day. He receives time mmd a half if he works past 24 hours in one week. The bottom of the scale is $6.05 per hour. with most instructors earning about $7.50 per hour. This scale is for the 1974-75 season, last season. He makes the same whether working classes or private lessons. A class lesson ticket. costs the public $10 per day. A private lesson is $20 per hour, with it costing $25 for two persons and $30 for three, per hour. Three people is. the limit for private lessons in Aspen. So the average instructor makes $7.50 an hour for a four hour day, which is $30 per day. It is most often that he will have a class of 10 students each paying $10. So. he brings in $100 and gets paid $30. Who pays for this? The public. Who can't make a living and is driven out of the trade? The ski instructor. Is this in the l)eSt interests of the most Should sI 1 instruction be considered more of a service to the public rather than a major source of revenue to a private corpora- tion? PAGENO="0077" d. District (7-8) - 05 e. Use Number (9-12) 2720 f. Kind of use (13-15) Aspen Touring and Guide Service, ____________of ~p~1s~n~coloradoel6l1 (3AME) (p~:t Of/i~s Ad.!,,:. not Zip Cnd.) (hereafter called the permittee) is hereby authorized to use National Forest lands, as indicated below, in connection with outfitter and guide operations within the Whi▒tCRiYer ~National Forest at the locations stated, subject to the GENERAL PROViSIONS on the reverse and to the SPECIAL PROVISIONS AND RE- QUIREMENTS, items 1 to 8 on page(s) 1 to___j , attached hereto and made a part of this permit. The locatiOn of camps, routes of travel, and grazing areas (where applicable) are shown on the attached map(s), which Is (are) a part of thin permit. 1. CAMP USE: CAMPSITE PERIOD OP USE MAXIMUM USE ` IMPROVEMENTS Name or Number From To bays ___________________________ No overnight carps or structures of any type are authorized. 2. GRAZING USE: LIVESTOCK PERIOD OF USE MAXIMUM USE GRAZING ALLOTMENTS Number Kind From To Animal Mo. ______________________ No livestcck use is authorized. All transportation to be by foot, skis, or sncwshoes For this use frcni 12/1 191Q.. to _AL15_ 19_7L. the permitlee shall pay to the Forest Service, U.S. Department c-F A;rt:-~Tiare, the sum of TWOnty~fi3re_ dollars ($ 25.00 THIS PEP.NJT ISACCEPTED .&SSTATED. ~ ,.~,-------~~ , I ~- P __________ ~ 73 In June of 1971, Curt Chase wrote a letter in the Aspen Times stating his philosophy about the subject, and I wrote an answer. I include also, a letter written by the Corp's lawyer telling why I should not receive a permit, and a rebuttal to that letter, I might mention that I just "hap- pened" to get wind of the Corps letter, and it was not offered to me. In conclusion, I would like to state that I feel most encouraged by these hear- ings and by the fact that Senator Haskell has seen fit to review the whole For- est Service Permit structure as it relate to ski areas, and I urge that strong, specific language be included in the proposed bill to rectify the holding down of the ski instructor, the subjection of the ski instructor to serfdom under the yoke of oppressive corporations, and all this done at the expense of the public and to the detriment of skiing and the people. Thank you. U.C. DEPARTMENT CF AGRICU ~E a. Record No. (1-2) b. Region ) c. Forest (56) -~ FOREST SERVICE OUTFITTER-GUIDE ________~- ~ PERMIT LAND USE - GRAZING _________ AUTHORITY: Act: June 4, 1897 g. State (16-17) h. County(18-20) k. Card no, (21) usrrucs:ons a-sir 2700 . C:opt.tr ,nd .tfoih f.r-oI,) - 2700.20,...! 7=~ :rgb~O~ann!Ss _0 5 0 2 L _________________L 67-512 0 - 76 - 6 PAGENO="0078" 74 SPECIAL PROVISIONS AND REQUIREMENTS 1. This permit authorizes the permittee to conduct guided foot, ski, or snow- shoe trips on National Forest land. No overnight use or facilities of any type are authorized. 2. This permit does not authorize the permittee to use lift facilities, within the various ski areas located on National Forest land, in connection with the per- mitted touring and/or guide operations. 3. The permittee, in conducting his touring and/or guide service, shall not cross the ski partol boundary of any of the various ski areas located on National Forest land without first notifying the appropriate ski patrol and obtaining their clearance. It is understood that the purpose of contacting the appropriate ski patrol is to prevent confusion and minimize the possibility of false searches by the patrol. It is further agreed and understood that the patrol is in no way liable or responsible for any accident or other occurrence following the granting of clearance to cross the ski patrol boundary. 4. The permittee shall be solely responsible and liable for any and all acci- dents, injuries, and other costs incurred as a result of the exercise of the privi- leges granted in this permit. 5. Prior to each trip the permittee shall notify the Aspen District Ranger's Office of the number of persons participating, destination, manner of travel, and schedule. Such notification is solely for the purpose of maintaining use records. 6. The permittee shall be solely responsible for assessing the various natural hazards of weather, avalanche, etc.; but agrees to cancel any trip upon request of the Forest Service, or any other agency or organization having jurisdiction. 7. Use of aircraft or oversnow vehicles is not authorized. 8. The permittee shall carry emergency and first aid equipment appropriate to the trip, area, and schedule involved. NoTIcE To ALL PROFESSIONAL SKI INSTRUCTORS Subject: Professional instructors' teaching permits. As you may know, a year's effort has been made to persuade the U.S. Forest Service to grant permits to qualified Professional Ski Instructors for inde- pendent teaching on the U.S. public lands served by ski lifts under permit from the Forest Service. That effort has now been abandoned as unsuccessful, and a civil suit is being filed in Washington, D.C. seeking to have the Forest Service refusal of such permits declared unlawful. The conditions we now propose for issuance of such permits include require- ments that an Independent Instructor must: (1) Have five years prior teaching experience in an "area" school and a "mas- ters" or other higher certification if that is offered in the future. (2) Bring his own clientele, not solicit at the area. (3) Be limited to private lessons only, for no more than four students. (4)Not hire other instructors to work for him, but conduct himself as a per- sonal guide only. He will not start his own ski school. (5) Purchase appropriate insurance and pay fees set by the Forest Service. PAGENO="0079" 75 (6) Pay a fee to be negotiated with area ski school in return for lift line privileges. (7) Wear identification badge and register with area ski school when working. As U.S. skiing growth accelerates, there is room and public need for such a class of instructors as has long existed in several of the advanced alpine skiing countries of Europe. There would also be many benefits to the system and to truly professional instructors individually if they have a job aspiration other than that of ski school director. When you examine the relevant information and the issues, we believe you will have to agree. You are asked to express your affirmation to all concerned; to the Board Members of your Division and to P.S.I.A., and generally "spread the word". Your much needed contributions to keep the ball rolling may be sent to: Instructors Legal Fund Box 321 Aspen, Colorado 81611 For additional information or for details on how to apply for a permit, write the above address. Thank you. Sincerely, DON LEMOS, 1?MSIA. PROFESSIONAL SKI INSTRUCTORS OF AMERICA, INSURANCE PLAN MANAGERS, J & A INSURANCE ASSOCIATES, Billings, Montana, September 25, 1975. Mr. DON LEMOS, Boa, 321, Aspen, Cob. Dear Don: This letter is to serve as a commitment to provide for you a Com- prehensive General Liability Policy insuring your Ski school operation as out- lined recently to me in your phone conversation. This policy will provide $300,000 Bodily Injury and $25,000 Property Damage Liability protection for your Ski School, yourself, and any other persons employed by your Ski School for the period of November 1, 1975 to November 1, 1976. The annual premium will be $100.00 based on the underwriting facts that there will be only two or three instructors composing your Ski School. This policy is underwritten by the American Home Assurance Company of New York. It will be part of the Master P.S.I.A. Liability Insurance Plan, which has been administered by our office since 1967. In the very near future we will be sending you the necessary applications for your completion. I am happy that we can assist you in this matter. Looking forward to serving you in the future, I remain Sincerely yours, JACK LAWSON, P.S.LA. Insurance Manager. PAGENO="0080" 76 CP.TJ'IINAL CASC AIATIS OF COLONM)0 III TIUS COUNTE COURT. Pithin C~:oty of- PEOPLE OF TIlE STATE OF COLORADO DON LEIIOS Tioa of Filiog j..~d.... Odook...... M. COMPLAINT Oclo, SI~~pIiE~d C~iooioII Pocoodooe TIlE PEOPLE OF TUT !.TiS OF COLORADO. TlrcvvpIeotO.~dlofe~tiev~f - j.dnaa Eauker ~ ~ir~ ~ ~ ~ ~Ad ~ 18th - ~ Fc-hruary A.D.I92~1 bgde7ysvvoth$~Y~tk~t. DON LENOS - ye, sooN: tSr ~ ~ .~. ~ . A. 0. 71 1- ~... ~ Fithin 5"- *~ did unlawfully and lflSCdt3.OOalIy t~pas3 olt the ~refi~eo oi~ ~utteti~i1k Pount~ifl Skiing Corporation, and intentionally and without regard for the rights of Outterelilk fountain Dk~inq Corpor~Ition, uced, occupied and CCOItRed the preaises of Outtermilk fountain Skiing Corporation without authority :-o do so frost Catterailk `ouptain skiing Corporation in violntion of C.fl.S. 1953, 40-3-6, 30 ai~tiided, and arsaiIist the poaco and CAPfnlty of the People of the State of Colorado. For a Second Count, it is further charged that in the County of Pitkin, State of Colorado on the 15th day of Pckruary, 1971, Do~ Lemos did unlawfully and intentionally deprive Outternilk Nount~in Skiing Corporation of the use, benefit and enjoyrsent of certain real property of which Sutteroilk fountain Skiing Corporation was the lawful occupant, in vIolation of C.P.9. 1963, 40-3-8, cc aeced ogtthrpre,ddigvjty otth. Poop!, of tSr Sot, OO,y Sr eyrr,trd ed doeR v-itS cyvordioC to - -. -- - Sobryribvdoedeoo:o tobrfvv,~e this 18th ..-~7 rLl laCy A 0 7l~ ~ I p:: -- CUTER .. -..-.--...-.~..... DEPUTY Dole J -/~~1 `~Ll92L No. 3532 Received From __p~~U.J/?.Zr~ )~o',░?. ,J a',.:;,~,5 Address ~ 30j gc.ris.~.i ("~vJ.p. _~9~7p c~> ., ~ Dollars $ PAGENO="0081" 77 an ON C ow~ww eoS~0J~,,5,, IN ~ COURT fiSK No.... IN AND FOR ~ ~ STATE OF COLORADO The People of the State of Colorado DEFENDANT'S Defendant - / RECOGNIZANCE BOND KNOW ALL MEN BY THESE PRESENTS, That we,.~... P9~ ... us principal. and jointly end rev rally held and freely hoaRd node the People of the State of Coloreids Li the Penal sum of ~.░ ~ ~?.~2~olisrn, lawful mosey of the United States, to bo levied upon our and each of our goadn and chattels, antIs sod tenrmests onto the eve of said People, if default be made in the fellawis' conditionn, svhich conditiono are these: That if the ubave lsouoden Don `Lemon shall personally be and appear at the ~ ~ Court, ritting within nod for the County of State of Colorado, on the i~2.~hd day of SL~NR~.Y A. D. 19.2). end from day to day and teriR toteroa thereafter, and not depart the Court without leave, tlsea sod there te answer unto a certain ~NZ.9e therein pending agaiunt the raid. INn for the crime of ~FP.R2░ then this reeo'isieance to be void otheewise to be.and rereain in fall force and effect. Given uader our hands and reals this day of ~ A. D. ~ (SEAL) STATE OF COLORADO Count.░ of.. the surety whose name in suhscrihsed to sue aoove undertaking, tiring duly snore, apse his oath says. Thathe isa resident and reslty holder svithin Ike Crusty Pd.Lle.i.n and that he is worth the sum specited in Ike raid undrrlsking en the penalty thr,esf over and above Isis jest dehsts and liabilities in lees sets' not by law rsrmpt from correction i this Stale raid p operty csn'isti of. ~ ~IN'Lt Of' lena [n the SE bi of Sec 16 C S.'R. t~t, W. of t~o ~ ntaiindJiiS~2:oo INsa "" b~cˇ~dff6 TI~ IN÷k 234~E~ 27005 tile ~ County Colorado Suhiscribesl send sworn to before me Ilsis ~r}ly nf...INk A. D. if'?)... 3.dIN- /t?:u-.d? w.....,. (SEAL) Clerk ~... ~ STATE OF COLORADO County of the nuecly whose noose is rs,lsseribed to the abuse undertaking, being duly rworn, sepon lutsoatls says. That lie is o rrsislent and rrelly holderssiil,in the Cously ef ond that he is worth the esim spreifed is Ike said esslrrleskisg as Ike penally thereof, over and obese his jest debts and liabilities, in property sot by lass esreept. fross esecs lion ~ .rasserte runostese n5.~.. Dl /9/ No 3628 ~ 2 PAGENO="0082" 78 HOLLAND & HART, ATTORNEYS AT LAW, Aspen, Cob., February 2~, 1971. Mr. DON LEMOS, P.O. Boa~ 321, Aspen, Cob. DEAR DON: On Monday, February 22, you and your attorney, Ken Jensen, were in my office to work out an interim arrangement under which you would be allowed to use the ski lifts and slopes operated by Aspen Skiing Corpora- tion (ASC). I agreed to recommend that my client go along with the temporary agreements which you proposed. It was my understanding that you would call me before you went skiing in order to verify that ASC had followed my recom- mendation. I did not hear from you but I assume that you were granted access to ASC's lifts and ski areas. In order that there be no future misunderstanding, I think it is appropriate for me to let you know what my understanding of our agreement is. 1. You requested that ASC sell you lift tickets during a short period (4 or 5 days) while you attempt to get reinstated as an instructor in the Aspen Ski School; 2. During this period of time you promised that you would not teach skiing to anyone at any of ASC's ski areas; and 3. If you are not successful in your efforts to rejoin Aspen Ski School during this period there are no promises on either side following the expiration of the agreed upon time period. At my request, ASC went along with this arrangement. Although we didn't specifically agree on the time involved, you asked for 4 or 5 days. I am willing to go 7 days, that is until the close of business on Monday, March 1, 1971. If nothing definite has been established by then I wish you would come in for a talk so that we at least know what position each party to this controversy is taking from then on. I can tell you that I am willing to recommed continued access to ASC's facili- ties so long as there is no teaching activity on your part. If we are able to make a "rest of the season" agreement on this point, I will also recommend return of your season ticket. If such an agreement is made and subsequently breached by you, I will advise ASC to deny you access to its facilities for the rest of this season. It is understood that the present temporary agreement and any subse- quent agreement are not to be construed as a waiver of any claims or defenses that may be available to you or to ASC regarding independent ski instruction on public lands. Yours very truly, JAMES T. MORAN. J. KENNETH JENSEN, ATTORNEY AT LAW, La Jolla, Calif., March 1, 1971. JAMES T. MORAN, Attorney at Law, Moantain Plaza Building, P.O. Bo~v 1128, Aspen, Cob. DEAR MR. MORAN: As you know this office represents Don Lemos to whom you sent a letter on February 24, 1971. This is a reply to that letter. Apparently there is some misunderstanding as to the conference we had on February 22, 1971. My client did not wish to "rejoin" or obtain "reinstatement" as an instructor in the Aspen Ski School. Instead, Mr. Lemos was exploring the possibility of some kind of an agreement with the Aspen Skiing Corporation to resolve the dispute which had arisen. Aspen Skiing Corporation agreed not to interfere with Mr. Lemos' skiing while an attempt was made to resolve this dispute. As I stated during our last conversation, I do not believe Aspen Skiing Cor- poration can arbitrarily refuse Don Lemos, as a member of the public, the use of the skiing facilities. Furthermore, the course of conduct taken by Aspen Ski- ing and others to deny Mr. Lemos the use of the skiing facilities is incredible. This letter is notice that any further interference with Mr. Lemos' skiing or use of the facilities will be done at your peril. This letter is also a demand that any and all passes or tickets purchased by Mr. Lemos and held by you be re- turned to him immediately or you will incur a greater liability than you already have. Very truly yours, J. KENNETH JENSEN. PAGENO="0083" 79 SHELLMAN, CARNEY, & EDWARDS, LAW OFFICES, Aspen~, Cob., August 6, 1971. Mr. JAMES T. MORAN, Holland ~ Hart, Mountain Building, P.O. Boa, 1128, Aspen, Cob. DEAR JIM: This will acknowledge receipt of your letter of August 3, 1971, in which you declined, on behalf of the Aspen Skiing Corporation to remit funds to Don Lemos for daily lift tickets which he was required to purchase after his season pass was seized. It is our position that the seizing of his season pass was wrongful, and that he was under no obligation to make any promises to the Aspen Skiing Corporation in order to obtain the right to ski at its areas. The appropriate remedy, If Mr. Lemos is found teaching skiing without special use permit, appears to be under the Forest Service's Trespass Regulations, rather than having the area operator extract special covenants from one skier which are not required of all other skiers on the mountain. We might further suggest that the double charges which Mr. Lemos was forced to pay constitutes fees which are well in excess of the schedule approved by the Forest Service for Aspen Skiing Corporation's mountains and are thus unauthorized under Aspen Skiing Corporation's Term Special Use Permit. In view of these considerations, I hope that you will reconsider your rejection of our claim. Very truly yours, WILLIAM J. CARNEY, (for Shellman, Carey & Edwards). SHELLMAN, CARNEY & EDWARDS, LAW OFFICES, Aspen, Cob., September 9, 1971. Mr. JAMES T. MORAN, Holland ~ Hart, Mountain Pia~a Bldg., P.O. Boa, 1128, Aspen, Cob. DEAR JIM: This will acknowledge your letter of August 12, 1971, and the offer of the Aspen Skiing Corporation to refund the amount of $65.15 to Don Lemos as a prorated share of his season pass. However, your statement of the facts leading up to Don's arrest and seizure of his season pass is something Don feels requires a response. Don categorically states that he did not teach for money on mountains operated by the Aspen Skiing Corporation during the winter season of 1970-71. Your letter refers to Don's having been seen teaching on February 17 and 18, 1971. On February 17, Don was with his wife on Little Nell. On February 18, 1971, Don did not ski. O~i February 19, at the time of his arrest, Don was alone and was not skiing with anyone. Since Don had at that time in his possession both a season pass and a daily lift ticket, it is our opinion that there was no justification whatever either for Don's arrest for trespass or for the revokation of his season ticket. We have advised Don that as a result of these facts he has an action against the Aspen Skiing Corporation and those who acted in concert with it for abuse of process. However, at this time Don wishes to take a constructive approach to solving his dispute with the Aspen Skiing Corporation, rather than to pursue litigation. For the 1971-72 season, Don is willing to apply for employment as an instructor with the Aspen Ski School. Don would expect to abide by all of the rules and regulations imposed by the school, but would request that his only requirements as to lessons be those lessons which he brought to the school himself. In other words, Don is not interested in teaching regular classes, but would simply bring to the Aspen Ski School those persons who wish to receive instructions from Don. Don would be willing to share his lesson fees with the Aspen Ski School on the same basis as other instructors. In short, the Aspen Ski School would probably obtain revenue from lessons which would not otherwise have been available to it rather than enter into lengthy litigation. You should be advised that Don will continue to pursue his attempt to be independently licensed as an instructor on ski areas located on national forest lands. However, this effort will -proceed through legal channels, and I would think that our proposal would eliminate the direct conflicts between Don and the Aspen Skiing Corporation. PAGENO="0084" 80 A refund check can be sent to Don at Post Office Box 321, Aspen, Colorado 81611. I hope that this will be the start of a more cordial relationship between our respective clients. Very truly yours, WILLIAM J. CARNEY, (for Sheliman, Carney & Edwards. ASPEN, CoLo., September 13, 1971. CURT CHASE, Director, Aspen Ski School, Aspen, Cob., D131&R CURT: With the approach of the coming ski season I'm writing to you in the hopes of resolving our past difficulties, and preventing any future ones. As you know I've been pursuing the U.S. Forest Service to grant a limited num- ber of individual use permits to teach Alpine skiing on Government lands serv- iced by ski lifts. So far I've met with no success, and as I've many students who have requested my teaching services, I'm applying to you for a job in order that their needs be met. Several persons who have requested that I~ be their teacher happen to be mutual friends of Yvon Tache and myself. One of these persons recently spoke with Yvon and made this request known. These people are all connected with Henri Moreault. I skied with them last season and they requested that I teach them at Vail. They now plan to come to Aspen and would like me to teach them here. This includes Henri himself. I spoke with Yvon and informed him of my wish to teach my own clientel as an Aspen Ski School Instructor. He told me that if I wished to teach for the Aspen Ski School I could not just teach my own clientel and arrange my own lessons, but would have to coordinate all lessons through him, and be would make the proper arrangements and super- vise me, all contingent upon your approval. Curt, I propose to you that you hire me as a private lesson instructor with no special deal. I will attend your clinic, abide by all your rules, and will spread no "subversive" ideas. I will back you Curt, and if unable to, will speak only with you about it. I will be working nights and shall desire a flexible daytime schedule, thus the request to teach only private lessons, not to mention that I feel my talents can be best utilized in this field. Curt, if you can accept my proposal it can only benefit everyone. It's a deal where everyone wins. The student who so desires my services will be happy, I will be working in my profession rather than fighting to do so, and the Aspen Ski Corporation and yourself will remove a thorn in its' side and turn it into an asset. Psychologically speaking it will be a win for you. Don Lemos could not beat you, so he must join you. Curt, please let me know what you think. My attorney has been confering with Jim Moran on this matter, hut ultimately the matter of my employment is between the two of us, thus this letter. I would be most happy to meet with you and discuss things further. Thank you Curt for your consideration. Most Sincerely, DON LEMOS, ASPEN SKIING CORP. ASPEN, CoLo., September 17,1971. Mr. DON LEMOS, Boco 321, Aspen, Cob. DEAR DON: Thank you for your letter of Sepember 13th. We have for some time now been on opposite sides of the fence in regard to basic philosophies about ski teaching, ski schools, private ski companies, public land and Forest Service policies. It is nothing persona' as far as I am concerned, and I hope you know that I hold no animosity toward you. You must realize that I didn't make the rules, organize the system or create the establishment. During the past 20 years I have chosen to work within the established order of the ski teaching business with some degree of success. I have found it to be not perfect, but cer- tainly a workable and orderly system. You, on the other hand, have chosen PAGENO="0085" 81 to reject this system, and to work around and outside it. In doing so, you have been something of a "thorn in our side" as you put it. You will remember that as recently as two years ago I did agree to reinstate you as an instructor in the Aspen Ski School if you would agree to the same conditions of employment as the other instructors in the organization. You chose then not to agree to such conditions. What has happened since that time is well known to all concerned. In light of the attitudes and actions you have expressed and exhibited, you must realize that you now ask quite a lot. As I see it, there are presently three major obstacles to my favorable con- sideration of your request for employment by the Aspen Ski School. Number one is the fact that the school is already overstaffed. We have recruited and trained many fine instructors in recent years, and are now faced with a situa- tion where consolidation, streamlining and cutting down the size of our staff is our primary consideration rather than adding to it. The second problem area is that of morale within my ski school organization. We have worked hard at developing the happy family we now have, and main- taining it is essential to our continued success. I have a lot of instructors who have worked faithfully and loyally within the ski school structure for the past seven years while you have been engaged in doing your thing outside of it. I strongly feel that there is an important question of fairness to them involved. The attitude and reaction of my staff to any action I might take in this matter is something I have to evaluate very carefully. The third, and perhaps most important consideration is the fact that as di- rector of the Aspen Ski School I must assume responsibility for the actions and performance of the instructors I employ. This is a responsibility that I do not take lightly. During the seven years that I have known you, Don, including my experience as your employer in the Aspen Ski School, you have displayed a pattern of unpredictable, irrational and sometimes violent reaction to situations and events that don't go quite the way you think they should. Stress situations are quite common in our business. Unfavorable reaction to such situations could have most seriOus results. Frankly this is a risk that I would be most reluctant to assume. This is my side of the picture, Don. I don't view your proposal as a simple answer to everybody's problems, but rather as a final resort solution to your problems, which in fairness I think you have to recognize are a direct result of your own attitudes and actions over a long period of time. In your letter you say that if I accept your proposal it will be a "psychological win for me". I don't feel that I am, or have been fighting you. There is no question of winning or losing involved as far as I am concerned. My decision will be based solely on what I consider to be in the best interest of the Aspen Ski School. I would be happy to talk with you, Don, but I thought you ought to be aware of these points which I will have to consider. If our positions were reversed, I am sure you would see things the same way I do. Sincerely, CURT CHASE, Director, Aspen Ski School. ASPEN SKIING CORP., Aspen, Cole., November 22, 1971. Mr. DON LEMOS, Boa, 321, Aspen, Cob. DEAR DON: I have met recently with a representative group of my super- visors and instructors and discussed with them, according to my agreement with you, your proposal of September 13th. At this meeting no one chose to speak in support of your request, and no one indicated that they felt I should further consider my position as stated in my September 17th letter to you. I am sorry, Don, but I do not feel that it is in the best interest of the Aspen Ski School to offer you employment. Sincerely, CURT CHASE, Director, Aspen Ski School. PAGENO="0086" 82 PENDLETON WOOLEN MILLS, HIGH GRADE WESTERN WOOLENS, Portland, Oreg. November 15, 1971. Mr. CURT CHASE, Director Aspen Ski School; Aspen, Cob. DEAR MR. CHASE: My family along with myself are planning to be in Aspen for 2 weeks during the Christmas holidays. It would be our intentions to ar- range lessons with your ski school. A special request would be for the services of Mr. Don Lemos. I would appreciate you advising me of his prior schedule and the possibility of his services. Looking forward to your reply. Best regards, M. J. ALESKO. ASPEN SKIING CORP., Aspen, Cob., November 22, 1971. Mr. MIKE ALESKO, California Mart, Suite 1129, California Mart, 110 B. 9th Street, Los Angeles, Calif. DEAR MR. ALESKO: Thank you for your letter of November 15th. We are happy that you will be in Aspen for the holidays. Don Lemo~ has not been associated with the Aspen Ski School since the win- ter of 1964. It is, therefore, not possible for me to arrange for his services. If you will advise me specifically in regard to your requirements, I will be happy to make the proper arrangements and confirm them to you. Sincerely, CURT CHASE, Director, Aspen Ski School. ASPEN, CoLo., October 3, 1972. CURT CHASE, Director, Aspen Ski School, Aspen Skiing Corp. Aspen, Cob. DEAR CURT: Another ski season is approaching, and once again I come to you with the hopes of teaching skiing with your ski school. Many people have contacted me in regards to my being their instructor. Please let me know if my employment is possible. Thank you. Sincerely, DON LEMOS. ASPEN SKI ScHooL, NOTICE The Aspen Ski School has an exclusive franchise to conduct ski instruction in the ski areas controlled by the Aspen Skiing Corporation. Bona fide instructors from ski schools outside the Aspen area who may be visiting with private clients are welcome if they will register with the ski school office. Unauthorized persons conducting ski instruction in the ski area controlled by the Aspen Skiing Corp. will be denied further access to these areas. D. R. C. BROWN, President Aspen Skiing Corp. Posted Aspen Corp. Property at Little Nell. Poster filed as evidence in T.R.O. hearing health case. PAGENO="0087" 83 This was attached to all season pass application contracts, July 1974. REGULATIONS GOVERNING SEASON TICKETS REVOCATION FOR MISCONDUCT Any Season Ticket or Discount Card may be suspended or revoked without refund as penalty for fast or reckless skiing, skiing out of bounds, or any other misconduct on the part of the skier which might constitute a danger to himself, other skiers, or the personnel and/or property of the Aspen Skiing Corporation or the Aspen Highlands Skiing Corporation. REFUND POLICY Refunds will be subject to a $10 minimum service charge if no photo has been taken, or a $15 minimum service charge if the ticket has been made, provided the refund is requested prior to the opening of the season. Other refunds will be made only in the event of incapacitating illness or in- jury certified by a LOCAL physician on the following basis: Three-area limited and four-area unlimited season tickets-Pass in possession 1 thru 30 days-refund will be 50% of cost; Pass in possession 30 thru 60 days- refund will be 30% of cost; Pass in possession over 60 days-refund will be 20% of cost. There will be no refunds for any reason effective March 1, 1975. Exceptions-In the event that a charge of $10 per day for each day in posses- sion should total less than 50% of the cost of the ticket, the difference between this total and the cost will be refunded. Discount cards :-A charge of $5 per day will be deducted from the cost of the card for each day it has been in possession and the difference refunded. To obtain your ticket please fill out the application below completely and legibly and mail with payment in full to the Aspen Skiing Corporation, Box 1248, Aspen, Colorado 81611. Receipts will be mailed if a self-addressed, stamped envelope is included with the application. If you wish to apply for more than one pass, a photo copy (or reasonable facsimile) of the applicattion form, ac- companied by full payment, will be accepted. Photographs will be taken and tickets delivered at the Main Ticket Office of the Aspen Skiing Corporation be- ginning November 5, 1974. This was given with pass Nov. 1974. DEAR PASS HOLDER: Aspen Mountain has a number of areas within its ski area boundary that are potential avalanche paths and which are permanently closed to public skiing. These areas in every case are directly above some of the most heavily skied trails on the mountain. Aspen Mountain policy dictates that the only people allowed in these areas will be members of the Aspen Mountain Ski Patrol. The Patrol controls these areas before people are allowed on the mountain, usually early in the morning. Following is a list of the closed areas: 1. The west side of Spar Gulch from Zaugg Dump to the end of the Spar Cat- walk below the International Trail; 2. The International Swing which leads to Silver Queen and the north-facing slope above Little Nell; 3. The east side of No. 5 Lift above the Bingo Slot Trail and north of the new Jackpot Trail; 4. On the west side of Aspen Mountain, the area north of the Aztec Trail on the Trainor Ridge. If you are not sure of the area, check with the Patrol before skiing. The penalty for violating this policy is the loss of skiing privileges for the remainder of the season. Other offenses which will result in suspension or loss of skiing privileges include skiing closed trails, reckless skiing, collisions, line crashing, fraudulent use of ticket or pass, unloading from lift at any place except regular stations, profanity, disorderly conduct, and drunkenness. Thank you for your cooperation, ASPEN SKIING CORPORATION. PAGENO="0088" 84 0 i~. (Otis JO uMPLAINT-OFFENSE iiPOtlT OMPLAINANT'S NAME - Ust, First, Middle [~XSE HEADING (~i~iuteNo.) CASE NtJittsrsK Victim) (Easiness) DOlt: ~P~'LSL~L_OorP jj?~p op~ oiopksiuant's i~ddress Home Phone Business Phone Location of Occurrence ~ 92š-/22.0 Sc1i'<- Aspeti /`ii~ ~p) tepoated by ~ i/sf fA~iiress ~ p,~ Home Phone Business Phone How Reported I 3x ~ 9)3- d/,7~J 9a~ i9aOO t.eceinedby Time Day Date OflicerAssb'ned Car No. ttnw Received Arrival Time b C0'~/~ 4 _________ )ate & Time ~ ~/ Date & Time Persons/Property Attacked sf Occurrence OC V. ,~ ~ of Discovect' ~. ~ Or~~š, leans nf Attack (sveapnn, toot toed) Object of Attack V ______________________________ fehicte Cotor Make Model Year [License No. (state) (year) YIN No. (other description) 000tvy I I t (m tdp m fF w ff wcmmH dp t~ m I ) 2i~. ~ ~ ~. ~ ~ / ~I ~ 7/ ~ $~. (~ ~ ~-. ~ ~) ,~J ~ (oie ~ ( ~ ~ ~ /ct~O~ ~ / ~,šJ ~ eO , /~s ~~ao,eoa' ,-eni~ae J"t~.. ~e ~ ~ /J~; ~7A~J&1F~ ~ed ~f7~ 4~'~ ~ ~; ~j~Von ~o~/~t7tff I ~ ~ j~. J~t& ~ `jso. ~ ~ ~ ~ /~ 4~ `~ ~ ~ ~ / ~ ~ io PP ~ ~ ~ ~ /32 iignatnroof Reportin Officer 1 ~tn of Report Typed by Reniew/1t by ~ ~ /~ ~ i/f /~ 71 N OPIES TO: ATTA(FISIENTS: Written Stmts. by APD Invest. Si~ocd Complaint Photograpins ________________ DA Jusonite Stolen Car Report Accident R. _ Probation ~ DeMhRcport _______________ PAGENO="0089" 85 ~ ~ * C~pk~i,~t Add~s~ FSRR~ N~. 2~-i J~ ú~>~ //~) ~š/-q,/~ ~4'o,i (~i~ * ~ ~ ~*~***~.* DETAILS OF OFFENSE. PROGRESS OF INVESTIGATION, ETC.: (IR~Rt:NRtLg OIIIRN, ~g~) 9_ - -_____ ~ ~ ~ ~ ~ * --*-----*-*------------**-.----------- --*-~~*-**----~-"~- I ::N::::~ii~~_~ -- ~ ;*~~;*-~ ~ Y~ 0 IV 0 CV,~d by II? 0 :IJM~"d~d 0 VVIVI0O:h~,D[~ ~zr~) PAGENO="0090" 86 MARTIN H. KAHN, ATTORNEY AT LAW, Aspen, Cob., December 23, 1974. JAMES T. MORAN, Esq. Holland ~ Hart, Bo~v 1128, Aspen, 0010. DEAR JIM: I am writing regarding the situation involving my client, Don Lemos, and yours, the Aspen Skiing Corporation (the Corp). As you know, we have had numerous conferences regarding the matter in an attempt to explore a resolution acceptable to the Corp, Don and the Forest Service, all apparently to no avail by virtue of the Corp's rejection of all alternatives presented. I also understand that you had a lengthy conference with George Morris of the For- est Service, his assistant, and the Corp representatives, likewise resulting in no progress. George Morris suggested to me that I write to you to indicate again our willingness to resolve this continuing problem in a reasonable man- ner, and to ask the Corp to present any alternative proposal in the event those previously discussed are deemed unworkable. I should like briefly to restate the proposals we have discussed and which the Corp has rejected. Don has offered to become a member of the Ski School teaching staff, to be treated as other top instructors who have a substantial number of persons in- terested in private instruction with them. He would be bound by the rules ap- plicable to such employees and expect to be treated on a par with them. As an alternative to this approach (and, I would think, perhaps more accept- able to both the Corp and Don) Don has offered to work out a system (similar to that presently being utilized by the Vail Ski School with at least one inde- pendent instructor) of an affiliation with the Ski School under which Don would pay either a percentage of his income or a flat fee to the Ski Corp and would be able to teach independently of the Ski School with the same privileges as Ski School instructors, for example, lift line privileges with private lessons. The Corp has thus far rejected any of these alternatives (and indeed, as you know, has recently refused to hire Don's Jeanne, even though she was ap- parently qualified, because she is a Lemos). Furthermore, the Corp has not advanced any other proposal enabling Don to teach on the mountains for which they hold temporary use permits. I should like, ~both in the spirit of compromise and that of the season, to once again urge that one of the foregoing alternatives be favorably considered by the Corp. This would end the divisiveness between the Corp and the Lemos', eliminate the possibility of further arrests under questionable circumstances, and result in a situation whereby independent certified instructors could work through and with the Corp rather than against or around it. It would also per- mit the Forest Service (and District Attorney's office) peace of mind. If the Corp feels that the foregoing alternatives (which I sincerely believe are moderate and reasonable) are not viable, then we would ask the Corp to propose an alternative which would enable Don to teach skiing forthwith with- out being harassed. In view of the time which has elapsed since we began our discussions and the time which the Corp has presumably thus far devoted to considering the matter, we will assume that unless we hear from you on or before January 2, 1975, the Corp has again rejected the alternatives we have previously discussed and is not proposing any other alternative. I hope that this will not be the case, and that we can avoid other approaches to the problem which circumvent the Corp. Surely reasonable men, in good faith, should be able to resolve this matter on terms satisfactory to all concerned. Very truly yours, MARTIN H. KAHN. DECEMBER 13, 1974. I do hereby state that I will be pleasure skiing and not teaching for pay on the Aspen Skiing Corp. served mountains this Dec. 13, 14, 15, 1974. DoN LEM05. DECEMBER 10, 1974. Mr. Don Lemos has permission to ski this date using his ski pass, No. 3505. BOB C0RNI5H, Security Officer, Aspen Ski Corp. PAGENO="0091" 87 ASPEN SKI SCHOOL GENERAL INFORMATION REGARDING SKI SCHOOL CLINIC DEC. 2-7, 1974 1. All new and apprentice instructors who have not previously been employed by the Aspen Ski School are required to pay $50.00 registration fee. This covers all clinic activities and use of lift facilities during the clinic. 2. In the event that candidates drop out of the clinic for any reason including injury, refund will be made on the following basis: After first day $30 refund. After second day 20 refund. After third day 10 refund. After fourth day No refund. 3. Fully certified instructors who are retained as members of the Aspen Ski School staff will receive full clinic refund at the end of the season if they teach a minimum of 200 hours during the season. 4. All candidates in the clinic will wear their clinic number so that it is easily recognizable at all times during the clinic. At all times includes during lunch breaks, etc. 5. All candidates will remain with their assigned groups and group leaders at all times during the clinic. 6. Candidates will be under constant observation during clinic in regard to personal appearance, dress and behavior. We assume that the way you dress and act during the clinic is what we might expect after the clinic. So that there will be no misunderstanding-during this week of clinic we are looking for a few people who we feel have the potential to eventually become members of the Aspen Ski School staff. We are not looking for a specific num- ber and we may not select more than 30 apprentice candidates. Those who are selected will be expected to continue training and orientation on a daily basis until their final disposition is determined. Clinic will start promptly at 9:00 a.m. Monday, December 2nd at BE ON TIME. BE READY TO SKI. MARTIN H. KAHN, ATTORNEY AT LAW, Aspen~ Col., January 5, 1975. Mr. GEORGE MoRRIs, District Ranger, U.S. Forest Service, Aspen, Cob. DEAR MR. MORRIS: As you know, I represent Don Lemos, of. Aspen, in connec- tion with his attempt to be able to teach skiing on ski areas operated under permit by the Forest Service. As you also know, we have made a serious and sustained attempt to reach an amicable solution to this problem through the Aspen Skiing Corporation (the Corp), which has rejected all proposed alterna- tives and does not appear to have a proposal of its own. You have a copy of my December 23, 1974 letter to the Corp's attorney, James T. Moran; I received a response thereto on January 4, 1975, copy attached, which states they need more time to reply. I have been advised, however, that the reply would be negative. Consequently, it has become clear that any solution must come from the Forest Service, and we are hopeful that you will see the merits of our case and act accordingly. I shall set forth in this letter several points, in relatively brief fashion, and would hope to discuss these (and others) with you at greater length. 1. Complaint against the Corp. We should like to make formal complaint against the Corp on at least three grounds: (a) On December 4, 1974, Mr. Lemos was skiing on Aspen Mountain with Jill St. John, and was "arrested" by Bob Cornish, a "security officer" for the Corp (and also a deputy sheriff), allegedly for criminal trespass. Cornish's position was that Mr. Lemos' $250.00 season's pass had been revoked due to alleged underground ski teaching~ (b) The Corp has refused to sell a $60.00 pass to Mr. Lemos unless and until he signs a statement to the effect that he will not teach for pay; (c) The Corp refused to hire Mr. Lemos' wife Jeanne as an instructor, athough she was one of the top applicants in the recent clinic, because she is married to Mr. Lemos. PAGENO="0092" 88 I would note that with respect to (a), above, the charge was dropped by the District Attorney, who took the position before the Court that this was essen- ially a private matter between Mr. Lemos and the Corp and had no place in the criminal system. I would also note that Mr. Cornish's actions were taken without any notice, hearing, or proof. Moreover the Corp's own rules setting forth the conditions under which the pass can be revoked nowhere mention teaching, but rather go to misconduct relating to safety (see copies attached hereto). With respect to (b), above, the Corp presumably does not require such a statement of others desiring to purchase said pass, and it would seem that this is clearly a case of discrimination against Mr. Lemos. The Corp's actions against Jeanne Lemos seem particularly reprehensible. To exclude an otherwise qualified applicant because of her marital status is patently arbitrary and capricious. 2. Request that Forest Service Issue Permit. In light of the Corp's unwill- ingness to enter into any arrangement pursuant to which Mr. Lemos might teach, we must request the Forest Service to issue a permit to Mr. Lemos for that purpose and to instruct the Corp not to interfere with the use thereof. There are, we believe, several points to be considered in this regard. (a) The Corp is manifestly unwilling to reach some amicable solution. We have done all we reasonably could be expected to do to effect such a solution. (b) Mr. Lemos is eminently qualified to teach sking. He is a certified instruc- tor both in the United States (since 1963) and France (1974), and has seven years experience with formal ski schools (Aspen Ski School and Aspen High- lands Ski School), and teaching experience outside as well. He is a member of the Professional Ski Instructors Association. There can be no question about his credentials. And, of course, there are a substantial number of people who very much desire his instruction. (c) The Corp, of course, has not been granted the exclusive right to teach skiing on the mountains it has a permit for. The permit itself does not grant any exclusive right, and the Corp does not, I understand their position, claim * any such right. The Forest Service can clearly issue such a permit to Mr. Lemos, and there are compelling reasons for doing so, among which are the opportunity for alternative teaching experiences by users (i.e. the public) of public land, the opportunity for others than merely the permittee reasonably to earn a livelihood thereon (which in no way is inconsistent with the recreational use of the land), and the negation of the arbitrary use of power (ranging from arrest to harassment) by a permittee. Mr. Lemos' desire to teach on the land is no more incompatible with the use of the land than is the rental of skis to be used on the land by the dozens of shops in town that derive considerably more income therefrom than could any individual instructor from teaching. In short, there are no compelling reasons against issuing the permit, other than the protection of the Corp's asserted economic interests which, in reality, could not be jeopardized by Mr. Lemos' teaching. As I indicated earlier in this letter, we have tried to set forth some major points in brief fashion and would be more than happy to discuss this matter in greater detail. We will appreciate whatever consideration and attention you can give to our request. Very truly yours, MARTIN H. KAHN. Enclosure. U.S. DEPARTMENT OF AGRICIJLTURE, FOREST SERVICE, ASPEN RANGER DISTRICT, Aspen, Cob., January 27, 1975. Mr. MARTIN H. KAHN, Attorney At Law, Roaring Fork Building, Bo~v 3386, Aspen, Cob. DEAR MR. KAHN: I am in receipt of your letter of January 5, 1975 requesing a permit for Don Lemos to instruct skiing on the existing ski areas and com- plaining that the Aspen Skiing Corporation treated Don and his wife unfairly. * I have delayed in making a formal reply, after discussing the matter with Don, until Don had an opportunity to talk with Forest Supervisor Evans. This dis- cussion occurred January 15. PAGENO="0093" 89 I have discussed all three of the complaint issues with the Ski Corp. officials. As you realize I have personally contacted Tom Richardson, Curt Chase, Bob Cornish and Jim Moran to explore the opportunities for Don to instruct skiing within the Aspen Ski School and to insure that Don is given fair treatment. I am not in the position to issue a permit and Forest Supervisor Evans has indicated that he will not issue the permit but is willing to permit the Aspen or Aspen Highlands Skiing Corporation to sub-lease to Don or any other present independent ski instructor. Sincerely, GEORGE A. MORRIS, District Ranger. COMPETITION SKI NEWS, Olympic Valley, Calif., January 11, 1975. GEORGE MORRIS, District Ranger, U.S. Forest Service, Boa 359, Aspen, Cob. DEAR MR. MORRIS: I write you concerning Don Lemos and the issue of inde- pendent ski instructors. My own qualifications for commenting on this matter to you include: I am a certified ski instructor in both the U.S. and France; a certified ski coach in the U.S.; I am a past U.S. Ski Team coach; I am an ex- aminer for the Far West Ski Instructors Association and for the Far West Ski Coaches Association; I am the editor of Competition Ski News, and a free lance writer with articles printed in Ski, Skiing, Ski Racing, Skiing Area News, and Mountain Gazatte. One article that appeared in the January 1973 issue of Skiing Area News was about Lemos and his cause. I have known Don Lemos since 1963, and know he is honest, sincere and dedicated to the sport of skiing, and to the profession of teaching skiing. He is also an outstanding teacher. I have been working as a ski instructor since 1963, and am fully aware of the inequities of ski instruction in America. Personally, professionally and philosophically, I am one-hundred percent behind Don Lemos and his efforts. What he is attempting to do is the very best thing that could happen to the working instructor and the paying customer. The majority of working instructors, as opposed to ski school directors and management em- ployees of ski corporations, are hoping that Lemos will help convince the F.S. to issue land use permits to qualified independent ski instructors. Virtually all of the paying customers I've discussed this issue with, are in favor of Lemos' position. Anything done to further the position of the qualified independent ski in- structor in America should be supported. Anything you can do to help Don Lemos get a land use permit will receive the complete backing of me and my colleagues. Thank you for your interest and time in the independent ski instructor issue. Sincerely, DICK DORWORTH, Editor. BEVERLY HILLS, CALIF., January 21, 1975. District Ranger GEORGE MORRIS, U.S. Forest Service, P.O. Boa~ 359, Aspen, Cob. DEAR RANGER MORRIS: Recently, I, and my wife, Lynne, visited Aspen, where we had the good fortune to meet Don Lemos who we prevailed upon to give us some skiing instruction. Don advised us in advance that he was unable to charge us for his time or skill, but be kindly agreed to donate them to us in view of his friendliness with my brother-in-law, who lives in Aspen. Lynne and I had received other skiing lessons. But, we'd like you to know that we found Don's methods, skill and patience, to be nothing short of superb, and infinitely more rewarding than any other skiing instruction we have had. It would not be an overstatement to say that through Don Lemos we fell in love with skiing and with Aspen and look forward to returning as soon as we 67-512 O-76-----7 PAGENO="0094" 90 can. We found him to be safe, sane, cautious and articulate, and he helped us immeasurably toward becoming skiers, in a very short time. My wife and I believe that Don Lemos should have the right to teach skiing at Aspen, and he should be able to receive compensation for his time and talents. Don Lemos is one of those rare people who have both dedication and talent. My wife and I respectfully urge you to help him so that be can continue to help us and others to know and enjoy the world of skiing and receive just compen- sation for so doing. Very truly yours, BARRY SCHOLER. ASPEN SKIING CORP., Aspen, Cob., October 17, 1972. Mr. DON LEMOS, Bo~v 321, Aspen, Cob. DEAR DON: I have received your letter of October 3rd concerning your request to be employed by the Aspen Ski School this winter. Last year I answered your similar request in some detail and outlined the reasons I felt I could not give it favorable consideration. For the same reasons I gave you last year, Don, I have no choice but to give you the same answer again this year. Sincerely, CURT CHASE, Director, Aspen Ski School. HOLLAND & HART, ATTORNEYS AT LAw, Aspen, Cob., March 20, 1973. Mr. DON LEMOS, P.O. Boai 321, Aspen, Cob. DEAR DON: It has recently become very apparent to the Aspen Skiing Cor- poration that you are consistently, instructing skiing at Aspen Mountain, But- termilk and/or Snowmass. Since we both know the legal ramifications of unau- thorized instructing without a valid permit, I won't burden this letter with an esoteric discussion of the legalities. On behalf of our client however I will notify you that, if you are found instructing again on any of the three areas run by Aspen Skiing Corporation, your pass will be pulled, you will receive a pro rata refund, and you will be barred for the remainder of the season. Yours very truly, JAMES T. MORAN. U.S. DEPARTMENT OF AGRICULTURE, FOREST SERVICE, ASPEN RANGER DISTRICT, Aspen, Cob., March 26, 1973. Mr. DON LEMOS, P.O. Box 321, Aspen, Cob. DEAR DON: After considering our conversation of a couple of days ago, con- cerning the admonition you received from Mr. Jim Moran on instructing skiing, I find there is little I can say to clarify the situation. If you are not conducting unauthorized lessons, then it seems to me that you need have no concern about the matter. On the other hand, I do not feel it would be productive or helpful for us to engage in a debate on the propriety of a possible action. Rather, it would seem more logical to consider a concrete occurrence when all the facts are known. I believe the current litigation will further clarify the situation for all of us, and I'm sure you agree. Sincerely, JOHN E. BURNS, District Ranger. PAGENO="0095" 91 U.S. SENATE, Washington, D.C., March 25, 1975. Mr. JOHN R. MCGUIRE, Chief Forester, U.S. Forest Service, Washington, D.C. Re: Use permits for independent ski instructors. DEAR MR. McGUIRE: The question of the Forest Service's refusal to issue use permits to qualified independent ski instructors has been called to our atten- tion. We are aware of your previous position as expressed in your letter to Con- gressman Wayne Aspinall, but the problem has become even more exacerbated by recent incidents in Colorado. The situation is such that a review and revision of your regulations and policies concerning exclusivity of winter sports area permits appears to be appropriate. Recent events involving the Aspen Skiing Corporation and an erstwhile inde- pendent instructor are a cause of great concern. This instructor, Don Lemos, was recently "arrested" on National Forest land by a Corporation security of- ficer for "trespassing," but the prosecuting attorney refused to file charges. Mr. Lemos was ostensibly arrested for conducting an independent skiing lesson, although this was never proven. As you may know, the controversy between Mr. Lemos and the Corporation is of long standing, but the underlying question is not isolated to this single dispute. Confrontations of this sort have recently occurred in other Colorado ski areas and the problem is~ a recurring one. At least one area, Vail, has recognized the need for change and now agrees to allow qualified independent instructors to operate in the Vail ski area in return for a percentage of their fee. Forest Service policy, as we understand it, is to refuse permits to individual instructors for use at ski areas under permit to another party, without that party's consent. This can, as illustrated by the Aspen situation, lead to abuses of corporate power against overmatched individual citizens. For example, not only has Mr. Lemos been arrested under questionable circumstances and pre- cluded from independent instruction: both he and his wife, who are highly qualified instructors, have been refused employment by the Aspen Skiing Cor- poration as regular ski school instructors. The effect of the monopoly conferred on the Corporation has been to deprive these people, and others, of the opportu- nity to pursue their profession. Such "company town" conditions not only affect the individual instructors in- volved: the public's right to choose between competing instructors and/or tech- niques is also impaired. The policy of exclusivity is at odds with the statutory mandate that the general public be allowed full and free enjoyment of national forest lands. Furthermore, I can see no compelling justification for conferring monopoly power over ski instruction on permittees such as the Aspen Ski Corporation or Vail Associates, as they are financially sound operations whose economic inter- ests could not possibly be seriously jeopardized by a relatively small number of independent instructors. Consideration should therefore be given to revising the practice of granting only exclusive permits. This can be accomplished by either requiring all finan- cially sound areas to make provisions for independents, such as those granted at Vail, or by promulgating regulations revising section 2721 of the Forest Service Manual to allow individual use permits for qualified instructors operating in financially sound areas. Appropriate provision should be made to insure that such instructors meet minimum standards of qualification, have liability in- surance, keep adequate records, and if appropriate, compensate ski areas for the use of facilities by both instructor and pupil. The need for a review of past policy is both apparent and immediate. Please advise us concerning your views on this matter. Sincerely, FLOYD HASKELL, U.S. Senate, GARY HART, U.S. Senate, PATRICIA SCHROEDER, Member of Congress. PAGENO="0096" 92 ASPEN, COLO., April 20, 1975. Mr. JOHN R. McG▄IRE, Chief Forester, U.S. Forest Service, Washington, D.C. DEAR MR. MCGUIRE: It must be about three years now since we met at Vail, Colorado where my wife and I dicussed the Independent Ski Instructor Permit issue with you. If you recall, I wrote you a follow up letter and your reply to that was that you would not issue me a permit until the Court had its say since I had filed suit. Last week the 10th Circuit Court of Appeals ruled on the case and they re- manded the case down to the District Court for a re-hearing. Their basis was the anti-monopoly aspect of my suit. While not a total win for me this ruling was certainly in my favor, and Mr. McGuire, I would like to now drop the suit and negotiate a settlement and I feel that now is an appropriate time for the Forest Service to do this. The "climate" has changed, new developments have taken place. President Ford announced that he will vigorously enforce the anti- monopoly laws to stir competition within the economy. What better place to start than within the Government? I've enclosed a package of papers to quickly review the situation without having to go into the lengthy details, just to bring you up to date. I realize you probably have seen some of these papers, however there have been additions. Also, I've been working closely with George Morris, the Local District Ranger, and I've spoken with George Tourtillott of the Regional office. May I suggest that you contact these men, especially Mr. Morris, to really get a pic- ture of what is happening in the field. Mr. McGuire, in view of the latest occurrences I really hope you will recon- sider your former position so that we may finally settle this issue to the benefit of all. I look forward to your positive reply. Thank you. Most Sincerely, DON LEM05. CONGRESS OF THE UNITED STATES, HOUSE OF REPRESENTATIVES, Washington, D.C., April 28, 1975. Mr. JOHN R. MCGIJIRE, Chief Forester, U.S. Forest Service, Washington, D.C. DJ~&R MR. McGUIRE: You were recently contacted by Members of the Colorado Congressional Delegation concerning the problem revolving around the ap- plication of one Don Lemos of Aspen, Colorado, for a permit to conduct inde- pendent ski instruction at the Aspen Ski area. After studying this matter with some care, I cannot escape the fact that there is equity on both sides of this case. There is no doubt in my mind that the Aspen Ski Corporation expresses a valid objection to opening up its permit area and facilities to independent ski instructors when its own ski instruction program is expected to provide a legit- imate source of income for its total operation. It is not reasonable to expect any business to purposely erode a source of income. On the other hand, we are talking about public land and such things as the right of the public to have a choice of services. These factors give a legitimacy to Mr. Lemos' application. In looking for some kind of compromise, I am wondering if the parties in- volved, including the Forest Service, could consider an arrangement whereby a fee could be charged for an independent ski instruction permit that would be calculated to compensate the Aspen Ski Corporation for its loss of revenue. This might mean the independent ski instructor would have to charge a premium price for his services, but it would give the instructor the opportunity to practice PAGENO="0097" 93 his profession while requiring him to compensate the Aspen Ski Corporation for their loss of income. I would appreciate having your comments on such a proposal. Sincerely, JAMES P. JOHNSON, Member of Congress. ASPEN, COLO., May 3, 1975. Hon. JAMES P. JoHNSoN, 51.~ Cannon Boulevard, Washington, D.C. DEAR MR. JOHNSON: I was most pleased to receive your letter of April 28, 1975 along with a copy of your letter to Chief John McGuire of the Forest Service. You asked for my comments and I will state a few thoughts and per- haps pose some questions. First I'd like to say that I think your letter is carefully thought out, designed to be in the best interests of all, and I really appreciate that. As far as the In- dependent Instructor taking revenue from the corporation, it could be argued that this would be offset by the additional draw of people to the area to seek the Independent's services, resulting in increased lift ticket sales. Also, many of the students request the services of an Independent would not take lessons from the area ski school in any case. This would indicate that the Independent would not be a substitute for the existing ski school, but an addition to it. The Independent provides services not normally provided by the existing ski schools such as flexibility of schedule, pick up service, choice of different areas and a choice of different techniques, not to mention a choice of price. Now even if the Independent did cut into the revenue of the area ski school, should the area be compensated? Rather than think of it as something that they're entitled tO, may we not think of it as something that should never have been? Mr. Johnson, from my viewpoint there are two aspects. One is the economics involved; the other is the freedom to pursue my profession. Of the two, the freedom is the dominant factor, and with that in mind, I support your solution proposing a compromise. I've given some thought as to how this might work, and the simplest way might be for the Independent to present himself along with his permit to the management of the area where he desires to conduct a ski lesson, pay a fee to them, or perhaps purchase a commercial lift ticket at maybe twice the price of a normal one, and then proceed to conduct his business. He would be obliged to display indentification advising that he is a permitted Inde- pendent, and he would be extended lift line privileges like any other ski school private lesson instructor. This could also be worked out on a seasonal basis with a season pass. I've proposed one way that this might work and I'm certainly open for ideas and negotiation. My goal is to contribute something to the sport of skiing, and in this spirit I will agree to any reasonable settlement. ~ I thank you for your interest and support Mr. Johnson, and I look forward to hearing further from you. Until then I remain, Sincerely, DON LEMOS. Enclosure. CONGRESS OF THE UNITED STATES, HOUSE OF REPRESENTATIVES, Washington, D.C., July 28, 1975. JOHN R. MCGUIRE, Chief, UJg. Forest Service, Washington, D.C. DEAR MR. MCGUIRE: Please reference my letter to you of March 25, 1975 (also signed by Senators Hart and Haskell) regarding the possibility of the issuance of special use permits to qualified independent ski instructors. I also have read with great interest Congressman Johnson's April 28 letter to you on this subject. As Congressman Johnson wrote you, there appear to be legitimate concerns PAGENO="0098" 94 on the part of both the ski companies and the independent instructors. The ski companies fear a loss of revenues, but the independent instructors argue that the public deserves a choice of services on these public lands. I believe there is merit in Congressman Johnson's proposal for a compromise- namely, that the Forest Service would issue the special use permits for qualified independent instructors, but that the instructors would be charged a fee to com- pensate the ski companies for their loss of revenue. I would appreciate your comments on this proposal. Please respond to my Denver District Office. With kind regards, Sincerely, PATRICIA SCHROEDER, Member of Congress. LA MAUR, INC., Minneapolis, Minn., January 10, 1975. DISTRICT RANGER, U.S. Forest Service, Box 359, Aspen, Cob. DEAR SIR: During my recent skiing vacation in Aspen, I became aware of a situation that troubles me greatly. The situation concerns one Don Lernos. My understanding of this situation is that be has all of the qualifications to properly and safely instruct people in skiing, but has not been issued a permit to do so. It is further my understanding that these permits have to be issued by the Forest Service, and to date this has not been done. I cannot understand why he has not been issued this permit. First, it appears that he has more than adequate qualifications to properly execute his teaching responsibilities. The second part which greatly disturbs me is that I do not understand how the Aspen Ski Corporation can have a "lock" on the right to teach skiing on public land. As a matter of fact, I believe that any person, fully qualified, should be given the opportunity to teach skiing on public land. It seems to me that a set of qualifications could be readily set up so that any individual who meets the qualifications could be issued a permit for private instructions. It further seems to me that this country was built on the position that com- petition is healthy, and that the public benefits are best protected by having competition in every field of endeavor. As a business person, I am confronted with competition on a daily basis, and I firmly believe in it. While I was in Aspen I personally spent time with Mr. Lemos, and found him to be a person of the highest integrity and responsibility, and I very strongly feel that the sport of skiing needs this type of people. I would appreciate an answer to this letter at your earliest convenience. Very truly yours, RICHARD G. SPIEGEL, President. PRYTANIA CLINIC, New Orleans, La., June 18, 1975. Senator J. BENNETT JOHNSON, Rusxell Building, Washington, D.C. Dear SENATOR JOHNsoN: I am writing to ask that you support a piece of legisla- tion which I understand is to be proposed by Senator Gary Hart of Colorado. Like many other Louisianians, I have become devoted to the sport of skiing as a recreational activity. I also share with the vast majority of Louisianians, a concern for the public lands and their fair utilization by the public, to whom they "belong". A situation has arisen in the community of Aspen, Colorado where the Aspen Skiing Corporation rent public land from the Forest Service to provide the necessary facilities for skiing. An impasse has been reached in that the skiing corporation has been pre- venting a highly qualified ski instructor or his wife (Don and Jeannie Lemos) from earning a livelihood as professional ski instructors. The Ski Corporation has been able to maintain this situation in what appears to be an illegal manner, and at the same time the United States Forest Service PAGENO="0099" 95 simply will not issue a permit to Mr. Lemos-although they certainly have the right to do it and there appeared to be very compelling reasons for them to do it. As Mr. and Mrs. Lemos do not have the financial resources to take this matter through the courts, as I understand the situation, there is to be an attempt to resolve the issue through appropriate legislation. I am enclosing some correspondence which gives some detail and documentation to the issue and I hope someone on your staff will have a chance to become familiar with it. If and when the matter comes to your attention for considera- tion, I together with the many Louisiana advocates of outdoor activities, fairplay, and particularly skiing as a recreation will be very grateful. Yours very truly, ARTHUR 3. SILVERMAN, M.D. ENGLEWOOD, CoLo., May 13,1975. Mr. Joux R. McGuraE, Chief Forester, U.S. Forest Services, U.S. Forest Service, Washington, D.C. Re: Don Lemos and independent ski instructors. Dear Mn. McGrnRE: I have followed the career of Don Lemos for over ten years, and I have had the distinct pleasure of skiing with both him and his wife. They are both highly accomplished and beautiful skiiers. Over the years I have also skiied with many instructors at various ski schools in this country and in Europe, and in my opinion, it is a great tragedy that Don's ability in teaching has been denied to the American skiing public. The slopes and lifts are ostensibly maintained for the benefit of the public, but for all practical purposes, they are obviously being maintained for the sole benefit of the lift operators, creating a monopoly against the small entrepreneur, in this case, the independent ski instructor. The lift operators maintain facilities for which they are well paid. That is their compensation. However, if they wish to have a ski equipment rental service, or a ski school, that is all right. But there is nothing in the Act granting their permits which denies the right of teaching to other qualified instructors, and nothing granting any monopoly to the operators. The lift operators should not have the exclusive right of determining what is best for the American public. What is good for the lift operators is not necessarily good for America and I am glad to see that Vail has already agreed to various changes, respecting the independent ski instructors. The details involved in settling teaching qualifications, compensation for use of ski facilities, liability insurance, are all technicalities which certainly can be worked out by this country's various financial branches. That should not be a problem. What is necessary is the determination to permit the well-qualified, but independent instructor, to teach; to allow the American public to choose their own instructors and to see to it that the freedom of the American public is not curtailed by selfish monetary interests. I do hope that you will review this matter now with the major emphasis on the need of the American public to have the full and free enjoyment of their natioinal forest lands, and that independent ski instructors of the high calibre of Don Lemos will not be denied to the American skiing community. Sincerely yours, Mrs. GLADYS OPPENHIMER. SOUTH LAKE TAHOE, CALIF., May 26, 1971. Mr. EDWARD P. CLIFF, Chief U.S. Forest Service, 14th Street d~ Independence Avenue SW., Washington, D.C. DEAR Sin: As a certified ski instructor and having taught skiing fulltime for over nine years, I give my fullest support to this petition, for many reasons which are not necessary to go into at this time. PAGENO="0100" 96 At the present time, most ski-schools are controlled by the lift operator, strictly for the purpose of financial gaiin. Also the instructors are financially dependent on the lift operator. These instructors are then not able to improve the quality of ski instruction to the public in the United States. At the present rate, it will take too many years for our standard of ski instruction to equal that of the leading countries. I am asking the support of the United States Forest Service in rectifying and improving this situation. Yours, very truly GUNTHER HOHLWEG. P.S. Right on! Let's keep the movement going. The original went to R. Cliff with the petition. ASPEN SKI ScHooL, GENERAL INFORMATION-1974--75 INSTRUCTOR STAFF The Aspen Ski School will employ a regular staff of approximately 200 in- structors for the winter season 1974-75. Contracts will be signed with some in- structors while others will work on a non-guaranteed basis. The staff will in- clude apprentice instructors who undergo continuous instructor training in preparation for spring certification exams. PAY SCALE Instructors are paid on the basis of certification status, experience, and value to the Aspen Ski School. The teaching scale starts at $6.05 per hour for ap- prentice instructors and goes to $9.55 per hour for our top instructors. Instruc- tors receive pay at time and one-half for teaching in excess of 24 hours a week. CLINIC Instructors returning from last year will attend clinics scheduled before Thanksgiving. Apprentice and experienced instructors who have not previously been employed by the Aspen Ski School will clinic December 2-7. The clinic is an indoctrination in the Aspen Ski School system and a period of evaluation. Further training and evaluation is continued through the Christ- mas holiday period and the ski school staff is finalized the first of January. CLINIC REGISTRATION See letter. TEACHING SEASON The Aspen Ski School operates every day from Thanksgiving until the area closes in mid-April. From Thanksgiving until Christmas the class load is light and there is enough work only for our returning contract instructors. During the Christmas holidays our peak days will be over 2,000 students and there is work for all instructors. Instructors should plan to supplement their ski school income until such time as their status in the ski school becomes firmly estab- lished. Most first-year instructors will receive no pay before January 1st. On January 1st, our staff will be finalized at 200 instructors. A general work- ing priority will be established for all instructors at this time. During January, training is continued for apprentice instructors. Through February and March there is reasonable steady employment for all. UNIFORMS Basic uniform (jacket and pants) are provided by the Aspen Ski School. Ski school sweaters and pants may be purchased through the school at cost price. PAGENO="0101" 97 IIOIJSING Instructors must make their own housing arrangements. Housing is at a premium in Aspen as in most resort communities. HOLLAND & HART, ATTORNEYS AT LAW, Aspen, Cob., May 19, 1975. Mr. GEORGE MORRIS, Aspen District Ranger, U.S. Forest Service, Aspen, 0010. Re: Independent ski instructors. DEAR MR. MORRIS: At the request of Curt Chase, Aspen Ski School Director, I am enclosing copies of a letter, dated March 25, 1975, from Senators Hart and Haskell and Representative Schroeder to Chief Forester McGuire, together with a copy of our reply, dated May 16, 1975, on behalf of Aspen Skiing Corporation. This correspondence relates to the independent or underground ski instructor question as it affects ski area permittees. Your very truly, JAMES T. MORAN. HOLLAND & HART, ATTORNEYS AT LAW, Aspen, Cob., May 16, 1975. Mr. GARY HART, U.S. Senate, Washington, D.C. Re: Use permits for independent ski instructors. DEAR SENATOR HART: As general counsel to Aspen Skiing Corporation (ASC) we are writing in response to your letter of March 25, 1975 addressed to Chief Forester, John R. McGuire. Since Senator Haskell and Representative Schroeder joined as signatories to your letter we are sending copies of this letter to each of them. You have referred to the long standing controversy between Don Lemos and ASC as an example of the corporate abuse of individual citizens which results from the current Forest Service policy of refusing to issue special use permits to individual instructors. You then conclude that the single permittee policy impairs the right of the public to engage ski instructors of its own choosing and contravenes the statutory mandate that the general public be allowed full and free enjoyment of national forest lands. Against this backdrop you urge the Forest Service to consider policy re- visions which would either require ski area permittees to make provisions to accommodate independent instructors or would provide for the issuance of special use permits to "qualified" individual instructors. You state that the need for review of past policy is both apparent and immediate. I can appreciate your concern that governmental policy not become a vehicle for abuses of corporate power or for denial of the public's full and free enjoy- ment of national forest lands. I fear, however, that you have accepted Don Lemos' "Robin Hood" theory of the independent instructor without fully con- sidering how the skiing public's interest is best served and, certainly, without full knowledge of the facts surrounding Don's particular situation. The question of whether current Forest Service policy on ski instruction is at odds with the public interest has been examined twice by the federal courts. In Heath vs. Aspen Skiing Corporation, 325 F. Supp. 223 (D. Cob. 1971), the Court expressly found and concluded that the "regulations and policy of the Forest Service applicable to ski schools are reasonable, authorized, lawful and in the public interest". In Sabin v. Butz,-F. 2d-(lOth Cir., No. 74-1060, April 9, 1975) the Court concluded that the relevant provisions of the Forest Service Manual and the single permittee policy are within the scope of power granted by Congress to the Secretary of Agriculture. The Sabin case has been remanded to the District Court for a. determination as to whether the agency gave fair consideration to the possible monopoly and anti-competitive aspects of the single permittee policy. If the District Court concludes that the Forest Service failed to consider all relevant factors the case will be further remanded. to the Secretary of Agriculture for reconsideration. PAGENO="0102" 98 My point is simply that the two District Court judges who have weighed the current policy on the scales of public interest have both concluded the public interest is better served by present policy than by the proposals advanced on behalf of Mr. Lemos. The posture of the Sabin case will require yet another examination of the public interest factor in terms of monopoly and anti-com- petitive aspects. Having been involved with this problem for several years I can assure you that the Forest Service policy is not premised on a desire to confer economic favors on the ski area permittees. It is based on long and careful consideration of how to best serve the overriding interest of the public in the full and free enjoyment of national forest lands. Your apparent assumption to* the contrary seems unwarranted in view of the fact that the federal courts have so far con- curred with the Forest Service. The close scrutiny of such problems which is afforded by the judicial process is certainly entitled to greater weight than the mere protestations of public interest which are continually advanced by Mr. Lemos primarily because they appear to coincide with his own individual inter- est. May I respectfully suggest that you will obtain a clearer understanding of the specific elements that entered into the public interest determination by carefully rereading Judge Winner's opinion in the Heath case. You point out in your letter that there are "a relatively small number of independent instructor". I take it that you have not been furnished with any evidence that a substantial segment of the general public is protesting about the unavailability of instruction from these few independents. Certainly we have never been furnished with any such evidence. By way of contrast, let me in- form you that the Aspen Ski School, with a staff ranging from 200-250 instruc- tors, annually provides the following services to the general public: 1. 336,000 hours of class instruction; 2. 16,000 hours of private lesson instruction; 3. Free ski classes for local youngsters under thirteen years of age; 4. Coaching assistance for Aspen Ski Club junior racing programs; 5. Free instruction and guidance for blind and other physically handicapped skiers; 6. Continuous training to maintain a high level of technical competence among its instructors; and 7. Expertise and manpower for the conduct of one or two premier amateur ski races such as the Roch Cup and the World Series. To so serve the public demand for ski instruction and related services requires an organized and efficient staff of ski instructors who are willing to be avail- able at regularly scheduled times, who are willing to give class instruction or private instruction, who are willing to instruct first timers as well as advanced skiers, and who are willing to give additional time and effort to special events such as packing and maintaining courses for amateur and junior race events. On the other hand the so-called independent instructor uniformly proposes preferential arrangements which benefit him at the expense of his professional colleagues and serve oniy those few members of the general public whose de- sires for preferential treatment coincide with his own. To illustrate let me sum- marize the requests which have consistently appeared in the proposals ad- vanced by Mr. Lemos over the past few years: 1. No fixed daytime schedule; 2. Private lessons only; 3. Privilege of "cutting" lift lines; and 4. Treatment on a par with the top instructors who are within the organized ski school. In short the independent instructor seeks more privileges than are accorded to any ski-school instructor without undertaking any of the latter's obligations. Which instructor better serves the general public? I anticipate that you may ask: Cannot the independent be accommodated without disrupting the organized ski school? In theory at least that, seems a possibility which would allow the ski school to continue to serve the public at large and the independent to serve his own restricted clientele. The answer is that the theory has been disproved in actual practice. You may know that for some years past the independent instructor was tolerated and was then euphe- mistica.lly referred to as an "underground" ski instructor. The peaceful coexist- ence (another euphemism) might have continued indefinitely but for the fact that some of the underground instructors, Heath and Lemos foremost among PAGENO="0103" 99 them, began to publicize their own activities by indulging in some attention pro- voking conduct on the slopes and by promoting dissension among the instructor employees. Their gospel was that the independent gets to keep the entire fee paid by the pupil and thereby makes considerably more money than the poor ski school instructor. This caused a great deal of understandable concern among ski school personnel, viz "If Health and Lemos can get away with it, why shouldn't we all do it?" The problems of maintaining an organized ski school to meet the overrall public need in the face of that situation should be apparent to you. The policing of the notorious independents was a direct result of their own agitations among the regular instructors. Nevertheless, ASC has not closed its corporate mind to the problem. Earlier this year in evaluating Mr. Lemos' most recent'proposals I requested Curt Chase, director of the Aspen Ski School, to once again consider the matter. Here is what he wrote to me: "The feasi- bility of providing some ski school services through special arrangement with independent operators has been evaluated in the past and is constantly being evaluated on a current basis. It has been and continues to be our feeling that this procedure would not improve our service to the public, that it would create unacceptable problems of accounting and control, create a preferential treatment for selected instructors and be disruptive to the morale and efficiency of our in- structor staff." The single permittee policy has resulted in "the greatest good for the greatest number". The proven capacity of the organized ski school to meet the need of the public for competent, efficient, organized and safe ski instruction should not be subverted to Mr. Lemos' thesis that the public interest requires his serv- ices above all else. Nowhere has the real essence of the public interest question in this matter been better captured in one sentence than by Circuit Judge Mc- Williams, who wrote: "It is abundantly clear to me that the Forest Service was of the view, which I believe to be a rational one, that, all things considered, a single permittee policy, as opposed to a multiple permittee policy, was more advantageous for all concerned, except possibly these plaintiffs, and others similarly situated, who in reality simply seek to benefit from the work of others" (Separate opinion, concurring in part and dissenting in part in Sabin `i' Butz, supra.) Turning now to the specific facts surrounding Mr. Lemos' personal situation, I don't believe that you have been furnished with an adequate or complete sum- mary. This is not a case in which the corporate bully has abused the over- matched individual citizen as you have apparently assumed. I cannot, in this letter, detail the entire history of the Lemos-ASC controversy but I can sum- marize some of the pertinent facets that you may not be aware of. To begin with Mr. Lemos was given employment as a contract ski instructor with the Aspen Ski School during the 1963-64 season. As the season progressed, the school became concerned over a rash of pupil accidents occurring in Mr. Lemos' classes, including two broken legs in a one week period. Observation by qualified supervisors established that he was pushing or overskiing his pupils relative to their ability and was exercising poor judgment in the selection of terrain. He was apprised of this and, although he disputed the supervisory opinions, did begin to slow his classes down somewhat. He was counseled about his responsibility for the safety and welfare of his pupils. On the evening before the 1964 Roch Cup he announced that he was going to take the following day off to watch the competition, was reminded that his class was returning for continued instruction and was told that be was expected to be available to teach them. Both literally and in effect he told the ski school to "shove it" and did not report for work the following day. Accordingly, he was terminated as an employee. He then moved on to Aspen Highlands where be was engaged under some sort of special arrangements made with Fred Iselin who, at that time, was Aspen Highland's Ski School Director. The exact details of the arrangement were not known to the four Highlands supervisors who are now the directors of the ski school. Apparently the agreement was similar in certain respects to Mr. Lemos' current proposals for independent instructors. By the following year Fred Iselln had left Aspen Highlands and his successors did not re-employ Mr. Lemos. There then followed several years of more or less open underground teaching by Mr. Lemos. PAGENO="0104" 100 In the fall of 1969, Mr. Lemos approached ASC with a request to resume teaching under the auspices of the Aspen Ski School. He was offered employ- ment on the same basis as all other instructors in the school. Mr. Lemos in- sisted that he had to have special privileges and concessions that were not ex- tended to the other instructors. 1~ianagement was unable to accede to such re- quests and Mr. Lemos chose not to accept an offer of employment on the same terms as were offered to all others. During the 1970-71 season, Mr. Lemos for a short while taught at Aspen Highlands under fee-spit arrangements which he and Mr. Heath bad separately negotiated with the Highlands management. These arrangements, which are described in the Heath decision, were terminated prior to the end of the season because of conflicts with the regular ski school. The arrangements with Jack Heath were terminated at about the same time and he promptly commenced suit against Aspen Highlands, Aspen Skiing Corporation and the principal of- ficers of each. Heath v. Aspen Skiing Corporation, supra. At the beginning of the 1971-72 season, Mr. Lemos again approached the Aspen Ski School, this time with a freelance type of proposal in which he would teach only his own clientele, would arrange his own time schedule, and would not be available for class instruction or any of the other regular duties under- taken by the other instructors. This proposal was not accepted by the Aspen Ski School. The same basic proposal has been submitted and rejected several times since. In the interim there have been lift-line scuffles and various lawsuits of which you probably have some knowledge. Mr. Lemos has repeatedly turned down all offers of employment on a basis consistent with other instructors. He has requested special treatment that can- not in good conscience be given to him without being given to the entire ski school. The preferences which he desires, if applied uniformly to all instructors, would make it impossible for the Aspen Ski School or any other ski school to give adequate instruction to the public. With regard to Mrs. Lemos, you should know that about 3 years ago she was engaged as an apprentice instructor by the Aspen Ski School. She was assigned to teach at Christmastime and worked for two days. The next day, the busiest of the season, she failed to show up for work and was not seen again for the remainder of the season. This past course of conduct was a strong factor in ASC's decision not to employ her this season. As with any teacher in any school, the qualification to instruct is not solely determined by proficiency in the subject matter. An appreciation and willing- ness to undertake all of the responsibilities of the profession to the public and to the employer are also required. In these areas Mr. Lemos has fallen so short that it has completely outweighed any technical proficiency he might possess. The independent instructor experiment has failed not on account of permittee abuse of power nor on account of "company town" attitudes. It has been rejected because of the deleterious effect which such arrangements have had upon the ability of the organized ski school to effectively serve the public interest. Mr. Lernos has played a leading role in reinforcing the wisdom of the single per- mittee policy. I hope that, in the future when you decide to espouse the cause of the seem- ingly oppressed, you will spend more time collecting all of the facts in lieu of accepting the protestant's version as the whole truth. Contrary to the version supplied to you, Mr. Lemos was not arrested on National Forest land but on private land leased to ASC. We are also advised through recent inquiry that Vail does not have an independent instructor program as represented in your letter. Should you desire further information on any of the matters discussed in this letter or in your letter of March 25, we will be happy to provide it. Yours very truly, JAMES T. MORAN. MARTIN H. KAHN, ATTORNEY AT LAW, Aspen, Cob., Juby 3, 1975. Hon. GARY HART, U.S. Senate, Senate Office Building, Washington, D.C. DEAR SENATOR HART: As you know, I represent Don Lemos and have been in contact with members of your staff on prior occasions regarding our belief that present Forest Service policy regarding independent ski instructors is unwise. PAGENO="0105" 101 I have recently received a copy of a letter sent to you by counsel for the Aspen Skiing Corporation (Corp), and I would like to respond thereto in relatively brief fashion. The Corp contends that Forest Service policies are in the public interest and cite as evidence the apparent approval thereof by two federal district courts in cases involving Don Lemos and one Jack Heath. I submit that a reading of either district court opinion manifestly demon- strates that the policies in question were not, as claimed by the Corp, "afforded close scrutiny," but rather were approved with but cursory analysis. As you are a lawyer, I am certain you recognize that courts, in reviewing administrative actions (except in circumstances not relevant here) in theory and in practice give great (and, some would say, undue) weight to the agencies' factual determinations. I believe that the two district courts in question did that in their deliberations. Judge Winner's rationale that Forest Service policies were "reasonable, authorized, lawful and in the public interest" seems to have been based upon two points: (1) protection had to be given potential investors in ski areas against "fly-by-nights" who have no permits; (2) the government must realize a percentage of all income derived from permit areas, and "to allow anyone and everyone to teach for hire would create a situation the Forest Service could not police." I do not believe either argument justifes monopoly power, particularly when the alternatives has never been tried in any formal, open way. The Corp contends that the Forest Service's policy is based on a "long and careful consideration" of how to best serve the public interest and the "full and free enjoyment of national forest lands." Our experience is that the Forest Service has failed to give careful (if any) consideration to the alternatives we have proposed. Rather, the Forest Service (as is unfortunately the case with some other federal regulatory agencies) seems to view its mission as protecting the industry it regulates-not the public. So far as we can determine the Forest Service has never attempted to issue permits to qualified independent instructors in order to assess the merits thereof, and, therefore, it must be concluded that the Forest Service's "careful consideration" must have been in a vacuum, so to speak. The Forest Service has certainly never sat down with Mr. Lemos to discuss how such a system might be set up to minimize or eliminate any of the "problems" arguably created by such action. It seems to me that at this point Congress should review the Forest Service's policy, because it is apparent that the Forest Service is not prepared to do so. I am aware that you and Senator Haskell have already indicated dissatisfaction with the Forest Service's policies and procedures in other aspects of ski area administration, and* that Senator Haskell will be holding hearings in the near future. Perhaps it would be appropriate to include this question among the sub- jects of inquiry, and to have representatives of the Forest Service, ski schools, independents (or erstwhile independents) and members of the general public testify. The Corp, in its letter to you, sets forth services it provides "to the general public." We have no quarrel with the fact that the Corp does many things which benefit the public (and, of course, enhance its good will). We do not wish to do away with the Corp's ski school. We believe, however, that just as the fact that General Motors produces a number of good automobiles ought not to preclude Ford, Chrysler (or, more appropriately here, American Motors) from mnufacturing cars, so too, Don Lemos and others ought to be able to teach skiing on public land. Indeed, as public land is involved, the case is all the more compelling. These activities of the Corp, by the way, are not exclusive to the Corp. Mem- bers of the Aspen community voluntarily assist in some of these endeavors. (In- deed, my wife has taught blind skiers as a volunteer, and, incidentally, had to pay for her lift ticket to do so.) I simply do not believe that if independents were given permits under the types of conditions we have proposed in discussions with local Forest Service officials (and, for that matter, with Corp representatives as well) there would be an exodus of Corp ski school employees who, after all, are guaranteed some economic benefits independents would not have (e.g. salary, workmen's comp, stock options, group insurance, etc.) And, with respect to the "preferential treatment." Mr. Lemos is allegedly so insistent upon, I can only note that in my discussions with Corp representa- tives, we have simply asked to be treated on a par with the Corp's other top ski instructors who have a substantial following of their own. PAGENO="0106" 102 The Corp asserts that the accommodation of the independent without dis- rupting the organized ski school has been "disproved" in practice. It does so by implying that it "tolerated" underground instructors but could not continue to do so because Mr. Lemos (and other) publicized their activities. Thus, they would have a situation where the existence of a right would depend upon one's not being able to exercise that right openly. We can but imagine how that type of argument would have appealed to the framers of the Bill of Rights. The Corp also asserts that the single permittee policy has resulted in "the greatest good for the greatest number." I submit that this assertion is a paraphrase of "what's good for General Motors is good for the U.S.A." Finally, the Corp then sets forth some of the "specific facts" surrounding the Lemos situation (Mr. and Mrs.). I shall not, in common with the Corp, at- tempt to detail the entire history of the Lemos-Corp controversy, but will briefly respond to what they set forth. It is true that in the 1963-64 season here were several injuries in Mr. Lemos' classes-ranging from a student who suffered a bruised (or dislocated) shoulder as a result of being pushed by another skier while standing in a lift line to one who fractured a leg, while making a traverse on an easy slope at But- termilk. (Mr. Lemos does not recall two broken legs over any period, including "a one week period.") Mr. Lemos does not believe that any of these accidents were attributable to any action (Qr inaction) on his part. We would note that in that same season Mr. Lemos was one of the two instructors assigned by the Corp to teach members of the Kennedy family. One would think that the Corp would not assign an irresponsible instructor for that task. I would further note that Mr. Lemos had been employed as an instructor by the Corp for the two seasons (1961-62 and 1962-1963) preceding the one in question, further sub- stantiating the fact that he is not a careless instructor. As to the Roch Cup "shove it" incident, apparently the Corp is confusing Mr. Lemos with another instructor, Rick Carney, to whom that incident applies. In fact, Mr. Lemos was not "terminated", but resigned, as a result of dis- agreement with ski school policy. He went on to Aspen Highlands where he was employed for four years as a top contract instructor with no "special arrange- ments," as alleged by the Corp. With respect to the question of Vail's permitting an independent to teach, we did not fully understand the arrangement as reported to us by someone asso- ciated with Vail Ski School. The person to whom they made reference is ap- parently not "independent" as he is considered an employee of the Vail Ski School. We do understand, however, that this individual works independently of the ski school in that he books his own lessons with his clientele paying Vail Ski School, and he receives 70% of what is paid with the ski school re- ceiving 30% (unlike the other instructors, who are paid a salary). We regret any problem caused by our not being fully informed. We think you will agree, however, that this arrangement is more "independent" than "employee" in its orientation, and is one which we would be happy to explore as a starting point with the Forest Service. We have other disagreements with the Corp's recitation of the facts (includ- ing those asserted with respect to Mrs. Lemos). We do not believe, however, that any purpose is served by endeavoring to recapitulate that history, because of our conviction that the issue involved transcends the personal dispute be- tween the Corp and Mr. Lemos. The issues involved, we submit, concern fundamental aspects of governmental policy. Freedom of competition, barriers to access, utilization of public land, al- ternative teaching methods, prevention of corporate abuse are some of these. These issues should be decided on the basis of a searching and impartial inquiry with the public interest in mind. We hope that you will see that such an inquiry will be made. We are taking the liberty of forwarding copies of this letter to Senator Haskell and Representative Schroeder, signatories to your original letter to Mr. McGuire and receipients of copies of the Corp's letter, and to Mr. McGuire and Mr. Morris (local Forest Service) and the Corp's counsel as well. Should you need any fuurther information, please contact us at your convenience. Very truly yours, MARTIN H. KAHN. PAGENO="0107" 103 U.S. DEPARTMENT OF AGRICULTURE, FOREST SERVICE, Washington, D.C., April 11, 1975. Hon. GARY HART, U.S. Senate. DEAR SENATOR HART: This is in reply to your letter of March 25 concerning use permits for independent ski instructors. You have asked that we review our policies, particularly as they relate to independent ski instructors and exclusivity of permits. In administering National Forest winter sports sites, we have been guided by several important principles. Three which seem to have particular applica- tion in this.instance are: All commercial uses of the National Forests must be covered by a formal contractual agreement or permit for which a commensurate fee or charge is collected. The responsibility for public service and safety through quality ski school instruction rests with the basic permittee. When more than one related use takes place on the same area, experience argues for a prime permittee who can be held accountable for the development and use of that area. We believe the situation you describe at Vail responds satisfactorily to these principles. The presence of independent instructors is mutually agreed to by the permittee and the Forest Service, and, of course, a fee is recovered. The Forest Service, under this arrangement, can fairly hold the permittee ac- Ŕountable for the full term of occupany. This is being accomplished with little or no need for arbitration between Vail Associates and the independent ski instructors. The situation regarding Mr. Lemos at Aspen is somewhat different. For reasons beyond our knowledge, the corporation has refused to utilize the serv- ice of Mr. Lemos and other independent ski instructors. Our principle concern is to assure the permittee redeems his responsibility for everything that hap- pens on permitted areas. We do not feel it appropriate to inject the Government into the personnel policies of a permittee, providing permit terms are met and laws such as those pertaining to Equal Employment Opportunity are followed. The situation, although perplexing, at Aspen is not persuasive in itself for us to change National direction. We continue to believe that all of the operations on a permitted area must be the responsibility of the basic permittee. In light of this overall area responsibility, we give the permittee every reasonable private right to carry out his operations. You may know this whole matter of independent ski instructors is before the courts. The suit essentially challenges the authority of the Secretary of Agricul- ture. Under law, he has discretionary authority to grant permits for use and occupancy of National Forest lands under terms and conditions he may pre- scribe. Currently, he is not required to accede to the wishes of every applicant. Since a decision may bear on the subject, the results of this suit, of course, may require modification of these procedures. We appreciate the effect that Aspen Ski Corporation policies can have due to their size. On the other hand, they do not represent the sole opportunity for professional instructor employment in this area. Hopefully, those unable or unwilling to work for the corporation will find satisfactory alternatives. Thank you for taking the time to give us your thought. We are sensitive to your concerns and will work diligently within our guidelines to maximize em- ployment and equity in service operations. Sincerely, JOHN R. MCGUIRE, Chief. U.S. DEPARTMENT OF AGRICULTURE, FOREST SERVICE, Washington, D.C., July 3, 1975. Hon. TOM RAILSBACK, House of Representatives. DEAR MR. RAILSBACK: This is in reply to your May 12 letter which enclosed correspondence and newsclippings about Don Lemos, a ski instructor from Aspen, Colorado. You asked for information about the case. PAGENO="0108" 104 The question at hand is related to the law suit styled Sabin v. Butz, et al., Court of Appeals 10, Civil No. 74-1060. The Circuit Court ruled in favor of the Government on three counts. The fourth count, involving consideration of a monopolistic situation, was remanded to the District Court. Our plans are to proceed with the decision of the Circuit Court, and to provide additional infor- mation to the District Court so they can proceed with the case. Mr. Lemos has suggested dropping the case and settling out of court by allowing him to teach skiing at a ski area of his choice. We believe it is appropriate, however, that the Court issue a decision in this instance. Public skiing on the National Forest is provided by issuing special use per- mits to private investors. They are required to develop and operate the fa- cilities and provide services defined in the permit. To accomplish this, they are authorized to conduct a variety of exclusive business operations. These include uphill transportation lifts, food and lodging operations, ski schools, and other services. These operations generate the profit needed to build and operate the area, and to provide a variety of services which are required but which earn no income. Consequently, our policy recognizes the permittees need for exclusion control of key elements of the business on the permitted areas. We are amenable to having several entreprenuers operating at a ski area, pro- vide they are there with the concurrence of the permittee and are under his con- trol as sublesses under his permit. We believe that other arrangements could result in poorer services to the public. Profit centers in this type of business must pay for numerous necessary expenses and services for which there is no direct charge. Without a single permit policy, all profit centers such as ski schools, ski lifts, and food services could conceivably be operated by individuals who would have no responsibility for providing other services. These services include plowed road access and parking lots, well maintained ski slopes, ski patrol, avalanche control, public restrooms, warming shelters, information, and others. Liability insurance, taxes, overhead, and other items add to expenses. Most businesses must have control over their operations, including hiring and standard setting for their personnel. When the general public visits a ski area, they look to the principal operator to provide satisfactory accommodations and services. If they are unhappy with a segment of the services, this dissatis- faction is reflected upon the operation as a whole. Ski area operation is com- petitive, and area managers need to have control or risk losing customers. This situation could affect all ski area and public service operations. While we are sympathic with Mr. Lemos and other qualified instructors, we believe the objectives of our policy remain sound and in the public interest. We appreciate your inquiry and hope that this gives you sufficient background. We have conveyed these same reasons to Mr. Lemos and others who have been interested in the case. Sincerely, JOHN R. MCGTJIRE, Chief. Enclosure. ASPEN, CoLo., September 25, 1975. ZANE G. SMITH JR. Director, Division of Recreation U.S. Forest Service, Washington, D.C. DEAR Mn. SMITH: Throughout the course of the summer I've received copies of letters written by you, on behalf of Chief McGuire, to various members of the public and to various legislators. These letters were in response to inquiries by them on behalf of the Independent Ski Instructor Permit issue. Virtually all of the inquiries were supportive of the ski instructor receiving an Independent Teaching Permit on some basis. While your letters to them varied a bit, the same theme pervaded all, and it is this that I shall comment on in general, choosing your letter of July 3, 1975 addressed to Congressman Tom Ralisback, Illinois, in particular. In the second paragraph of that letter, in response to the suggestion of settling the court action that has recently been returned to the District Court from the 10th Circuit Court of Appeals on monopoly grounds, you state: "We believe it is appropriate, however, that the Court issue a decision in this in- stance." I point out, in regard to this, that the Forest Service has the power PAGENO="0109" 105 to grant the permit under its existing rules, without changing anything or hav- ing to receive a Court decision, and I once again urge this settlement, and perhaps after reading my rational in this letter a new position can be adopted. In your third paragraph you go on to explain that special use permits are issued to private investors, and ". . . they are authorized to conduct a variety of exclusive business operations." Nowhere are they authorized to conduct "ex- clusive" operations, and, in fact, some permits even state "non-exclusivity" clauses. In essence, however, the Forest Service, by its refusal to issue me a per- mit, has granted exclusivity to these permittees. Another way to view this is that the permittee has the exclusive right to operate an on site business, such as a ski rental shop, but does this preclude someone from renting skis at a shop off of the area? Why then cannot a member of the public rent a ski in- structor off of the area, to be used on the area, just as rental skis rented off of the area are used on the area? The denial of this right to the ski instructor and the public would seem to me to certainly be an abuse of exclusivity result- ing in an unnecessary monopoly. In paragraph four you say that "We are amenable to having several entre- preneurs operating at a ski area, provided they are there with the concurrence of the permittee and are under his control as sublesses under his permit." You ~ay it would be all right to have a system whereby there are, in fact, several entrepreneurs, thus agreeing with a splitting of service, yet you say it must he all controlled by one company. This, by logic alone, is what monopoly laws are designed to oppose. And, in your ". . . belief that any other arrangement would result in poorer services to the public," I ask, try it and see? I believe not. This country is based on the free enterprise system and competition results in just the contrary, better services to the public. Also, in paragraph four, you make a point that an Individual with a permit would have no responsibility for providing other services such as ". . . plowed road access and parking lots, well maintained ski slopes, ski patrol, avalanche control, public restrooms, warming shelters, in- formation, and others." Mr. Smith, a very small percentage of skiers at a given area buy ski lessons. So then, where does the compensation come from to cover these services? It comes from lift ticket sales, that's where. All these extras are included in the price of a lift ticket, which, of course, the Independent Instructor would have to purchase, as would his student. I pose the question, should not ski instruction be considered a service to the public rather than a profit oriented exclusive business for a private corporation? Which would be in the best inter- ests of the public? In paragraph five, you state: "Most businesses must have control over their operations, including hiring and standard setting for their personal." Fine, they can have control over their business. If they don't want to hire an instructor. I grant them that right. Provide an alternative, however, for the qualified instructor and the public. It is a fact that in Aspen, and at most ski areas, a *ski instructor is not permitted to have a beard. I grant the ski school the right to set that standard. Does that mean, though, that the bearded, qualified ski instructor should not have the right to work independently, teaching someone to ski who will accept his beard? And, I might add, on public land? * Mr. Smith, I don't believe that present Forest Service policy regarding this situation is what this country is all about, and I respectfully request that you once again re-consider your position. In paragraph six you say you ". . . are sympathetic with Mr. Lemos and other qualified instructors . . ." and, with respect to that feeling, I ask that you please confer with Mr. McGuire and Mr. Tom Nelson, whom I bad the pleasure of. coifferring with here in Aspen, and truly consider granting Independent Teaching Permits. I look forward to bearing from you, and I thank you in advance for your ~openmindedness. Sincerely, DON LEMOS. Senator HASKELL. The next witness is Miss Jill St. John. STATEMENT OF JILL ST. JOHN, ASPEN, COLO. Miss ST. JOHN. Thank you, Senator. Mv name is Jill St. John. I reside in Aspen, Cob. I am an avid skier with a sincere interest in the betterment of the sport of skiing. 67-512-76--S PAGENO="0110" 106 Senator, there is an existing situation that is not in the best inter- ests of skiing, and I refer to the lack of choice, by the public, of quali- fied ski instructors. Right now, if I want a ski lesson, I am forced to seek the services of an affiliated ski school instructor of the area. Now, I have done this in the past, and have not been satisfied. I then came in contact with a ski instructor who was not connected with a ski school, but rather "did his own thing." I found the freedom of ideas and instruction offered me to be far superior to the methods of the ski school, and through this instructor found the joys of skiing that had been hitherto escaping me. This instructor and I skied to- gether for three winters, until December 4, 1974, when this relation- ship was most rudely interrupted by the arrest of my skiing com- panion for alleged "underground" skiing activities. Senator HASKELL. Underground? Miss ST. JOHN. That was the term used, underground. We were skiing together that day when an Aspen Skiing Corp. security officer removed' my friend, Don Lemos, from the mountain under arrest. At this time I protested to the officer that I felt my civil rights were being violated, and that as a citizen and member of the public I had the right to ski with anyone I CloSe to. My protest fell on deaf ears, and Mr. Lemos was taken away in a toboggan. Senator HASKELL. That's because he tried to ski underground. Miss `ST. JOHN. Since many ski areas, and those in Aspen, are on Forest Service land, I proceeded to write the Chief of the Forest Service, Mr. John' McGuire, on behalf of Mr. Lemos, and of course myself, representing a member of the public, asking that he remedy the situation. Once again my protests fell on deaf ears. I did not re- ceive a reply from Mr.. MeGuire, and that letter, which I include a~ copy of with my testimony, was written on April 21, 1975. I truly enjoy skiing with a ski instructor who is not affiliated with an organized ski school, and I have other friends and acquaintances who share in those feelings. It is a pleasure to receive instruction from an instructor dressed in normal ski attire rather than a ski uniform, as all affiliated instructors are'required to wear. It has been my choice to ski in the style taught by Don Lemos rather than the method in- sisted upon by the Aspen Ski School. The unaffihiated instructor has offered services above and beyond any offered by the ski school, and this informal arrangement is much more satisfactory, and is unob- tainable through a ski school. Since it is obvious, that at this point in time, neither the Forest Service nor the ski areas `will take steps' to remedy this situation, they will not permit qualified independent instructors to teach, I see no alternative but to correct this problem through congressional legisla- tion, and I respectfully request that you, Senator Haskell, take meas- ures to include this issue in your bill. Thank you. Senator HASKELL. I understand from Mr. Quarles that this business of having an exclusive right to teach skiing isn't even in the Forest Service permit. I just give that for your information. This is some- thing brand new to me. I never heard about it before and it hardly seems right that just because you get a permit you have a right to ex- clude instruction or anything else from the public's land. It is a brand new idea to me, Miss St. John, so thank you very much for appearing. PAGENO="0111" 107 Miss ST. JOHN. Thank you, Senator. [The letter referred to by Miss St. John follows:] ASPEN, CoLo., April 21,1975. DEAR Mn. MCGUIRE: It is my understanding that you are fully aware of the issue being brought forth by Don Lemos of Aspen, Colorado. This is in regards to the right of an independent instructor to teach skiing on public land, and the right of the public to choose such a qualified teacher. I strongly support Mr. Lemos' position and respectfully request that you grant him a permit. I would like to hear from you as to what is being done in this matter. Thank you. Sincerely, JILL ST. Joux. Senator HASKELL. Our next witness is Maggie McMahon. STATEMENT OF MAGGIE MeMAHON, PROFESSIONAL SKI INSTRUC- TORS ASSOCIATION, ASPEN, COLO. Miss MCMAIION. Senator Haskell, I want to welcome you to Aspen and thank you for the opportunity to testify here today. My name is Maggie McMahon. I am a professional skiing instructor. I have taught skiing for 8 years. I was fully certified here in Aspen in 1971. I have worked for an Aspen ski corporation for 2 years. Last year I went to Japan and taught skiing for Hart, and when I came back I became interested in the possibility of working as an independent in- structor in the Aspen area. As you know, the Aspen Skiing Corp. cur- rently holds the only permits to teach skiing in the three Aspen ski areas serviced by corporation lifts. Senator HASKELL. I think we better correct that statement. My understanding, and I am depending upon Mr. Quarles here, is that the Aspen Skiing Corp. holds a permit which allows them to teach, but there is nothing said about exclusively, and I think that is very, very important. Miss MCMAH0N. Well, it is my feeling that since they hold the onTy permit, they are the exclusive- Senator HASKELL. As a practical matter, you are dead right, but I don't know about the authority they have to enforce exclusivity. Miss MCMAH0N. I see. All right, may I continue? Senator HASKELL. Yes; excuse me. Miss MCMATIoN. I think I may answer that question. The U.S. Forest Service has denied special use permits to teach skiing to any other qualified applicants. thereby granting a monopoly. The Forest Service rationale preserving a monopoly in skiing instruction, as stated in a letter to me from former Aspen area district ranger George Morris, "rests with the belief," and I quote, "that the public is best served by granting permission only to the ski area perinittees and to honor their physical investments such as slope maintenance, lifts, restrooms, and the like," end of quote. Now, you, Senator Haskell, have stated, The holders of permits for commercial outdoor recreation facilities are granted the privilege of pursuing private gain on public lands. But the ultimate purpr~se of such permits is to provide high quality service at a reasonable cost to the public which owns the land. At the same time, permittees are entitled to reason- PAGENO="0112" 108 able assurances as to the security of their investment, not only for their protec- tion but to insure that services are provided to the public. That is a quote from the Congressional Record on July 16 of this year. It seems clear that the primary purpose of issuing Forest Service permits is to provide service to the public and that private gain of the perinittees should be merely a result of that goal, not an end in itself. In granting permits to teach skiing on public lands the Forest Service must consider first and foremost the question of what will serve the public interest and needs. Second they must consider the permittees' needs for security and profit to insure that high quality services will be provided. It is my belief that monopolies in ski teach- ing by skiing corporations do not best serve the public interest, and that corporation needs for security and profit can be met while al- lowing independent ski instructOrs to provide additional services on public lands served by corporation lifts. The monopoly in ski instruction by skiing corporations rules out price competition and a choice of ski techniques; prospective students either learn ski school technique or they don't learn how to ski; they pay ski school prices or they don't get a lesson. If instruction is sought elsewhere the public risks the hazards of inferior instruction by un- qualified instructors. One solution to this problem is for the Forest Service to issue multiple special use permits for teaching skiing to qualified instruc- tors. Allowing independent instructors to teach skiing in the Aspen area would restore a competitive pricing system, provide a choice of ski techniques and improve the qualify of instructions offered by both ski school instructors and independents alike. I propose that the following qualifications be required of all appli- cants seeking such a permit: Full certification status or its equivalent from a regional or na- tional professional ski instructors' association. Also full insurance coverage for liability to protect both the in- structor and the client, and also submission of yearly financial state- ments of profits and operating expenses to the Forest Service for public review. Special use permits to independent instructors could be limited to the private instruction of one to three students. Larger classes would be offered exclusively by corporate ski schools, thus assuring adequate profits. In proposing these changes for granting Forest Service per- inits I do not suggest that the ski school be abolished in favor of in- dependent instructors. I believe that the additional service provided by independent instructors can augment the services presently pro- vided by the corporation ski school. The public is entitled to a wider choice of instructors, techniques, and prices than is offered under the current monopolistic system. Therefore, I urge you to give careful consideration to these proposals :as amendments to your bill. Thank you very much. Senator HASKELL. Well, I will. I certainly will. I had forgotten ~this. I remember actually when Mr. Lemos was arrested, I don't know what for. and I did write Chief McGnire a letter on the subject. ~Reafly, this kind of smacks of the company town. PAGENO="0113" 109 Miss MOMAHON. Yes. Senator HASKELL. And I wrote Chief McGuire on March 25 anct there hasn't been much skiing since then. When I see Chief McGuire in Washington, I will ask him what's been the result, what is the ultimate upshot. Miss MCMAHON. I certainly hope something can be done for the forthcoming winter, Senator. Thank you. Senator 1-IASKELL. Thank you very much for appearing. Our next witness is Mr. Charlie Paterson, past president of the Rocky Moun- tain Ski Instructors Association. STATEMENT OP CHARLIE PATERSON, PAST PRESIDENT, ROCKY MOUNTAIN SKI INSTRUCTORS ASSOCIATION Mr. PATERSON. Thank you. Senator Haskell. Welcome to Aspen. My name is Charlie Paterson and my qualifications to speak on this issue are that I have been a ski instructor for 17 years in the Aspen Ski School from 1952 to 1969, and spent the last eight years as top class instructor on Aspen Mountain. I am Past-President of the Rocky Mountain Ski Instructors Association, served two terms, in 1967 and 1968. I have been a lodge owner since 1965 in Aspen and in daily contact with the skiing public. Incidentally, I am also a small stockholder in Aspen Skiing Corp. for the last 15 years, and I have lived here for about 26 years in Aspen. The way I feel about it basically is that knowing ski instruction intimately and understanding how inside politics in ski schools can be used to drive qualified ski instructors from schools to the detriment of the profession and the public, I see a definite need to rectify the situation. The system in existence has a monopoly power over ski instructors. I know of scores of cases where excellent, qualified, fully certified in- structors were deprived of their right to make a living as instructors. Usually it is due to slight disagreement with management regarding teclinique~ schedules, pay disputes, small things. Seiiator HASKELL. Let me ask you this, if I may. What, for example, would a ski instructor employed, let's say, in a private or single half- day lesson, get paid if he worked for a ski corporation? Mr. PATERSON. Senator Haskell, I left the ski school in 1969. At that time lessons were about $12 an hour. A ski instructor, a top ski in- structor, was paid about half of that, about $6 an hour, basically on private lessons. Senator I-IASKELL. You don't know whether that condition prevails? Fifty percent of it, roughly, does it prevail now? Maybe I should- Mr. PATERSON. I should actually qualify that because a ski instruc- tor is paid according to his tenure, whether he is fully certified or not fully certified or just coming into the sport, so there are contracts given by ski schools according to the qualifications of the individuals. The top instructor will earn so many dollars a day for so many hours. Usually if he works over 4 hours, for instance, there is additional pay. Very often there are disputes in ski schools regarding contracts which are made for standby conference. When a ski instructor who PAGENO="0114" 110 is a top instructor is not in use, he is paid about half rate for standby. At least, this was the way when I was in the school about 6 years ago. \` cry often that comes into dispute and does cause problems, and some `of those disputes cause a ski instructor to be fired quite summarily because he feels he should be paid for his standby time. I quote this, because this is exactly what happened to me. Senator HASKELL. I guess you know of your own knowledge. Mr. PATERSON. Well, as a matter of fact, that season I was on standby probably eight hours the whole season, and that was the dispute. Senator HASKELL. I see. Mr. PATERSON. As I was saying, a lot `of the j ohs were lost and no recourse then is available to these instructors when the present Forest Service system allows a one-company mountain on public lands, and that's really what has happened. A fully certified independent ski instructor could offer the skiing public a choice of being-I am a little redundant, but I am repeating what's been said-a choice of teaching techniques, cost paid for les- sons, flexibility of schedule and a choice of ski area and personalized attention to the customer. I am aware of efforts being made in this direction and to the opposi- tion to these efforts, and I earnestly urge this committee to take posi- tive steps to correct this situation. Thank you. Senator HASKELL. Thank you. I think this might be an appropriate time to break for lunch and come back at 1 :30 p.m. AFTERNOON SESSION Senator HASKELL. The hearing will recommence, and we have a panel of Roaring Fork citizens: Herb Klein, counsel; John Lucy, president; `Ralph Brendes, attorney; Jerome Michaels, and Charles Kalish. I believe John Lucy is the first witness. STATEMENT OP JOHN LUCY, ADMINISTRATIVE DIRECTOR; ROARING POlK CITIZENS, INC, Mr. Lucy. Yes, Senator, thank you. First of alL I would like to welcome you to Aspen and also thank you for this opportunity to testify. Senator HASELELL. Thank you, sir. Mr. Lucy. Before I start, I am just going to start things off in a light mood. I would like to thank you for your well-timed lunch recess. Jill St. John is certainly a tough act to follow. What I have to say I have not prepared extensively because basi- cally it is personal in nature. I direct my testimony to your subcom- mittee as an appeal on behalf of myself and the group of people that I represent, and I would' also like to address this testimony to the specific nature of section 4 of your proposed bill. My name is John A. Lucy. I am a resident of Aspen, Cob., and I am current administrative director of the Roaring Fork Citizens, Inc. I first came to Aspen from the east coast almost 3 years ago. I have called it home since then and hope to do so for many more years. Some people call me a ski bum. I do not consider myself one. I PAGENO="0115" `Ii bave a bachelor of arts degree from Hamilton College. I perform use- fiil and necessary service as a waiter in a restaurant. My life is not contained within the bounds of this occupation. It is not a career. It is a job which I hope I do well in order to live here. This allows me to pursue my life, my career, if you will, in the limitless potential of this area. Probably the most important facet of my life here is skiing. I have owned some form of season pass for the last three seasons. During the 1974-75 season I purchased not only the $~5Q season pass but also the $60 employee discount pass. I ski an average of 4 days a week for a few hours at a time and having bought passes permitted me the convenience of not purchasing daily bought passes permitted me still being able to ski during the 4 weeks of restricted periods. I am not alone in my love for skiing. I think, Senator, that you are probably by now familiar with the character of the town and its unique nature, that is based predominantly on a tourist-skiing oriented society. I think enough people have already gone into this, so I won't dwell on it. People like myself give up a great deal by living in Aspen, but we gain a great deal more in return. It is our choice not to pursue more lucrative careers in localities with greater opportunities, even though for many that potential exists. At the same time, we have not sur- rendered any of our personal rights or dignity simply by adopting a different life-style. It is thus with indignant feelhigs that we sit by and watch the relationship between the public agency, the U.S. Forest Service, and a private corporation, the Aspen Skiing Corp., grow dangerously close to a partnership. The resentment in this town has been build- ing tremendously over the last several years, sporadically erupting in senseless, frustrating violence. The town of Aspen and its residents have been transformed from an encouraging post to a meek petitioner seeking alms from the corporation prospering in its midst. Each year decisions are made which affect our survival and lifestyle with no local input whatever. It is not enough where we are subjected to the profit motives of a huge corporation. We must at the same time be subjected to the indifference of a public body designed and entrusted to protect us as citizens. I think it is therefore understandable why the Roaring Fork Citizen was formed and incorporated. It has become the only public action forum to which the Aspen residents can turn. Its basis of support is the nearly 4,400 ski passholders in the area. Our membership includes people ranging from dishwashers to business owners and businessmen in the community. We have adopted the position that all increases in lift rates should not only be thoroughly justified but that they should be subject to a definitive form of regulation. We also maintain that without a means of consideration or local input concerning the specific needs of a skiing community, rate determinations will continue to be made in the name of some indefineable, amorphous body called the American public. If this situation persists, the entire character of Aspen will change. ~\Vithout a reasonably priced skiing discount for local citizens, Aspen will become a ghetto for the wealthy and a haven for transients wish- PAGENO="0116" 112 ing only one season's employment. If some form of season pass is not restored, I, along with a great number of residents like myself, will be forced to leave. Even though I love Aspen, I will not remain here indirectly serving the profitability of the Aspen Skiing Corp. when I cannot afford to partake in the tremendous skiing available. I can live in Aspen with gratitude, but not with servitude. Senator HASKELL. Thank you, Mr. Lucy, very much indeed. Mr. Klein. STATEMENT OF HERBERT KLEIN, COUNSEL, ROARING FORK CITIZENS, INC. Mr. KLEIN. Senator, greetings. My name is 1-lerbert Klein. I am the counsel for theBoaring Fork Citizen. Senator, you have proposed legislation that would greatly extend the duration of permits for ski area operators on public land and which would also increase the al- lowable acreage for ski area permits. Your bill at the same time ad- dresses substantial problems in the existing permit system and at- tempts to create a realistic legislative standard for administering permits for the use and exploitation of public lands. However, before such far-reaching grants of monopoly power are put into law a care- ful review of the present system and its problems is warranted. We need to know whether or not the ski area operators are com- mitted to a judicious use of public land. Will they serve the public as trustees of those lands, or are we merely legislating a land grab to freewheeling entrepreneurs? What price will citizens have to pay for the recreational use of the public land and in whose hands will such economic decisions be placed? Your proposal to extend the term of the permits for ski areas from 30 years to 50 years and increase the allowable acreage from 80 acres to an unlimited allotment defies the public trust when you consider that the present ski area permittees refuse even to admit that the Government has a right to regulate the prices that are charged to the public. Senator, your bill addresses problems of the 1970's and the potential exploitation that is possible through large scale modern industries, but those to whom you wish to grant longer term permits and greater acreage allotments possess a 17 century merchantilistic mentality. They will procure vast areas of public land at less than fair market value and then call upon the shibboleth of the "free market" when the issue of governmental regu- lation of those lands is raised.. Until we are certain that there exist guidelines and procedures which will insure that the public interest will be protected, it would be folly to implement a new plan which could result in an even greater exploitation of resources than is possible under the present system. If we do not take a close look at these issues now, we may be creating cartel entities over vast areas of prime public land which will endure well into the next century. The situation in Aspen provides an insight into the present rela- tionship between the Forest Service and ski area permittees. The public, in a sense, is a third party in this relationship. Only recently has the public's voice been heard. Our concern and opposition to the new ski lift rate increase has been met with indignation, we have been PAGENO="0117" IIC) I L~) labeled "yahoos" by the permittee, we have been ignored by the Forest Service. Somehow the years of familiarity between the permittee and the Forest Service have allowed our interests to be forgotten. When we remind our trustees that they must consider our interests, we find that they are incapable or unwilling to respond. In some instances, regulations exist to protect the public interest but local Forest Service officials unfamiliar with their application stubbornly refuse to change old ways of doing business," in other situations, there are no regula- tions at all. But, by and large, a relationship exists where the per- mittee proposes and the Forest Service disposes. The lack of procedures to explore the public need, the absence of pricing methodology, and no explanation of the relative weights to be given to each factor considered render the present decisionmaking system completely arbitrary. At one point in the meeting with members of the Roaring Fork Citizen and mayor of Aspen held last February, the Forest Super- visor was asked what he considered a reasonable return on investment to the ski area operator. He responded, oh, about 15 percent. When asked why that was an appropriate figure, he replied, "That's what' we allow timber contractors." The Forest Service also applies no guidelines to regulate discount ticket programs. This is probably due to the Forest Service broad. view of the national interest to the exclusion of the particular interest of local communities. By its failure to provide for reasonably priced. skiing for local residents, your legislation supports this one-dimen- sional concept of Government regulation. Certainly, Senator, you can appreciate that the impacts of Forest Service policies are most strongly felt in those communities like us which are contiguous and dependent on the use and administration of public lands. Your bill makes no provision for the consideration of local needs. You haveS heard testimony today from members of the city of Aspen govern- ment detailing the impacts on our community due to the Forest Serv- ice pricing policies. There is clearly a need for reasonably priced ski- ing for local residents. At present, the consideration of our needs is diluted by this concept of a singular public need. We believe that the public interest requires the Forest Service to address itself to con- sideration of the public need wherever it is identified. There is pres- ently Forest Service policy which requires that permittees provide social and economic benefits to the local communities, but this may be satisfied by any number of programs, a ski club, a bus system, a charity ball, but when it comes down to a need as basic as discount ski rates, the Forest Service claims they cannot require a discount package. Your bill provides for public hearings prior to any rate increases so citizens will have an effective voice in Forest Service regulations so that the public interest will be protected. Senator, we have informed the Forest Service of our need for rea- sonably priced rates, but our requests have been ignored. The Forest Service presently has authority stated in their U.S. permits held by the Aspen Skiing Corp. and other permittees to regulate the rates: and character of services offered to the public as the public interest requires, but the Forest Service refuses to respond to this need. PAGENO="0118" 114 The paralysis of the Forest Service to be responsive to the needs of ~Lhe local community is evidenced by the following statement from the letter of approval of rate increase from the Forest Service to the per- mittee, Aspen Skiing Corp., from Tom Evans: The Aspen Skiing Corporation has a wide latitude in merchandising proce- dure that can be used and that would be approved to balance quality skiing with community needs and goals. With the strong interest in Aspen concerning your season ticket use and rates, I am sure that you will do what you can to offer quality skiing, and at the same time meet the needs of the people who provide the services that have made Aspen famous. The Forest Supervisor is aware of the needs of the community. He expresses what he feels and sees as the public interest, but, unfortu- nately, the Forest Supervisor leaves the decision of whether or not the interest will be protected in the hands of the permittees. Therefore, Senator, there must be more than just consideration of public interest through hearings. The Forest Service is aware of this need, but will not exert its authority. There must be le~isl.ative lan- guage which requires the differential pricing to be utilized to meet the needs of the community. Senator HASKELL. I'm sorry, Mr. Klein, but that bell was the 5- minute bell, and if I waive it for one, I am going to have to waive it for all, and we have got a lot more witnesses. Mr. KLEIN. Excuse me, Senator, I was wondering, the impression was we were granted a block of time. Senator HASKELL. Well, you are, but I thought those folks were going to speak. Mr. KLEIN. They are, but they have shorter statements. Senator HASKELL. Well, if you will keep within however number of people you have times 5 minutes, that's swell. Mr. KLEIN. Thank you. As I was saying, therefore, Senator, there must be more than just consideration of public interest as the Forest Service is aware and need but will not exert its authority. There must be legislative language that requires the differential. Differential pric- ing is uniformly accepted as being appropriate in ratemaking where various classes of users are identified, and here where the impact is so significant, as you have heard people being forced to leave their homes, it cannot be overlooked. The Forest Supervisor eventually approved an increase from $10 to $11 for the daily ticket price and a discount ticket program. There is no season pass for Aspen Mountain this year but the dis- count program provides for the purchase of a $200 discount card which will allow a person to ski Aspen Mountain for $8 per day. Last year, a season pass was available for $250 and the discount card cost $60 and it only cost $5 to ski Aspen Mountain. The new pricing sched- iile represents a significant increase in the cost of skiing to local residents. If a skier were to ski Aspen Mountain for 100 days on the new dis- count card, his average cost per day would be $9. Last year the full price ticket was $10 per day. This year his seasonal cost of skiing is $900. Last year the season pass was $250. That is not what we con- sider responsive differential pricing. If the permittee is not economically able to continue the traditional season pass or discount ticket program, or if the permittee alleges PAGENO="0119" 115 that the carrying capacity of one of its ski areas can no longer handle the usage of both local and tourist skiers, then such financial data and local factors must be presented to the forest supervisor and examined through the application of sophisticated evaluative techniques and expertise. They should also consider alternative approaches to the problem. Once the public interest and need is recognized, it cannot be sacri- ficed to expedience, inarticulated standards of analysis or the timidity of Forest Service personnel. In light of the severe economic impact and social dislocation to the community of Aspen resulting from the elimination of the season pass and especially where the needs of the public are so apparent and compelling, the Forest Service bears a heavy burden to deny its au- thority to protect that public need. Your bill must include provisions for discount programs and any formula for determining fees paid by the permittee should not require that discount tickets be computed at full daily ticket value. Among the three categories the forest supervisor considered in making his decision, the category entitled "Comparability" deserves some mention. Once an applicant ski area is judged, in the unguided opinion of the forest; supervisor, to be comparable to some other ski area, the forest supervisor reasons that he is confracturafly prevented from requiring the permittee to set his rates lower than the com- parable area. The forest supervisor is thereby precluded from any `analysis and from seeking any justification for a rate increase from an `applicant where the applicant can show that a comparable ski area i~as been allowed a higher pricing structure than the applicant. The Forest Service bases such `comparability upon completely subjective `standards that seem to relate only to the type of facilities and the quality of skiing. There is no cost component. In the rate increase approved here. it has been stated that since Vail got an $11 rate, Aspen was entitled to the same rate. We must note that the facilities differ greatly and one wonders, then, how Buttermilk, a beginner's mountain is entitled to the same $11 rate. In addition, Vail offers a reasonably priced season pass to local skiers while there is no such Pass available for Asnen Mountain. But, the Forest Service states that because Vail got their rate increase, Aspen skiers will be paying a hi&'ier price. Your bill also provides for the consideration of the potential growth impacts of new developments. We strongly urge that the environ- mental effects of administrative policies on existing permits be in- cluded in this review. Most ski areas are in pristine alpine ecology systems which react more severely to encroachments by man than do the environments found closer to urban areas. These environmental impact.s must be evaluated before long-term commitments of resources are authorized. The preparation of an environmental impact statement simil ar to that required by the National Environmental Policy Act should be a prerequisite to Forest Service decisions. No action has been undertaken by the Forest Service to solicit corn- rn~inity views or to minimize the adverse effects of its decision. 0niy through the adoption of procedural guidelines, developed with the PAGENO="0120" 116 public interest as a paramount consideration, and utilizing sophis- ticated analytical techniques can such decisionmaking by the Forest Service be lawful and fair to both the public and the ski industry. The guidelines should canvass, all relevant factors-economic, tech- nical, environmental, social and political-and must provide for dif- ferential pricing to be responsive to the particular needs of local communities whose economic and social survival depends most di- rectly on Forest Service administrative policies. Without these provisions, Senator, Aspen will become just another overpriced honky-tonk resort town. Thank you. Senator HASKET. Thank you, Mr. Klein. [The prepared statement of Mr. Klein follows:] STATEMENT OF HERBERT S. KLEIN, COUNSEL, ROARING FORK CITIZENS INC. My name is Herbert S. Klein, I am counsel to the Roaring Fork Citizen. Sena- tor, you have proposed legislation which would greatly extend the duration of permits for ski operators on public land and which would also increase the al- lowable acreage for ski area permits. Your Bill at the same time addresses sub- stantial problems in the existing permit system and attempts to create a realistic legislative standard for administering permits for the use and exploitation of public lands. However, before such far reaching grants of monopoly power are put into law a careful review of the present system and its problems is warranted. We need to know whether or not the ski area operators are committed to a judicious use of public land. Will they serve the public as trustees of those lands, or are we merely legislating a land grab to freewheeling entrepreneurs? What price will citizens have to pay for the recreational use of the public land and in whose hands will such economic decisions be placed? Your proposal to extend the term of the permits for ski areas from thirty years to fifty years and increase the allowable acreage from eighty acres to an unlimited allotment defies the public trust when you consider that the present ski area permitteea refuse even to admit that the government has a right to regulate the prices that are charged to the public. Senator, your Bill addresses problems of the 1970's and the potential exploitation thatis possible through large scale modern industries, but those to whom you wish to grant longer term permits and greater acreage allotments possess a seventeenth century merchantilistic mentality. They will procure vast areas of public land at less than fair market value and then call upon the shibboleth of the "free market" when the issue of governmental regulation of those lands is raised. Until we are certain that there exist guidelines and procedures which will insure that the public interest will be protected, it would be folly to implement a new plan which could result in an even greater exploitation of resources than is possible under the present system. If we do not take a close look at these issues now, we may be creating cartel entities over vast areas of prime public land which will endure well into the next century. The situation in Aspen provides an insight into the present relationship be- tween the Forest Service and ski area permittees. The public, in a sense, is a third party to this relationship. Only recently has the public's voice been heard. Our concern and opposition to the new ski lift rate increase has been met with indignation, we have been labelled `yahoos' by the permittee, we have been ignored by the Forest Service. Somehow the years of familiarity between the permittee and the Forest Service have allowed our interests to be forgotten. When we remind our trustees that they must consider our interests, we find that they are incapable or unwilling to respond. In some instances, regulations exist to protect the public interest but local Forest Service officials unfamiliar with their application stubbornly refuse to change old ways of "doing business",. in other situations, there are no regulations at all. But, by and large, a rela- tionship exists where the permittee proposes and the Forest Service disposes. An example of the benevolent attitude toward permittees that the Forest Service takes at the expense of the public concerns our efforts to obtain the financial data that the Forest Service relied upon to approve the rate increase for the coming ski season. Your proposed Bill provides for the disclosure of the PAGENO="0121" 117 financial data relied upon by the Forest Service in determining rate increase requests, an issue which the Roaring Fork Citizen became involved with as we attempted to obtain a review of the rate increases approved for the Aspen area. Our request pursuant to the Freedom of Information Act for such financial data was rejected by the local Forest Supervisor and his superior, the Regional Forester, on the grounds that such information was confidential under the terms of the permits held by ski area operators. We appealed this denial of disclosure to the Washington office of the Forest Service where they did not take a position as protective of the permittees as did the regional office. The data was ordered released by the Washington office. The data supplied and presumably relied upon by the Forest Service was rudimentary and clearly superficial. The financial figures supporting the rate increases were submitted by the permittee last March and contained projections for the 1974-1975 ski season in progress at the time of the rate increase request. The Forest Service decided to approve a rate increase based on these figures on May, 1975. The actual figures for the 1975 season were available near that time but due to pres- sure from the permittee for an early decision so that the permittee could con- tract for promotional advertising for the following ski season, the Forest Service did not consider the actual revenues for the 1975 season. The data disclosed revealed that the projected revenues upon which the increase was based, were almost 1.5 million dollars lower than the revenues actually received, yet, the Forest Service approved the rate increase to accommodate the permittee. There has been no re-evaluation of the rate increase in light of the actual figures. Any legislation detailing procedures to be applied in determining rate increases must include a requirement that actual figures be used. There is no excuse for this windfall to the permittee at the expense of the taxpayers for whom the Forest Service holds the public land in trust. Even if proper financial figures were available, there exist no guidelines to aid the Forest Service in determining whether or not to approve a requested rate increase, nor is any procedure available to assess the public interest. In January, 1975, the permittee requested that the Forest Service grant a rate increase. Substantial controversy developed due to the impact that local resi- dents believed would occur to the community if the requested rate structure were to be approved by the Forest Service. Aspen is economically dependent upon Forest Service administrative policies concerning the contiguous National Forest lands. The Roaring Fork Citizen, Inc. attempted to provide input into the Forest Service decision-making process in order to call to the attention of the Forest Supervisor the concerns of local residents and business people who are most directly affected by his administrative determinations. Letters were sent, petitions were circulated asking for a public hearing and an airing of community views, and countless meetings were held. Although the Forest Supervisor refused to provide a public forum for the community, he agreed to attend a private meeting with representatives of the Roaring Fork Citizen, Inc. and the Mayor of Aspen on February 7, 1975. The information exchanged at this meeting was abbreviated and certainly was no substitute for a formal public hearing. However, one consistency prevailed throughout the discussion; the Forest Supervisor had no guidelines or regulations to consult in determining whether or not a rate increase was (1) justified, or (2) in the public interest. At one point, the Forest Supervisor was asked what he considered a reasonable return on investment to a ski area operator. He responded, "Oh, about fifteen percent". When asked why he felt that was an appropriate figure he replied, "Well, that's what we allow timber contractors". The Forest Supervisor eventually approved an increase from $10.00 to $11.00 for the daily ticket price and a discount ticket program. There is no season pass for Aspen Mountain this year but the discount pro- gram provides for the purchase of a $200.00 discount card which will allow a person to ski Aspen Mountain for $8.00 per day. Last year, a season pass was available for $250.00 and the discount card cost $60.00 and it only cost $5.00 to ski on Aspen Mountain. The new pricing schedule represents a significant in- crease in the cost of skiing to local residents. If a skier were to ski Aspen Mountain for 100 days on the new discount card, his average cost per day would be $9.00. Last year the, full price ticket was $10.00 per day. This year his seasonal cost of skiing is $900.00. Last year the season pass was $250.00. That is not what we consider responsive differential pricing. PAGENO="0122" 118 The Forest Service applies no guidelines to regulate the discount programs because it does not construe its authority to regulate prices as including discount programs. This is probably due to the Forest Service's broad view of a national public interest to the exclusion of consideration of the particular interest of local communities contiguous to Forest Service land. By its failure to provide for reasonably priced skiing for local residents, your legislation supports this one dimensional concept of government regulation for the public interest. Cer- tainly Senator, you can appreciate that the impacts of Forest Service policies are most. strongly felt in those communities like Aspen which are contiguous to and economically dependant upon the use and administration of local public lands. Your Bill makes no provision for the consideration of local needs. You have heard testimony today from members of the City of Aspen government detailing the impacts on our community due to the Forest Service pricing policies. There is clearly a need for reasonably priced skiing for local residents. At present, the consideration of our needs is diluted by this concept of a singular public need. We believe that the public interest requires the Forest Service to address itself to consideration of the public need wherever it is identified. There is presently Forest Service policy which requires that permittees provide social ~tnd economic benefits to the local communities, (FSM 2711.2(4)) but this reg- ulation may be satisfied by any number of community benefit programs, a ski club, a bus system, a charity ball, but when it comes down to a community need as basic as discount ski rates, the Forest Service claims they cannot require a discount package because that defies the public interest (see also FSM 2301.1). The paralysis of the Forest Service to be responsive to the needs of the local community is evidenced by the following statement from the letter of approval of rate increase from the Forest Service to the permittee, Aspen Skiing Corpora- tion. (May 8, 1975) "The Aspen Skiing Corporation has a wide latitude in merchandising proce- dure that can be used and that would be approved to balance quality skiing with community needs and goals. With the strong interest in Aspen concerning your season ticket use and rates, I am sure that you will do what you can to offer quality skiing, and at the same time meet the needs of the people who provide the services that have made Aspen famous." The Forest Supervisor is aware of the needs of the local community; he expresses what he feels the "public interest" requires. But, unfortunately, the Forest Supervisor leaves the decision of whether or not the public interest will be protected in the hands of the permittee. If the permittee is not economically able to continue the traditional season pass or discount ticket program, or if the permittee alleges that the carrying capacity of one of its ski areas can no longer handle the usuage of both local and tourist skiers, then such financial data and load factors must be presented to the Forest Supervisor and examined through the application of sophisticated evaluate techniques and expertise. The Forest Supervisor should also consider alternative approaches to the problem as posed by the permittee. Once the public interest and need is recognized, it cannot be sacrificed to ex- pediency, inarticulated standards of analysis, or the timidity of Forest Service personneL If the Forest Supervisor feels that he has no authority to require a season pass, the Forest Service must define why his authority extends oniy to regula- tion of the daily lift ticket. The Forest Service must develop procedures and guidelines which articulate what is and what is not a permittee marketing de- cision within the purview of its statutory authority to regulate. In light of the severe economic impact and socthl dislocation to the community of Aspen resulting from the elimination of the season pass and especially where the needs of the public are so apparent and compelling, the Forest Service hears a heavy burden to deny its authority to protect that public need. Your Bill must include provisions for discount programs and any formula for determining fees paid by the permittee should not require that discount tickets be computed at full daily ticket value. In addition to the absence of mandatory language authorizing Forest Service regulation of discount programs to meet the needs of local resort communities, the methods consulted by the Forest Service in passing on the propriety of re- quested rate increases are confused and inadequate. As previously stated, the Forest Supervisor has no criteria or guidelines to aid him in such determina- tions. There is statutory authority for the use of pricing procedures, but once PAGENO="0123" 119 again, tile Forest Service's attitude of beneficience toward permittees has thwarted any commitment to a well articulated, reasoned decision. The mandate to Forest Service officers in their administration of special use permits is ample authority for requiring the application of specialized techni- ques to determine whether or not a rate increase is(1) justified, and (2) in the public interest. See, 36 CFR 251.1(5). When authority is given to a Forest Service officer to require that the permittee charge reasonable rates and furnish such services as may be necessary in the public interest, that authority carries with it the correlative obligations to develop procedures whereby the public interest can be determined and for a calculus of factors and a balancing of weights to be given in aid of the determination of reasonable rates. Especially, where the permit itself indicates a test of reasonable return on investment, such an economic evaluation cannot be satisfied by criteria wholly lacking the application of accepted accounting and utility pricing techniques. The Forest Service has improperly delegated this complex task to the judgment of the local Forest Supervisor. The Forest Supervisor proceeds on his own, without guid- ance of any sort with respect to the procedural or substantive considerations necessary for an informed decision. The administrative rationale for the Forest Supervisor's decision to approve the rate increase contains no criteria for assessing the public interest. The Forest Supervisor narrowed his consideration of the reasonableness solely according to ski industry profits. This action is contrary to law and existing Forest Serv- ice policies and procedures. The Supreme Court has held that "Rates must be intended to balance investor and consumer interests", and the FSM states that "Concession permits are issued to provide an essential public service and not primarily to afford a profitmaking venture for the permittee." FSM 2721 The lack of procedures to explore the public need, the absence of pricing methodology, and no explanation of the relative weights to be given to each factor considered rendered the present decision making system completely arbitrary. Among the three categories the Forest Supervisor considered in making his decision, the category entitled~ "Comparability" deserves some mention. This category apparently restricts the Forest Supervisor from any balancing and weighing of relevant factors in his decision to approve or disapprove a rate in- crease. Once an applicant ski area is judged, in the unguided opinion of the Forest Supervisor, to be comparable to some other ski area, the Forest Super- visor reasons that he is contracturally prevented from requiring the permittee to set his rates lower than the comparable area. The Forest Supervisor is thereby precluded from any analysis and from seeking any justification for a rate increase from an applicant where the applicant can show that a comparable ski area has been allowed a higher pricing structure than the applicant. The Forest Service bases such comparability upon completely subjective standards that seem to relate only to the type of facilities and the quality of skiing. There is no cost component. In the rate Increase approved here, it has been stated that since Vail got an eleven dollar rate, Aspen was entitled to the same rate. We must note that the facilities differ greatly and one wonders, then, how Butter- milk, a beginners' mountain is entitled to the same eleven dollar rate. In addi- tion, Vail offers a reasonably priced season pass to local skiers while there is no such pass available for Aspen Mountain. But, the Forest Service states that be- cause Vail got their rate increase, Aspen skiers will be paying a higher price. Not only is this concept of decision making contrary to law and Forest Serv- ice regulations, but it is wholly inconsistent with the requirement of a reasoned decision. This element of comparability totally negates the meaning of Section 2342.42 of the Forest Service Manual: "Lift and tow rates will be regulated to ensue the lowest possible charges to the public and an equitable return to the Owner." Your Bill also provides for the consideration of the potential growth impacts of new developments. We strongly urge that the environmental effects of ad- ministrative policies existing permits be included in this review. Most ski areas are in pristine alpine ecology systems which react more severely to encroachments by man than do the environments found closer to urban areas. For example, air pollution may be eight times more toxic at Aspen's. altitude than, at Denver. Also, many potential recreation areas lie in wildlife habitats and migration routes. These environmental impacts must, be evaluated before long-term commitments of resources are authorized. The preparation of PAGENO="0124" 120 an environmental impact statement similar to that required by the National En- vironmental Policy Act should be a prerequisite to Forest Service decisions which may cause adverse environmental effects on local populations and fragile ecosystems. Citizens seeking review of such Forest Service decisions must pres- ently base their arguments on the National Environmental Policy Act which requires that impact statements be prepared only for "MAJOR" federal actions significantly effecting the human environment. Most court decisions, however, look for millions of dollars invested in a project, or millions of acres, or thou- sands of tons of pollutants before this threshold criteria of major federal action is attained. A citizen suing for environmental review of a Forest Service de- cision that impacts a relatively small mountain community may have dif- ficulty meeting this standard, although the actual harm to the ecosystem may be substantial. Therefore, your Bill should define Forest Service decisions which may cause environmental degradation as major federal actions which signi- ficantly effect the human environment for purposes of the National Environ- mental Policy Act. Such a provision should also include consideration of the environmental effects of resource restriction through price discrimination. The recreational resources of our nation are as important to the quality of the human environment as are the trees, water courses and wildlife located on public lands. The isolation of these resources from those members of the public desirous of their use through price discrimination is environmental degradation which ought to require complete review and consideration by the Forest Service before such decisions are made. No action has been undertaken by the Forest Service to solicit community views or to minimize theadverse effects of its decision. Only through the adoption of procedural guidelines, developed with the public interest as a paramount consideration, and utilizing sophisticated analytical techniques can such decision making by the Forest Service be lawful and fair to both the public and the ski industry. The guidelines should canvass all relevant factors -economic, technical, environmental, social and political-and must provide for differential pricing to be responsive to the particular needs of local com- munities whose economic and social survival depends most directly on Forest Service administrative policies. Senator HASKELL. I will maybe ask some questions, but I will wait until everybody gets through. The next witness will be Jerry Michaels. STATEMENT OF JEROME MICHAELS, ATTORNEY, ROARING FORK CITIZENS, INC. Mr. MIOHAELS. Senator, thank you. I am Jerome Michaels and I am an attorney and operator of a restaurant here in town. The restaurant has been functioning for 4 years.. I am primarily going to direct my comments to what I have learned and what I have found to be our work force. It is my feeling that as opposed to what one might think the work force here is a very stable one. The average of my employees have lived here from 5 to 7 years and they conduct their lives far from being one of the old ski bum. It is my understanding some statistics a.re that persons move once every 5 years. These people seem much more stable than that. The.y came here and they remained here al- most without exception to ski. With daily increases in the price of tickets and the absence of any real seasonal discount pass I foresee many of those that have lived and worked here for many years leaving in a slow but constant deterioration of our work force. We will evolve int.o a town of seasonal employees. There will be a crowd every spring and a crowd that will come every November. and with this a definite downgrading in quality of service and products. PAGENO="0125" 121 The seasonal employees, and I have tried in my business to avoid hiring them, have no commitment. They have no real involvement. They just move in. They ski their 100 days and they leave. It is a bad situation for everybody involved from management point of view and tourist point of view. I would be the last to say that I would be here were it not for the skiing and for the contribution in terms of skiing of the Aspen Skiing Corp. However, there are other things involved. The tourists have to be fed and they have to be housed, and one of the comments that we hear year-round is the quality of the service, and the friend- liness and the affability of the employees. I think it comes from a stability in the community and a stability in the working life that these people have. I really don't see this being maintained. It is my great fear that 5 or 10 years from now, many of these people will have moved on. They can make more money and in many ways they can have a more comfortable life. However, they have selected to come here and be here because of the mountains, because of the community, and very definitely because of the skiing. I think that certain accommodations need to be made and should be made and some relationship between the community and the Forest Service should be established whereby we can maintain this quality that Aspen has become known for. Thank you. Senator HASKELL. Thank you, sir. The next witness is Charles Kalish. STATEMENT OP CHARLES KALISH, MEMBER, BASALT TOWN COUNCIL Mr. KALISH. Senator, we are running out of time, and I am a public official from Basalt. I was wondering whether I could speak longer? Senator HASKELL. I guess under those circumstances I cannot deny you the occasion. Good thinking. Mr. KALISH. My name is Charles Kalish. I am an elected member of the Basalt Town Council, and I was appointed by Governor Lamm to the citizens advisory bill on mutual recreation in Cob- ~ado, which Mr. Monaghan mentioned at the beginning of these proceedings. I am also a professional ski instructor and work for the Aspen Skiing Corp. I asked to speak as a part of the group relating to the Roaring Fork Citizen because I felt they are addressing problems that relate to all of us in this valley. I realize that I might be placing my job with the ski corporation in jeopardy by doing so, and I feel that I am obligated to take that risk. As you may or may not know, Basalt was a town that originally developed as a railroad town around the turn of the century. The railroad pulled out of the town approximately 50 years ago, and with it nearly all the residents. Those who stayed, lived and de- veloped the community lived more or less at a subsistence level. The oldtimers who still live in town talk of pulling together through hard times. The surrounding ranchers and farmers helped them. 67-512 O-76----9 PAGENO="0126" 122 I moved into Basalt nearly 7 years ago. When I arrived, the town could still be described as sleepy. The dust blew down Main Street meeting little opposition along its way. Saturday nights the streets were empty. Seven years later, we have a community seeking an identity. We have literally no cohesive community spirit, which is not to say we are not working at it. Various civil groups are either operating or developing to face our problems. The problem is that we largely serve as a bedroom community for Aspen. We get a lot of lower income people hying in and around our community who simply cannot afford to live in Aspen. They tend to be in large degree transients. The result is that we have many of the problems that are caused by people that have no roots, no involvement, no stake in the community. For those of us who live in Basalt as permanent residents, this causes a tremendous difficulty to identify and work within our community. We in the small town are literally uncertain as to what our community really is or if indeed a conununity does exist or simply a lot of small links. My point is that there are tremendous advantages to living in our end of the valley. The proximity to Aspen is one of these. The work provided by Aspen falls into that category, but work is not, cannot be the be-all and end-all of existence for healthy communities. A bedroom community with no advantages in its quality and life tends to turn to more demeaning forms of diversion. Alcohol and hard drugs are two of these. We have a serious alcohol problem in our town. One amenity to living in Basalt I feel the Forest Service should be addressing itself to is skiing. There is a negativism about the sport in our town that is derived totally from its prohibitive cost. Many, many people come to the Aspen area in order to work and ski. They wind up out in Basalt and not being able to afford to ski. The result is that they turn to the bars, to negativism and to lust plain ripping off the energy of our town and our valley. I am not asking the Aspen Skiing Corp. to subsidize these people. I am asking the U.S. Forest Service to function as a business repre- senting its stockholders, one of whom is our community, in negoti- ating a contract that involves affc~rdable costs to local people. What I am saying is that the Forest Service should stop thinking of itself as the adopted child of industry and start thinking of itself as a separate business, one of whose purposes is the leasing of the shareholders' land. The profits that the Forest Service should be looking to are not monetary necessarily but should be seen in terms of the amenities that the public designates as its profits. These amenities should be totally determined by the public will, not by a bureaucracy. The Forest Service should think of itself as a company hired to maximize the gross profit of its client, we the public. They should initiate these as simply as any other real estate leasing company would. It is absurd to be engaged in business trans- actions, that is leasing, when you are not coming from a business point of view, that is profits. One of the amenities that I am suggesting is in the interest of our community is the season pass. Without it, the skiing and its PAGENO="0127" 123 traditional meaning to local people is destroyed. Traditionally, a ski town or ski valley is composed of two types of skiers, those who ski a few hours many times a week and those who are serious skiers skiing all day nearly every day. In both cases, they need to have a season pass in order to do so. When those people, the very same people that have contributed to the charm and atmo- sphere that has made Aspen so special, are driven out of the area because of a lack of a season pass, the result I observe is the ever- increasing deteriorating and debilitating pressures that we are now facing in Basalt. The ski pass is not the only answer, but it is one of the important instruments to a solution. Thank you. Senator ITASKELL. Thank you. Our next witness is Ralph Brendes. STATEMENT OP RALPH BRENDES, ATTORNEY, ROARING PORK CITIZENS, INC. Mr. BRENDES. Brendes, thank you. I was just reading a note I just got handed. I will try to be brief and I will submit my entire state- ment in writing to the subcommittee. Senator HA5KELL. It will be reproduced. Mr. BRENDES. I know that we are pressed for time. I would like to use my part of the testimony today to show you just briefly how the Roaring Fork Citizen-Aspen Skiing Corp. controversy has evolved, and in so doing to illustrate to you why it is so vital that future rate increases be granted only after full disclosure and a meaningful public input through a public hearing. I will do this with my actual written testimony and with articles from the Aspen Times and so on and so forth. It all began on New Year's Eve, 1974, when D.R.C. Brown- by now everyone knows who D.R.C. is-announced the proposed rate increase, and basically there are two things I will discuss quickly. The Aspen rate increased from $10 to $12 per day and a season pass from $250, restricted 28 days, to $550, unrestricted. A group of concerned citizens met in my office to determine what if anything could be done, and at that meeting concern was ex- pressed about the effects of bucking D.R.C., so to speak. In fact, some people preferred to remain anonymous initially, and I think one of them was Mr. Kalish, and the statement handed me was Mr. Brown said "former ski instructor" when Mr. Kalish announced himself. Well, people were concerned about that and so were other people about losing the complimentary passes, so as a result we had to tread lightly. The first thing we did was circulate a petition and we asked for three things, now in your bill, by the way. We asked for a public hearing in connection with this rate increase. We asked that any rate increases which were not justified financially be disap- proved and we asked for some consideration of the local input. Now, we met with Tom Evans on February 7 and we presented our petition, which had 3,800 signatures, about 1,000 of those people from people not from Aspen, by the way. We asked for a hearing. PAGENO="0128" 124 Mr. Evans told us what Michael Kinsley told you earlier, "This is not a situation where there is going to be any vote taking." We asked the Forest* Service to take steps to establish some standards, and I will point out that the Forest Service is beginning to take some steps to establish criteria for future rate increases. We also asked for financial information. We were told the Ski Corp.'s costs had gone up 20 percent and the revenues were confidential infor- mation. When I discussed the proposed program with Tom Evans, he said to me, "D.R.C. is running the show," and he said to me that D.R.C. had said to him, "I am running this thing." Now, as a result of that, we tried to have our own public hearing. We did have a hearing. Our committee is not a bunch of yahoos. It is a very hard-work committee. We did a computer printout on every pass proposal the corporation made and every one we made so peo- ple could analyze the real costs. No one came to that meeting from the Ski Corp. The biggest problem was no one was required to come to the meeting or listen to us. It was a total exercise in futility, as has been much of our effort vis-a-vis the ski pass to date, because no one has to listen to us, the people most affected. When the Aspen daily newspaper asked the Ski Corp. why they failed to send a representative to our hearing, Tom Richardson said, "We discussed it and felt it would be a waste of our time and their timc~. These are the only changes we are going to make. We are not going to compromise," in the Aspen newspaper of February 18, 1975. We were totally frustrated in trying to get any kind of input or results, so as you know we have requested your office to assist us in obtaining the financial information, because when we met with the Ski Corp. they would not tell us anything about their revenue, and we asked your assistance to obtain that information from the U.S. Forest Service, and on March 25, 1975, you did in fact request that information from the U.S. Forest, and as you also know you were denied that information, so that July 29, 1975, the Roaring Fork Citizen through its trial counsel, Herb Klein, filed an appeal with the U.S. Forest Service in Washington, D.C., under the Freedom of Information Act for the release of that information. In September we received a call from John Burns, former Aspen district ranger and now with the Forest Service in Washington, and he told us that the Forest Service had made an error and were trying to release the financial information used in passing upon the rate increase. One of the first things we discovered was the estimate of revenues for the Ski Corp. upon which the Forest Service based its approval was $1i/2-million too low, and we would never have known that information but for the Freedom of Information Act and our appeal. Now, the information that we did get from the Forest Service was sketchy at best. The city economist stated that there is no way these figures could be used as a. basis for any kind of rational decisionmaking. They are very, very sketchy. A little while later, Mr. Brown will probably testify that Aspen Mountain is the Cadillac of mountains in the U.S. ski industry. PAGENO="0129" 125 We feel the U.S. Forest Service is the Edsel of regulatory agencies. I am trying to be brief. I am beginning to summarize. Now, what does this chronology show? I haven't traced what's actually hap- pened in the past except to say as a result of our efforts to try and get a lower price we now have no pass for Aspen Mountain, and when we asked the financial numbers we were told the corporation was a private business and it was confidential information by both the~ Forest Service and th Ski Corp. and, of course, under the Freedom of Information Act we find that is not true. When we asked for the public hearing, we were told that is not a vote-taking situation. Clearly, without Federal legislation no one is going to listen to us, if anyone is Tepresentrng the public, and if they do listen to us they won't pay attention to what we have to say. Public hearings in my mind are the only way to keep them honest, and that's all of us, not just the Ski Corp., but the Forest Service as well. Private enterprises who would be monopolies on public lands must be put to the test of justifying their rates to the public in general and not leave the fate of entire communities and states to a few executives and bureaucrats operating behind the closed doors. The Roaring Fork Citizen would like to thank you for respond- ing to our petition requesting public hearings and full financial disclosure, as well as the establishment of standards by which the future rate increases will be made, since they seem to have fallen on deaf ears in the U.S. Forest Service. Make no bones about it, without your legislation Aspen will remain a one-company town with a one-man rule and with that one man accountable to only one other man, Tom Evans, and both of them able to ignore the public whose destiny they control. In conclusion, at each juncture in our path to oppose what we feel are the unjustified rate increases, we had been warned about "pushing D.R.C. too hard." "If you don't watch out, you won't have anything," we were told. Apparently we didn't watch out for D.R.C., because we don't have anything. At this time or at times the Roaring Fork Citizen feels ilke the young child that is told by his daddy if he does not behave he won't be able to go to the movies. That's just what happened to us, Daddy D.R.C. and the Aspen locals, but the Ski Corp. must now be put on notice that this child, Aspen and Pitkin County, have Űome of age. No longer are a few powerful men going to run the town. We de- mand to be acknowledged and not ignored. The only chance we have as children to stand up and be counted is your Senate bill. Citizens freely volunteer their time and efforts to make democracy work here. The participation in today's hearing shows that. We are only asking to be heard and reckoned with in matters that control our destiny. In closing, I would say "Power to the People." Senator HASKELL. Thank you, gentlemen. I think that I would like to recite how the situation came to my attention. I read in the newspapers, of course, that three areas, and this was one of them, were simultaneously applying for rate increases, and I believe it was PAGENO="0130" 126 an unusual time of the year. I think it was in the spring, and I wrote to the Forest Service, actually assuming that they, would have public hearings and financial information would be provided that the public could examine, and got again to my somewhat surprise a "kiss-off" letter. Mr. BRENDES. We know the feeling, Senator. Senator HASKELL. It said, "We are quite concerned about making public the specific financial information about individual operations. Over the years we have developed a level of confidence and trust with our concessionaires which has allowed us to study and respond to the financial world they live in."~ I will put my letter to Chief McGuire and his response in the record at this point. [The letters follow:] U.S. SENATE, COMMITTEE ON INTERIOR AND INSULAR AFFAIRS, Washington, D.C., February 26, 1975. Hon. JOHN R. MCGUIRE, Chief, U.S. Forest Service, 12th and Independence Avenue SW., DEAR CHIEF MCGUIRE: It ` has come to my attention that several ski corpora- tions in Colorado-Vail Associates, The Aspen Ski Corporation, and Aspen High- lands- have applied to the Forest Service for authority to increase their present $10 daily ski two ticket rates to $12. This, of course, is a sizeable percentage increase. I am quite concerned over the continuing rise in the cost of this important Colorado recreational activity to consumers. I fear that, if the present trend continues, it will be priced out of the reach of the average citizen. Indeed, I suspect the present rates already preclude participation by many Coloradoans and out-of-state visitors. For this reason, I am requesting that you initiate a careful study of the applications of these firms before you grant their request and would appreciate receiving a report of your findings. I am particularly disturbed to learn that the financial information submitted to the Forest Service to justify requested increases in rates, such as these, are withheld from the public under provisions contained in your special use permit contracts. I would like to see this changed in all such future contracts and a vigorous attempt to renegotiate existing contracts in this regard. I find it difficult to understand why any contract involving public lands should not, by their very nature, be made public. It would seem to me to be only proper that the financial justification for such rate increases be made available for public inspection and, if necessary, `public hearings. Only this way, I feel can the public be assured that the requested increased revenues are necessaf~r for the continuation of normal operations and needed improvements. I understand that the decision on whether or not to grant the current rate ,increase requests is to be quite soon. I would appreciate it, therefore, if you would look into the matter immediately and either delay the proceedings until more information can be made available to the public or adequate justification can be given to satisfy the very real concerns of myself and many of my constituents. You will agree, I am sure, that it is always important for government to protect the consumers' interests wherever possible. In my opinion, this respon- sibility is absolutely mandatory in matters involving the oversight of public lands entrusted to the Forest Service. Best wishes. Sincerely, Fi~o~n K. HASKELL, U.S. Senator. PAGENO="0131" 127 U.S. DEPARTMENT OF AGRICULTURE, FOREST SERVICE, Washington, D.C., Marelt 11, 1975. Hon. FLOYD K. HASKELL, U.S. Senate DEAR SENATOR HASKELL: This is in reply to your February 26 letter and one from Mr. Kenneth A. Senn of Aspen, Colorado. Both letters express concern over proposed lift ticket and season pass prices at some Colorado ski areas. Departmental regulations require that concessioner services and facilities be made available to the user at reasonable rates. Accordingly each National Forest concession permit provides that user charges are subject to Forest Serv- ice review. Each Forest Supervisor is responsible for these reviews within his area of jurisdiction. When price changes are proposed which involve more than one operation, as it this case, State-wide or industry-wide studies are insti- tuted by the Regional Forester so that a broad market base can be established. Just such a study is underway. Since many operators are already making plans for the next ski season, we can expect decisions on the proposals to be made shortly. You will be interested to know that requests to institute the new rates for the remainder of this season have been denied for both Aspen and Vail. The development of skiing in Colorado has been made possible by the private individuals or corporations ~ho have invested millions of dollars in facilities. Private enterpri~e cannot, of course, continue to serve the public without a reasonable profit opportunity on its investment. Naturally there is a profit varia- tion influenced by such variables as managerial ability. We do Rot feel we should either limit or guarantee a particular level of profit. We do, however, feel that pricing, should reflect the added cost of doing business and that it can legitimately be passed on to the user. When an operator serves the same number of customers with no additional investment, a raise in price to the user to simply increase profit would gen- erally be disallowed. On the other hand, we would not restrict profit if it was the result of efficiencies in management, economics in operation or an increase in number of participants. We are mindful that any program involving price con- trol is quite complicated and that there are no easy answers. In that respect, we are most interested in the studies being made and will assist and counsel the Regional Forester so that local decisions reflect consistency as well as equity. We are quite concerned about making public the specific financial infor- mation about individual operations. Over the years, we have developed a level of confidence and trust with our concessioners which has allowed us to study and respond to the financial world they live in. This has been developed by maintaining, as confidential, all financial information secured. We have and will continue to make public the results of studies reflecting average or industry- wide data in a manner that individual respondents cannot be identified. Useful information regarding appropriate levels of fees for the use or data to analyze proposed* changes in charges relies on this confidentiality. Further, exposure of individual private costs and operating procedures could place that permittee in an unfair position vis-a-vis competition. We believe there are sufficient factors including the market place which will assure a range of ticket rates in Colorado. This, we hope, will allow a maxi- mum number of skiers from different economic levels an opportunity to par- ticipate. Those enterprises which provide more and higher quality facilities and services will naturally command higher prices. Thank you for the opportunity to comment on this important matter. We will, as you suggest, monitor carefully the appropriateness of decisions issued in the field and be alert to any needed adjustments. JOHN R. MCGUIRE, Chief. It occurred to me then that these lands tha.t they are oper- ating on belong to the people of the United States, and that's how I happened to get involved in this. My bill, as you know, would provide for public hearings and would provide for preplanning. It would provide for public, community, local government, adoption of a satisfactory overall land-use plan covering the entire area. PAGENO="0132" 128 I have learned a lot of things today. I did not realize that the feelings in the community had raised to the level that they ob- viously have. It has been brought to my attention that there is a substantial burden which any community-let's try and not separate ourselves from this community-any community has to provide the public services when you have a high density operation on public lands. I am not quite sure that my bill addresses itself to that point the way it should, but I appreciate your testifying, and again I say I guess to Mr. Klein, you are the counsel for the group, if you have any suggestions as to statutory changes, you might want to send them in, as the other people have. I think in fairness to the opposition, and the opposition appears to be Mr. Brown, I should not confine him to the 5-minute rule. Steve Quarles tells me that excluding the testimony of Mr. Kalish who is a public official your time ran by 5 minutes, so I will then allocate 10 minutes to Mr. Brown instead of 5 minutes just in simple fairness. Thank you, gentlemen, very much. [The prepared statement of Mr. Brendes follows:] PAGENO="0133" 129 TESTIMONY OF RALPH C. BRENDES, ATTORNEY FOR THE ROARING FORK CITIZEN, INC., BEFORE SENATE INTERIOR SUB-COMMITTEE ON ENVIRONMENT AND LAND RESOURCES CONVENED IN ASPEN, COLORADO, SATURDAY, OCTOBER 4, 1975. Senator Haskell and counsel to the sub-committee: First let me thank you for the opportunity of appearing before you today to outline some of the views of the Roaring Fork Citizen, Inc. regarding your proposed bill S.B.2l25. I would like to use my part of the testimony presented by the Roaring Fork Citizen to show you how the Roaring Fork Citizen and Aspen Skiing Corporation controversy has evolved. In so doing I hope to illustrate to you why it is so vital that future rate increases be granted only after full disclosure of all financial and other information and a meaningful public input at some public hearing that should be held by the United States Forest Service. As has been stated earlier, the Roaring Fork Citizen, Inc. is comprised of approximately 500 local residents who joined together to try to preserve some type of season pass for skiing on Aspen Mountain. This is a result of am announcement New Year's Eve, 1974, made by D.R.C. Brown, President of the Aspen skiing Corporation, in which he set forth the corporation's rate increase request for the 1975-1976 ski season. In its request to the Forest Service, the Aspen Skiing Corporation requested that the daily rate for skiing on Aspen Mountain be increased from $10 to $12 and that the season pass be increased from $250 to $550; further that the employee discount program initiated awhile ago be increased on a daily validation basis from $5 to $6 per day. As a result of this announcement, a group of concerned citizens met in my office to determine what, if anything, could be done to resist the requested rate increases. At the time this meeting was held, a great deal of concern was expressed concerning the effects of "bucking D.R.C. Brown," in fact some people preferred at that time to remain anonymous for fear of losing their jobs with the Ski Corp; others were concerned that they might lose their complimentary passes given by the Ski Corp (That is to say people who received a free discount pass, instead of paying the $100 would not find themselves having to pay the $100 for such a discount pass). The group decided that the first thing it should do is to circulate a petition to the United States Forest Service. 1 have appended a copy of this petition to my written statement which will be presented to the sub-committee. Part of that petition states, "Whereas, we believe the proposed increase rates, specifically those with respect to season passes, are unjustified, arbitrary, capricious, indiscrimatory in that they are designed to, and will effectively, make use of the ski facilities prohibitively expensive for local residents; now therefore, we, the undersigned, do hereby petition the United States Forest Service PAGENO="0134" 130 to hold a public hearing in connection with its evaluation of the proposed rate increases and to disapprove any rate increases which are not fully justifiable by increased costs directly attributable to the operation of the facjlities with respect to which the increases are intended to be applied and which tend to unreasonably increase ~the cost to local residents of the use of those facilities.' This petition was circulated through Aspen and Pitkin County and approximately 3400 names were subscribed thereto. Officers of the Roaring Fork Citizen met with Tom Evans of the United States Forest Service on February 7, 1975, to present the petition and to recjuest a public hearing. Mr. Evans informed us that this was not a `vote-taking" situation and that no such hearing would be held. We had been informed that the Ski Corp had asked for a 2O7~ rate increase because its cost had increased by 207.. We requested to see financial information regarding the revenues of the corporation in order to determine the. correlation. This financial information was not released to us. Lastly, we requested the Forest Service to take steps to establish standards to review rate increase requests in the future. I understand that some steps in this direction have, in fact, been taken. On February 10th, the following Monday, members of the Roaring Fork Citizen met with Tom Richardson and George Madsen of the Aspen Skiing Corporation. At that time we presented our views on the situation and were essentially told that we had no vote in the matter. Mr. Madsen asked us why we hadn't talked to the Ski Corp first. I responded, "Would it have made any difference?". Mr. Madsen replied, "Well, no, but you `yahoos' are going to hurt Aspen if you persist in your actions." Here also we were denied any financial information concerning any revenues of the Corporation. On February 12, 1975, I discussed the situation with Tom Evans and his reply was, "D.R.C. `s running the business". In fact, he stated to me that Mr. Brown had stated to him, "I'm running this thing". This is just the first of many examples in which it becomes increasingly clear that Aspen remains a one-company town, subject to the whims of one man as to the fate of that town. On February 13, 1975, the Aspen Skiing Corporation modified its request for the rate increase after talking to Tom Evans. Instead of thanging the season ski pass from $250 to $550, the corporation eliminated the season pass completely! Consequently, as a result of our speaking out, we were treated like little children and got our hands slapped for standing up to D.R.C. Brown! On February 21, 1975, the Roaring Fork Citizen held its own (non-binding) hearing to review with the public its potential counter- proposal,that it planned to make to the Forest Service regarding a more fair rate structure for Aspen in the future. Although the Aspen PAGENO="0135" 131 District Ranger attended that meeting, he stated that nothing said there would be binding upon the Forest Service nor did anyone appear from the Ski Corp to discuss their point of view. The biggest problem with our whole hearing was that no one in a position to act was required to attend or to listen to us, the people most effected. It was truly an exercise in futility as has been much of our efforts. In an article in ~ ~y, February 28, 1975, Ton Richardson of the Aspen Skiing Corporation, when asked why the Ski Corp failed to send a representative to the Roaring Fork Citizen's hearing, stated that, "We discussed it and we felt that it would be a waste of their time and our time. These are the only changes we are going to make. We are not going to compromise." Again, the Ski Corp was shoving its views down the throats of the community, without discussion or input from its citizens. On March 4, 1975, George Madsen of the Aspen Skiing Corporation met with members of the Aspen Chamber of Commerce. He stated that if the Ski Corp did not receive their rate increase to $12 a day, there would be no Buttermilk and Snowmass Mountain pass (this $250 pass woulc have replaced the former three-mountain $550 requested pass under an amended application they had filed with the Forest Service). Further, there would also be no employee discount pass if the Roaring Fork Citizen were successful in keeping the price of the daily ticket down. In other words, if the Ski Corp did not get its request from the Forest Service, and the Roaring Fork Citizen and others blocked it, all the people would have to pay the full daily price to ski Aspen Mountain. Because of our utter frustration in this matter, the Roaring Fork Citizen in March of 1975 requested the assistance of your office, Senator Haskell, to obtain some redress for our grienvances. We asked you to obtain for us the financial information from the Forest Service by which the Ski Corp was justifying its proposed rate increase. As you know, you were denied this request by the Forest Service, and, partially as a result of this, decided to draft S.B.2l25 and hold today's hearings. On March 6, 1975, the As~.R Times reported that the thirdquarter financialreport of the Aspen Skiing Corporation showed after tax profits of $592,200.00 for the first nine months of the current fiscal year. This represented increase in net profits of 75.67~ over the record profit levels of the prior yearn This is the first indication we got at all concerning the Ski Corps revenues and profits; it showed that although their costs had increased by 207~, operating. revenues had also increased by 27.47W, more than making up the increased cost, and in fact resulting in dramatically increased profits for the corporation. It was Roaring Fork Citizen's position that based on these results, no increase what- soever was necessary for the current or next ski season. -3- PAGENO="0136" 132 On April 28, 1975, in a letter to D.R.C. Brown, Tom Evans rejected the $12 daily rate, but indicated that he would approve a $11 daily rate and stated some of the grounds on which he made his evaluation, noneof which included local input or impact. On July 29, 1975, the Roaring Fork Citizen filed its appeal with the United States Forest Service in Washington, D.C., challenging the rate `increase approval and demanding full disclosure of all financial information by which this rate increase was approved under the Freedom of Information Act. This topic has already been covered by Mr. Klein in our testimony today. On August 27, 1975, according to the pp~ Times, the Ski Corp requested a "Vail-type" pass, which would involve~~OO purchase price, with a $100 refund at the end of the season, plus a surcharge of $8 a day to ski Aspen Mountain, $5 a day to ski Aspen Highlands and $3a day to ski Snowmass and Buttermilk Mountains. This meant that someone who skied Aspen Mountain for 80 days this season would have to pay $740 to ski that mountain, which represented approximately a 300% increase over last year's rates! Concerning the Vail-type pass, it is to be noted that Vail does not require any daily validation fee and its prices range from $175 to $325 maximum, depending on whether the person skis on restricted days, when he purchased the pass and if he stays all season. Early in September, the United States Forest Service in Washington, D.C. granted the Roaring Fork Citizen'S appeal and agreed to release financial information used in passing the rate increase request. This financial information, which consisted of one 8-1/2 x 14 page of numbers taken from the records of the Ski Corp, showed that the revenue figure used by the United States Forest Service to grant the rate increase was 1.5 million dollars less than the actual income of the Ski Corp for that season! Without our appeal, no one would have known this dramatic error in the Forest Service's calculations upon which it had granted the rate increase.' Meanwhile, regarding these numbers, the Aspen City Economist has stated, "There is no way these figures could be used as a basis for any kind of rational decision making. They are very, very sketchy." As of this hearing, we still have not heard from the Forest Service regarding our appeal on the new rate structure, per se. Later on today, you will hear D.R.C. Brown' state that. Aspen Mountain is the "Cadillac" of ski mountains and therefore deserves to charge the highest price in Colorado. Someone has said that if Aspen Mountain is the Cadillac of skiing mountains, then the Forest Servicemust be the "Edsel" of regulatory agencies, based upon methods by which they operate. What does this chronology show? When the Roaring Fork Citizen asked for financial information, it was told that the Corporation was a private business and that financial information was confidential, even though this was in violation of the Freedom of Information Act. When we asked for a public hearing, we were told that this is not a vote-taking matter; the Forest Service was not interested in our views. Clearly, without federal legislation, no one is going to listen to us or the public in general; and if they do, they won't pay any attention to what we have to say, as history has already shown. -4- PAGENO="0137" 133 I have told this story to illustrate how difficult it has been just to get listened to seriously by the two powers that be, Tom Evans of the Forest Service and D.R.C. Brown of the Ski Corporation, even though Tom Evans himself stated on February 12, 1975: "The further you get from the people when making decisions, the harder the decisions are to make. The closer you get to the people, the more sound your decisions will be." Public hearings are clearly the only way to "keep them honest", and that means all of them, not just the Aspen Skiing Corporation, but the Forest Service, itself, as illustrated by the fact that the 1.5 million dollar error would have never been discovered but for our appeal under the Freedom of Information A˘t, no matter who was responsible for that error. Without such public exposure the onus of "secret bureaucracy" looms threateningly. In conclusion, I would like to state that private enterprises holding monopolies on public lands must be put to the test of justifying their rates to the public in general. Otherwise the fate of entire communities will be left to a few executives and bureaucrats operating behind closed doors. We can already see what a small amount of public disclosure has done. Imagine what benefits full disclosure and hearing by the public would have. I should point out, however, that just having a public hearing by the Forest Service would not be enough, although airing the information in public itself has some advantages, and would tend to make actions on the part of both the Ski Corp and the Forest Service more visible subject to scrutiny so that shamanigans of the type already discovered probably would not happen in the future. In addition, however, the Ski Corp must be made to publicly justify its request and the U.S. Forest Service must be required to consider the public input, including the effect on the communities, before granting any rate increases. Your bill appears to do that - and we laud you for it. The Roaring Fork Citizen again would like to thank you, Senator Haskell, and your Senate Interior Sub-Committee on Environment and Land Resources for responding to our petition to the United States Forest Service requesting public hearings and full financial disclosure, as well as the establishment of standards by which to pass on rate increases in the future, since you seem to be the only parties in government or out that will listen to us. All of our other requests have fallen on deaf ears at the U.S. Forest Service and we are impotent without financial disclosure and public hearings. Make no bones about it, Senator Haskell, without your legislation Aspen will remain a one-company town, with virtually total one-man rule, with that one man accountable essentially only to one other man, and both able to virtually ignore the public whose destiny they control. At every junction in the Roaring Fork Citizen's path to oppose the unjusti- fiable rate increases on Aspen Mountain, we have been warmed against PAGENO="0138" 134 pushing D.R.C. Brown too hard. We were told, "If you don't watch out, you won't have anything." Apparently we didn't watch out, for, in~ fact, we still don't have anything as a result of our opposition to the $550 season pass on Aspen Mountain. We now have no such season pass at all! The Roaring Fork Citizen feels like the young child that is told by his daddy that if he does not behave he will not be able to go to the movies. That is just what's happening with Daddy D.R.C. andthe Aspen locals, but the Aspen Skiing Corporation must now be put on notice that this "child" (Aspen and Pitkin County) has now come of age. No longer are two powerful men going to run this town. We demand to be acknowledged and not ignored; and we need the help of S.B.2l25 to do that. The only chance we "children" have to stand up against "Daddy D.R.C." is your legislation, and we thank you for it. Aspen has always been a community where the people have been actively involved in the democratic process. Its citizens freely volunteer their time and energies to make democracy work here; the participation at today's hearings demonstrates that fact. We are only asking to beheard and. reckoned with in matters that shape our destinies. Isn't that our constitutional right? Thank you very much, Senator Haskell. -6- PAGENO="0139" 135 Senator HASKELL. Our next witness is Mr. Peter King of the Sierra Club, Aspen. STATEMENT OP PETER KING, REPRESENTING THE SIERRA CLUB, ASPEN, COLO. Mr. KING. Thank you, Senator. My name is Peter King. I am actually from Steamboat Springs. I am an attorney up there. I am representing the Sierra Club. We have about 150,000 members, and as the official witness for them I don't know if I am confined to the 5-minute rule. Senator HASKELL. Yes. Mr. KING. I will try to keep my remarks brief. I would like to outline a few of our concerns today. We will submit a detailed statement to your office later. As you may know, the Sierra Club is currently involved over the closed ski areas of Beaver Creek and Mineral King in Cali- fornia. This involved the apparent ignoring of the Wilderness Act by certain members of the Forest Service, and particularly Mr. Lucas in the Beaver Creek area. The Beaver Creek area was desig- nated as a proposed winter site area, winter sports site area, when the wildrness area study had not~ yet been completed. Your pro- posed legislation at this time does not address itself to this kind of problem. We hope that when your bill is rewritten that you would attempt to put in there provisions which would lessen the possibility of the Sierra Club or other organizations having to go to the court again over proposed ski areas, and we think that it would be very simple to say in the legislation that no permit would be appproved until the completion of a wilderness study for a pro- posed area. The wilderness study had not yet been completed for Beaver Creek, and, of course, not for Mineral King. Senator HA5KELL. Let me interrupt you. This won't go against your time, but is there a study bill approved and passed Congress for this area? Mr. KING. It was included in the inventory for proposed wilder- ness areas. Senator HASKELL. Oh, I see. Mr. KING. This does require a study to be completed. Senator HASKELL. I see. It was included in the Forest Service inventory? Mr. KING. Yes, and redesignated as a winter sports area before the completion of the wilderness study. This is the reason why the Sierra Club has had to go to court in the past, and we hope your legislation will correct this problem by simply putting in a require- ment that proposed areas would be either designated or not desig- nated as wildnerness areas before they are considered for winter sports sites. We have some problem with the Congressional Review provisions in the bill as it stands now. From 1,280 acres to 5,000 acres, congres- sional approval would be presumed from the failure of certain committees to act in the 60-day time frame. We have three major problems with that. PAGENO="0140" 136 First: We think it is unrealistic to expect a congressional com- mittee will ever pass a resolution of disapproval. Second: If confined to substantially private lands below the pub- lic lands, a major ski area such as Beaver Crek of approximately 3,000 acres can easily be approved without any affirmative action under the system. Third, and I think most objectionable: This may preclude judicial review. If Congress is deemed by the courts to have reserved final benefits even by inaction, the court may not be willing to review the inaction of Congress under the separation of powers doctrine, and we think it should be made clear that judicial review will be available in any case whether Congress has acted, or not, and we hope that there will be some changes in your legislation to make that clear. We strongly oppose the extension of permits from 30 to 50 years, and we will submit what we think will be an alternative that will be fair to the ski operators and will make the permit system a little bit more realistic, perhaps giving preference to existing operators over other potential operators, at the end of the, say, 10-year period, for the renewal of the permit, that the permit would not be revoked unless there was a substantial violation of the permit, and I think this would take care of the financing problems. One of our biggest objections to the bill is it almost seeks to guarantee a profit to the ski operators. It doesn't quite do that, but it gets very close. It says, "a reasonable rate of return on equity investment," and we think the government has no business legislat- ing anything that comes close to a guaranteed profit. There is a lot of rhetoric coming out of Washington these days concerning the evils of too much government interference and too much regulation of private business, and we feel that this guaranteeing a reasonable rate of return or coming close to it is not what the government should be doing. We are also concerned about the discrimination in the access pro- vided the public to public lands by the Forest Service and ski oper- ators. We believe the trend is toward the phasing out of the day skier and local area in favor of the weekly package skier who spends money in the condominiums and the ski shops, rather than the local skier, who may brown bag, and the local skier doesn't have much money anyway. `We hope there can be equal treatment for all citizens, or in the alternative, as Dr. Mahoney suggested, regulating them under some sort of public utilities system. `We would like you to look into the discounting practices of air- lines and chambers of commerce. I don't have much information on this, but I know it does go on. I don't know who takes an actual loss on that. ,The public must take it somewhere. Certainly, people in the public are being afforded a preferential treatment in the access to public lands. I could say a great deal more, but I would like to conclude by commending you for your initiative in this area, and I am grateful on behalf of the Sierra Club for being able to present some of our ideas to you today. We would hope you could continue to hold hear- PAGENO="0141" 137 ings in other parts of the country; namely, California and also in New England, we would suggest, because these areas of the country in addition to the Ski Country-U.S.A. are affected by any legis- lation that you will propose to Congress. Thank you very much. Senator HASKELL. Thank you. Before you go, Mr. King, actually I do intend to hold hearings, obviously in Washington. I was also thinking of New England and out in California, because I would like to get this bill moving. What do you mean by preferential access to public lands? Mr. KING. Well, I think this goes to the pricing or how much people pay for it. There are package deals in which they get not only skiing privileges but also condominium and travel privileges through the airlines, and somewhere along in here the price is dis- countable anywhere below what it would be ordinarily. I don't know whether the airlines take the loss on this, the condominium owners, the operators themselves, but in any case the money is discounted and doesn't get back into the public funds, the amount of money that is designated to be returned to the public, and we don't know that much about it yet but we would hope you would look into this and take some sort of investigative action on it. Senator HASKELL. Well, yes, it seems to me at least what I am trying to do in this bill is set down general principles that should be followed, and obviously the Forest Service has clearly, from all the testimony here and from things I have heard elsewhere, not done its job. In talking to its Chief, however, he realizes this deficiency and I think sincerely wants to do his job. But when you get into such details or such things as package tours. I don't think that's the kind of thing I ought to get into in this legislation. Mr. Loesch has called my attention to something. You indicate that the bill guarantees a rate of return. Mr. KING. Senator, I think I said it comes close to that. It doesn't actually do that. It does talk about a reasonable rate of return being a factor to be considered. Senator HASKELL.. Obviously you have got to give a person a reasonable rate of return, even though he has got a monopolistic situation or the opportunity to make it. He may not make it. Some go bust, you know. Mr. KING. Of course, we don't have any utility regulation at this point. Senator HASKELL. Well, you see, that's what we are thinking of. As I mentioned earlier, and perhaps you weren't in the room, I mentioned to one of the economists, I think it was Dr. Mahoney, that where you have a truly competitive situation, then the economic theory which I think works is you will have regulation by com- petition. So, if you had a finding that in a given situation, A and B ski areas were truly competitive, you wouldn't need to go any further. It is only when you find that there either isn't competition or they are operating in cahoots that then you need to go into the utility-type regulation, which I think you have to do at that time, but that's the thinking behind it. Anyway, Mr. King, I assume that what you will do on behalf of the Sierra Club is you will sub- 67-512 0 - 76 - 10 PAGENO="0142" 138 mit any specific statutory changes that your organization may wish to put forth. Mr. KING. Yes; we will. Senator HASKELL. Am I correct in that ~ Mr. KING. Yes. Senator HASKELL. Thank you very much. I appreciate it. Mr. KING. Thank you, sir. Senator HASKELL. Our next witness is C. W. Miller, executive director,. Aspen Valley Improvement Association. STATEMENT OP 0. W. MILLER, EXECUTIVE DIRECTOR, ASPEN VALLEY IMPROVEMENT ASSOCIATION Mr. MILLER. Senator Haskell, ladies and gentlemen: I am the executive director of the Aspen Valley Improvement Association, which is a citizens organization whose approximate 100 members are taxpayers in Pitkin County. Over the period of 9 years in which this association has been actively engaged in civic, city, and county affairs, the board of trustees has developed a list of nine guidelines for approaching problems of the area and accepting projects for consideration. Of these nine guidelines, three give us concern in relation to the proposed Senate bill 2125. May I explain: The AVIA reviewing committee on 5. 2125 has concluded that this proposed bill is probably a good bill, is very much needed and should help strengthen relations between ski facility permittees, the U.S. Forest Service, and the public. It attempts to establish fair regulations for use of public lands and to establish reasonable economic basis for permit costs, public charges, terms, and protection of the permittee's equity investment. It ap- pears to be an improvement over existing legislation and should vastly improve communications between permittees and the public with a resulting improvement in understanding. Since many areas of this bill are necessarily broad at this juncture, we would like to caution Senator Haskell and the proponents of this bill to give full consideration to the following three AVIA guidelines: Our guideline No. 9: "To foster the concepts of free enterprise that it will continue to be a delightful place in which to live and visit." Our remark: This is a successful resort community with the economy based upon skiing. Our citizens love it and our guests love it. Any provisions of this bill that might lessen this lifestyle should be avoided. Our guideline No. 4: "To maintain a healthy economy and en- courage a balance between guest facilities and recreational capaci- ties." Our remark: If this bill should in any way tend to discourage the very best in operation and performance by the permittees or should inhibit them from utilizing the land and facilities to the greatest advantage of the public, it no longer would be a good bill. *Our gmdelme No. 9: "To foster the concets of free enterprise with minimum governmental controls in a manner that will be con- PAGENO="0143" 139 sistent with our constitutional rights and with the desires of the citizens of our county." Remark: S. 2125 is a governmental control bill and it does attempt to establish what "reasonable return on equity investment should be, what reasonable fees should be charged and what reasonable prices to the public should be. It directs the Secretary of Agricul- ture to make all records and information available for public in- spection. These proposed regulations are contrary to the principles of the free enterprise concept. They do, however, affect leasing of public lands and may be necessary for the public good. In the consideration of these controls and regulations we urge recognition that the permittees are competitive with each other on the open market, that they must perform efficiently to satisfy the public needs, that they must seek the public's continued support, and that the stockholders of the permittees must be encouraged to keep their money invested in the enterprise rather than redirct it elsewhere. Let us not kill the goose that laid the golden egg and let us assure ourselves that the contents of this bill are not only strongly in favor of the general public but also encourage the existence of a strong and successful recreational ski industry. Thank you, sir. Senator HASKELL. Again, Mr. Miller, as I started out with saying today, this is a working document. If you have any specifics, any language, we would appreciate having it. Mr. MILLER. Thank you very much. Senator HASKELL. Thank you very much, sir. Now, we have Mr. D. R. C. Brown. Mr. Brown will have 10 minutes instead of the usual 5 minutes. STATEMENT OP D. R. C. BROWN, PRESIDENT, ASPEN SKIING CORPORATION, ASPEN, COLO. Mr. BROWN. Thank you, Senator. My name is D. R. C. Brown and I am the ogre that's been referred to here quite frequently today, and I had intended to confine my testimony to the meat of this bill, but there has been one statement that has recurred frequently in the testimony of other witnesses which I feel it is necessary to re- fute, and that is they say or I have heard time and again today financial information was not available. The financial information, Annual Report of the Aspen Skiing Corp., including all the infor- mation given the Securities and Exchange Commission, is readily available in our office to anyone for the asking and always has been, and I think it is as complete a set of financial disclosure as anyone could ask for. I will not return to my prepared text, if I may. Mr. Chairman, I apreciate the opportunity which you have given me to appear before you and testify with regard to Senate bill 2125, and I would like to say that in one area in particular it would go far toward resolving a matter which has long been a source of con- cern to those ski areas operating on the National Forest. That is the provision in the bill which eliminates the 80-acre limitation on permits. As you know, most ski areas cover far more than 80 acres and the Forest Service has gotten around this by granting a 1-year PAGENO="0144" 140 term permit on the balance of the land involved. This is not a satis- factory solution from either the viewpoint of the area operater, his banker, or the Forest Service and I am* sure that every ski area operator with a Forest Service permit will appreciate your efforts to solve one of our major problems. There are three areas of par- ticular interest to me in your bill to which I would like to address my comments. The first is section 3, subsection (C) (c) 1, regarding the fees to be charged. The second is a more generalized comment on the lack of consistency from one National Forest to another in the adoption and enforcement of rules and regulations. In view of the cozy relationship imputed by several speakers between me and the Forest Service, I am sort of reluctant to take off on this regard, but I am already committed. Lastly, I should like to allay the fear you expressed that Colorado ski areas are pricing themselves out of the reach of the skiing public. Section 3(C) (c) 1 of Senate bill 2125 states in part: The permittee shall pay an annual fee for the use and occupancy of forest reserve lands covered by this permit. Such fee shall be computed so as to provide a reasonable return on equity investment. Senator HASKELL. May I interrupt you there, Mr. Brown? That has already been called to my attention and that was certainly not the way to compute the fee to the U.S. Government, and the Forest Service recently appears to have adopted a formula which is more precise so that particular section will no longer really be considered seriously. Mr. BROWN. Thank you. Well, I will save your time and mine. For many years, the Forest Service charged the permittee a rental based on a straight percentage of gross sales. It had the advantage of being simple to compute and difficult to cheat on. The big prob- lem with it was that there was no consistency in the percentage charged. It varied from 1/2 to 5 percent for little apparent reason. As an aside, the only area I know of which was in the 5 percent bracket went bankrupt. Recently, the Forest Service has gone to what they refer to as the graduated rate fee system. This system is a complicated formula which relates gross sales to gross fixed assets and then comes up with a graduated percentage fee. It requires seven pages of explanation in the permit and one almost has to be a CPA to understand it. It requires the permittee to keep two sets of books, one for the Forest Service and one for the Internal Revenue Service. It discriminates against older areas with lower capital investment costs. For ex- ample, Aspen Mountain with lifts dating back almost 20 years has a low gross fixed asset base and consequently pays a high percentage rental. If it were to be sold at its fair market value, the new owner would find his percentage rental greatly reduced from what we pay merely because his gross fixed asset base would be the price he paid for it. It also discriminates against an efficient operator who keeps his construction costs down and it encourages inefficient and wasteful construction practices since the more money an operator spends on his capital improvements the higher his gross fixed assets and the lower his percentage fee. In many cases, the graduated rate fee sys- PAGENO="0145" 141 tern is resulting in a lower return to the Governrnent than it pre- viously received. May I suggest that you consider including in your bill a clause which would establish a straight percentage rental along with a minimum per acre fee. I am sure that 2 percent of a ski area's gross with a minimum charge of $10 per acre would bring in more to the Government than it is presently receiving and would constitute a far greater return per acre than is received from timber sales or grazing permits. It would be simple to compute and easy to ad- minister and would eliminate the lack of uniformity in treatment which the permittees now receive due to varying interpretations from one forest to another as to what constitutes one's gross fixed assets. The second area of concern to me lies in the lack of consistency shown by Forest Service officials in their dealings with ski area permittees. Pricing changes, even in midseason, are granted rou- tinely and without any request for economic justification in some regions. For example, Discovery Basin in Montana notified the Forest Service it was increasing prices 20 percent in January of 1975 and received immediate approval. While our request for a similar percentage price increase made in January of 1975 to be effective in March was flatly turned down although we supported it with our reasons for it. I suspect that the Forest Service has be- come overly sensitive to public pressure and that the protest raised here in Aspen by a small, but vocal, minority of our customers whose main concern was that they were no longer going to be able to ski for $2 a day or less was responsible for the publicity campaign which they mounted. Another reason lies in the Forest Service's region IV definitions of discrimination. For many years, we have provided a special package of lifts and lessons on Saturdays to the schoolchildren of Basalt and Carbondale. Last year, we were informed that this was a discriminatory practice and must cease or make it available to all schools everywhere. Since I considered this impractical, I reluctantly informed the sponsors of the program that we were being forced to give it up. The embattled mothers of Carbondale and Basalt generated so much pressure on the Forest Service that the program was restored with some rationalization that it fitted in with the President's physical fitness program. The whole area of special rates is one of concern to the ski in- dustry in Colorado. Special rates are an important marketing tool when you are competing in a national market. Good marketing pro- grams are usually aimed at specific groups and when one cannot make special rates as an inducement one frequently loses his business to a competitor that can. For example, Killington, one of the East's largest ski areas and located on private land, has several special deals aimed at the New York and Boston markets which we are unable to meet because of the Forest Service attitude in region IV as to what constitutes discrimination. Other Forest Service regions are not so strict. In fact, most New England areas operating on the PAGENO="0146" 142 National Forest enjoy the freedom to meet special deals offered by their competitors on private land. Lastly, I would like to address myself to a subject that, in your remarks accompanying the introduction of your bill, you said~ con- cerned you. You stated that you fear that ski areas are pricing themselves out of the reach of part of the skiing public. I would like to point out that not everyone can afford a summer vacation at the Broadmoor, nor can everyone afford to buy a Cadillac, but there are less expensive summer resorts in Colorado that cater to a less well-heeled public and there are Fords, Volkswagens, and Chev- roleth on the market as well as Cadillacs. The same is true of Colo- rado ski areas. There are ski areas in Colorado priced to meet all budgets. In Aspen, $11 will buy you the use of 31 chairlifts at four areas with up to 3,500 feet of vertical descent; free bus service be- tween all areas 10 on the mountain restaurants; the services of over 100 ski patrolmen; and three-quarters of a million dollars worth of over snow machinery for trail grooming. An assortment of facilities unavailaible anywhere in the country. On the other hand, one can buy a ticket at Cooper for $5, or Squaw Peak and Pikes Peak at $4.50. Just as in vacation resorts or automobiles, there are facilities to meet every purse. In summary, I do not think that-I will skip that because you all agreed to that. The Forest Service from forest to forest and region to region has applied regulation with little regard for consistency. And, that our Colorado ski areas offer the consumer a wide range of facilities and prices on which to spend his recreational dollar. One last sugestion, if the intent of these hearings is to receive input from the greatest possible number of people who ski at Aspen, it would be more appropriate to hold them in Los Angeles, Chicago, or Dallas. More skiers come to Aspen from each of these cities than come from here. Thank you. Senator HASKELL. Thank you, Mr. Brown, very much. I would just like you to comment on a couple of things, if you would care to. The bill that I have introduced provides for public hearings to allow any interested party to comment on proposed increases prior to the granting of increases with of course, access, it goes without saying, to historical financial information. Do you have any opinion on that or attitude? Mr. BROWN. I think that if the public hearing is to be held, it should be held where the greatest number of our customers are located, and that isn't in Aspen. Senator HASKELL. No, I am not talking about this hearing. I am talking about if the bill were adopted. One provision of the bill says that as a condition precedent to getting a change or increase in lift ticket, prices, the public will have an opportunity to comment. There will be made available financial information to the pub- hc and this will be done prior to the granting of the change or increase. A lot of people have commented on that. I wondered if you had an opinion. Mr. BROWN. I certainly have no objection to the complete dis- closure of historical financial data. I think it is a healthy thing for PAGENO="0147" 143 the industry as a whole and I think that the majority of ski area operators will feel the same way. So far as public hearing on the price raises, nobody likes to pay any more for any product than they did last year, and I think you are going to find that the input on that is bound to be largely negative, regardless of what justifi- cation the affirmative puts out. If a public hearing were held on grocery prices, I am sure you would find lots of protests. Senator HASKELL. Well, do you think it would be a healthy thing to do or unhealthy thing to do? Mr. BROWN. I don't think it will accomplish much one way or the other, but it will let some people let off steam, and possibly in this respect it is helpful. Senator HASKELL. Then just really two other things. The bill could be changed to provide, among other things, that there will be an overall local government adopted land use plan before the is- suance of a permit. Let's take a brand new area. Let's take before Vail went in. There would be an obligation to get some kind of a land use plan adopted by Eagle County as a condition precedent to the Forest Service giving Vail their permit. Do you consider that desirable or undesirable? Mr. BROWN. I consider it desirable in principle. I think the way it will be administered will have a great deal to do with whether or not it might effectively kill a potential ski area if you have to go through too many different governmental entities before you know whether you are going to get a permit or not. If you have to go first to the county, then to the State and then to the Forest Service, all with environmental impact statements- Senator HASKELL. No, that's not really-I am just thinking of the concept. In other words, right now, as you know, the Forest Service says what you can do on the Forest Service lands and it says what you can do on the so-called base land, which is a very small area, and also as you are very much aware a major ski area has a tremendous impact-even some folks from Basalt are testi- fying here-so it occurred to me that before you, you being the Forest Service, before the Forest Service granted a permit to a major ski area there should be adopted an acceptable land use plan involving the to-be-affected geographical area. Now, that's some- thing new and I just wondered if you reacted favorably. Mr. BROWN. I would react favorably to that. There is one thing you mentioned just now, Senator, which I would like to attempt to straighten out. You say that the base area is usually just a very small bit at the bottom. At Aspen Mountain only 20 percent of the land involved-19 percent of the land involved is Forest Service. The other 81 percent is privately owned, yet the Forest Service dictates everything that can be done on the 81 percent. Senator HASKELL. Just one other question. I don't want to keep you. What is your attitude on these independent ski instructors? I don't mean any controversy, but do you feel very strongly that it would louse things up to let them on the hill? If so, why? Mr. BROWN. Senator, we have an expert witness here, who will devote his entire testimony to that. PAGENO="0148" 144 Senator HASKELL. That sufficeth. Let him talk then. Thank you very much, sir, for appearing. The next witness is Stephen Green, vice president of Western Ski Vacations, New York City. Mr. GREEN. Senator. Senator HASKELL. Mr. Green. STATEMENT OP STEPHEN GREEN, VICE PRESIDENT, WESTERN SKI VACATIONS, NEW YORK, N.Y. Mr. GREEN. My name is Stephen Green and I am vice president and principal stockholder of Western Ski Vacations, located in New York City. I guess I represent different constituents, the tourist who comes into Aspen as his destination, so maybe I will give you a slightly different view as representing a little different type of interest. Just a little bit about Western Ski to put it in the frame of reference. We are basically a tour wholesaler. We have a back-to-back charter operation serving the cities of principally New York, Hart- ford, Albany, Philadelphia, and Washington. We have approxi- mately this year 45 charter aircraft with a total capacity of about 8,500 passengers that we will bring out to the West. In addition to providing air transportation, Western Ski Vacations also has op- tional packages for land and lift tickets. We service the areas of Sun Valley, Utah and Aspen and Vail. We have certain people going to other areas, but those are our principal areas. Although Western Ski probably transports more ski charter than anybody else in the country, we are really but a small portion of Aspen's business. We will bring into Aspen this year about 4,500 tourists between Aspen and Snowmass, which I would suspect is but a small fraction of the amount of guests that Aspen enjoys during the course of a winter. I think it would help to break down the component parts of a typical tourist ski package. If so, we would see that the ski lift ticket is by far the smallest part of his total cost and his expenditure when he takes let us call a 7-day ski package. For example, charter air fare round trip, New York to Denver, is $159 high season and $149 low season. A typical land package on an economy basis, in- cluding transfers, is $124, while we have been advised that the 6-day lift ticket in Aspen is $64, which is obviously the smallest part of the total package for the tourist coming into Aspen. From a competitive standpoint, we deal with this constantly, because as much as Aspen we are involved in Utah and we are in- volved in Sun Valley and all throughout Colorado, and people really tell us where they want to go. We. don't tell them where we want them to go, but they choose it and we fit their needs and try to give them the service to accommodate them. Aspen in my opinion is a real value at $11 a day compared to other areas that I have personally visited and that people who take our charter flights have visited. By frame of reference, in the North- east, where I have skied many years and where many of my customers traditionally ski on weekends, you see areas such as Stratton with vertical field about 1,900 who have advised us that their lift ticket PAGENO="0149" 145 is $12. Stowe is $12 a day. Kington is $12 a day, and I maybe am a little prejudiced because I love skiing in the West, but these areas just can't compare to Aspen, not only in the vertical, but in trail maintenance, lift facilities, lift line. You can go on ad infinitum. So, from a competitive comparison standpoint, I do feel that the product which is offered to the guests or my guests that are coming into Aspen is well worth the price, vis-a-vis what other areas are charging. There are areas if we have people who come into the West on our flights if they do not feel that they can afford an $11-per-day or $64 6-day pass in Aspen, some of them will ski Copper Mountain. Some will go to some of the other areas that offer lower price packages. It generally follows that the areas that have lower priced lift packages also offer lower price room accommodations. There seems to be a certain type of customer that chooses Aspen, and I might say Vail also, which is represented by the quality of the mountain and hotels and food in the area. So, looking at it from a consumer standpoint, the consumer who comes from different points of the country, albeit I only have trips from the Northeast, in our opinion Aspen is well worth the money, and obviously the consumer who takes our trips thinks so because this is by far our most popular area, and I think the quality of the mountain, the way they keep the mountain, the lift practices, the patrol, everything that goes into making a mountain great, Aspen is far superior to any other area that I know, that I have skied any- way, and I thank you very much for your time. Senator HASKELL. Thank you, Mr. Green. Really, I would just like to comment. The purpose of these hearings are not whether Aspen ski tickets are too high or too low. It is whether' the system under which permits are issued and administered is proper. You know, I just wanted to be sure you understood the thrust of the bill. Mr. GREEN. Well, we are really not privy and our interest as such in the bottom line is what the consumer is going to spend. Senator HASKELL. Oh, sure, I appreciate your testimony. I just wanted to be sure you understand what the bill is about. Mr. GREEN. I have read the bill and I understand, and to be honest, just from the testimony this afternoon, I was a little confused as to what the real issue was. Senator HASKELL. The next witness is Mr. Tom Blake, general manager of Snowmass Resort Association. STATEMENT OF TOM BLAKE, GENERAL MANAGER, SNOWMASS RESORT ASSOCIATION Mr. BLAKE.. Thank you, Senator. My name is Tom Blake. I am general manager of the Snowmass Resort Association. I have been a member of this community for the past 6 years. From what I under- stand, the purpose of these hearings will determine the feasibility of regulation on the daily lift and season lift prices in Aspen and all over the country. Senator HASKELL. A lot more than that. It will be the issuance of permits, the land use planning in the areas, what contribution, PAGENO="0150" 146 if any, should the ski lift operation make to the local community. It is a whole spectrum of matters. Mr. BLAKE. I would like to address myself to just a couple of those aspects. Senator HASKELL. All right. Mr. BLAKE. I would like to point out some factors which may affect your decision on whether the lift rates have been reasonable his- torically. In some years of observation of increasing lift rates in the Snowrnass-Aspen area, those of us in the lodging and base area service industries have been able to note the lift rate increases have been taking place at a slower pace than the general increase in prices in the area. The other services in the community such as lodging and restaurant services and those things which are in- creasing faster than the lift rates haven't been increasing we don't think because of capricious pricing policy but because of the definite inflationary pressures in this country to raise those rates. I would surmise that the lift rate increases in this situation, the daily lift rate increases, are as a result of the same inflationary pressures in this general community. In addition to that general parity between the lift rate increases here and the general increase i nprices in our specific community, the increase in ski prices is substantially below the general cost-of- living raises all over the country. If you could refer to that graph that is a.ttached to my testimony you can see that using a base year of April 30, 1972, the price of Aspen ski lift tickets has increased approximately 20 percent, while the Wholesale Price Index has increased over 50 percent. There are a number of other indexes all on that ground, all of which indicate an increase in price over the 20 percent indicated by the Aspen Ski Corp. Again, it seems to me that the pricing of skiing in this area is directly r~eiated to the inflationary pressures evidenced throughout the whole spectrum of costs of the tourists coming here and skiing in the area. Another facet which I know you are concerned with and which the Government should concern itself with outside of economic rationale is the availability of recreational opportunities on public lands. The real factor limiting the number of people skiing in Pitkin County is not the price of daily lift rates offered but availability of beds to house the people who wish to ski in this area. People here traditionally are not price sensitive to the lift rates or rate of general services, but this is not to say that the industry as a whole does not offer the public a great variety in both lodging and lift rates. In Colorado alone, the lift and lodging rates vary greatly from area to area. Wolf Creek, with which I am sure you are familiar, lodging, for example, varies a great deal from the Vail area. The effect of the lift ticket price on the public's choice of an area in which they ski depends very little on their choice of which area to ski, since the net price, the daily rate price, is only about 10 percent of the expenditure made by a tourist to a destination resort PAGENO="0151" 147 It seems in view of the above the public has a large choice of varying vacation opportunities in both price and experience. In a number of years of experience in dealing with guests in our area I have received very few complaints on the price of the daily lift ticket. In fact, this last year I can remember only two complaints on that subject. It is possible to conclude there is no demand from the guests, specifically in this area, and I do not know since I have not been in contact with them in other areas if there is any demand, for regulation in the price for daily lift tickets in any of the other areas. In analyzing this apparently reasOnable daily lift ticket. price increase, it should be noted that the Aspen Ski Resort Corp. and other entities in the area such as Snowmass Resort Association have found it necessary to spend considerable amounts of money in the area to transport skiers from Aspen, where most of the accommoda- tions are, to Snowmass, where most of the skiing takes place. This dislocation of skiing has cost the Aspen Skiing Corp. $250,000 a year, and this cost must be absorbed in the daily lift price. As to I think the subject of most of this morning's testimony, the seasonal lift rate, especially to the employees season lift rate, the Snowmass community in the past in view of that has received a fairly equitable rate. This year is a case in point. A skiing Snow- mass resident has a fairly reasonable lift rate. The ski pass problem in the Aspen community, correctly relating the Aspen community to Aspen Mountain, possibly may be one which has problems of demographics, bed capacity and lift capacity in the immediate area, and that is a problem along with the pricing. Thank you. Senator HASKELL. Thank you very much, Mr. Blake. We appreciate your analysis. [The graph referred to follows:] PAGENO="0152" 148 - / - -- -~ - I ~ ~ - 1~ /~oc~ -~~): ~./1' / / / ,. / / /1 / / ~ / I' / / -, - PAGENO="0153" 149 Senator HASKELL. David Christensen is our next witness. Is Mr. Christensen here? STATEMENT OP DAVID CHRISTENSEN, RANCHER, PITKIN COUNTY, COLO. Mr. CHRISTENSEN. Thank you, Senator Haskell. My name is David Christensen and I wish to address my testimony, Senator, to little known and lightly considered facts concerning the Aspen Skiing Corp. development programs and policies, things that seem currently overshadowed and easily forgotten during times of con- troversy and preclude proper recognition. I am engaged in sheep and cattle ranching in Pitkin County. I came to the Aspen area and acquired my first ranch properties in 1946, which was prior to any serious ski development. Subsequently, I acquired Forest grazing permits that either bounded or encom- passed what ultimately became the Forest ski area in Aspen. As a result, I have grazed sheep or cattle on every part of each area using them in common with the Aspen Skiing Corp. I believe that unquestionably I know more about the physical activities of the corporation than anyone else outside their own organization. During the initial stages of development of the ski slopes, I probably represented the only vehement opposition to the develop- ment. To me, it represented competition and infringement to my personal use. I was skeptical of this new change because I was very much aware that development of a ski area meant roads, clearing and leveling land, lift line installations, buildings, disturbance of top soil and vegetation of top soil and vegetation, erosion, all con- tradictory to my interests. As a rseult of the early mining practices and overgrazing in the early range war days, I had seen how very slow, if ever, rehabili- tation of top soil and ground cover was, particularly if left to nature alone. Thinking back, I believe the most serious threat of all was the awareness that most of the people in the community saw the ski de- velopment as new lifeblood, business opportunities and jobs for a town that had for many years laid dormant. What I feared in this atmosphere was that the community was more interested in skiing becoming a reality than in how and at what environmental expense it did become a reality; therefore, little or no ecological concern as to how the ski corporation developed it. As a result of these things, I probably viewed the ski area development with a more critical and juandiced eye than most. During the years of development that followed, however, my fears were arrested and I have been pleasantly surprised at the concern and inexhaustible efforts aimed at environmental policies. I have watched in amazement their experimentation with techniques, with equipment and manpower, their extensive planning and the expenditure of vast sums of money, all because of a dedication and corporate policy of finding solutions to existing environmental problems. I have seen them succeed in their reseeding and erosion control projects where similar efforts by other industries, highway PAGENO="0154" 150 departments, railroads, ranchers, Forest Service and Bureau of Land Management agencies have met with little or no success. The Aspen Skiing Corp. has truly been a pioneer in rebuilding and reseeding this type of terrain and has employed many inventive and imaginative practices to create suitable seed beds for revegeta- tion of disturbed areas, cost notwithstanding. As a result of these efforts, I can clearly show anyone concerned areas that now have productive ground cover where it was previously completely devoid of vegetation. It seems that we are experiencing a period in our lives when all that is necessary to be heard loud and clear is to mention ecology or wildlife. For those individuals concerned but not informed about the ski corporation's activties and its effect on wildlife, let me assure you of a few facts. The deer and elk, if they are any one thing, they are adaptable. I have~ seen them adapt to many pressures over the years, hunting pressure, development, people, livestock, and certainly not least to weather. In spite of these pressures elk herds in this area are at historical record numbers. This has to suggest adaptability. Trail-clearing and seeding through heavier timber stands has created an abundance of feed within the protected area they seek, Normally, the heavy timber stands provide only protection for them as they produce very little vegetation and because of a lack of sun is not palatable to them. Through consultation, study, trial and error, the Ski Corp. has selected the best domestic grasses for the various soil conditions and elevations. Grasses that are far more resistant to adversities, that are far more productive and palatable to both wildlife and live- stock than native grasses. Iii short, wildlife never had it so good. Development of the ski slopes in this area has unequivocally been no deterrent to wildlife migration habits. In spite of the increased productivity of grasses on the ski slopes, surprisingly enough, they do not represent a substantial need or use by livestock or by wildlife. This whole area now as always is blessed with an abundance of summer grazing. The critical grazing periods and controlling factors to wildlife population are late fall, winter and spring, all at elevations below ski area development. As a result, the ski areas represent only a pass-through area in the migration from spring to summer ranges. Senator HASKELL. Sorry, Mr. Christensen, but we do have to observe the bell. Your full testimony will be reproduced. Mr. CHRISTENSEN. Fine, just in summary, Senator, having seen and experienced in total the development of these mountains by the Aspen Skiing Corp., I must conclude that from the following points of view, esthetically, from the standpoint of utility, wildlife, livestock, and multiple use, these mountains are far better today for all concerned than they were 30 years ago. Senator HASKELL. Thank you very much, Mr. Christensen. [The prepared statement of Mr. Christensen follows:] STATEMENT OF DAVID CHRISTENSEN, RANCHER, PITKIN COUNTY, CoLo. My name is David Christensen; I am engaged in sheep and cattle ranching in Pitkin County. I came to the Aspen area and acquired my first ranch properties in 1946, which was prior to any serious ski development. Subse- PAGENO="0155" 151 quently, I acquired forest grazing permits that either bounded or encompassed what ultimately became the four ski areas here in Aspen. As a result, I have grazed sheep or cattle on every part of each area, using them in common with the Aspen Skiing Corporation. I believe that unquestionably I know more about their physical activities than anyone else outside their own organization, and I have personally witnessed the vast transformation of the past 30 years, from rangeland to the present. During the initial stages of development of the ski slopes, I probably repre- sented the only vehement opposition to development. To me, it represented competition and infringement to my personal use. Traditionally and his- torically, change has come slowly and been hard to accept for agriculture and those involved with it. I was skeptical of this new change because I was very much aware that devlopment of a ski area meant roads, clearing and leveling land, lift line installations, buildings, disturbance of top soil and vegetation, erosion, etc. All contradictory to my interests. As a result of early mining practices and overgrazing in the early range war days, I had seen how very slow, if ever, rehabilitation of top soil and ground cover was, particularly if left to nature alone, and especially on steep slopes and the general topography of the land involved. Where top soil is shallow or totally absent, it represents a truly delicate situation. Thinking back, I believe the most serious circumstance of all was the aware- ness that most of the people of the community saw the ski development as new life blood, business opportunities, and jobs for a town that had for many years laid dormant. There was an excitement in the community that had been absent since the mining days. What I feared in this atmosphere was that they were more interested in skiing becoming a reality, than in how and at what environmental expense it became a reality. Therefore, little or no co- logical concern as to how the Ski Corporation developed It. As a result of these things, I probably viewed the ski area development with a more critical and jaundiced eye than anyone. It has been said that "the only thing in life that is constant is change". Ski development was inevitable and change did come. During the years of development that followed, my fears were arrested and I have been pleasantly surprised at their concern and inexhaustible efforts aimed at environmental problems. I have watched in amazement their experimentation with tech- niques, with equipment and manpower, their extensive planning, and the expenditure of vast sums of money. All because of a dedication and corporate policy of finding solutions to existing environmental problems. I have seen them succeed in their reseeding and erosion control projects where similar efforts by other industries, highway departments, railroads, ranchers, Forest Service and Bureau of Land Management agencies have met with little or no success. The Aspen Skiing Corporation has truly been a pioneer in re- building and reseeding this type of terrain and has employed many inventive practices to create suitable seed beds for re-vegetation of disturbed areas- cost not withstanding. To mention a few methods that have been particularly successful for them and ultimately adopted by other confronted with similar problems are: Relocation of top soil.-Actually hauling soil to areas in need; mine dumps, rocky outcroppings, barren ridges. Chipping.-Utilization of some of the smaller cleared timber and placing it as mulch for erosion control. Chopped hay-Extensive use of equipment that chops and blows in place a protective ground cover of fine hay particles for seeded areas and also pro- vides much needed humus for the soil. Fish neting.-On extreme slopes where the above methods have failed, they have covered the surface of the area to be seeded with a webbed ma- terial, a very expensive but certainly effective means of holding seed and mulching material in place until seed his germinated and established itself. As a result of these efforts, I can clearly show anyone concerned areas that now have productive ground cover, where it was previously completely devoid of vegetation. It seems that we are experiencing a period in our lives when all that is necessary to be heard loud and clear is to mention ecology or wildlife. For those individuals concerned, but not informed, about the Ski Corp's activities and its effects on wildlife, let me assure you of a few facts: 1. They are extremely adaptable-if deer and elk are any one thing, they are adaptable. I have seen them adapt to many pressures over the years, PAGENO="0156" 152 hunting pressure, development, people, livestock, and certainly not least, weather. In spite of all these pressures, elk herds in this area are at his- torical record numbers. This has to suggest adaptability. 2. Trail clearing and seeding through heavier timber stands has created an abundance of feed within the protected areas they seek. Normally the heavy timber stands provide only protection for them as they produce little vegetation and because of a lack of sun is not palatable to them. 3. Through consultation, study, trial and error, the Ski Corporation has selected the best domestic grasses for the various soil conditions and elevations. Grasses that are far more resistant to adversities, that are far more pro- ductive and palatable to both wildlife and livetock than native grasses. In short, wildlife never had it so good. 4. Development of ski slopes in this area has, unequivocally, been no de- terent to wildlife migration habits. 5. In spite of the increased productivity of grasses on the ski slopes, sur- prisingly enough, they do not represent a substantial need or use by wildlife. This whole area now as always is blessed with an abundance of summer grazing. The critical grazing periods and controlling factors to wildlife pop- ulation are late fall, winter and spring, all at elevations below ski area de- velopment. As a result, the ski areas represent only a pass-through area in the migration from spring to summer ranges. I feel that we have come through what I call the critical period of ski area development unbelievably well. The period when most of the mentioned conservation practices were adopted only because of the Ski Corporation's philosophy to conserve, preserve and rebuild the lands they develop-not because of the various pressure groups that are so actively breathing down their necks today. It has been a pleasure for me to cooperate with them and I am proud to have in effect been a partner with them in the common use of these ranges. I must attribute a great deal of the environmental concern the Ski Corporation has displayed to a man who because of his agricultural background was a conservationist and ecologist long before they became household words. This man is President of the Aspen Skiing Corporation, Mr. D. R. C. Brown. If we were to look beyond personal interest, I honestly believe everyone would concur that the Corporation has had a unique attitude among cor~ora- tions in that even after abundantly providing the finest facilities, the finest groomed and manicured slopes, the finest maintenance of trails, equipment and facilities, and the finest service-combined providing the best quailty skiing the world has known, they still choose to continue upgrading existing facilities and equipment, to build new facilities and trails as opposed to funneling all their profits into divided payments to their stockholders. Having seen and experienced in total the development of these mountains by the Aspen Skiing Corporation, I must conclude that from the following points of view: aesthetically, utility, wildlife, livestock, and multiple use, they are far better mountains today for all concerned than they were 30 years ago. Senator HASKELL. Our next witness is Wilton Jaffee, Sr. STATEMENT OP WILTON JAPPEE, SR., ASPEN, COLO. Mr. JAFFEE. Senator Haskell, Ladies and Gentlemen: My name is Wilton Jaffee, Sr. I came to Aspen in January of 1947 because Fred Iselin, one of the codirectors of the ski school and an old friend, had told me he thought Aspen had the best skiing in this country. When I found this to be so, I soon became a part-time Aspenite and eventually became a full-time Aspenite. I was, and am, an officer of the AVIA and I was a member of the Aspen Valley Hospital Board, and I now am a trustee of the new district hospital board that is responsible for the construction of the new hospital. PAGENO="0157" 153 I am also a member of the Aspen Medical Foundation that has undertaken to raise $1,500,000 in. private contributions to help fund the cost of the new hospital. For the record, you should know that on one night in 1974, the Aspen Hospital with 27 beds, had to house 53 patients, obviously an impossible situation. I have given you these scant details to emphasize one major point. The Aspen Skiing Corp. has pledged $250,000 over a 5-year period, the largest contribution to be made, and with the full knowledge that only 30 percent of the hospital's patients over the last several years have been orthopedic in nature. Additionally, the Ski Corp. gave special rates to hospital employees until forbidden to do so by the Forest Service. If a bill such as 2125 becomes law, then the Ski Corp. may be forced to sell its product at lower rates than prevail elsewhere, as high as $12 per day, and the Ski Corp. will have to cut back on unessential expenditures such as the new hospital and the community in the `ong run will be the loser. Section 3B (b) of the bill states in part: Such regulations, among other things, shall require consideration by the Secretary of all facilities to be developed by the permit applicant, all housing, recreation, and commercial development which will likely occur as a result of the development of the applicant's facilities, and all public services neces- sary for such development, both on Forest reserve land and private land in the proximity thereof. Such consideration shall include an assessment of the extent and nature of such development, its compatibility with other uses for and the protection of the resources on such Forest reserve and private lands as determined through federal, state or local planning processes, and the authority and capability of the relevant state and local governments to zone or otherwise regulate such develOpment to insure such compatibility. Such regulations shall also set forth a specific procedure for consultation with the relevant state governments prioD to the issuance of any such permit. One is forced to the conclusion that the Federal, State, and local government will become involved in private enterprise with disas- trous results. I suggest in the name of commonsense and for the benefit of the~ new hospital in Aspen that the bill be amended to permit the free enterprise system to function for the overall benefit of the community as it has in the past. Senator HASKELL. Thank you, Mr. Jaffee. I must observe that the Forest Service is already involved in the ratemaking process. What we are attempting to do here is inject some consistency and some standards that you can feel and touch so I just make that obser- vation, but I appreciate very much your testimony. Mr. JAFFEE. Thank you very much. Senator HASKELL. Our next witness is Ed Irwin of Aspen. STATEMENT~ OP ED IRWIN, MARKETING DIRECTOR, BANK OP ASPEN, COLO. Mr. IRwIN. Senator,. my name is Ed Irwin. I have been the' marketing director at the Bank of Aspen for a' period of 31/2 years. In my opinion, the ski industry is an essential contributor to the economic welfare of the Aspen community. We will first look at the direct impact. In terms of dollars, the `ski industry in' the Aspen 6'7-512-76----i1 PAGENO="0158" 154 area has a payroll of approximately $4 million. In terms of employment, this $4 million is paid to an estimated 800 employees, which I consider essential factors of our business community. These two factors alone in my opinion are ~very significant inputs, not considering the industry's investment in buildings, equipment and supplies. As far as indirect impact, the~ winter visitor in Aspen is here primarily due to skiing, and according to a survey by Colorad& University Professor Dr. Goeldner, the average winter visitor spends from $52 to $53 a day. If we consider skier visits in the number of 1,356,000, on expenditures per person at $52 per day, this amounts to an estimated total of $70.5 million pumped into the Aspen community each ski season. It is the quality of skiing that attracts the visitor and brings this large dollar volume to the economic community. The increase from year to year in the number of skier visits as a result of the quality of skiing is a factor that provides the growth of our economic community, as demonstrated by the follow- ing figures. Commercial bank deposits in 1963 $4,164,000. In 1974, it was increased to $35,858,000. In terms of sales tax collected in 1963, the figure was $668,000, increased in 1974 to $2 million. Spent on meals and lodging, in 1963, $3,735,000. The figure in 1972 is. $19 million as compared to $3 million in 1963, so in 9 years there was a significant increase. It has been argued that the Aspen community is a self sufficient. community, it is economically independent of the ski industry, but according to . a survey of the summer visitor conducted this past summer, it is. estimated that the summer visitor spends on the average of $22 or $23 a* day, approximately half the average' amount of the winter visitor. This smaller or one-half the amount of an expenditure for the summer visitor, coupled with many fewer~ visitors in the summertime tends to refute the self-sufficient economic theory. From the previously mentioned figures, stating the direct impact. to the ski industry and the indirect impact to the ski industry,; I conclude that the ski industry's input is not only essential but. vital to the economic welfare of the Aspen community. If the ski industry is subject to over-regulation and price controls, the quality of skiing, the businses community, the city and county governments and the Aspen resident will be jeopardized. Thank you. Senator HASKELL. Thank you. The next witness is Wilton Jaffee,. Jr. STATEMENT OP WILTON JAPPEE, TR, W/S RANCH, ASPEN, COLO Mr. JAFFEE. My name is Wilton Jaffee, Jr. I reside at W/J~ Ranch, Aspen Cob. I am a landlord providing employee housing and residential housing in the Aspen locality. Senator, before I start my remarks, this is my. home and this is~ my community, and you have heard many, many arguments on both sides and you will continue to hea.r them, but there is a lot of' dissention in. this community and it is unpleasant and it is really' PAGENO="0159" 155 not necessary. I don't know if your bill will help solve it, but I would like to make a request of you-I know it is not in'your normal course of activities-that before you are through with this hearing we call a 30-day moratorium on this kind of political activity and you make a request to the Ski Corporation and your duly and properly elected officials to somehow get together and work out the outstanding issues that are causing these kinds of problems. Senator HASKELTJ. Well, thank you. I am not sure that I have the right to do that, but I would hope they would, because ap- parently there are some local issues. The particular one is the great deal of high feeling on the season pass, and I would certainly hope that some accommodation could be made there. The rest of these things that are of more broad applicability don't seem to be as controversial as that, I mean judging from the testimony of, for example, Mr. Brown. He did not seem to be terribly upset. He probably doesn't like a lot of the things in the bill, but he doesn't seem to be terribly upset about it, so I would hope that that one particular thing, that the two sides could sit down and work some- thing out, because that affects an awful lot of people. Mr. JAFFEE. Senator, I would like to quote a well-known Aspen philosopher by the name of Spinoza in reference to your bill. 1-le said, "He who seeks to regulate everything by law is more likely to arouse vices than to reform them." With that in mind, I have skied in the Aspen area for many years and Aspen offers more for your money than most other areas I know of, which has been covered, both in snow conditions, climate, also the town. Colorado is definitely the best skiing in North America in my opinion, and Aspen is one of Colorado's top areas. Now, to the meat of the matter, in my opinion, it is my opinion that the Ski Corporation has the right to select for preferential treatment those categories of its employees that in its opinion benefit the economy of the area. As an example of the categories of people that should., be given special passes or discount passes, I would say would be doctors, ambulance drivers, nurses, hospital attendant. school teachers, paying members of business groups, advertising and promotional people, et cetera. The responsibility to provide discount, ski discount passes, to the general employee in the community might be a laudatory aim and it might even be in the community's interest,, but the costs should be borne `by the owners and partners of going businesses. It is not the function of the Ski Corporation to subsIdize area businessmen through dis- count passes any more `than local residents or employees have ~ right to cheap discount for food or shelter. However, even if one disagrees with my moral and legal position., the harm done to this area and the quality of ,skiino and life by making the rate qi~iestion a political football is devast~ting. Carried to its logical political conclusion, by forcing the Aspen Skiing' Corp. to provide a low cost season ticket, Aspen' Mountain would he skied by local residents, expert skiers, paying a nominal or very very small rate to the exclusion of a lot of tourists who pay full price, but are crowded off the mountain by the local experts. The facts and figures will substantiate the above statement by PAGENO="0160" 156 analysis of skiers on Aspen Mountain. During almost any given time, any kind of random sample a statistician might choose will show that the vast amount of skiers on Aspen Mountain are expert, local skiers. Therefore, the conclusion that, we have to draw is an analysis of the problem of Aspen Mountain, not the problem of skiers, not the problem of passes, but who skies Aspen Mountain. Strict attention must be paid to the fact that this whole fury, this tempest in a teapot, is how a ration skier days on Aspen Mountain and Aspen Mountain alone. The ski corporation's position in my opinion as a resident and stockholder is more than generous. I received my first dividend, after 20 patient years of waiting, whereas a 31-day resident employee believes the first year he has a right to use our facilities at a discount. Only a relative few are really causing all this trouble. I believe the intermediate skiers and be- ginning skiers are satisfied with the pass system offered by the ~ki corporation which covers all three ski areas. Last, but not least, to prove my point, a season pass is offered at the Highlands Ski Area for roughly $2.50 per hundred skier days ~or local residents. Highlands Mountain in any other part of the Western ski world would be a star attraction in itself; here, it is taken for granted. In fact, a lot of local people, people who are expert skiers, consider it barely adequate. We must see, Senator, this issue as it really is-a fight as to who will ski Aspen Mountain- economic rationing or po1itic~1 rationing. Is is a group of gentlemen and ladies who are expert skiers and want to ski a mountain and are not willing to pay the going rate. There are many other expert skiers in other parts of the country who would like to ski this mountain and who will pay the going rate. And that't all it is. There are no other side issues. How you are going to determine who is to ski Ajax Mountain is something I can't determine, but if you have any other system other than an economic system, I think in the long run the whole area will suffer for it. Thank you. Senator HASKELL. Thank you, Mr. Jaffee. I want to assure you that it is not my intent to determine who skis Ajax Mountain, and I want to remind everybody that lift tickets are basically already regulated. What we are trying to do is develop objectivity and uniformity, and that's the purpose of the bill. I first skied Ajax Mountain in 1946, as I remember. There wasn't much in the way of ski lifts at that time. Our next witness is Michael Strang, if Mr. Strang is present, and in view of the fact that he is a distinguished former Colorado State legislator there will be no limit on time. STATEMENT OP MICHAEL STRANG, VICE PRESIDENT, BOSWORTH AND SULLIVAN, INVESTMENT BANKING, ASPEN, COLO. Mr. STEA~G. Mr. Chairman, I will be brief because I am no longer in politics. My purpose in being here today is to talk about a kind of a technical aspect of your bill which relates a little bit to the~ investment problem that ski operators face mostly away from here. PAGENO="0161" 157 My name is Michael Strang. I live on the Mill Iron Lazy W. Ranch in Missouri Heights. I have been associated with the invest- ment banking firm of Bosworth & Sullivan and Co. for 10 years, and am presently a vice president and Director, responsible for the operations of the Aspen and Glenwood Springs offices. From an investment standpoint, the track record of the ski area lift companies has been a very poor one. distinguished more by severe financial difficulties than by shining success. One can point to Mount Snow in Vermont, Waterville Valley in New Hampshire, Snowbird in Utah and Telluride and Crested Butte in Colorado, to name a few that have really had bad times. Because of the high risks in the lift operating business, I as an investment banker have never recommended Aspen Skiing Corp. common stock for any investor-when D.RC. asked me to testify in this, I said, "I thought you would never ask me"-despite the fact that this is, in my view, the best-managed lift operating com- pany anywhere. The national offering of stock in 1973 was at $20 a share. This week it' is about $11.50 a share. I believe yesterday the bid was $10.73, a rather disastrous beating for somebody who made that investment in the national offering. It should be recog- nized thatthis is basically a transportation company, whose function it is to move people up mountains. There is a finite limit to the amount of people willing to pay for tickets, `~but recent history has shown that the cost of providing this service has no apparent limit.' The present return on equity for the Aspen Skiing Corp. is about 12 percent. That's all right for a utility company.. It's far too low, for a high-risk business. The provision of S.2125 which attempts to resolve the acreage' problems should help the industry. The proposal that the Secretary of Agriculture conduct a study of fees charged could possibly be an improvement over the present situation. Parenthetically, I would draw the committee's attention to the fact that it is operating ex- penses, not permit fees, which bear directly on' investment return, and I think you have already talked about that. *Mr. Chairman, I would like to mention a few worries I have with S. 2125 as drafted. The language in section .3 `(2) (c) (b) is too broad. It imposes an unreasonable burden on the applicant which could well stifle any further investment. If local, regional, in this case the county, State or Federal Governments require the impact data outlined in this section, then the law must require that each pay its share of the `high cost of obtaining such impact informa- tion because it can be almost limitless. The frequent use of the phrase "reasonbie return on equity in- vestment" in the bill has an appealing ring to it, but one woi~iders a little who is to define this criterion. The industry? The city council? The Secretary of Agriculture? The Senate? The uncertainties raised by those problems could pose grave threats to the financial future of all ski area operators, the weak as well as the strong. I would like to thank you for letting me appear, Senator, and I would raise one other question. In the bill it requires your hearing procedure, as the `bill is at `least drafted in `my ver~ion, requires PAGENO="0162" 158 that you also go through this procedure for a decrease in rates. I didn't quite understand that. It says decreases as well as increases. That was just a conclusion. Senator HA5KELL. Let me ask you a completely irrelevant question that hasn't come up in these hearings, that has absolutely nothing to do with Aspen, but as a former legislator I would be interested in your opinion. Prices all across the Nation in the last ~0 years, 10 years, whatever you want to say, have gone up. A great many people are priced out of the ski market, and not through any fault necessarily of the ski company. It is happenstance and I think it is a terrible shame that young people with kids that are just learning to ski can't afford to take those kids skiing the way I could my kids. Should, as a matter of public policy, we urge the Forest Service to issue permits to an organization that will design low-cost skiing? It won't be as magnificent as the facilities you have on this mountain. They may be the old T-bar, just so a broader spectrum of the people of Colorado can learn and enjoy skiing. I mean this is not in this bill now. It hasn't come up in this hearing, but it has been something that has been bothering me. Now, as a former member of the Colorado State Legislature, if you have a reaction to that, I would appreciate it. If you do not, I would appreciate it if you would write me a letter. Mr. SmANG. What I would suggest to you, Senator, briefly, is that we already have in Colorado one publicly owned ski area and there is one in New Hampshire. The one in Colorado is the one that belongs to the city and county of Denver, namely Winter Park. I started there in 1939 and 1940 and it was cheap. I think what you propose very definitely makes a lot of sense, but only where you have a very large metropolitan population. Senator HASKELL. Oh, absolutely. Mr. STRANG. And it might tend to have an effect on this problem here, which is really the rates of local people who have been denied by the Forest Service a right to have a preferential rate. Senator HASKELL. Thank you. I appreciate it. The next witness is John Carison. STATEMENT OP JOHN CARLSON, ATTORNEY, REPRESENTING ASPEN SKIING CORP. Mr. CARLSON. My name is John Carison. I am an attorney for the firm of Holland and Hart, and we represent the Aspen Skiing Corp. Before I launch into my prepared remarks, I would like to share an observation with you, Senator, and that si what I perceive you to be grappling with is the great issue that the country as a whole faces, how shall the public lands be used? Are they to be used on a national basis? Are there to be given special considerations to local interests? What are the economic rates and bases that are to apply in determining who uses the land? This rate case here~ and the furor in Aspen is but a reflection of that great sort of national drama, if you will. I am sure that there are many people in the Senate of the United States from the Eastern States that do PAGENO="0163" 159 not have public lands that would be furious with the concept of Colorado interest being preferred. They think we have enough preference perhaps by the* fact that we live midst this great beauty, and I attended hearings in Washington where the bases of Colorado's economic reliance oii public lands has been attacked left and right, and I am sure you are aware of this. Second, I would like to address a small remark to the problem you addressed earlier, how can the great bulk of the Colorado Qitizenry maintain skiing proficiency? I think we all want that. I don't think that the lift ticket, though, is the problem that affects the mass of the citizens. I suggest you will not only have to provide a fairly low cost rate, but you will have to provide skis: You will have to provide public transport. You will have to provide all the equipment and gear that are associated with skiing today. Senator }IASKELL. I don't know if I would go that far with you, Mr. Carlson. You know kids do hand down skis and ski boots, like everything else, and when I was talking to Mr. Strang it was an idea that I have had in the back of my head if we somewhere in all this vast National Forest had, not gondolas, not chair lifts, but cheaper facilities, and Mr. Strang is right, it has got to be close to a centerof population, maybe more folks could enjoy the sport. Mr. CARLSON. Well, I am with you. I suggest there are a lot of other costs in going skiing, and as a father of children that seem to go through boots with too much rapidity, I find those costs to be the ones that terrify me these days. Senator HASKELL. I see. Mr. CARLSON. Senator, you also posed as a principal problem in this bill the nature of regulation of permittees' rates, and the tack that you are adopting is that of classically a public utility. The testimony that's been given here today I think should cause you to back off and reexamine that whole concept, the underlying concept of the bill, if you will,, and what I have in mind is the fact that Aspen competes on the national market for the bulk of its ski areas. It draws people from~ Dallas. It draws people from Chicago, from the West Coast. Those people pick and choose over the Nation as a whole as to where to ski, and when one bears that bulk of the skiing public that uses Aspen Mountain in mind, one can recognize that this is not a monopoly. This is an industry that is subject to intense competitoin. It is an industry that is not particularly healthy either. In January 1972, United Bank of Denver found that the average pre-tax return on investment for ski area operators was 10 percent, or less than that obtained by your classic public utilities. The March 1972, Monthly Review of the Federal Reserve bank of Kansas City reported that 44 percent of the ski areas surveys lost money. A study entitled "Winter Sports Ski Review" published by the Forest Service in 1971, stated that 62 percent of the ski areas reviewed were unprofitable. I think these facts demonstrate that there are not exorbitant profits made in the ski industry and there is not sluggish competition. . ,, . . . . Aspen, in competing for destination-type tourists,' is subject to this.. national competition. It is subject to~ competition from resorts' PAGENO="0164" 160 that do not bear the liability or expense, if you wifl, of operating on the public lands. Senator HASKELL. You know-excuse me. Mr. CARLSON. The principal resorts- Senator HASKELL. Excuse me, let me give you one thought. Your time isn't running because I am talking. You are right, Aspen competes with Vail and probably competes with Switzerland, and in that sense there is competition, but for people that live in Aspen However, in the economic surveys that were made by the reserve it is a monopoly, you know. This isn't lust Aspen, goodness knows. We happen to be sitting in Aspen. It would be true in other destination ski areas as well. This is something you have to take into consideration. Mr. CARL50N. I acknowledge you have to take it into consideration. You have to also take into consideration what comes first, the chicken or the egg. Would there have been a community here, but for the ski development, and there is a point. Senator HASKELL. Now, go back one step further. Would there be a community here had it not been for the miners? Mr. CARLSON. Well, they didn't sustain themselves, as you know. Senator HASKELL. No, in 1946 it was a pretty small community, that's right. Excuse me, I did not mean to interrupt you. Mr. CARLSON. But I am advancing today what I fear or perceive to be an old-fashioned attitude; namely, that the public welfare is best served by these market mechanisms that I have described, and I would urge the Senate subcommittee to take those considerations into account. Mr. Brown mentioned earlier some of the considerations that have been applied in the past in establishing rates and imposing costs to permittees. I recommend a return to those tactics on the part of the United States of America, our principal landlord here in the West. The United States holds the national forest in some~ thing of a dual capacity. it functions as a proprietor of landed estates of just enormous value. In this role it seeks income consonant with proper environmental considerations. The United States is also the government, and as sovereign it is obligated to protect and advance the public welfare. Now, if it is the public welfare of the Aspen community to offer a quality operations here, then the bill must encompass the kinds of rates of return that allow a quality operation to be maintained, and I am fearful that if you adopt the classic standard rate of return there is no place for maintenance of a quality operation. Another factor that should be borne in mind in determining the U.S. role in these proceedings, rate proceedings, is what is it about the U.S. holdings that entitle it to a rate of return? Well, the United States holds the land on which the snow falls. It has a monopoly, if you will, in the West on suitable lands for ski areas,, and it is this monopoly that entitles it to a profit and a return for its own lands. However, in the economic surveys that were made by the reserve bank in Kansas City, it was determined that the actual snow conditions and the geologic and weather conditions that obtained in various western ski resorts were not so significant in establishing PAGENO="0165" 161 profitability in a particular area. The profitability and the quality of `the area depended on the managerial service, and I fear as a citizen that when you move to the completely regulated kind of public utility that Mr. Spinozza of former fame was speaking of, you suffer a loss in quality and you suffer increased costs that are ultimately borne by the taxpayer and by the persons who participate in the rate hearings. Mr. Brown mentioned one other thing that I would like to call your attention to, and that is the position of the Forest Service in this very community. The United States owns the title to approxi- mately 90 percent of the land of Aspen Mountain. The Ski Corp. owns in fee simple the remainder of those lands. The Ski Corp. has attempted numerous times to trade other lands sought *by the Forest Service has been extremely reluctant to even entertain serious negotiations. They do not wish to let loose of what is in their hands a monopoly. By the ownership of their small amount of land they control an entire industry here in Aspen. This is the tail cwagging the dog. Well, I have two very small other points about the bill in ques- tion that I would like to share with you. Sections 3(a) and 3(b) allow issuance of recreation permits, embracing the larger acreage only after consideration of the permit applications by Congress. Obviously, I agree that large acreage permits need to be confirmed in cases and should be authorized. However, the procedure called for by the bill represents in my mind an aberration from normal patterns of statutory legislation. The legislature should delegate to an administrator the laws, the enforcement,, and execution of laws, that it wishes to pass. Sections 3(a) and 3(b) in effect reserve to Congress those administrative duties and thus combine' the legislative and executive functions in one branch, and I think that's an unwise and unhistoric compounding of the separation of powers. Additionally, it will make each question a large question. The loser or winer will not have the recourse to judicial review and will not have the benefits of a firm standard by which they can measure their actions and by which they can plan their destiny. Second, I would call your attention to section 3(d) of the bill, which says that in the event of a permanent termination without cause, the United States must pay the permittee an equitable con- sideration for his improvements. As a lawyer with long experience, not long, in years but intense experience in recent times, I should say, in dealing with governmental actions affecting citizens' property rights, I feel very strongly that the best standard is that contained in the U.S. Constitution. When we talk about cancellation of per- mits without cause, I suggest that payment be what the Constitution calls for, just compensation. Thank you, Senator. Senator HASKELL. Thank you. Mr. CARLSON. And I wish you well in your efforts to solve the public l,ands question. That's a dilly. Senator HASKELL. All right, I have one other question. If anybody in the audience belongs to Mountain Rescue, would you `please go to the lobby. Mr. Carlson- Mr. CARLSON. Yes, sir. PAGENO="0166" 162 SenatOr HASKELL. You obviously don't care for the rate of return standard. Do you prefer the standard employed by Tom Evans of the Forest Service, who refused the Ski Corp.'s interim rate hike and also lowered the proposed rate hike for this season? Which do you prefer? Mr. CARLSON. Am I limited to those two choices? Senator HASKELL. Well- Mr. CARLSON. I do not mean to be coy with you, I'm sorry, Senator. What I am saying- Senator HASKELL. I would like to know which one you prefer. You may not like either. Which one do you find less obnoxious? Mr. CARLSON. If you are going to adopt a standard utility-type operation, then it must be a reasonable standard of return. I per- ceive all the problems that have been mentioned here today. Senator HASKELL. But really, Mr. Carison, do you prefer Mr. Evans' standards that he employed in refusing the Aspen Skiing Corp.'s requested rate increase as opposed to a rate of return stand- ard? Mr. CARLSON. No, I thought I was saying that if you become a completely regulated utility, then you must have a reasonable rate of return. What I am asking you to do is to consider whether the public will of this country is served by making this the classic regulated utility. The airlines have faced this problem. Senator HASKELL. Mr. Carlson, you still haven't answered my question, and that is, there is the status quo which is embodied in i\fr. Evans' standards that he employed to refuse your client an in- terim rate. Now, he employed some standards. Do you find them pref- erable to the standards that we have been discussing? Mr. CARLSON. I would think-I thought I was answering the ques- tion. If we are moving down the road that you described and the choices are between the standard and the one that you are proposing, I prefer your standard because it includes a reasonable rate of return. lTVhat I have tried to do today- Senator HASKELL. You don't like either? Mr. CARLSON [continuing]. Is to ask you to reconsider what the general thrust should be. Now, I don't-I think it woudl be easy to throw a lot of bricks at the Forest Service. Senator HASKELL. Now, we have had plenty of bricks thrown at the Forest Service, but I gather then that what you are saying is at least you would prefer the rate of return standard over the stand- ards employed by Mr. Tom Evans, but really you don't like either of them. Is that basically it? Mr. CARLSON. That's true, Senator, and I think maybe I have failed to make it clear. I think you are trying to deal with what is a gap in the law right now. The Forest Service does not really have satisfactory vehicle to operate under and I have made that point and I agree with you. What I am questioning is if we are moving in the right direction with your bill. Senator HASKELL. Thank you very much, sir. I appreciate it. Mr. CARLSON. Thank you, sir. Senator HASKELL. Mr. James Moran of Aspen. Is Mr. Moran here? PAGENO="0167" 163 ~STATEMENT OP JAMES T. MORAN, ATTORNEY, REPRESENTING ASPEN SKIING CORPORATION Mr. MORAN. Good afternoon, Senator, my name is James T. Moran. I am a member of the law firm of Holland & Hart and we are Den- -ver counsel to Aspen Skiing Corp. I would like to address myself briefly this afternoon to the issue ~of the single permittee policy as it applies to ski school operations. While this is not specifically treated in your bill, it does come in I suppose when one considers 3(f) and 3(g). In 3(f) the Secretary is `authorized to issue permits within the ski area for uses not incon- sistent with the existing permit. That, of course, has been done a number of times in this area. 3(g) says that the Secretary shall not issue more than one permit pursuant to this act for identical outdoor * commercial recreation activities or facilities within an area of less than. 5,080 acres unless each such permit irrespective of acreage is `issued under the provisions and procedures set forth in 3(a) (2) (b) `or (c), which is the Joint Congressional Committee procedure. The problem comes to focus because of the earlier testimony from Don Lemos and the independent ski instructors. Now, instruction in skiing is an integral part of ski area operation in all but the smallest areas. There is public demand for it. Special use permits typically authorize the permittee to provide it and area operators generally `have invested substantial sums in staffing, training, and outfitting `a ski school of sufficient size to meet the demands of the public. kt Aspen, for example, a class of private instruction is available at all levels' from the very first-time beginner to advanced racing tech- niques. Revenue from ski school operations is included in the base on which permit fees are computed and paid to the Forest Service. There are a small number of ski instructors who insist that they have' the right to teach schooling for hire at a permittee area inde- pendently of the established permittee's ski school. Historically, there `are various reasons for this position. One of the obvious ones is that `an aggressive independent can make more money if he uses the estab- lished area facilities, the lifts, the trails, the availability of ski patrol protection, the grooming, the restaurants, for his private business purposes without payment to the area operator or the Forest `Service. Now, this was the issue that was litigated in Heath v. Aspen AS'lciing Corp., and I would commend that case to you for an eluci- dation of what problems can be created. Another reason for the inde~ `pendent ski instructor is probably the desire to avoid regular sched- ules' in the real or imagined tedium of teaching beginners. A third `could be the fact that certain instructors by their past conduct or misconduct have rendered themselves unemployable by the existing `ski schools. ` * The problems created by the conduct and `demands of relatively few independents have been previously discussed at some length in `correspondence between Senator Hart and myself, and in order to conserve time at these hearings, I would ask, * Senator, that there ~be here inserted in the record copies of the letter to Chief Forester John McGuire of March 25, 1875, which was signed by Senator Hart `and yourself and Representative Schroeder, as well as the letter PAGENO="0168" 164 dated May 16, 1975, addressed to Senator Hart and signed by me~ and copies of those letters to Senator Hart and signed by me, and copies of those letters are attached to the written testimony which I have submitted. Senator HA5KELL. It will be included. Mr. MOEAN. You have previously received them. The position of the. Aspen Skiing Corp. has been and continues to be that meeting the public demand for ski instruction requires the permittee to main- tarn a sizeable, highly trained and loyal staff of instructors. By in- vesting substantial capital in lifts and other area facilities, the per- mittee creates an ideal and safe vehicle for teaching of skiing. `We believe that the so-called independent simply seeks to capitalize on th permittee's investment without similar capital risk on their part, and that the permittee is entitled to protection against such profiteer- ~ng both in the permittee's own self-interest and in he public interest. As Judge Winner pointed out in his opinion in the Heath case: It is clearly in the public interest to have well developed, financially sound ski areas, and unless investors who are willing to abide by Forest Service regulations are given some protection against fly-by-nights who have no per- mit, such investors cannot be expected to risk their capital in the development of a new and unproven area. The suggestion now is that there should be multiple permits cre- ated with specific reference to ski instruction. At least, that is the suggestion of the independents. This is a more rational approach than they had 4 or 5 years ago, and I think the Heath case was an educational process for them, but we believe that the creation of multiple instructor permits at a single permittee area would indeed play havoc with the financial planning of permit holders, would ~eopardize existing and planned investment and result in substand- ard services to the public, and, Senator, I call your attention to your own remarks in the Congressional Record that it is this type of these disadventages that you are trying to alleviate by 5. 2125. `W'e believe that the present policy of entrusting ski instruction to the area permittee best serves the public, while at the same time minimizing administrative burden on the Forest Service. If inade- quacies develop, the single permittee is answerable to the Govern- ment. Commercial ski instruction at developed ski areas should not be permitted execpt under the auspices of or with authorization from the ski area operator who bears the capital risk, the area operating cOsts and the potential liability for accidental injuries. Senator, that concludes my prepared remarks. I thank you for this opportunity. You indicated to Mr. Brown that you might want to pursue this particular problem a little bit, and I would be happy to try to. Senator HASKELL. No, I think you have articulated your viewpoint on this very nicely and I appreciate it, Mr. Moran. Thank you very much. Mr. MORAN. Thank you very much, Senator. [The letters referred to by Mr. Moran follow:] PAGENO="0169" 165 U.S. SENATE, Washington, D.C., March 25, 1975. Mr..J0HN R. MCGUIRE, Chief Forester, U.S. Forest Service, Washington, D.C. Re: Use permits for independent ski instructors. Dear Ma. MCGUIRE: The question of the Forest Service's refusal to issue use permits to qualified independent ski instructors has been called to our attention. We are aware of your previous position as expresed in your letter to Congressman Wayne Aspinall, but the problem has become even more exacerbated by recent incidents in Colorado. The situation is such that a review and revision of your regulations and policies concerning exclusively of winter sports area permits appears to be appropriate. Recent events involving the Aspen Skiing Corporation and an erstwhile independent instructor are a cause of great concern. This instructor, Don Lemos, was recently "arrested on National Forest land by a Corporation security officer for "trespassing," but the prosecuting attorney refused to file charges. Mr. Lernos was ostensibly arrested for conducting an independent skiing leson, although this was never proven. As you may know, the contro- versy between Mr. Lemos and the Corporation is of long standing, but the underlying question is not isolated to this single dispute. Confrontations of this sort have recently occurred in other Colorado ski areas and the problem is a recurring one. At least one area, Vail, has recognized the need for change and now agrees to allow qualified independent instructors to operate in the Vail ski area in return for a percentage of their fee. Forest Service policy, as we understand it, is to refuse permits to indi- vidual instructors for use at ski areas under permit to another party, without that party's consent. This can, as illustrated by the Aspen situation, lead to abuses of corporate power against overmatched individual citizens. For ex- ample, not only has Mr. Lemos been arrested under questionable circumstances and precluded from independent instruction: both he and his wife, who are highly qualified instructors, have been refuse demployment by the Aspen Skiing Corporation as regular ski school instructors. The effect of the monopoly conferred on the Corporation has been to deprive these people, and others, of the opportunity to pursue their profession. Such "company town" conditions not only affect the individual instructor involved: the public's right to choose between competing instructors and/or techniques is also impaired. The policy of exclusivity is at odds with the statoutory mandate that the general pulilic be allowed full and free enjoy- ment of national forest lands. Furthermore, I can see no compelling justification for conferring monopoly power over ski instruction on permittees such as the Aspen Ski Corporation or Vail Associates, as they are financially sound operations whose economic interests could not posibly be seriously jeopardized by a relatively small number of independent instructors. Consideration should therefore be given to revising the practice of granting only exclusive permits. This can be acomplished by either requiring all finan- cially sound areas to make provisions for independents, such as those granted at Vail, or by promulgating regulations revising section 2721 of the Forest Service Manual to allow individual use permits for qualified instructors oper- ating in financially sound areas. Appropriate provision should be made to insure that such instructors meet minimum standards of qualifications,, have liability insurance, keep adequate records, and if apropriate, compensate ski areas for the use of facilities by both instructor and pupil. The need for a review of past policy is both apparent and imediate. Please advise us concerning your views on this matter. Sincerely, GARY HART, U.S. Senate, * FLOYD HASKELL, U.S. Senate, PATRICIA SCHROEDER, Member of Congress. PAGENO="0170" 166 HOLLAND & HAnT, ATTORNEYS AT LAW, Aspen, Cob., May 16, 1975. Mr. GARY HART, U.S. Senate, Washington, D.C. Re: Use permits for independent ski instructors. Dear SENATOR HART: As general counsel to Aspen Skiing Corporation (ASO) we are writing in response to your leter of March 25, 1975 addressed to Chief Forester, John R. McGuire. Since Senator Haskell and Representative Schroeder joined as signatories to your letter we are sending copies of this. letter to each of them. You have referred to the long standing controversy between Don Lemos. and ASC as an example of the corporate abuse of individual citizens which results from the current Forest Service policy of refusing to issue special use permits to individual instructors. You then conclude that the single per- mittee policy impairs the right of the public to engage ski instructors of its. own choosing and contravenes the statutory mandate that the general public be allowed full and free enjoyment of national forest lands. Against this backdrop you urge the Forest Service to consider policy re- visions which would either require ski area permittees to make provisions to. accommodate independent instructors or would provide for the issuance of' special use permits to "qualified" individual instructors. You state that the need for review of past policy is both apparent and immediate. I can appreciate your concern that governmental policy not become a vehicle for abuses of corporate power or for denial of the public's full and free en- joyment of national forest lands. I fear, however, that you have accepted. Don Lemos' "Robin Hood" theory of the independent instructor without fully considering how the skiing public's interest is best served and, certainly,. without full knowledge of the facts surrounding Don's particular situation. The question of whether current Forest Service policy on ski instruction. is at odds with the public interest has been examined twice by the federal courts. In Heath vs. Aspen Ski'ing Corporation, 325 F. Supp. 223 (D. Cob. 1971), the Court expressly found and concluded that the "regulations and, policy of the Forest Service applicable to ski schools are reasonable, author- ized, lawful and in the public interest". In Sabin v. Butz, - F. 2d - (10th Cir., No. 74-1060, April 9, 1975) the Court concluded that the relevant pro- visions of the Forest Service Manual and the single permittee policy are within the scope of power granted by Congress to the Secretary of Agricul- ture. `The Sabim case has been remanded to the District Court for a determi-. nation as to whether the agency gave fair consideration to the possible monopoly and anti-competitive aspects of the single permittee policy. If the~ District Court concludes that the Forest Service failed to consider all rele- vant factors the case will be further remanded' to the Secretary of Agricul-. ture for reconsideration. My point is simply that the two District Court judges who have weighed'. the current policy on the scales of public interest have both concluded the public interest is better served by present policy than by the proposals ad- vanced on behalf of Mr. Lemos. The posture of the Sabin case will require yet another examination of the public interest factor in terms of monopoly and anti-competitive aspects. Having been involved with this problem for several years I can assure you that, the Forest Service policy is not premised on a desire to confer economic favors on the ski area permittees. It is based on long and careful consideration of how to best serve the overiding interest of the public in the full and free enjoyment of national forest lands. Your apparent assumption to the contrary seems unwaranted in view of the fact that the federal courts have so far" concurred with the Forest Service. The close scrutiny of such problems which. is afforded by the judicial process is certainly entitled to greater weight than the mere protestations of public interest which are continually advanced by' Mr. Lemos' primarily `because they appear to coincide with his own individual interest. May I respectfully suggest that you will obtain a clearer under-. standing of the specific elements that entered into the public interest determi-~- nation by carefully rereading Judge Winner's opinion in the Heath case. PAGENO="0171" 167 You point out in your leter that there are "a relatively small number of independent instructors". I take it that you have not been furnished with any evidence that a substantial segment of the general public is protesting about the unavailability of instruction from these few independents. Certainly we have never been furnished with any such evidence. By way of contrast, let me inform you that the Aspen Ski School, with a staff ranging from 200-25G instructors, annualy provides the following services to the general public: 1. 336,000 hours of class instruction; 2. 16,000 hours of private lesson instruction;* 3. Free ski classes for local young~ters under thirteen years of age; 4. Coaching assistance for Aspen Ski Club junior racing programs; 5. Free instruction and guidance for blind and other physically handicapped skiers; 6. Continuous training to maintain a high level of technical competence among its instructors; and 7. Expertise and manpower for the conduct of one or two premier amateur ski races such as the Roch Cup and the World Series. To so serve the public demand for ski instruction and related services requires an organized and efficient staff of ski instructors who are willing to be avail- able at regularly scheduled times, who are willing to give class instruction or private instruction, who are willing to instruct first timers as well as ad- vanced skiers, and who are willing to give additional time and effort to special events such as packing and maintaining courses for amateur and junior race events. On the other hand the so-called independent instructor uniformly proposes preferential arangements which benefit him at the expense of his professional colleagues and serve only those few members of the general public whose desires for preferential treatment coincide with his own. To illustrate let me summarize the requests which have consistently appeared in the proposals advanced by Mr. Lemos over the past few years: (1) No fixed~ daytime sched- ule; (2) Private lessons only; (3) Privilege of "cuting" lift lines; and (4) Treatment on a par with the top instructors who are within the organized ski school. In short the independent instructor seeks more privileges than are accorded to any ski-school instructor without undertaking any of the later's obligations. Which instructor better serves the general public? I anticipate that you may ask: Cannot the independent be accommodated without disrupting the organized ski school? In theory at least that seems a possibility which would allow the ski school to continue to serve the public at large and the independent to serve his own restricted clientele. The answer is that the theory has been disproved in actual practice. You may know that for some years past the independent instructor was tolerated and was then euphemistically referred to as an "underground" `ski instructor. The peaceful coexistence (another euphemism) might have continued indefinitely but for the fact that some of the underground instructors, Heath and Lemos foremost among them, began to publicize their own activities by indulging in some attention provoking conduct on the slopes and by promoting dissention among the instructor employees. Their gospel was that the independent gets to keep the entire fee paid by the pupil and thereby makes considerably more money than the poor ski school instructor. This caused a great deal of understand- able concern among ski school personnel, viz "If Heath and Lemos can get away with it, why shouldn't we all do it?" The problems of maintaining an organized ski school to meet the overall public need in the face of that situation should be apparent to you. The policing of the notorious independents was a direct result of their own agitations among the regular instructors. Nevertheles, ASC has not closed its corporate mind to the problem. Earlier this year in evaluating Mr. Lemos' most recent proposals I requested Curt Chase, director of the Aspen Ski School, to once again consider the matter. Here is what he wrote to me: "The feasibility of providing some ski school services through special arrangement with independent operators has been evaluated in the past and is constantly being evaluated on a current basis. It `has been and continues to be our feeling that this procedure would not improve our service to the public, that it would create unacceptable problems of accounting and control, create a preferential treatment for selected in- PAGENO="0172" 168 str˝ctors and be disruptive to the morale and efficiency of our instructor staff." The single permittee policy has resulted in "the greatest good for the greatest number". The proven capacity of the organized ski school to meet the need of the public for competent, efficient, organized and safe ski instruc- tion should not be subverted to Mr. Lemos' thesis that the public interest requires his services above all else. Nowhere has the real essence of the public interest question in this matter been captured in one sentence than by Circuit Judge McWilliams, who wrote: "It is abundantly clear to me that the Forest Service was of the view, which I believe to be a rational one, that, all things considered, a single permittee policy, as opposed to a multiple permittee policy, was more advantageous for all concerned, except possibly these plaintiffs, and others similarly situated, who in reality simply seek to benefit from the work of others" (Separate opinion, concurring in part and dissent- ing in part in Babin~ v. Butz, $upra.) Turning now to the specific facts surrounding Mr. Lernos' personal situation, I don't believe that you have been furnished with an adequate or complete summary. This is not a case in which the corporate bully has abused the overmatched individual citizen as you have apparently assumed. I cannot, in this letter, detail the entire history of the Lemos-ASC controversy but I can summarize some of the pertinent facets that you may not be aware of. To began with Mr. Lemos was given employment as a contract ski instructor with the Aspen Ski School during the 1963-64 season. As the season prog- ressed, the school became concerned over a rash of pupil accidents occurring in Mr. Lemos' clases, including two broken legs in a one week period. Obser- vation by qualified supervisors established that he was pushing or over- skiing his pupils relative to their ability and was exercising poor judgment in the selection of terrain. He was apprised of this and, although he dis- puted the supervisory opinions, did begin to slow his closes down somewhat. He was counseled about his responsibility for the safety and welfare of his pupils. On the evening before the 1964 Roch Cup he announced that he was going to take the following day off to watch the competition. He was re- minded that his class was returning for continued instruction and was told that he was expected to be available to teach them. Both literally and in effect he told the ski school to "shove it" and did not report for work the following day. Accordingly, he was terminated as an employee. He then moved on to Aspen Highlands where he was engaged under some sort of special arangements made with Fred Iselin who, at that time, was Aspen Highland's Ski School Director. The exact details of the arrangement were not known to the four Highlands supervisors who are now the' directors of that ski school. Apparently the agreement was similar in certain respects to Mr. Lemos' current proposals fOr independent instructors. By the following year Fred Iselin had left Aspen Highlands and his successors did not re- employ Mr. Lemos. There then followed several years of more or less open underground teach- ing by Mr. Lemos~ In the fall of 1969, Mr. Lemos approached ASC with a request to resume teaching under the auspices of the Aspen Ski School. He was offered employ- ment on the same basis as all other instructors in the school. Mr. Lemos in- sisted that he had to have special privileges and concessions that were not extended to the other instructors. Management was unable to accede to such requests and Mr. Lemos chose not to accept an offer of employment on the same terms as were offered to all others. During the 1970-71 season, Mr. Lemos for a short while taught at Aspen I-Iighlands under fee-split arangements which he and Mr. Heath had sep- arately negotiated with the Highlands management. These arrangements, which are described in the Hcatlb decision, were terminated prior to the end of the season because of conflicts with the regular ski school. The arrange- ments with Jack Heath were terminated at about the same time and he promptly commenced suit against Aspen Highlands, Aspen Skiing Corporation and the principal officers of each. Heath `v. Aspen ~Skiing Corporation, supra. At the beginning of the 1971-72 season, Mr. Lemos again approached, the Aspen Ski School, this time with a free-lance type of proposal in which he would teach only his own clientele, would arrange his own time schedule, PAGENO="0173" 169 and would not be available for class instruction or any of the other regular duties undertaken by the other instructors. This proposal was not accepted by the Aspen Ski School. The same basic proposal has been submitted and rejected several times since. In the interim there have been lift-line scuffles and various lawsuits of which you probably have some knowledge. Mr. Lemos has repeatedly turned down all offers of employment on a basis consistent with other instructors. He has requested special treatment that canot in good conscience be given to him without being given to the entire ski school. The preferences which he desires, if applied uniformly to all in- structors, would make it imposible for the Aspen Ski School or any other ski school to give adequate instruction to the public. With regard to Mrs. Lemos, you should know that about 3 years ago she was engaged as an apprentice instructor by the Aspen Ski School. She was assigned to teach at Cbristmastime and worked for two days. The next day, the busiest of the season, she failed to show up for work and was not seen again for the remainder of the season. This past course of conduct was a strong factor in ASC's decision not to employ her this season. As with any teacher in any school, the qualification to instruct is not solely determined by proficiency in the subject matter. An appreciation and willing- ness to undertake all of the responsibilities of the profession to the public and to the employer are also required. In these areas Mr. Lemos has fallen so short that it has completely outweighed any technical proficiency he might possess. The independent instructor experiment has failed not on account of permittee abuse of power nor on account of "company town" attitudes. It has been rejected because of the deleterious effect which such arrangements have had upon the ability of the organized ski school to effectively serve the public interest. Mr. Lemos has played a leading role in reinforcing the wisdom of the single permittee policy. I hope that, in the future when you decide to espouse the cause of the seemingly oppressed, you will spend more time collecting all of the facts in lieu of accepting the protestant's version as the whole truth. Contrary to the version suplied to you, Mr. Lemos was not arrested on National Forest land but on private land leased to ASC. We are also advised through recent inquiry that Vail does not have an independent instructor program as represented in your letter. Should you desire further information on any of the matters discussed in this letter or in your letter of March 25, we will be happy to provide it. Yours very truly JAMES T. MORAN. Senator HASKELL. I am going to go a little bit out of order from the witness list. Apparently the mountain rescue unit does have an emer- gency and Mr. Stapleton is part of that unit and he has made a request to appear at this time, so if there is no objection I would ask Mr. Don Stapleton to come forward if he is still here. STATEMENT OP DON STAPLETON, PRESIDENT, ASPEN CHAMBER OP COMMERCE, ASPEN, COLO. Mr. STAPLETON. Thank you, Senator. My name is Don Stapleton. I was born and raised in Aspen, approximately 33 years ago, and I would like to acknowledge the Aspen Ski Corp.'s cooperation with and participation in the Aspen Chamber of Commerce in the following projects and events. First of all, what we call Winterskol Ski Day. The Aspen Ski Corp. allows the chamber of commerce to go to Snowmass and sell old Winterskol pins for $5. This enables the purchaser to ski all day long. Last year this money, which amounted to $1,200, was turned over to the Winterskol Fund. I might add at this time it takes about $6,000 to put on Winterskol. 67-512 0 - 76 - 12 PAGENO="0174" 170 The employee orientation seminar is something we have worked on for several yeas. In this seminar, the chamber tries to inform all the employees of Aspen about Aspen itself, how much snowfall we have, the typical questions that the employees might be asked by tourists. This employer, the Aspen Skiing Corp., was the primary contributor to an orientation film called, "We're the Hosts," which is available through the Aspen Skiing Corp., and we will use this this fall in our seminar towards all employees. June Days, the Aspen Skiing Corp. always promotes and funds the golf tournament. This year it conflicted with Aspen arts festival and we did not have it. The Aspen employee discount ticket, last year this ticket was spon- sored by over 40 businesses in and around Aspen and it offered spe- cial discounts to chamber members and their employees. This pro- vided a discount ski pass which cost $60 to purchase and an added daily use fee. The pass was set up for the purpose of improving em- ployer and employee relationships and to help relieve some of the burden that is placed on the employee that lives in this area because of our high cost of living. Last year we sold over 3,000 of these ski passes and it generated $13,000 for the Aspen Chamber of Commerce. This year, Senator, I believe we are the recipients of a $200 ski pass, $100 of it to be refunded at the end of the ski year. It would cost $8 a day to ski on Ajax, $5 to ski at Highlands and $3 to ski at Buttermilk and Snowmass. I believe that this pass for a business community is well accepted by the chamber and chamber members, and the Chamber of Commerce, as you know, is not set up to set guidelines for the control of prices, et cetera. For the business com- munity, for those that ski Buttermilk and Snowmass, it is a fine pass. Thank you, Senator. Senator HASKELL. Thank you very much. I am sure you under- stand that nothing in this bill would prevent the corporation from continuing those worthwhile services. Thank you. Is Mr. Moran still in the audience? SPECTATOR. He is in the lobby. Senator HASKELL. Mr. Moran, I would just like to get one ques- tion on the record. I can ask you from here. I am told, but I have never skied in Europe so I don't know, I'm told that in Europe it is com,rnon to have independent ski instructors. Am I right or wrong? Mr. MORAN. I don't know, Senator. Senator HASKELL. You don't know either? Well, we will have to ask somebody that does. All right, thanks a lot. Mr. DAVE FARNUM. Senator, could I answer that? Senator HASKELL. Yes. Mr. FARNUM. There are independents, but they are normally af- filiated with a ski school. Having been with Aspen Highlands Ski School for a number of years, we have ski instructors from Vail, Steamboat Springs, and they introduced themselves and we always gave them a pass. Senator HASKELL. Well, I will get exactly what happens in Eu- rope. What is your name so the reporter can have it? Mr. FARNUM. Dave Farnum. PAGENO="0175" 171 Senator HASKELL. Thank you, Sir. Our next witness is Wava Turner of Aspen. STATEMENT OP WAVA TURNER, COORDINATOR, SCHOOL PROGRAMS, ASPEN SKIING CORPORATION Mrs. TURNER. Thank you, Senator. Senator, I am Wava Turner. I came to Aspen in the fall of 1961 as an employee of the Aspen School District, and my first task here is to give a little bit of back- ground on the ski programs that we. have generated `along with Aspen Skiing Corp. and the Highlands at times, of course, for our students in our schools. When I came here I became involved in the Aspen School Ski program which was sponsored by the schools, Aspen Skiing Corp and Aspen Highlands Skiing corp. I have remained active in the skiing programs during the past 14 years and now coordinate the school programs for the Aspen Skiing Corp. This involves student ID's, student rates, et cetera. The Aspen Skiing Corp has given special discount rates to stu- dents and teachers during the years. Our students have had free instruction and lift privileges. At one time the instruction was furnished by Aspen School teachers who received a complimentary pass for their services. During the past 5 years, the instruction and lift have been taken care of through the Aspenaut program. This program provides free instruction by Aspen Skiing Corp.'s certi- fied instructors and lifts for all Aspen children ages 6 through 12 during Saturdays in January and February. The following is a summary of the last 5 years of student rates and teacher discount rates. In 1970-71, teachers skied for one-half price, either daily or season pass. Students through high school were permitted child rates, $4 daily. In 1971-72, the teachers skied for half price by purchasing a $20 use ticket or a three area season ticket. Students through high school were permitted child rates of $4 daily at Aspen Mountain and Snowmass and free skiing all at Buttermilk. Students also were given a special rate on a season ticket. In 1972-73 teachers were permitted to ski at student rates at Buttermilk and $4 at Aspen Mountain and Snowmass. Students through high school were permitted to ski for $2 at Buttermilk and $2 at Aspen Mountain and Snowmass. In 1973-74, teachers were given a four-area complimentary dis- count card which permitted them to ski for $5 per day. Students through high school skied Aspen Mountain for $5 and Buttermilk and Snowmass for $3 a day. Last year, teachers were eligible to purchase a $60 discount card which permitted them to ski for $5 a day. Students through high school were permitted to ski Aspen Mountain for $5 per day and Buttermilk and Snowmass for $3 per day. I feel the Aspen Skiing Corp. has tried to make skiing possible for our students and teachers. Perhaps this has at least in part been possible by subsidizing student-teacher programs from regular daily ticket sales and season PAGENO="0176" 172 passes. We have been fortunate in having some of the finest mainte- nance and help from the employees of Aspen Skiing Corp. in working with our youngsters out on the slopes. We also have had many of our students employed part time and full time. I feel that I have always had a congenial working relationship and good co- operation in the years that I have been in the school program. Hopefully, the Aspen Skiing Corp. can be considered a positive. part of our community and can function as a dynamic force in our area. Thank you. Senator HASKELL. Thank you, ma'am, very much indeed. The next witness is Betty Moore of Aspen. STATEMENT OP BETTY MOORE, ASPEN, COLO. Mrs. MOORE. Senator Haskell and few remaining long-suffering fellow skiers. My name is Betty Moore. I have lived in Aspen for nearly 20 years, having moved here with my husband and small children in 1956. We had discovered this place in 1952 while on our first ski~ vacation, after which we couldn't wait to abandon Long Island and move here, hoping but not at all assured that we could make a living in the precarious economy of this remote resort. Naturally, we were looking forward to the "good life," super skiing in the glorious mountains of Colorado, but unfortunately we could not afford to go sking all day and every day, even though it was pretty cheap and there was plenty of space on the mountain. We had to build our little lodge business, doing our best to entice customers through assiduous letter writing at the chamber of commerce and half-inch ads in "Skiing," magazine and sending out reams of postcards every time it snowed, and gradually these poli- cies succeeded in their aim of getting us off the poverty level. Our business prospered and so did the economy of the town, and I sup- pose the skiing corporation. But, right at the beginning, when a season pass cost $75, I liter- a1ly couldn't afford one, and then in 1961 as prices began their gradual upward erosion, there was a typical Aspen crisis precipi- tated by a sudden hike in children's lift rates from 75 cents to $2 a day. Local mothers banded together in outrage. Why, it was traditional that school kids got to ski free every Wednesday after- noon. How could the skiing corporation ruin their weekend fun? I too was indignant. With two children clamoring to ski on week- ends this was a cruel blow, but when the affair mounted into a street march to burn D.R.C. Brown in effigy, I began to wonder, who did we think we were? What had we done to deserve a subsidy for our skiing pleasures? Why not demand also a discount from the grocery store and drugstore and sport shop? Well, some time went by and each year our expenses mounted, but so did our income, and each year, whether it is $75, $175, or even $250, the price of the season pass still seems worth struggling for, a special privilege. It was fine to ski into the lift at any time of day for a few runs, flash that magic card and roll away up the mountain with no demeaning wait in a ticket line and no drab PAGENO="0177" 173 passing filthy lucre. With a glorious "in" feeling to be a resident of this blessed valley, to ski better and more often at less cost than all the poor souls who had not arrived yet. But "yet" is the key word to making my point. They hadn't arrived yet. If my story up to now has sounded somewhat trite, it is because there is nothing unique in our experience. We only had it sooner. Almost everybody who arrived at Aspen after we did felt exactly as we had, what a place to lead the good life, and as the sixties boomed on, more and more and more lucky people could afford to move here, too. Obviously, the effects have been exponen- tial. Real estate values, businesses of every sort and, of course, local population problems have multiplied and expanded beyond our ability to comprehend. Still the skiing corporation looms over us all, and their profit figure is one statistic we do seem able to grasp. Unfair. Exorbitant. How dare they get rich at our expense? We, the beautiful people of Aspen, rebel. OK, we are rebelling. We, and how many others? Actually, there were 1,125 $250 season pass holders last year, and to tell the dismal truth, for several years we privileged folk have been jostling fo: space on Aspen Mountain with some almost outnumbered, paying customers. Evidently, what has finally happened is that the powers- that-be have counted us up, measured the space available, and de- cided that the days of wine and roses are over. This is very sad. My own sense of personal loss is acute. Twenty years of the good life ends and this season I will have to queve up pay $11 a day along with all the other owners of the national forest. But, wait. This is a democracy. Why can't the Forest Service prevent this dismal ending? Why don't, we pass Senate bill 2125 and legislate ourselves healthy, wealthy, and wise? Our local government wants to help, too. Stop growth, they say, and keep up the quality of life in this valley. Maybe the govern- ment should buy up the sking corporation and let the bureaucrats run the areas? Well, if government is capable of such benevolence, why hasn't it held down the price of everything else? Food, housing, fuel, manufactured goods, even tennis and golf are now luxury past- times. What's so different about skiing? I'll tell you what. The skiing corporation has kept- [Bell rings.] Mrs. MOORE. May I finish, sir, 2 minutes? Senator HASKELL. No. I'm awfully sorry. We would have to ex- tend it for everybody. Mrs. Moom~. Is that kind, when you allowed everybody from the Roaring Fork Citizen's group to finish everything they chose? I could finish in 11/2 minutes, sir? Senator HASKELL. Go ahead. I did not let them speak `as long as they chose, but go ahead. Mrs. MOORE. Well, I will tell you what's so different about skiing and the cost of skiing is .the skiing corporation has kept it different to a degree. The cost of an Aspen ski ticket has not gone up nearly PAGENO="0178" 174 so much as the cost of everything else, and that's documented al- ready. What I have to point out in all honesty is in my 20 years in Aspen I haven't seen much else as well managed as the skiing corportion or as generous. That traditional Wednesday free ski afternoon of the 1,950 schol children has grown into the Aspenaut program of today, when at least 300 kids get to free ski all Satur- day with free coaching from the ski school instructors and the Aspen Ski Club receives $25,000 cash a year from the corporation to sub: sidize their racers, and all kids, not just local ones, get to ski Buttermilk or Snowmass for $3 a day. Now, if anybody knows where they can beat that, maybe they better go there. As a matter of. fact, if all the people who want something for nothing left Aspen, then many of our problems would disappear with them, and if all these people refused to vote their selfish interests foolishly, legislation like Senate bill 2125 would die in committee. Senator HASKELL. Thank you very much. Mrs. Mooim. Thank you. Senator HASKELL. Our next witness is Mr. Ray Kashinski. STATEMENT OF RAY KASHINSKI, ASPEN, COLO. Mr. KASHINSKI. Thank you, Senator Haskell. My name is Ray I have lived in Aspen for 14 years. I am married and have three small children, 5, 7, and 9, and it is the children that prompt me to come here. I am going to deviate somewhat from my prepared statement, because Wava Turner has gone over this. I would just like to express that my children have always enjoyed very favorable ski rates, as outlined by Wava, and I appreciate this and I would hope that any intervention in the price-setting policy would not jeopardize favorable rates that have been extended to the children. I have no problem with the adult rate, because I feel that adults are able to make the value judgment. As Mr. Brown brought out, I do not drive a Cadillac either. I also have a problem with my grocery bill, but I am able to make my value judgment myself. It is, however, difficult for me to explain to my children when I can't afford to send them skiing when the kids next door can. Fortunately, I do not have to make that value judgment. I would also like to say that it has become apparent that rising prices have become a major portion of this hearing. I do not think that was the original intent, but it seems to me that rising prices are in general caused by the inflationary spiral which is brought about by Government spending. I would hope that Senator Haskell would do everything he could to cut down a little bit on Govern- ment spending. [The prepared statement of Mr. Kashinski follows:] STATEMENT OF RAY KASHINSKI, ASPEN, COLO. Senator Haskell, let me take this opportunity to thank you for the oppor- tunity to testify concerning the ski industry and particularly the Aspen Skiing Corporation. My name is Ray Kashinski. My wife and I have been Aspen residents for 14 years. We have three children, aged 5, 7, and 9. My wife and PAGENO="0179" 175 the children are avid skiers as I used to be, but the requirements of earning a living leave little time for skiing. In any event it is my concern for the children that prompts my testimony before this subcommittee. The Aspen Skiing Corporation has, ever since my oldest child began skiing, offered skiing to children on a no cost basis or at very reasonable rates. Let me outline these rates. The Aspenaut program under which children from ages 6-12 are provided with a free ski ticket and free ski instruction on Saturdays from December- February. It is a fine learn to ski program as well as a recreational ski pro- gram as the children progress to the point where they require less instruction. One of my children is involved with the Aspen Ski Club racing program and is provided with free tickets on race days. With all the free skiing opportunities, I estimate that I only have to pay for about 1/2 of the days that my children ski and then it is at the very nominal rate of $3.00~ per day, which I might add, is down from $4.00 per day during the 70-71 ski season. The one exception to the inexpensive rates is Aspen Mountain where no children's ticket is offered except to Aspen school students who have a $1.00 school identification card. This financial deterent is in my opinion good as Aspen Mountain is no place for inexperienced skiers due to the excessively fast and reckless skiing which prevails there. This situation will probably improve in the future due to the fact that the Aspen Skiing Corporation has changed its season pass policy. In summary, let me say that I am concerned that intervention in the rate seting process might make the Aspen Skiing Corporation less disposed or less able to continue its favorable treatment of children under 12. At this point in time, I am not concerned with the adult lift rates as I believe them to be fair in relation to other recreational pursuits. Also, adults are better able to make value judgments concerning how they spend their money; childrn, however, are not and I feel that the Aspen Skiing Corpora- tion's pricing policy and free skiing has made all children in Aspen equal so far as being able to ski is concerned. Parents in Aspen do not have the diffi- cult job of telling their children that they can't go skiing for financial reasons because there are plenty of free opportunities or the reasonable $3.00 ticket. Senator ETASKELL. Our next witness is Mr. Sim Thomas of the Aspen Ski Club. STATEMENT OP SIM THOMAS, REPRESENTING THE ASPEN SKI CLUB, ASPEN, COLO. Mr. THOMAS. Senator Haskell, I seem to be joining a parade on this one issue, `and I would like to call to your attention perhaps right off the bat my last paragraph, which is possibly unfair, as clarified, but it might not be if you consider it in terms of omission, and it also concerns rates to some extent. I am manager and Alpine program director for Aspen's amateur ski competition programs. I am speaking as the official representa- tive of the Aspen Ski Club and the Aspen Skiers Educational Foundation at the request of the Aspen Skiing Corp. The Aspen Ski Club since 1937 and with the Aspen Ski Club Educational Foundation since 1963 has been providing our com- munity with Alpine and Nordic ski competition programs. Over 200 youngsters compete on every level from the local Aspen Cup circuit to the world Cup, World Championship, and Olympic Games. Most of Aspen's youngest skiers begin their participation in the sport in the Aspen Ski School Aspenaut program. Those interested in competition progress through the Aspenaut Cup circuit to the club's local Aspen Cup program and on to the regional, collegiate, PAGENO="0180" 176 national and international series. They are coached by the founda- tion's staff from the time they start in the Aspen Cup. Competitive skiing is an incredibly expensive sport, and through many individuals and businesses in the Aspen community con- tribute enormously to the development of our programs, these pro- grams quite simply could not exist without the support of Aspen's skiing corporations. I am including both. Aside from outright do- nation of between $16,000 and $25,000 by the Aspen Skiing Corp. for each of the last 4 years, the skiing corporations have made lifts available free or at discounted rates for training or racing for a cash value easily exceeding $250,000 for the last 4 years. This figure does not include the contribution of services of a part-time coach by the Aspen Ski School, the construction and maintenance of a racing trail for our use at Buttermilk Mountain, the preparation and periodic closing of other trails for top level competition, the services of specialists in skiing-related expertise, and I could con- tinue on for another 5 minutes. Much has been stated recently about the relative importance and value of organized amateur sports. I think there has been quite a lot of attention paid to that recently within the Congress and the Senate, and I think this is a personal aside that it might well be worthwhile spending a little more time on it. Quite obviously, we believe strongly in the educational possibilities and opportunities for direction and accomplishment available in sports. The Aspen community's competitive skiing programs provide each participant a chance to discover his or her individual level of excellence and the opportunity to choose what role athletics and physical fitness should play in his or her life. These programs are among the very finest in the country and their high quality is largely due to the strong support of the Aspen skiing corporations. No other sector of the community either seems willing or able to give such extensive support. Therefore, Senator, we urge you to consider the adverse effects and again I think this might be unfair in view of what you have explained before, in view of the bill not meeting this particular problem head-on, but again I think omission might indicate it might be good to have something involved in this. Senator HASKELL. I `appreciate- Mr. THoMAs. We might consider the effect a bill by omission, if I might put it that way, would have on athletic programs in the whole. Senator HASKELL. I appreciate your statement. I am a little puzzled by a little of the recent testimony. This is not a hearing on rates. It is not a hearing on the Aspen Skiing Corp. It is a hearing on whether the present system employed by the Forest Service to ad- minister ski facilities and services permits is satisfactory or is not. Mr. THOMAS. If I may, the only thing I could say is our ignor- ance of the possible ramifications of a possible bill dictate us to bring to your attention- Senator HASKELL. Right. PAGENO="0181" 177 Mr. THOMAS. [continuing], that we are very concerned about our ability to continue with such a program. I believe very strongly in its value. Senator ETASKELL. I understand. Thank you very much indeed. Our next witness is Ray Bates of Aspen. STATEMENT OP RAY BATES, ASPEN SKIING CORP., ASPEN, COLO. Mr. BATES. Senator, and the few hardy souls that are left: My name is Ray Bates. I am a resident of Aspen and employed by the Aspen Skiing Corp. as a lift operator in the winter and as a lift construction supervisor in the summer. I started to work for the corporation in December of 1947 and I left the company about 1955 to work elsewhere. In December of 1966, I returned to work for the company as a lift operator in the winter and on lift con- struction in the summer. The pay in 1947 was $1 an hour, and there was no such thing as overtime then. In 1966, the hourly wage scale was $2 per hour for the first-year employees, $2.25 for the second year, $2.45 for the third and fourth years, and $2.50 for the fifth year and over. I can't remember what the fringe benefits were, but they were minimal at best. Presently, the lowest hourly rate is $4.10 per hour and the corn- fringe benefits are substantial. All my Blue Cross, Blue Shield and major medical insucance is paid by the present company. In addi- tion, the company pays the complete cost of my disability and life insurance premiums. The annual cost of these items to the com- pany is $372. The company pays the complete cost of my pension plan and the annual cost of this to the company is, I believe, ap- proximately $939. The company's sick leave policy allows me to accrue up to 12 days of sick leave and this leave commences on the second day pf absence when I am sick. I am also entitled to 3 weeks of paid vacation, and after 10 consecutive years of seniority, I am entitled to a month's paid vacation and to an annual $500 bonus that is increased $50 a year after every additional year of seniority. Also, employee housing is provided for new employees who are unable to obtain housing elsewhere at extremely reasonable rates. I believe the company has approximately $400,000 tied up in em- ployee housing units. Presently, the lowest hourly rate is $4.10 per hour and th com- pany has a policy of increasing the pay scale on May 1 of each year commensurate to the increase in the Consumer Price Index. This year's wages were increased 12.2 percent. I feel it is necessary to point out these facts since the Aspen Skiing Corp. is coming under constant criticism. Aspen is an expen- sive place to live in and the Aspen Skiing Corp. makes every effort to pay its employees well. In my opinion, the Aspen Skiing Corp. is about the only business in town that pays its employees a living wage. Some of the people in this community expect the Aspen Skiing Corp. to subsidize them and their employees with various types PAGENO="0182" 178 of local discounts. For the most part, these people could care less what the tourist has to pay and their only concern is that they pres- sure the Aspen Skiing Corp. into offering give-away skiing to the local community. In large part this group is made up of transient people who have no stake in the community and have only their own selfish interest at heart. Thank you. Senator }IASKELL. Thank you. Our next wetness is Francis Whitaker. STATEMENT OF FRANCIS WHITAKER, ON BEHALF OF THE ASPEN SKIING~ CORP. Mr. WHITAKER. I would like to speak on behalf of the benefits offered by the Aspen Skiing Corp. to a number of groups in the community, and one that I don't believe that has been mentioned yet, and that's the senior citizen, youth, old age, those who devote much of their time to the community and the city council, county commissioners, hospital workers and so on. It has been my privilege to receive some of those benefits while 2 years as a city councilman and 3 years as a senior citizen. While these programs do not pay in the revenue received versus the bene- fits we get, it is my impression that they are mostly paid for by the one-day ticket purchaser, t'ae visitor skier. I would very much regret having the Aspen Skiing Corp. hay to drop these programs due to the present attempt to rollback the price of any type of lift ticket. If I may give a word of advice to those most critical of the Aspen Ski Corp. it would be, "If you want to run it, buy it." Thank you. Senator HASKELL. Thank you, sir. The next witness is Kenneth Moore of Aspen. STATEMENT OF KENNETH MOORE, ASPEN, COLO. Mr. Mooiu~. Thank you, Senator. I am going to depart from my prepared text a little bit because the distinguished Smoky Bear hasn't spoken this morning. I wear many hats. I should have my Smoky Bear hat on today. I am a member of the White River advisory council. This is un- official. I am not speaking for the councol and, of course, not speak- ing for the Forest Service, but I hate to see a bear made into an underdog. Let me take you through Aspen in terms of the bill through a bear's eyes. Now, when the bear looks at the bill and looks around Aspen and tries to put it together, he sees in here an assessment of the extent and nature of such development, skiing, its compatibility with other uses and the protection of the resources of such forest reserves and private lands as determined through Federal, State or local planning processes. Well, this bear has been looking around Aspen very hard for 2 years and has yet to find any planing. Now, we get into the accounting field. This bear can tell `you that the other night the city council met and only one citizen appeared PAGENO="0183" 179 at that city budget meeting, and that citizen's comments were not put in the paper. It is pretty hard for a Forest Service employee bureaucrat who has been trained in the great outdoors, who is really not brought up in any way, shape or form into top management, especially as it applies to Government administration, and then he ~says, "Why me? Why do I have to do all this sort of thing? Why do you have to go to the Federal Government and find out what they have spent, and the State government and the county govern- ment?" There are 22 taxing entities in Pitkin County. Never have I seen all of those budgets of those taxing entities in one place, and to my knowledge no one has ever tried to make sense or evaluate each one, and no one has ever put them in concert to find out what the overall impact would be. Putting 63 counties in the State, the bear looks down at Denver and says, "Boy, they must be in a mess down there. We don't know what we are doing and we are the most sophisticated county." Smoky Bear can't go out and straighten out the citizens and can't get the citizens to go to the city budget meeting, but in order to get the full extent and meaning of the bill it implies these struc- tures which have been mentioned and these processes such as audit- ing, economic and social and environmental exist. I would be very pleased if any number of the audience or the Senator's staff could present me with any such accounting. Now, when we get into the problems of Aspen, Dwight Sheilman mentioned a very good study. I attached a copy of it in my report. It is by John Gilmore and Mary Duff and it is on "Growth Manage- ment by Consensus in a Boom Community," and I will tell you my interpretation of it. It says given a lack of good data on this and many other aspects of Pitkin County, there is a real need for the staff and business community to cooperate in building a good data base. It goes on to say some of the problems have been aggra- vated, not by mismanagement but by nonmanagement. It would be interesting for you to realize in 1974 we had a growth in Pitkin County of what? Smoky Bear goes down to the court- house and says, "How are we?" They say, "We haven't got the figures again. Maybe by September." He goes down and asks the same question. They still don't have the indices of growth. They don't have any statistical matter and we are 9 months into 1975, so really Smoky Bear can't get everybody hot and interested about facts that just aren't there. Now, auditing in Aspen isn't a standard procedure. It is a double standard. We don't have the Ski Corp. and the Forest Service to do a lot of educating, and I am sure nobody has ever put together the Federal programs that work in this area over the past 12 years and their effect in concert, so to go to Smoky Bear and expect him to solve everybody's problems on all these levels is not quite realistic. It is interesting to note that on impact studies, the county has written to the State asking for powers to levy a local inconie tax and use taxes and real estate transfer taxes, and they want more States and revenue sharing and subsidies and greater and more PAGENO="0184" 180 flexibility in the laws. Even if we had the adverse effects known, you could politicize it and with an applause meter, if we had one in this room today or a vote, we could vote a policy that wasn't prudently sound financially, just like New York City did, so reason and reasonableness and structures really can't be elected. I mean it is common sense. They are all here. Local government has no plans to allow for more ski develop- ment in Pitkin County. There are no evidences of any growth of more ski areas. Yet they say they are going to grow at 3 percent a year. Well, if you look at the hospital service plan, you will find that the residential growth, because it is already zoned, will exceed the present ski capacities in 1980, and from then on increase like crazy until it is like 50,000 people in 1995 and the projected skiing is like 36,000 people, and the 36,000 people skiing in Aspen came from the airport master plan, which is a federally supported, environmentally impacted, approved, accepted local statement. What in the world are we going to do to the tourist industry when the resident population is clearly planned to continue to grow and outgrow the tourist and the ski facilities? So, the sking is only one part of it. We are a full-time community. We are an all-year-round community. In addition to controlling the largest and most productive land area, the Federal Government, although there is no complete accounting for the total amount of money spent and expected, it is clear that millions are involved. Like a shell man's hand out is a pretty good summary of that. The growth control policies of local government are using Federal resources in a way that has made the Aspen area an exclusionary rich man's resort and residential community. What are the social costs annually in subsidizing Aspen? I think the subcommittee- Senator HASKELL. Sorry, Mr. Moore. The time has expired, but you have a written statement and that will be included in the record. Mr. MOORE. Thank you, sir. [The prepared statement of Mr. Moore follows:] STATEMENT OF KENNETH MOORE, ASPEN, COLO. SUMMARY My comments on S. 2125 are specifically concerned with Section 3(b) and Section 6. Section 3(b) implies that there are "Federal, State or local planning processes" operating in the Aspen District of theWhite River National Forest. This is incorrect. There are no planning processes here. Section 6 assumes taht Recordkeeping and Audit are standard practices in comon use by private industry and government. This is incorect. There are very few audits available in the region around Aspen that would be useful to the purposes of 5. 2125. CONCLUSION The proposed Bill gives authority to the Secretary. He needs ability. It is beyond the capability of legislation to produce cooperation and reasonable practices on a national level. PAGENO="0185" 181 RECOMMENDATION Senator Haskell and the Subcommittee might consider providing the national leadership to work for and produce the planning and accounting presumed in S. 2125. METHODOLOGY The lack of planning and accounting processes in the Aspen winter resort is presented to give the Subcomittee prespective on the problems facing the Secretary of Agriculture in administering S. 2125. THE STATE OF THE ART The writer has spent the past twelve years as a political analyst and re- searcher in the Aspen area. The scale and nature of this resort provides a highly visible and concentrated view of the leisure industry in affluent America. The author has substantial evidence to support the following obser- vations. However, the Subcommittee can easily checkout the validity of the following statements by asking its staff to produce the information that I claim does not exist. The state of the art of multi government planning in Colroado is expressed very well by the title: The "Who's In Charge Here?" Puzzle-Environmental Planning and Management for Colorado's Second Century, League of Women Voters of Colorado. Public management is not organized in Colorado. The chief job of top management is to plan. Auditing is the tool used for evaluating management's. performance and progress towards its goals and objectives. This excellent job by the League details the problems faced in just trying to organize responsible public management. Filling the managers' positions is another story. So much for the State of Colorado. The Federal atempt to aid state land use planning has taken the form of the council of governments in Colorado. Aspen and Pitkin County are active members in the Northwest Colorado Council of Governments. This organization of five counties contains most of the prime winter recreational resources in the State. The NWCCOG is typical of the Federal `carrot and stick' approach to planning from the top down. Regional government becomes fascinated with grantsmanship. Regional planning becomes a mutual backscratching scramble for money and hardware. No planning or auditing is performed on any sophisti- cated level. The best way to dismiss regional planning from the discussion is to ask the Subcommitee's staff to come up with an inventory of all the Federal agencies, budgets and plans in Ski Country COG. Find the total dollars in- volved over the past 12 years. Evaluate the performance and progress of the individual programs, grants, etc. Judge the cumulative effect of public plans and spending with a cost-benefit accounting of the tangible and intangibles in the economic, social and environmental areas. The lack of plans and auditing in the State and region is reflected in Aspen and Pitkin County. There is no information on public plans and spending in the Aspen area. The Subcommittee might ask its staff to find a copy of the budget summarizes, revnues, expenditures and forecasts of the 22 taxing entities on Pitkin County. Who's in charge here? The situation in Aspen is well described by John Gilmore and Mary Duff in their Report: The Evolving Political Economy of Pitkin County: Growth Management by Consensus in a Boom Community, Denver Research Insti- tute, University of Denver. The authors of this excellent (and unused) analysis of Aspen's growth state the local lack of planning and auditing this way: "Given the lack of good data on this and many other aspects of Pitkin County's economy, there is a real need for county and city staff and the business community to cooperate in building a better data base." Commenting upon the quality of growth management, the Report states: "Some of the impacts of Pitkin County's growth have been aggravated, not by mismanagement but by nonmanagement." The same inadequate data and nonmanagement is the case today in Aspen. The "County's Indicies of Growth", a local statistical index published by the PAGENO="0186" 182 County in 1973 has not been repeated for 1974. We are in our ninth month and last year's performance has not been reported (or missed) by our public and private managers. Aspen shows no interest in a continuing facts, analysis, discussion method of measuring local progress and cost effectiveness. Fore- casting is something else. Auditing in Aspen is not a standard procedure, it is a double standard process. Calculating the impact of lift ticket prices is important emotionally and politically. However, no impact studies where requested (or thought about) when the City adopted a 7% sales tax. This tax was pased by the voters in the belief that the tourists should pay their share for the use of the resort. This 7% tax did not stop the tourists from coming to Aspen, in fact tourist volume and the sales tax has increased. This tax increased the visitors' daily costs by an estimated two dollars. The impact of a 10% proposed recreation tax in the County was not con- sidered significant by local or state government. This was the "lift tax" that would have added $1.00 to the tourists' lift ticket cost each day. It is also interesting to note that the County's request to the State for more taxing and borrowing power is not concerned with any economic impact. Other sources of revenue sought include locally levied income taxes, use taxes, real estate transfer taxes, more State and Federal revenue sharing and subsidies, and greater and more flexible borrowing powers. Adverse economic impacts are not considered in these matters of public costs. Even the knowledge of unsound financial policies could be ignored at the polls. The experience of New York City was that emotion and politics won out over prudent fiscal advice. The Federal government plays a big role in Pitkin County. The US Forest Service controls 80% of the land area. The prime alpine ski terroin is located in the White River National Forest. The ski development has taken approxi- mately 2,500 acres of the estimated 15,000 acres of quality ski slopes inven- toried by the US Forest Service. Optimum ski growth would use no more than 3% of the public domain. Local government has no plans to allow any more ski development. The residential growth in the Aspen area will exceed the present ski capacities by 1980. What will happen to the tourist industry as the "local population" continues to outgrow the ski facilities? In adition to controlling the largest and most productive land area, the Federal government also has a large stake in its grants programs in Pitkin County. Although there is no complete accounting for the total amount of monies spent and expected, it is clear that millions of dollars are involved. What is the Federal government getting as a return on its investment? The growth control policies of local government are using Federal resources in a way that has made the Aspen area an exclusionary, richman's resort and residential community. What are the social costs and benefits involved in subsidizing Aspen? The Subcommittee might ask their staff to come up with social and economic cost accounting that will answer these two questions. EPILOGUE I have seen the future of 5. 2125 and it does not work. That is because it legislates authority to solve problems that cannot be solved by the force of regulation. The Bill will exacerbate the national trend toward decision making based upon politicization. The larger problems of life cannot be solved by laws, votes or subsidies. There's good news and there's bad news for the Subcommittee. The good news is that they can act in the public interest and withdraw 5. 2125. The bad news is that it will take hard, productive work to create the leadership we need to set the example for quality and excellence in public management. That will take courage. That hard choice is easy to explain: "I suggest, that the public interest may be presumed to be what men would choose if they saw clearly, thought rationally, acted disinterestedly and be˝evolently."-Walter Lipmann, The Public Philosophy. "The ultimate justification for the study of politics, however, is certainly not a practical one. Perhaps the most intrinsically satisfying of men's activi- ties is trying to understand the world he~ lives in. Politics being one of the most difficult things to understand, is therefore particularly challenging. Responding to the challenge is, we think, its own justification and reward."- Edward Banfield, City Politics. Be brave comrades. KENNETE NOB MooRE. PAGENO="0187" 183 PAGENO="0188" 184 ABSTRACT OF ASSESSMENT-PITKIN COUNTY Number of Average per Property classification acres acre Valuation Residential: Platted or unplatted land, unimproved Platted or unplatted land, improved Improvements Movable structures Household furnishings and personal effects, productive of income Commercial: $6, 365, 670 8, 917, 680 25, 094, 720 40, 420 1, 272, 790 Platted or unplatted land, unimproved Platted or unplatted land, improved Improvements Merchandise, materials and supplies Furniture, equipment, etc Oil and gas (production): Oil or gas leaseholds or lands Surface equipment, etc Mining and mineral: Coal: Producing 200.00 $450. 50 Nonproducing 1,219.00 15.50 Improvements Materials and supplies and machinery and equipment Metalliferous: 901, 390 4, 246, 250 11, 253, 830 542, 900 2, 005, 730 82, 440 4, 250 90, 100 18,900 247,940 213, 180 Producing 372. 17 352. 39 Nonproducing 10,060.00 13.04 Machinery and equipment Improvements Mineral reserves: Mineral reserves 7, 163. 00 1. 01 131, 105 131,220 173, 950 33, 630 7, 190 Nonmetallic land: Producing 6.70 5, 673 Equipment Stockpile 38, 010 28, 470 7,740 Agriculture: Land classification: Irrigated land 5, 528. 00 50.04 Meadow and irrigated pasture 2,633.00 25.98 Grazing land 45, 886. 00 3.35 Improvements 276, 630 68, 410 153, 830 636, 250 Agricultural-personal property Total Livestock: valuation Cattle $155, 120 Sheep 10,490 Horses 47, 430 Other livestock 350 Machinery, equipment, etc.-agricultural 61, 290 Public utilities assessed by Colorado Division of Property Taxation Denver & Rio Grande Western Railroad Co $346, 540 Mountain States Telephone & Telegraph Co 1, 823, 300 Western Union Telegraph Co 600 Public Service Company of Colorado 317, 370 Colorado-Ute Electric Association, Inc 122, 910 Holy Cross Electric Association, Inc 457, 070 Rocky Mountain Natural Gas Company, Inc 427, 910 Aspen Airways, Inc 108, 150 Rocky Mountain Airways, Inc 140, 530 Western Air Stages, Inc 1, 300 Railroad Car Line Companies 5, ~ Total 3, 751, 590 PAGENO="0189" Fund Valuation Levy (mills) Revenue 1974 CERTIFIED VALUATIONS-SCHOOL DISTRICTS Fund Valuation Mill levy Revenue Aspen No. 1 re: General 24.05 Capital reserve 3. 00 Bond redemption 4. 60 Total $60, 780, 480 31. 65 Roaring Fork District No. 1 re: joint 1 portion: General 31. 10 Capital reserve 4. 00 Bond redemption - 11.70 Total 3, 869, 860 46. 80 Roaring Fork District No. 1 re: joint 12 portion: General 31. 10 Capital reserve 4.00 Bond redemption 11.70 Total 2, 360, 600 46. 80 Total school revenue (as separated above) Colorado Mountain Junior College 67, 010, 940 5.56 Total school revenue from county ad valorem taxes $1,461,771 182, 341 279, 590 1, 923, 702 120, 353 15, 479 45, 277 181, 109 73, 415 9, 442 27,619 110, 476 2, 215, 287 372, 581 2, 587, 868 SPECIAL DISTRICTS Valuation Levy (mills) Revenue District: Aspen Fire Protection $45, 306, 270 1. 55 Aspen Sanitation 20, 216, 650 4. 00 Highlands Water and Sanitation 865, 720 21. 50 Basalt Water Conservancy 1, 345, 530 . 42 West Divide Water Conservancy 1, 411, 450 . 49 Carbondale and Rural Fire Protection 2, 360, 600 2. 00 Colorado River Water Conservancy 67, 010, 940 . 55 Aspen Metropolitan Sanitation District 16, 349, 960 8. 00 White Horse Springs Water and Sanitation District 364, 890 3. 50 Snowmass Water and Sanitation District 14, 293, 730 18. 50 Basalt and Rural Fire Protection District 3, 374, 900 1. 90 Aspen Wildcat Basin Water and Sanitation District 413, 440 none Snowmass Wildcat Fire District 14, 077, 480 6. 50 Basalt Sanitation District 7, 690 3. 89 Town of Basalt 3, 200 13.90 Redstone Water and Sanitation District 388, 600 20. 00 Incorporated towns: City of Aspen 29, 235, 520 3. 60 Name of fund: State Predatory Animal Fund 10, 490 40. 00 $70 80 18 4 36 130 264 6 none 91 7 105 Movable Structure Valuation. $40,420=Tax $2,632 collected by county clerk. Pitkin County Predatory Animal Fund, 200 per head on all sheep and goats, 1974 Total= 1,852 Sheep at 200=$370. Grand total assessed valuation of Pitkin County for 1974 $67, 010 Grand total ad valorem taxes frOm all sources to be paid in 1975 4, 621 185 PITKIN COUNTY FOR THE YEAR County General Fund $67, 010, 940 Contingent Fund Road and Bridge Fund Social Services Fund Public Hospital Fund Retirement Fund Public Works Fund Public Library Fund 67,010,940 4.25 $284,796 1.00 67,011 5.20 348,457 .35 23,454 3.00 201,033 .10 6,701 3.00 201, 033 1.20 80,413 18. 10 1, 212, 898 67-512 0 - 76 - 13 PAGENO="0190" 186 REPORT, THE EVOLVING POLITICAL ECONOMY OF PITKIN COUNTY: GROWTH MANAGEMENT BY CONSENSUS IN A BOOM COMMUNITY BY JOHN S. GILMORE AND MARY K. DUFF, DENVER RESEARCH INSTITUTE, UNIVERSITY OF DENVER PITKIN COUNTY, BOARD OF COUNTY COMMISSIONERS, Aspen, Cob., October 28, 1974. Mr. GENE PETRONE, E~vecutive Director, Office of Planning and Budgeting, State of Colorado, State Services Building, Denver, Cob. Dear Mn. PETRONE: Pitkin County would like to enter the following into the hearing on the State Budget scheduled for Grand Junction, 1 :30-4 :30 p.m., at Mesa College on October 29, 1974: (1) We request legislation allowing each county to set its own salary sched- ule for elected officials, so that the best posible candidates can be encouraged to so serve and contribute more effectively to local budgetary and fiscal prog- ress. The needs of each county differ. For example, the Pitkin County Sheriff handles more cases each year than does Mesa County, simply because of Pitkin's tourist economy. The point is that "population" is not necessarily the best basis for County salary determinations. (2) We request and support the funding of a County Agent for Pitkin County as provided in CSU Extension Service budget proposal. (3) We support the CSU request for an improved salary scale for County Agent, especially for the position proposed for Pitkin County. (4) We urge continuation annually of the $25,000 to each county for land use administration pursuant to HB 1041 with some escalation each year to account for rising costs and the truer measurement of the size of the problem resulting from the first year's experience. (5) We recommend that the State Highway budget be required to include funds for bicycle trails, horse trails, and other pedestrian safety alternatives, on a budgetable formula basis, with some matching required by the affected cities and counties. Such trails can draw pedestrians away from roads and can become energy conserving where the trail systems become large enough to convert car trips to walking trips or bicycle trips. (6) We recommend creation of a Department of Transportation, to include roads, trails, air and transit, and a unified budgetary approach to each indi- vidually and to all four together, and a policy approach that recognizes the impacts of each and all of the transportation modes on each other and on land use, the environment, and the social and economic facts of life. (7) The State should enact legislation and allow counties to close roads and perhaps even highways where they are non-esential links and where it is beneficial to the local community to do so. (8) We request legislation, which effectively opens the income tax, real property tax, ski life tickets and/or other new sources or revenue to County Use, reducing thereby the need for counties to rely so heavily on the regressive property tax. (9) We recommend a program of State Revenue Sharing similar to the Federal Revenue Sharing. The counties at present time have very limited source of funds through the inequitable and regressive property tax system and the State apparently has an excess of unappropriated funds from its income tax revenues. Some State income tax money should be redistributed to the local bodies in the same manner as the federal funds are, as the local authorities are best qualified to know the problems of each area and the best application of these funds. (10) We recommend improved state funding for the several district COGs, including NWCCOG, and that the Committee urge each applicant State De- partment to locate its district offices as close as possible to the COG offices to the extent that the "little capitals" idea is furthered to the convenience of the local government official. (11) We recommend a Constitutional change to limit the right to divert water to the amount necessary to maintain a minimum stream flow to main- tam ecology of the stream. Recognizing the value of tourism for the State of PAGENO="0191" 187 Colorado and the value of preserving the ecological systems, the minimum stream flow maintenance should be made mandatory and diversions in excess of that should not be allowed. This may make necessary condemnation or other activities but should be given high priority. One mechanism might be to give the Colorado Water Conservation Board instructions and a timetable for filing minimum stream flows for all streams in the State and provide them with adequate funds for engineering back-up to do this quickly together with a legislative mandate the dates of appropriation may revert back to the earliest times. (12) Functional Home Rule in the same manner that City Home Rule has been allowed should be granted to counties to allow them to pick up reserve and residual powers which have been retained by the State in order to give them a free flexibility to deal with many problems. arising for local govern- ment. (13) The State should adopt a "go-slow growth policy' to allow for ade- quate planning and to evaluate the effects of future growth and also con- sider limiting the size of urban areas due to the statistical increase in crime and other undesirable social conditions which increase per capita costs for services. (14) The State should consider enacting regulations establishing trailer construction standards to make these living units safe in the form of ad- ditional firewalls and further provide for insulation to conserve energy and should also adopt a policy of energy conservation and encourage rail and mass transit. JOSEPH E. EDWARDS, JR., Chairman. LooKING To THE FUTURE-SKIER MARKET PREDICTIONS SHOW SLOWDOWN Based on reports by consultants Briscoe, Maphis, Muray, and Lamont, Inc., of Boulder, Cob, and Glendinning Associates of Westport, Conn., which conclude growth in the national skier market is leveling off, the town council is discussing several future means of expanding tax revenues, should the need become reality in the foreseeable future. Jim Muray of the Boulder consulting firm explained how national trends show a leveling of skier growth which will probably affect Vail significantly within the coming five years. Since even immediate attempts of diversication of Vail's recreational offerings would have no effect in the coming five years, Murray outlined a variety of ways to keep the municipal coffers full while skier, trends change. Acording to Muray, "the most popular candidates" for new sources of revenue would be a use tax, a bed-room tax, a lift tax, and a real estate transfer tax. The most popular among the council members were the last two. USE TAX Generally, a use tax says if a Vail resident buys something outside Vail's taxing jurisdiction, then brings the item to Vail and uses it, a use tax can be levied. Since most such purchases are difficult to. trace, the tax has his- torically been used only on building materials which can be collected through the isuance of a building permit, and vehicles, which can be collected through county licensing. A maximum 4 percent use tax could be levied in Vail without a public vote. However, because it would primarily bear on local Vail resi- dents, this form of taxation might be very unpopular, Murray noted. BED-ROOM TAX A bed-room tax could be either an excise tax on the consumer or an occu- pation tax on the business. Since any type of municipal income tax is pro- hibited in Colorado, the tax could not be based on sales, but must be fairly fixed. If levied as an excise tax, the cost could be passed on to the consumer in a tight availability market. However, since most times of the year Vail has an oversupply of beds, the tax would probably have to be absorbed by the businesses. Levied as an occupation tax, it could be similar to Denver's head tax per employee which would also have to be absorbed locally. A bed- room tax. would require a public vote and Murray felt it would not receive "good citizen acceptance." PAGENO="0192" 188 BEAL ESTATE TRANSFER TAX Most popular with the council was the suggested real estate transfer tax, which would be unique in Vail by state standards, although other states are using this type of tax. Basically, it's like a sales tax on land. It would require the cooperation of Eagle County for collection, and would not require a public vote. Since the tax would mostly be borne by non-resident investors and speculators who benefit from the Town's "infrastructure development," the real real estate transfer tax won the popularity straw vote with the council. LIFT TAX Another popular method of beefing up municipal revenues was the lift tax. Presently, Vail Associates donates 4 percent of its lift revenues to the Town of Vail voluntarily. This could be made into law, and the Town could raise the tax, since there is no statutory rate limitation as there is with sales tax. Lift tax is considered a specific occupation tax, and can be levied without a public vote. The tax would be borne mainly by Vail Associates, since Forest Service ticket price regulation limits the lift operator's ability to pass the tax on to the consumer. Although it might limit Vail Associates future develp- ment of Vail, Murray noted, "Citizen acceptance might be poor of if, the tax increase were perceived as threatening Vail's future economic health." Al- though the council did not seem convinced to increase the lift tax, it made definite noises toward legalizing the lift tax which is now a donation. Other forms of revenue suggested but not elaborated upon included alcoholic beverage tax, amusement tax, occupation tax for professional services, sales tax on services, and utility taxes. PREPABE FOR CHANGE At the conclusion of the $8,000 report, the consultants noted, "As Vail has repeatedly done in its short life, it must lead with the development plan and anticipate change and prepare for it, rather than wait for it to occur and be forced to react. Vail is unique in that it is in a closed system in which con- tinuous physical growth is imposible. It must, therefore, be particularly care- ful, in its developing years while there still are options, that it decides what it wishes to be when the growth stages are completed. To continue to build buggy whips when the market is changing will only necessitate severe adjust- ments in the future. While the potential revenue growth continues to expand, the expenditures must be wisely made in anticipation of the mature economy that is coming. Senator HASKELL. Our last witness is Mr. Rick Silverman, city councilman from Telluride, Cob. STATEMENT OP RICK SILVERMAN, TELLURIDE, COLO. Mr. SILVERMAN. I will have to disallow that last label. Senator HASKELL. I see. Somebody wrote it down. Mr. SILVERMAN. The present city councilman that appeared earlier gave me such a gloomy prospect of that. I am Rick Silverman from Telluride, Cob., a community as distant from Aspen in miles as it is socially and financially. I have lived there since before the advant of the ski area and I have been there since that time and watched what's occurred in that community in the course of the last 31/2 years. I have great misgivings about appearing at these hearings. Similar appearance on behalf of wild rivers and wild areas have done littile to reassure me the system resolves its problems consistent with my notion of what majoritarian views are. I am encouraged, however, that for the first time I am appearing at a hearing chaired by someone I elected, a man who had the initia- tive to pursue a matter first raised by the much ballyhooed Aspen PAGENO="0193" 189 yahoos, and firmly counterposing his stance with some of western Colorado's best financed and most arrogant entrepreneurs. Mr. appearance here is designed to lend support to my friends in Aspen, not so much because they are the victims of punitive actions from the Aspen Skiing Corp., but actions occasioned I believe be- cause of the vanguard behavior of both Pitkin County and Aspen city government in the realm of land-use planning and the more in- sidious propositions represented by their insistence that the Ski Corp. must recognize its responsibilities for picking up a fair share of the costs its venture had been passing on to the local industry. In fact, however, it is the people of Aspen represented symbolically by the Roaring Fork Citizen who are supporting me. `What has gone on in Aspen is not a unique phenomena, it is a microscopic forerunner of the situation in Telluride, Steamboat Springs, Breckenridge, and Dillon, and probably most of the 170 other areas where the Forest Service issues special use permits for ski areas. In Telluride, however, there are distinct differences, and they are worth noticing. In contrast to Aspen's resplendent success, we are a struggling failure. Where there are 30-plus lifts, excellent grooming, patrol, and massive ventures in Aspen, we in Telluride ha.ve five ill-placed lifts, no on-the-mountain facilities and essentially no pro- motion. Aspen is synonymous with being a site of skiing excellence, Telluride appears to be more and more an ill-conceived appendage to real estate scandal. Yet, the impact is essentially the same. Local government units are inundated by demands. The Forest Service is again an unwitting accomplice. In Telluride, we are part of the TJncompahgre National Forest. and it might be assumed that this would insure sophisticated scrutiny, but to the contrary it has apparently resulted in a cozy Forest Ser- vice relationship. In Telluride, a mountain where last year it took 35 minutes tO get from the bottom of the mountain, runs back to a chair lift, a bus paid for by the skier, and another 55 minutes to re- turn to the top. The seasonal rate has now gone to $275, an increase of some 80 percent in a single year. We believe this increasing to be capricious and dangerous, dangerous because as has been stated by earlier speakers the "push-me-pull-me" domino effect whereby rates seem to go according to the Forest's notion of uniformity, in Teilu- ride this is particularly disheartening because the Forest Service has evidenced not merely a willingness to extend profits of successful areas, which, of course, is the case in Aspen, but to reward incom- petency, most specifically passing on an unsheltered day skier load to those skiers, the former season pass holders, who have supported the area since its inception support rendered not only in the form of money, but support in the form of city lands, support in the form of effort that's been needed to restore the area to its historical love- liness that is Telluride. Tefluride, again counterposed to Aspen, offers high quality, fair prices, historical past going beyond what one could expect to be offered to so-called subjective amenities referred to by earlier speak- ers. Based on my experience in Tellurid, I would like to offer the following suggestions very briefly. PAGENO="0194" 190 No. 1: That permits not be granted for more than 10 years. We are in Telluride to a situation where a community becomes essenially indentured, in a. state of continuing slavery to an incompetent oper- ator, and I expect this is not a unique siuation and one which you are now in a position to correÚt. No. 2: That rates be increased subjectively and with full use par- ticipation. No. 3: A guarantee of local participation in all states of impact analysis. I am a layman by education and design, and as such am not quali- fied to proffer specific formulas for these positions. I am convinced that expertise does exist for these. I do believe it is time to get the Forest Service out of bed with its ski area consorts. Ultimately we are talking about public lands and a commensurate public trust. I sympathize with the ill-informed local ranger, as was the case in Telluride. I do not think he is culpable for complex actions, decisions that are far beyond his specific training as a forester. I am not near- ly as sympathetic about his superiors and I demand considerably more from his congressional mentors. This is not mere Aspen hippy diletantism. It is a public question. Are the public lands to remain within the reach of the public? Can public hearings be directed in such a way as to `lead to participation by an informed public and an honest permittee and a Forest Service arbiter who is not ashamed to represent nothing more than the American public. Thank you. Senator HASKELL. Thank you, Mr. Silverman. This concludes the hearing. I should announce that the most longsuffering gentleman at this hearing is Mr. George Tourtillott of the Forest Service, who came here to provide any expert information, and I appreciate very much, George, your being here. Thank you very much indeed. The hearing is recessed. [Whereupon, at 4:45 p.m., the hearing was recessed to reconvene Monday, October 6, 1975.] PAGENO="0195" OUTDOOR RECREATION AND SKI PERMITS ON NATIONAL FOREST LANDS MONDAY, OCTOBER 6, 1975 U.S. SENATE, SUBCOMMITTEE ON THE ENVIRONMENT AND LAND RESOURCES, OF THE COMMITTEE ON INTERIOR AND INSULAR AFFAIRS, Denver, Cob. The subcommittee met, pursuant to notice, at 9 a.m., in the audi- torium, Post Office Building, Denver. Cob., Hon. Floyd K. Haskell presiding. Present: Senator Haskell. Also present: Steven P. Quarles, counsel; and Harrison Loesch, minority counsel. Senator HASKELL. The subcommittee will come to order. OPENING STATEMENT OP HON. FLOYD K. HASKELL, A U.S. SENATOR FROM THE STATE OF COLORADO Senator HA5KELL. The hearing on S. 2125 of the Subcommittee on the Environment and Land Resources of the Senate will open. Be- cause of the tremendous number of witnesses, I would ask everybody except those representing elected officials and those who have been specifically invited to testify-that would be Mr. Hill and Mr. Croak, the Honorable John Vanderhoof, and Mr. Kennedy-to confine their testimony to 5 minutes. I wish to assure all witnesses that their written testimony will be included in the record in full. The purpose of S. 2125 is to provide a working draft for the reform of procedures for the issuance of permits for ski areas on National Forest lands. I think most of us are aware, certainly in our State, of not only the tremendous pressure for increased use of public land for skiing, but also of the environmental and economic impacts on the State and its citizens. I should mention that there are 170 special use permits issued nationwide for skiing on National Forestland and 24 of these are within our State. This, if my mathematics-or rather Mr. Quarles' mathematics-is accurate, represent 14 percent of all national forest ski permits issued nationwide. Since the permits are on public lands, that is land owned by all of us U.S. citizens, there are obviously special obligations which attach to those who seek to use public lands for private profit. The bill addresses principally three areas. One is the area of public access to financial information, with the concomitant right of hear- ings on various and sundry rate structures, increases and the like, so that the public will have an input into the process. Right now, of* course, the Forest Service has to give its approval to rate increases, (191) PAGENO="0196" 192 but this appears to be done on an ad hoc basis and depending upon the beneficence of the particular forest supervisor the area may or may not obtain its in6rease. The public, of course, has no way of knowing under the present set of circumstances whether the increase is or is not justified. Second, the `bill addresses the whole `problem of when permits are granted. Under permits as they are now granted, the use of the forest area and a small base area is prescribed in the permit. However, when you bring a great many people in for the purpose of skiing, you affect not only the smaller area where skiing actually occurs but also a much greater geographical ~area of both public and private lands, creating all sorts of impacts on `the local area. For this reason, the bill as originally drafted, requires Forest Service and State and local government consideration of all secondary impacts on both public and private land which may occur as a result of development of ski facilities. The purpose of this is to reduce ill-considered growth, and encourage planned and control growth. Another issue addressed by the bill is the extent of the area covered by a permit. Right now, the permi't applies to a small area of 80 acres for which use is granted for 30 years. Of course, the ski areas use much more than that, and for that reason the Forest Service has adopted the practice of issuing special use permits on a year-to- year basis to encompass substantial peripheral acreage. The legality of this practice of the Forest Service is being challenged in the Mineral King litigation in California. Of course if it is found to `be illegal, the investments of the entire industry will be threatened. So, without anything further, I would like to proceed to the first witness, Mr. Robert Hill, who is the first assistant attorney general of the antitrust division, and who is appearing on behalf of the Honor- able J. D. MacFarlane, attorney general, State of Colorado. Mr. Hill, it is a pleasure to have you. STATEMENT OP ROBERT HILL, ASSISTANT ATTORNEY GENERAL OF ANTITRUST DIVISION, ON BEHALF OF HON. J. D. McFARLANE, ATTORNEY GENERAL, STATE OF COLORADO Mr. HILL. Thank you. I think it perhaps best to begin with the request that I have prepared and submitted a formal statement- Senator HASKELL. That will be included in the record in full and, of course, as you know, Mr. Hill, you do not have a time limit. Mr. HILL. I realize that. I will attempt to keep within the time structure. Our antitrust section was formed this past summer. At the present time I think it is fair to say the number of complaints we, have re- ceived arising from the operation of ski areas in the State of Cob- * rado far surpass that of any other areas of commercial practices in the State. For this reason, we have taken an investigation into a number of these comp'aints and I would like to give the committee the benefit of some of the conclusions we have drawn from these in- vestigations. I think it is fair to say that the basic conclusion is that the Forest Service policies today operate to operate a monopoly and as to which a lot of people in the State of Colorado object, and, fur- PAGENO="0197" 193 thermore it is not a regulated monopoly at the present time. It is not effectively regulated. To me, what we have is sort of the worst of the worst worlds. We don't have competition and don't have regulated monopoly. We have something sort of in between. I can sort of summarize today some of our investigations that are underway. I would, however, like to point to certain basic I think procedural matters which I do feel is appropriate. The first is the one that you have alluded to in the past, and that is the veil of sec- recy. The Forest Service is operated in a fashion completely shielded from public scrutiny at the present time. During the past rate in- creases, when there was a large outcry in opposition, it was impos- sible for citizenry, congressional inquiry or State inquiry to obtain any kind of information which would allow anyone to make an in- formed judgment as to whether or, not the proposed rates were lusti- fled. This practice I suppose was highlighted at that time, but it is a practice which has continued throughout in terms of other policies as well. We have at the present time extensive freedom of informa- tion requests pending before the Forest Service. Senator HASKELL. Not to interrupt you, Mr. Hill, but not only do we have the veil of secrecy on the basis upon which increases may be granted, but we have a veil of secrecy on the conditions attaching to various permits. We have no uniformity. Mr. HILL. No question. As a major portion of our freedom of in- formation request, which is now pending, is to understand the con- tractural relations and other relations which exist between the area operators, the permittees, and the Forest Service. In litigation in the past, even in court opinions, there has been controvery and con- fusion over what in effect the contracts do provide, and in this area it simply extends across the board to all the policies to whether or not new, ski areas are going to be opened, who is going to be the re- cipient of the operating permit for the new ski area. It simply goes across the board. At the present time, as 1 say, we have a freedom of information request. We are meeting with the Forest Service next week and per- haps we will have additional information that I don't know. In the past, they have either refusel flatly to provide information to various public entities and other private parties or have supplied pursuant .to' the Freedom of Information Act some very limited number of documents, and it is a very limited number at the present time. It seems to us that the secrecy is not simply a procedural fault. It affects the substantive policies which are adopted. Decisions ar~e made. Standards are not in existence which would have to be in exis- tence if these procedures were subject to public scrutiny. You simply couldn't go on operating on an ad hoc basis if in fact `there was public scrutiny looking over your shoulder. You would have to rationalize your decisions, and it seems to us as a result that it is not a procedural problem we are talking about but a substantive prob- lem, and the first step would be to open it up. It seems to me that's just the first step. That's simply procedural. The one that would follow is what would result from public scrutiny once these policies or lack of policies are open to the public view. The second problem that we have encountered, and that is in pur- porting to regulate what is in effect a~ government created monopoly, PAGENO="0198" 194 the Forest Service has simply shown no consideration whatsoever for the anticompetitive effects of this operation. It creates at the present time one large monopoly and it seems most comfortable deal- ing with one large monopolistic in that region, and I suppose in regions of administration there are reasons. If you have one steel company to deal with, you know where to go to get your steel. You have no problems. That is basically what we have. They dealt to one person absolute discretion to run the ship as they see fit. That may be appropriate when a private enterprise takes over and runs its own business, but it seems to me inappropriate for Federally controlled land providing the impetus and sole basis for the operation itself. These Federal lands are common to the people of the United States and I think it is inappropriate to put that kind of control over these lands in the hands of very few corporate executives. Senator HASKELL. Let me interrupt you there, and I in large part concur. However, a two step procedure has been suggested-please bear in mind this bill is just a working draft and was introduced so people would have input. The first step might be a hearing to deter- mine whether the ski area asking for a rate increase is truly competi- tive with several other ski areas. If that determination is favorable- that is that there is true competition-the next finding is whether the area is exercising competition without anticompetitive practices. Now, if you make those two findings and those two findings are favorable, it seems to me that competition is regulating the prices and regulating the practices and, therefore, perhaps nothing further would have to be done. On the other hand, if those findings are not favorable, you would then utilize a formula to determine reasonable rate of return on invested capital, which would be more or less a utility concept. However, you woudn't have to go that second step, the suggestion is made, if you make the finding of true competition truly exercised. Now, you may not want to respond to that off the top of your head, but if you do, fine. If you don't, I woul4 appreciate perhaps some comments for the hearing record later on. Mr. HILL. I would like to respond. The proposal as you suggested as to the possibility of avoiding what I would call a rate type regu- lation in the formal sense by the existence of competition, which I take it takes place on a nationwide basis- Senator HASKELL. To name a couple of areas in Colorado, I would say that Arapahoe Basin and Loveland are probably very competi- tive because they are close and they draw from the same market. That's the kind of thing I'm talking about. Mr. HILL. I guess I have two reactions to that. One, when you are talking about these areas, there is very little competition between the major ski areas. The Aspen Ski Corporation dominates a great portion of our State. Senator HASKELL. I am really talking about a case-by-case basis. You might find that the Aspen Ski Corporation by its very nature could not be competitive. This might be a finding. You might find that Loveland, because of its proximity to other ski areas, is com- petitive. Mr. HILL. The problem I have with that approach-and I would like to use the Aspen Ski Corp.-they have several mountains in PAGENO="0199" 195 effective operation in the area of Aspen, Cob. For the citizenry of Aspen and for the surrounding area, there is no competition what- soever. Senator HASKELL. That's true. Mr. HILL. And in large part that is a substantial portion of the complaints we receive from the citizens of Colorado. They are from people who live within the shadow of a very large and very powerful monopoly, and do not like living in that shadow. Senator HASKELL. You are postulating one set of. facts. I am ask- ing your reaction to a different set of facts where you have, say, four ski areas all close together. Maybe it has to be near a population center so people have freedom of choice. You could have a finding there that they might be competitive. Now, my suggestion is if you make that finding, then tha.t's as far as you have to go, and I was wondering what your reaction is. Mr. HILL. I would agree with that, if one could make that finding. I would agree with it. The second problem one encounters in trying to make that other than the one I have just mentioned is that one has to limit the market in such a way that you don't imply a national market. Senator HASKELL. Oh, yes. Mr. HILL. It seems~ to me that would be the effective one. The second problem we come to is almost impossible given Forest Service policies. Senator HASKELL. That I agree. Mr. HILL. They simply are not allowed to compete. What the Forest Service in effect seems to be attempting to do is maintain uni- formity and obviate competition, and through practices today what little competition might otherwise exist is almost by definition squelched by what little they do. In other words, not only do they not seem to me-if they are going to regulate or provide competition, they haven't chosen which fork they are going to take, but in going down the middle they have avoided effective regulation and also effective competition. Senator HASKELL. That's very interesting. I would hope either in your prepared statement or subsequently you could detail the type of Forest Service regulations that prevent competition. I would really appreciate that. Mr. HILL. I think one example also is the recent rate hike. For instance, the Forest Service refers to comparable rates for all ski resorts in the State of Colorado, in effect not allowing differe˝tia- tions for whatever an individual businessman might choose to differ- entiate, not allowing one to go the cheaper route, but in effect at- tempting uniformity, and if you look at the different rates across the State, that's very obvious. A second thing we would like to point to in terms of lack of con- cern is the policy of regulating in turning over the entire area and all associated businesses to a single permittee. Our problem here, it seems to us, in some senses the operation of any given ski slope per~ haps, any given mountain, is probably close to what we call a natural monopoly. It simply doesn't make sense to balkonize it and have three operators operating. It may be certain enabling areas ought to be broken up, but certainly not to the one individual ski slope. PAGENO="0200" 196 On the other hand, in setting forth this policy, the Forest Service has created a monopoly in all related businesses, since it is their policy to grant one permit and allow that person to operate all asso- ciated services as, for instance, you are probably well aware, ski in- struction, about which there is a great dea.l of controversy. That's the second problem. It seems to me the third problem. in this area in terms of the Forest Service's lack of concern with competitiveness is their seeming willingness to automatically renew existing leases and allow existing permittees to expand to completely encompass the related areas, so you don't have in Aspen five companies operating five different moun- tains, all healthy, vigorous and competing, but one corporation domi- nating the same scene, and it is this lack of concern, lack of oppor- tunity. It is very hard to say what arrangements have been made, for instance, in the past with how a new slope permittee is designated, simply because that information is not publicly available. On the other hand, simply viewing the practice of the Forest Service historically has been to suggest there is very little opportun- ity for another corporation or its group of businesses within the State of Colorado to in this day and age come in and say, "We want to operate that next ski area. We don't want an existing company to do it. We want to come in and compete, knock heads with them. We think we can do it for better, for less, and do more." There is simply no opportunity for that sort of voice to be heard as it now exists. Those three areas are simply examples it seems to me on which I would like to see input in terms of concern that what you are try- ing to do here is provide a variety of services in fashion which we provide almost all other services, and that is through competition. In the absence of that, I think as a last resort we ought to go to a very complete and thorough and open, and I emphasize open, method of public regulation. My own preference would be that we think through various devices, insert enough competiton that we don't have that conflict relationship, but at least to the extent it exists now there is no competition, and I would answer that sub4uestion. It seems~ Senator HASKELL. Because of the method of regulation? Mr. HILL. In large part because of the method of Forest Service regulation, because of their willingness to grant all new ski areas to existing companies, so you have contiguous areas completely devel- oped by one ski corporation, in terms of their willingness to auto- matically renew new leases, in terms of the inability because of the secrecy of regulations to provide a forum for new people to come in in terms of development. If there is going to be development, we would certainly like to see some form of competition in this area, and with these sorts of views in mind we have suggested in our statement certain considerations to the committee in terms of amendments to the pending bill, the first of which would be to award all new permits on the basis ~f open and competitive competition. A second corollary would be when renewals come up we would suggest they be done on the basis of open competition with due compensation to the development of the prop- erty in advance. . I. would. also .like..to see. the assocj~ated businesses separated out and to the extent possible competition in those areas~ permitted, evei~ if PAGENO="0201" 197 the conclusion is drawn that the area has to be operated as a monop- oly. I also would like to see any public hearings in terms of rate in- creases, if we are going to have that, that there be some basic guide- lines for calculating how those are to be determined. It is now simply impossible in my view to determine how those calculations are made, and I think Congress ought to have some at least benchmarks pro- vided for the Forest Service. Senator HASKELL. I agree with you, Mr. Hill, and as you may be well aware when these rate increases occurred, I saw in the news- paper a rate increase simultaneously in three areas. I wrote the Forest Service and made the assumption erroneously that there would be public hearings and I also made the assumption erroneously that the financial information would be available. In response I got what I can call nothing but a "kiss-off," of one *or two sentences: "We're quite concerned about making public the specific financial information about individual operationst. Over the years we have developed a level of confidence and trust with our concessionaires which has allowed us to study and respond to\the financial world they live in." And it was this letter that precipitated this bill. This was sent to me by Mr. Thomas Nelson for the Chief of Forest Service. Mr. HILL. It is that same attitude that prompts our* appearance here today. I would also like to request that in terms of amendments or. possible consideration for amendment to the bill that some con- sideration be given to specifically obtaining input from the U.S. De- partment of Justice, Antitrust Division, with regard to permits which are going to be issued with anticompetitive consequences. There are a number of bills which are now either in existence or under consideration which do make putting that kind of requirement in. I think this is an appropriate occasion for that kind of scrutiny apart from environmental impact, which we now have a requirement that would be considered. I would like to have some consideration of theT anticompetitive consequencs of the permits, if the permit is going to be in a contiguous area whether or not it ought to issue to that ski area or perhaps an operator in Sun Valley, Idaho, or perhaps someone simply seeking to enter the industry, but as it presently exists in terms of the way these things are handled I think that is pra~tically nonexistent as far as we can tell. Those kinds of consideration in terms of putting competition into this industry it seems to me would solve a lot of the problems that we see in terms of coming to us in complaints and those are as I say simply the arbitrariness it seems to me in some cases, but perhaps justified, of monopoly power, and many people in our country have already made that decision a long time ago that that is an unattrac- tive prospect, and providing some alternative to me it seems is some device other than~some huge regulatory agency. If we could provide some input in terms of competition, I think that would be the most attractive alternative. On the other hand, I don't simply want to say competition pro- vides competition and walk away, because it would come very slowly. It would change hands and so forth, but I do think the present sys- tem is simply indefensible PAGENO="0202" 198 As you have alluded to, the present system in my view of operat- ing these things on special use permits Oh an annual basis is illegal. It seems to me what we are now talking about, if you take that posi- tion, as I mentioned in our comments, in related areas, mineral leases, the courts have consistently made a determination where there is an acreage limitation of awarding Federal land that those were intended for the express purpose of avoiding monopolistic practice, avoiding the Federal Government creating monopoly around the country, and it seems to me what the Forest Service did was not to live by that, which agreed would be difficult in the present circum- stances. They didn't seek amendatory language, but simply to circum- vent it, and I think some legislative response at least to that which would express concern over monopolistic problems and over present policies is highly appropriate. Senator HASKELL. Thank you, Mr. Hill. I would like to ask you one more question. This idea is not in the bill, but one thing occurs to me, and that is that many ai~eas because of their very substantial investment have to perforce make a rather high charge to the public, whether too high or too low, I don't know, but they have to recoup their investments. This really eliminates from the opportunity of ski- ing a large segment of the public, and it just occurred to me during the course of the hearings at Aspen on Saturday that perhaps the Forest Service should be urged to give consideration to permittees who are going to put in perhaps a less expensive capital plant-I don't mean unsafe, but maybe T-bars instead of chair lifts and gon- dolas-which would allow them to charge less and still make money. Perhaps this would be a socially desirable end so that more people could take their kids up and ski. Now, do you have a reaction to' that? Mr. HILL. I do. I think that's absolutely the kind of thing we would like to encourage and it is that sort of dampening effect of the present Forest Service policies we most object to. That can't take place under the present. policies, but it ought to be taking place and it is not. Senator HASKELL. Well, thank you, Mr. Hill, and I will look for- ward to studying your statement in full. Do I understand you have specific statutory suggestions for change.? Mr. HILL. We have specific suggestions and we are in the process of drafting specific language. Senator HASKELL. Fine, and the hearing record will stay open for 2 weeks for you or anybody else to submit information for the record. Thank you. Mr. HILL. Thank you very much for the opportunity. [The prepared statement of ]\`Ir. Hill a.nd letter referred to fol- low:] STATEMENT OF ROBERT F. HILL, ASSISTANT ATTORNEY GENERAL, ANTITRUST Divi- SION, ON BEHALF OF HON. J. D. MOFARLANE, ATTORNEY GENERAL, STATE OF COLORADO During the brief existence of the Colorado Attorney General's Antitrust Section, we have received more complaints with regard to the practices of certain corporations operating major ski areas in the State of Colorado than with regard to any other problem. Our investigation of . these complaints has forced us to conclude that most of these grievances stem . from the present policies of the Forest Service in administering, our federal lands. We would PAGENO="0203" 199 like to take this opportunity to pass on to you some of our observations re- garding present Forest Service practices as well as some specific comments and suggested changes regarding 5. 2125. It would be imposible for me to detail to you today the full spectrum of the complaints we have received. I will, therefore, attempt to focus my remarks on three aspects of the present policies of the Forest Servic that we find most disturbing. 1. The Veil of secrecy. Forest Service policies in this area have historically been shielded by a veil of almost complete secrecy. As you well know, as recently as this past spring, the Forest Service flatly refused all public access to the financial information upon which the rate increases for ski lift tickets were based. More recently, in response to a flurry of requests filed under the Freedom of Information Act, 5 U.S.C.A. ž 552 (1974), the Forest Service has begrudgingly supplied a very limited number of items. Our office has filed an extensive request under the Freedom of Information Act and we are presently awaiting a reply. We, of course, will be glad to share any possible fruits of that inquiry with this subcommittee. This veil of secrecy is more than merely a procedural fault. In our view it- and the corollary lack of opportunity for informed public scrunity-has con- tributed greatly to the development of many of the policies of the Forest Service that we find most offensive. And, perhaps more importantly, it has allowed the Forest Service to proceed to make decisions of the utmost sig- nificance to this State without any rational or consistent policies. I know of no other regulatory agency operating in this day and age that has com- parable discretion to make decisions in the absence of standards and shielded from public scrutiny. These conditions are further compounded by the archaic and inadequate review procedure now in existence-a procedure that can only be described as a bureaucrat's dream and a lawyer's nightmare. 2. The Complete Lack of Concern the Forest service Has ~Shown for the Anticompetitive Consequences of Its Policies. While the anticompetitive conse- quences of the present Forest Service policis are legion, I will limit my re- marks to two areas which we see as having the most serious anticompetitive impact. A. In granting permits for the development of new slopes and in renewing permits for existing slopes, the Forest Service has totally ignored the benefits to be provided by diverse and vigorous competition. Instead, the Forest Service seems to prefer to operate in the "quiet waters" of the monopolist giving existing ski companies the right to open adjacent new areas and routinely renewing existing permits. We think it is indefensible that control over federal lands-lands owned by the citizenry of this country in common- is allowed to accumulate in the hands of the few. B. The Forest Service presently relies exclusively upon the "single per- mittee" to operate ski areas and all related businesses on federal lands. In response to an inquiry by former Congressman Aspinall, the Forest Service stated that the permittee is "responsible for all activities on the area" and has "the exclusive right to carry on himself or under his immediate direction the asociated businesses." Sabin v. Butz, No. 74-1060 (Tenth Circuit, April 9, 1975), Slip Op. at 15 n. 8. In other words, at the present time it is the policy of the Forest Service not only to routinely create monopolies in the area of the ski lift service but in all related areas as well. The Sabin case provides an excellent example of the type of situation created by present Forest Service policies. While there does not appear to be any legitimate reason for not allowing independent ski instructors to provide instruction so long as they are able and willing to meet certain reasonable conditions, at the present time the Forest Service policy is to make no effort to assure competition in ski instruction on federal land leaving this, along with all other related businesses, within the sole discretion of the permittee. This, in turn, means that there is no price competition in ski instruction and, perhaps more importantly, there is the resultant stifling of competition in the quality and variety of ski instruction. 3. The Present Leasing System for Major Ski Areas Is Unlawful. As I previously advised your office this past June, one threshold problem that the Forest Service confronted in the administration of ski areas is that by statute the Secretary of Agriculture is limited to permitting the "use and occupancy of suitable areas of land within the National Forest not ececeeding PAGENO="0204" 200 eighty acres" (emphasis added). 16 U.S.C.A. ž 497 (1974). When confronted with this statutory limitation, the Forest Service chose not to comply with the clear limitations of the statute, nor to seek statutory amendment. Instead the Forest Service chose to circumvent the statutory limitation through the device of a series of special use permits issued on an annual basis. There is no statutory authority for such an approach and the propriety of proceeding in this manner is, at best, highly questionable. While we are not aware of any cases interpreting this specific statutory language, in related areas where Congress has imposed similar acreage limitations the United States Supreme Court has consistently held that attempts to circumvent the statutory limitation were invalid. Thus, in United States v. Trinidad Coat ~ Coking Co., 137 U.S. 160 (1890), Mr. Justice Harlan held, in a case in- volving coal leasing on federal lands in Colorado, that the object of the limitation to 160 acres for individuals and 320 acres for associations "was manifestly to prevent monopolies in these coal lands." 137 U.S. at 169. The Court's opinion emphasized that it "was for Congress to prescribe the con- ditions under which individuals . . . might acquire these lands. . . ." See also United States v. Ml2nday, 222 U.S. 175 (1911). While we certainly do not want our remarks to be interpreted as opposition to the concept of any aggregation in excess of eighty acres-a position that would make it extremely difficult to operate any of the major ski areas-we do think the present system is illegal and strongly endorse your suggestion that new legislation is absolutely essential. My primary concern is that in drafting any new statute, careful con- sideration be given to the elimination of the anticompetitive aspects of the present system. Fair and vigorous competition is the foundation of our economic system and government created monopolies are no less offensive to our economic system than privately created monopolies. I, therefore, would like to urge this subcommittee to consider certain amendments to S. 2125 to assure that the actions of the federal government provide the maximum possible competition in the development of these lands. With these considerations in mind, I would propose that S. 2125 be amended as follows: (1) All new permits should be awarded on the basis of open and corn- petive bidding with an express requirement limiting the number of slopes within any given geographical area that can be held by any one corporation or individual; existing permits should be renewed only after open and com- petitive biding with due regard to the compensation of the previous permit holder for the fair market value of the existing improvements; (2) The "associated businesses" should be separated out from the basic ski lift operations, and the right to conduct such businesses should be awarded on a competitive basis with all possible steps being taken to provide for the maximum possible competition; (3) The provision contained in S. 2125 requiring a public hearing prior to any increase in charges to the public should be modified to provide guide- lines for determining how such rates ought to be calculated as well as for a formal hearing before an impartial hearing examiner; (4) The present thirty (30) year maximum term of a permit ought not be extended to fifty (50) years as now provided in 5. 2125; (5) There should be a requirement that the Antitrust Division of the United States Department of Justice provide both Interior Committees with a report regarding the anticompetitive consequences of each permit in which the Forest Srvice proposes to award more than 1280 acres to a single individual or corporation. With these few changes I feel that 5. 2125 will provide a sound basis for the development of a vigorous and healthy system for providing the best posible variety of skiing facilities and services to the public at the most reasonable cost. PROPOSED AMENDMENTS TO S. 2125 Add to Section 1(b): (4) "local government" means each and every county or municipality in which all or part of the commercial outdoor recreation ski facility or related project is to be located; (5) "appropriate state agency" means the state agency designated by state statute for this purpose of the state in which the commercial outdoor recre- PAGENO="0205" 201 ation ski facility is to be located, or in the absence of such designation, the governor or his designee; (6) "independent ski instructor" means any person who instructs skiing for hire on or partially on Forest Service property that is designated as a commercial outdoor recreation area, and who is neither an employee of the primary permittee nor the area ski school; (7) "associated businesses" means any commercial services or facilities to be located or conducted on the permitted National Forest lands, except ski lift facilities; (8) "competitive bidding" means the highest dollar bid by any responsible bidder, whose proposal is consistent with the general development of the commercial outdoor recreation ski facility. Amend Section 3(a) (2) (A) as follows: Delete the language "one thousand two hundred and eighty" and substitute "eighty." Amend Section 3(a) (2) (B) as follows: Delete the word "five" and substi- tute "two." Amend Section 3(d) as follows: Delete the word "fifty" and substitute "thirty." Ad as new Section 3(h): The Secretary shall immediately notify the ap- propriate state agency and the local government whenever consideration is given to the development of comercial outdoor recreation ski facilities and shall include the appropriate state agency and local government in any plan- ning efforts related to the development of commercial outdoor recreation ski facilities. No permit shall be issued unless it complies with all applicable federal, state and local plans, regulations and statutes. Add as new Section 3(i): No permit shall be issued pursuant to this Act without the express concurrence of the appropriate state agency. Add as new Section 10: INDEPENDENT SKI INSTRUCTORS Section 10(a)-Within six months from the date of enactment of this Act, the Secretary, shall publish in the Federal Register and submit to the Con- gress proposed regulations containing guidelines to be employed by him in determining whether a permit shall be issued to an independent ski instructor at any comercial outdoor recreation ski facility which is located partially or entirely on National Forest land. (b) Such regulations shall require proof of ability as a ski instructor, liability and indemnity insurance, but shall in no case require the approval of the permittee operating the commercial outdoor recreation ski facility. (c) The Secretary may also promulgate reasonable rules regulating the manner in which independent ski instructors conduct themselves on Forest Service lands. (d) Each and every permit for a commercial outdoor recreation ski facility isued under this Act shall expressly include a provision recognizing the rights of such independent ski instructors to conduct skiing for hire on the entire commercial outdoor recreation ski facility, including private land and Na- tional Forest land, and agreement to such a provision shall be a condition precedent to receiving a permit for a commercial outdoor recreation ski facility. Add as new Section 11: ANTITRUST Section 11(a)-The secretary shall consult with the Antitrust Division of the United States Department of Justice and give due consideration to the views and advice of that Division in the formulation and promulgation of rules and regulations pursuant to this Act, and in the issuance and renewal of permits under this Act. (b) At least sixty days prior to any submission required under clauses 3(a) (2) (A) or (2) (B) of this Act, the Secretary shall advise the Antitrust Division of the United States Department of Justice of the proposed permit, together with his detailed findings as to the terms and conditions he proposes to impose upon the permit applicant. Any response received by the Secretary from the Antitrust Division shall be included in his submission pursuant to clauses 3(a) (2) (A) and (2) (B) of this subsection. 67-512 0 - 76 - 14 PAGENO="0206" 202 (c) The Secretary may not issue a permit pursuant to this Act to any person, association or corporation, which, directly or indirectly, has an interest in any other ski area, any part of which is located within 50 air miles of the area encompased by the proposed permit. (d) Permits for the operation of associated businesses on Forest Service lands shall be awarded on the basis of competitive bidding, with no preference being given to the commercial outdoor recreation ski facility primary per- mittee. (e) Nothing in this Act shall be deemed to convey to any person, association, corporation, or other business organization, immunity from civil or criminal liability, or to create defenses to actions under any antitrust law. U.S. SENATE, COMMITTEE ON INTERIOR AND INsULAR AFFAIRS, Washington, D.C., February 26, 1975. Hon. JOHN R. MCGUIRE, Cli'ief, U.S. Forest Service, 12th and Independence Avenue SW., Washington, D.C. DEAR CHIEF McGuiaE: It has come to my attention that several ski corporations in Colorado-Vail Associates, The Aspen Ski Corporation, and Aspen Highlands- have applied to the Forest Service for authority to increase their present $10 daily ski tow ticket rates to $12. This rate, of course, is a sizeable percentage increase. I am quite concerned over the continuing rise in the cost of this important Colorado recreational activity to consumers. I fear that, if the present trend continues, it will be priced out of the reach of the average citizen. Indeed, I suspect the present rates already preclude participation by many Coloradoans and out-of-state visitors. For this reason, I am requesting that you initiate a careful study of the applications of these firms before you grant their request and would appreciate receiving a report of your findings. I am particularly disturbed to learn that the financial information submitted to the Forest Service to justify requested increases in rates, such as these, are withheld from the public under provisions contained in your special use permit contracts. I would like to see this changed in all such future contracts and a vigorous attempt to renegotiate existing contracts in this regard. I find it difficult to understand why any contract involving public lands should not, by their very nature, be made public. It would seem to me to be only proper that the financial justification for such rate increases be made available for public inspection and, if necessary, public hearings. Only this way, I feel can the public be assured that the requested increased revenues are necessary for the continuation of normal operations and needed improvements. I understand that the decision on whether or not to grant the current rate increase requests is to be quite soon. I would appreciate it, therefore, if you would look into the matter immediately and either delay the proceedings until more information can be made available to the public or adequate justification can be given to satisfy the very real concerns of myself and many of my constituents. You will agree, I am sure, that it is always important for government to protect the consumers' interests wherever possible. In my opinion, this respon- sibility is absolutely mandatory in matters involving the oversight of public lands entrusted to the Forest Service. Best wishes. Sincerely, FLOYD K. HASKELL, U.S. Senator. U.S. DEPARTMENT OF AGRICULTURE, FOREST SERVICE, Washington, D.C., March 11, 1975. Hon. FLOYD K. HASKELL, U.S. Senate Dear SENATOR HASKELL: This is in reply to your February 26 letter and one from Mr. Kenneth A. Senn of Aspen, Colorado. Both letters express concern over proposed lift ticket and season pass prices at some Colorado ski areas. Departmental regulations require that concessioner services and facilities be made available to the user at reasonable rates. Accordingly each National PAGENO="0207" 203 Forest concession permit provides that user charges are subject to Forest Service review. Each Forest Supervisor is responsible for these reviews within his area of jurisdiction. When price changes are proposed which involve more than one operation, as is this case, State-wide or industry-wide studies are instituted by the Regional Forester so that a broad market base can be estab- lished. Just such a study is underway. Since many operators are already making plans for the next ski season, we can expect decisions on the pro- posals to be made shortly. You will be interested to know that requests to institute the new rates for the remainder of this season have been denied for both Aspen and Vail. The development of skiing in Colorado has been made possible by the pri- vate individuals or corporations who have invested millions of dollars in facilities. Private enterprise cannot, of course, continue to serve the public without a reasonable profit opportunity on its investment. Naturally there is a profit variation influenced by such variables as managerial ability. We do not feel we should either limit or guarantee a particular level of profit. We do, however, feel that pricing should reasonably reflect the added cost of doing business and that it can legitimately be passed on to the user. When an operator serves the same number of customers with no additional investment, a raise in price to the user to simply increase profit would gen- erally be disallowed. On the other hand, we would not restrict profit if it was the result of efficiencies in management, economics in operation or an increase in number of participants. We are mindful that any program involving price control is quite complicated and that there are no easy answers. In that respect, we are most interested in the studies being made and will assist and counsel the Regional Forester so that local decisions reflect consistency as well as equity. We are quite concerned about making public the specific financial infor- mation about individual operations. Over the years, we have developed a level of confidence and trust with our concessioners which has allowed us to study and respond to the financial world they live in. This has been developed by maintaining, as confidential, all financial information secured. We have and will continue to make public the results of studies reflecting average or industry-wide data in a manner that individual respondents cannot be identi- fied. Useful information regarding appropriate levels of fees for the use or data to analyze proposed changes in charges relies on this confidentiality. Further, exposure of individual private costs and operating procedures could place that permittee in an unfair position vis-a-vis competition. We believe there are sufficient factors including the market place which will assure a range of ticket rates in Colorado. This, we hope, will allow a maximum number of skiers from different economic levels an opportunity to participate. Those enterprises which provide more and higher quality facilities and services will naturally command higher prices. Thank you for the opportunity to comment on this important matter. We will, as you suggest, monitor i~arefully the appropriateness of decisions issued in the field and be alert to any needed adjustments. JOHN R. McGunm, Chief. Senator HASKELL. I should have introduced the gentlemen with me. On my left is Mr. Quarles, counsel for the subcommittee. On my right is Mr. Loesch, who is the minority counsel for the Interior Committee. Also present in the room is Mr. George Tourtillot from the Forest Service, who will be glad I am sure to answer any questions. Also, if anyone wants a copy of the hearing record, if you will sign up at the table just outside the hearing room and leave your address there, you will receive a copy of the hearing. NOW, our next witness is the Honorahie Tom Croak, the county commissioner of Summit County, who also represents the Northwest Coimcil of Governments. It is nice to have you here. PAGENO="0208" 204 STATEMENT OP TOM CROAK, COUNTY COMMISSIONER, SUMMIT COUNTY, REPRESENTING THE NORTHWEST COUNCIL OP GOVERN. MENTS Mr. CROAK. Basically, as far as the Northwest Council of Govern- ments is concerned, this statement was adopted a.fter three drafts and much discussion on the 26th of September, about a week ago. Basically, one of the principal things, we can generally support the bill with the one main exception I think, and that is with regard to what we fear will be the creation of .another Federal governmental. regulatory agency. I think from the comments that were made at the meeting the consensus was that Federal regulation in many areas has been* a pretty dismal failure. I think we have recently been attempting to get passenger rail service to the western slope through the Moffat Tunnel and so forth, and there we are dealing with the PIJC and I think the ICC has some influence in that area also. Our efforts have been a total failure at this point. Senator HASKELL. I should point out, Commissioner, that right now we do have regulation of charges by ski industries, but that we don't know on what basis it is conducted, so we are really talking about a choice between a present regulatory system which nobody can find out how it is operated, and some other. That really is the choice. Mr. CROAK. Right. I would say that here I am dealing specifically with Summit County, and to refresh your memory perhaps that we have four ski areas in Summit County. We have Breckenridge, Arap- ahoe, A Basin, Copper Mountain, and Keystone. I notice that none of them are charging the same rates this year. The highest rate is $10 per day. The lowest, I believe, is $6.50, if I recall correctly from the paper. Senator HASKELL. None of them are owned by the same group, isn't that correct ~ Mr. CROAK. That's correct. The Aspen Corp. owns the Brecken- ridge Ski Area.. which has the lowest rates in Summit County, and Ralston Purina owns Keystone Arapahoe and Copper are owned by other people. I'm not sure. who. Senator ~ Here is. wher~ you might find that you have honest. competition and not go any further. Mr. CROAK. We sort of feel that way. I think of the experience we have had in Summit County, admittedly we don't sit in when they are setting the rates and so forth, which maybe would not be so good, I don't know. Would any system of regulation work is the question, particularly at the Federal level. Admittedly, these are Federal lands and the Nation obviously has a very, very deep interest in the matter and should be interested in protecting the consumer. We in Summit County are certainly interested in protecting the consumer also, in that the visitors that come to Summit County, whether to ski or to recreate on for the most part 80 percent of Summit County's Federal land, come there, and. that's our basic economy', really. We have a healthy agricultural economy, which is ve~'y,; very sr~all, so w~ definitei~ want the lands managed, properly. We want the ski areas to operate as well as possible The question is PAGENO="0209" 205 whether or not the establishment of regulatory skiing could effective- ly do that. Another thing that we suggest is this statement as an amendment to the bill has to do with the fees that the permittees, the ski areas, are charged by the Federal Government. In other words, what they have to pay the Federal Government. We would like to see that per- haps increased, so at the same time we would like to see it go directly to local government to meet some of the added costs that we incur in helping to make the Federal lands accessible to the citizens of the Nation, and I think this is a real service that we are performing and it's very difficult to do when we have about 20 percent of the county that is subject to ad valorem taxation and at the present time get approximately 25 or 30 percent of the fees that are taken~ but they are pretty minimal. I think in our budget for our year we are anticipating $150,000. Senator HASKELL. I think, Commissioner, this is something that came through loud and clear at the hearings in Aspen, that you have a business operating on real estate that's not on the tax rolls but causing in your case the towns in your county have to supplY the water, fire, police protection, and the like, and yet you don't have the benefit of taxing the real estate upon which it is operating, and therefore some much larger percent of the fee should go to the local government units. Mr. CROAK. We would appreciate it. We do not have a draft of any language, but we would appreciate something along those lines to be included in the bill. We do have very great expenses in order to provide basically a good experience for the people that come to Summit County, visitors that w need to be able to provide that~ and that we need financial assistance to provide it. I might comment also, and I am not sure exactly how the Forest Service does operate on this rate fixing thing, but I would suggest that with regard to the personnel in the Forest Service that we come in contact with dealing at the local government with the Forest Ser- vice, which is the largest landlord in the county, that we have had a great deal of good cooperation from them, from Mr. Lucas to Mr. Evans down to our district ranger, Larry. Larson, that they coopera- ted with us in a great many ways, which I think is beneficial fo us as a local government, but I think at the same time beneficial to those people that are using the national resources through ski areas or wildnerness areas, which we would again like to throw into this bill in favor of that expanded wildnerness area in your bill, too. But, that I think basically is the position that we would like to express, and urge that the Senator and the committee consider that we are kind of in a position that we don't want to kill the goose as far as we are concerned with regulations. Perhaps it is a little bit too simple, I guess you might say, that I wonder what would be really the difference other than that they would, as I think recent publicity with regard.. to the utility companies has shown, just create different sets of books and hire a few more accountants to justify different accounting methods to show that they are losing money and they do need to raise rates. I think that they were charg- ing off taxes that they are not really paying as justifying an increase in their rates. PAGENO="0210" 2O~ Yet, I dont't like to be cynical about. it, but .1 think that experience has been not that great as far as really achieving the goals of the regulatory systems that have been enacted, and that they just add another cost to the businesses. Senator HASKELL. Well, I appreciate your remarks on that. We stress that we are regulated now, but the question is we don't know how. I would like to comment on one part of your statement. You* have mentioned a possible change in section 7, to permit the bill to override the provisions of the United States Code which require that the funds which go to the States can be spent only for roads and education. I would agree with you 100 percent. As a matter of fact, I have drafted legislation to do this for oil shale and have got it passed through the Senate three times, and I am going to do the same thing in this case. Thank you very much, Commissioner. Mr. CROAK. Thank you very much, sir. [The prepared statement of Mr. Croak follows:] STATEMENT o' Trio~&~ E. CROAK, CHAIRMAN OF THE SUMMIT COUNTY BOARD OF COMMIssIoNIRs, ON BEHALF THE NORTHWEST COLORADO COUNCIL OF Gov- ERNMENTS AND ALSO ON BEHALF OF SUMMIT AND EAGLE COUNTIES, INDIVID- UALLY The Northwest Colorado Council of Governments, Colorado Planning and' Management Region XII, is comprised of the' six counties of Eagle, . Grand, Jackson, Pitkin, Routt and Summit and the twenty-two municipalities `there- in.. The region contains approximately 75% of all ski capacity in the State of Colorado. For this reason, it is approporiate that we present testimony at this hearing concerning Senate Bill 2125. Colorado's. Ski Industry has grown drastically during the last fifteen years. Existing communities have expanded, new communities have been created and significant sOcial and economic impacts have occurred as a result of the industry's growth. We would like to present for your consideration these comments concerning use of the public domain for recreation. Because of the existence of the ski industry, we have seen many. of our communities achieve a stable economic basis. Cultural activities, such as the Aspen Institute, The Keystone Center, and the Vail Symposium, provide opportunities for access to services which did not exist before. The Industry has attracted top caliber administrative personnel, who have made positive contributions in both the public and private sector, in improving the capabilities of local government and business. In most cases, a healthy. relationship exists between local government and the indus- try working in partnership with the federal government to meet the nation s recreation requirements. Significant improvements in public services and ptilities have been funded to a large extent by the presence of the Industry. The many recreational activities available in our region, including ski areas, have brought many new permanent residents to our region as well as n~iany vacationing visitors. This ingress of people has and does strain our local governments' financial ability to provide public services. There is no provision in the pending Bill concerning increased funds for local government. Increased funding would enable local governments to better serve the needs of visitors using the nation's recreational lands and facilities. erequest that a section be added to. the Bill providing for the return to the local governments affected, of all permit fees collected and that they be set at a level which will pay the proportionate share of local government costs attributable to the ski industry. The addition of such a section will require the changing of Section Seven to permit this Bill' to override present provisions of the United States Code which requires that. such funds `be spent for roads and education. . . We also :~equest that a section' be' added to the Bill to provide that the industry may maintain speciai rates. which customarily are offered to orga- PAGENO="0211" 207 nized groups, such as school sponsored physical education programs and special group discounts for the handicapped, underprivileged and similar organizations. . Section 4 and subsection 2(c) (1) of the Bill are a first step in establishing a regulatory agency such as the I.C.C. or F.P.C. Although such agencies were established with good motives, their performance in protecting the consumer leaves a great deal to be desired. There is not sufficient evidence at present to believe that the controls proposed would achieve the goals suggested. We oppose the inclusion of Section 4 and Subsection 2(c) (1). With the exception noted and the additions suggested, we strongly urge that Senate Bill 2125 be passed. Senator ETASKELL Now we start with the private witnesses, and 1 would remind each of you of the 5-minute time limitation. The statements will be concluded in full in the record if they can't be completed in 5 minutes. Our first witness will be Dr. Lewis Perl of the National Economic Resea.rch Associates of New York City. Dr. Perl, it is a pleasure to have you here. STATEMENT OP DR. LEWIS PERL, VICE PRESIDENT, NATIONAL ECONOMIC RESEARCH ASSOCIATES OP NEW YORK CITY Dr. PERL. Thank you very much, Senator Haskell. I very much appreciate the opportunity to appear here and testify with regard to S. 2125. Before presenting my testimony I would like to say that I am here on my. own behalf and that I don't represent any organized group of skiers or the ski industry. The recent rise in ski rates in the Aspen ski area has raised a storm of protest. Why has that been the case? Daily rates have risen from $10 to $11. It seems to me in this inflationary period hardly anybody views that as extraordinary. On the other hand, the season skier finds this year he must pay $500 and $750 a year for what they were paying $250 a year last year. This represents something between a 200 and 300 percent increase. It is this change of rate structure which has aroused the wrath of skiers in the area. The question is, is their complaint legitimate? Secondly, we can reason- ably expect 5. 2125 to alleviate that grievance? I will try to summarize briefly because the time is short and other people have commented on may of these issues. I would like to comment on two aspects. First, I think it is worth considering whether the structure of the ski industry and its competitive industry structure justifies regulation, and, secondly, if there is to be regula- tion, I would like to suggest one kind of thing in addition to that. The conclusions of my review are despite the competitiveness of the ski industry nationally, the local market is not sufficiently com- petitive to assure reasonable rates for all skiers. Secondly, it seems to me that S. 2125 could alleviate this difficulty, but only if it included a provision for nondiscriminatory rates in addition to providing for reasonable rates of return, and, finally I would like to point out that I think regulation of ski rates if it is done in an equitable and reasonable way is an extremely costly proposition as we who work in the utilities industries have found out, and you might want to consider ways in which the Forest Serv- ice regulation could be altered to encourage increased competition and thereby obviate the need for regulation. PAGENO="0212" 208 Senator HASKELL. Similar to what Mr. Hill suggested ~ Dr. PERL. Yes, since it is a point I .think not brought out by others I would like to elaborate on the principle of nondiscriminatory price a little bit. I think it is confused with the idea that rates have to be uniform. I think it does not mean. that at all. It rather means the rates for individual users should bear some reasonable relation- ship to the individual users on the slopes, since the skiing is really a multitype industry, not ony ski lessons but skiing of varieties of different sorts. Simply assuring the rates of return are adequate doesn't necessarily assure that each of the rates that make up. that overall rate of return will be equitable and you can have a situation in which one class of skiers are in effect subsidizing another class. Just very briefly, I would like to comment on the relevance of nondiscriminatory prices. As regards the season pass, season passes in effect form a volume discount for skiers. The ski corporation it seems to me treats it as simply a discount it graciously gives to the local area to be taken away with some discreation. In reality it seems to me it is an effect of the price that emerges under competitive circumstances and therefore has a legitimate place in the structure. A season skier poses smaller administrative costs of the ski area, reduces the risks of the ski operators, improves their cash flow position, and I think most importantly has a far better load factor on the slopes, to use a term familiar to the utilities, than does the daily user. By that I mean much more use occurs during the off period. The question of this in the electrical situation is a critical one for setting rates. Clearly the capital costs much more frequently function than off season and costs of skiing ought to reflect that differential. I think this goes to a point you raised both in your introduction to the bill and your comments earlier. One way I think of dealing with the difficulty of skiing becoming so expensive that it is be- coming priced out of the range of low-income skiers is very simply defined peak and off-peak differentials which provide the opportunity for the low-income skier to ski during the off season period or for skiing during the peak periods. If I might, I would like to elaborate for another minute on this question of the competitiveness in the rate structure, because I do think that when you begin to become aware of all of these rate differentials and reasons for rate differentials the costs of providing regulation becomes apparant, and the utilities industry, taken col- lectively, spends several billion dollars a year in the process of setting adequate rates, and it doesn't seem to me the process of setting rates in the ski industry is inherently less complicated than that. It does seam some alternatives here are, one, in the process people have mentioned before attempt to make that hearing process simple enough that people can get into the ski business, and it seems to me that. as it becomes more complicated it certainly favors the wealthy, large ski operator, who understands the process. Secondly, it seems to me that it would be desirable in this bill that you have suggested to have a dual rate structure or a dual rate review process, one in which you consider the question of whether the areas are adequately competitive to begin with, and having PAGENO="0213" 209 resolved that question satisfactorily, there might be no need for rate regulations, and so there my testimony I think supports the point you are making, but the last point I would make, and I think it supports Mr. Hill's earlier remarks, is that there ought to be pro- visions in the regulatory procedure which actively discourage the Forest Service from permitting multiple ownership of ski areas by single owners. It seems to me the process now is designed to en- courage that, and if it could be discouraged it might be cheaper and better to get more competition. Senator HASKELL. While I am extremely interested in your presen- tation, there is no question about it that the bill I think is effective maybe not in other regards, but certainly in insuring uniformity o~ rates. What would you suggest-let's assume, or let's make the assump- tion that we can adopt Mr. Hill's suggestion and your suggestion and that we not have multiple ownership, but we really have a situa- tion such as we have in Summit County, where we have four ski areas operated by four different people. That seems to be quite ideal, but suppose we come to the very difficult situation, which might be the case, for example, in Sun Valley. I don't believe there are any ski areas in the vicinity, and I suppose the fOlks in Sun Valley have pretty much of a monopoly and can charge whatever they want. What standards then would you apply for determining the adequacy or inadequacy of rates generally? Would there be some standard you would require? Dr. PERL. Well, I think this principle that I am alluding to of no undue discrimination or rates that bear a reasonable relationship to costs is about the closest I can come~ I must say as I circulated this testimony among my colleagues, they all agreed these are difficult principles to apply in actual practice. I don't think there is any way around that. I would like to make one point on this, if I may, and that's one of the controversies that came up in Aspen on Saturday and was this question of whether discounts are consistent with nondis- criminatory pricing. The ski corporation pointed out at one time they had distcount rates for schoolchildren and it still has discount rates for older people and there is a discount for employees, and the Forest Service in its provisions said that was clearly discriminatory and they ought not to have that. I dOn't think those based on cost dif- ferentials would consider those groups and nevertheless I think there is no reason not to have them. The point I would like to make is that rate regulation in the ski industry ought to be setting maximum rates for individual classes of users and not minimum rates,. and that, secondly, rate of return, acceptable rate of return, should be based *on maximum rates. If a ski operator decides he wants to cut his own profits and offer skiing to some class of users at a cheaper rate without penalizing any other class of users that's his prerogative. He is paying for it and I don't think there is anything inconsistent there. Senator HASKELL. Thank you, Dr. Perl. I look forward to reading your testimony, and if you have any specific changes in the bill itself, I would appreciate it if you would submit them. Thank you, sir, very much indeed. [The prepared statement of Dr. Perl follows:] PAGENO="0214" 210 TESTIMONY OF LEWIS J. PERL Senator Haskell, ladies and gentlemen. My name is Lewis J. Perl and I am Vice President of National Economic Research Associates, an economic consulting firm located in New York, Washington, Los Angeles, and Philadelphia. Our firm specializes in the areas of rate regulation, antitrust economics, labor economics, and the economics of energy and the environment. I very much appreciate the opportunity to -. appear before you today to testify on Senate Bill 2125. Be- fore presenting this testimony, I would like to say that I am appearing here at Senator Haskell's request and that I do not represent any organized group of skiers or the ski industry. I am an avid skier and part time economist and I am very much interested in the principles of regulation as they might ap- ply to the ski industry. The recent rise in ski rates in the Aspen ski area has raised a storm of protest. Why? Daily rates for skiing have risen from $10.00 to $11.00. I doubt that a 10 percent increase in the per diem rate strikes anyone as outrageous. However, season ticket holders skiing 50 days or more per year find that they now must pay $500 to $750 per year for what formerly cost them $250. It is this change in the rate structure which has aroused the wrath of skiers, particularly those in the local area. Is this grievance a legitimate one? If it is, can one reasonably expect Senate Bill 2125, if PAGENO="0215" 211 enacted, to eliminate this grievance? These are the questions I would like to address inmy testimony. I would particularly like to comment on two aspects of Senate Bill 2125. First, I think it is worth considering the general question of whether rate regulation can be justi- fied in the ski industry given the structure of this industry. Second, I would like to suggest some general principles of rate regulation which might be applied in setting rates for the ski industry. My conclusions are: 1. Despite the competitiveness of the ski industry nationally, the local market is not sufficiently competitive to assure reasonable rates for local skiers. 2. Senate Bill 2125 could alleviate this diff i- culty, but only if it included a criterion for nondiscrimina- tory rates in addition to providing for reasonable rates of return. 3. Regulation of ski rates could be a very costly proposition and the Senate might also consider ways in which Forest Service regulation could be altered to encourage in- creased competition. One part of Senate Bill 2125 calls for criteria to be established for the regulation of rates charged consumers by the ski operators who lease federal lands. Clearly, there can be no legal question as to the ability of the federal government to regulate these charges in this way. However, there will be those who will argue that regulation is PAGENO="0216" 212 inappropriate or unnecessary given the highly competitive nature of the ski industry. Since there are at least 900 ski operators in the United States, the contention that this is a competitive industry seems, on its face, reasonable. Indeed, if one considers the world market for skiing, which is the relevant market for some purchasers of ski services, the num- ber of competitors grows even larger. - Despite the large number of firms, however, I think that the contention that competition is likely to work suff i- ciently well in this industry to assure a reasonable relation- ship between the rates charged for ski services and the cost of those services is misleading. This is true for several reasons. First, the quality of the commodity or service being supplied varies widely from ski area to ski area. Many ski areas are appropriate only for intermediate or novice skiers, whereas others are suitable only for advanced skiers. Consequently, the market for skiing of a given quality is considerably more limited than would appear from the national market. In addition,.many ski areas--particularly on the far East and far West Coasts--have become extremely over- crowded or have unsuitable ski conditions much of the year. Consequently, the market for high quality, relatively un- crowded skiing conditions is also limited. Finally, and I think most important, while some skiers are willing and able to travel widely in search of good skiing conditions, for PAGENO="0217" 213 others the market is much more limited to areas within a short distance from their home. These people may have chosen to live near a ski area in order to be close to high quality skiing and consequently have a high investment in that ski area, or their income may be insufficient to permit wide travel in search of good ski conditions. For these people, the national market is irrelevant and the relevant market consists only of ski areas within a short travel distance of their homes. While in the East even this market may be highly competitive, in the West good skiing areas are more widely dispersed and less numerous. Consequently, the number of competitors is severely limited. Thus, the market for skiing services may be viewed as one which is partly competitive for one class of customers and highly monopolistic for another class of customers. Even this market restriction would present no seri- ous difficulties to the establishment of a competitive price if skiing services were a homogeneous commodity and if ski services, once purchased, could be transferred among users. Under such circumstances, a single price would exist for all ski services and that price would be the competitive price. In the case of skiing, since the service is not transferable from user to user, it is possible for multiple prices to emerge and while competitive conditions for skiing conditions may prevail in one market, monopoly profits may be earned in another. If the objective of the Forest Service is to assure PAGENO="0218" 214 reasonable rates for all users, then either rate regulation or increased competition in the local skiing market is essen- tial. Assuming that there is to be rate regulation for that part of the ski industry operating on federal land, I would like to address the question of appropriate criteria for setting rates. Senate Bill 2125 explicitly mentions the provision of a reasonable return on equity as the basis for setting both leasing fees and rates, but leaves other cri- teria to be established by the Secretary of Agriculture. I would like to suggest an additional principle which might well be included in the legislation and on the basis of which more detailed specific regulations might be developed by the Forest Service. This is the principle of "no undue discrimi- nation" in setting individual skiing rates. While not neces- sarily always given the same definitions by practitioners, this principle certainly is a common one in utility rate regu- lation. Its application would not mean that the prices for ski services must be uniform, but simply. that the prices charged for individual skiing services must bear a reasonable relationship to the cost of providing those services. This principle would provide a mechanism for establishing an equi- table price structure for skiing services. In this regard, I think I should point out that much of. the debate in Colorado over the appropriateness of rates currently charged appears to be less concerned with the PAGENO="0219" 215 overall returns earned by the ski corporation than with the equitability of the rate structure. Having stated this prin- ciple, I think it is worthpointing out that establishing nondiscriminatory rates is likely, in practice, to prove to be extremely difficult. The true economic cost of supplying skiing services is likely to vary with the specific slope being skied upon, the time of the day in which the skiing occurs, the time of the year in which the skiing occurs, the volume of a particular skier's use in any one day and in the season, and in the intensity of that use. Assessing how costs would vary with each of these factors can be extremely complicated. On the other hand, establishing a rate struc- ture which ignores these factors is an important cause of community dissatisfaction with the rate structure and with skiing conditions. Some examples may serve to illustrate this point. Prior to the most recent proposed change, the structure of rates in Aspen provided a flat rate of $10.00 per day for skiing. A $7.00 half-day rate (beginning at 1:30 p.m.) was available and there were modest discounts on four-day and six-day ski tickets. A $250 season pass was available which permitted unlimited skiing, except for 20 to 30 days at the height of the season. In addition, there was a discount pass for $100 which enabled skiers to purchase daily passes for $5.00 per day on all slopes. In addition, there were discounts for children, people over 65, students, and PAGENO="0220" 216 employees. Is this rate structure unduly discriminatory? If it is the case, as some argue, that the true costs a skier imposes on a ski area are directly proportional to the number of runs he takes in a single day, then the rates are, at least in one sense, discriminatory. People who by their nature ski at a leisurely pace and therefore take few runs are being overcharged. People who make a large number of runs are being undercharged and, in fact, the rates ought to be charged, if possible, on a per ride basis rather than on a per day basis. If one accepts the notion that charges for skiing can best be allocated on a per run basis,. it is probably the case that the user that chooses to buy 100 rides does not im- pose 10 times the cost of the user who chooses to by 10 rides. This is presumably the basis for the volume discounts associ- ated with weekly or season passes and the disparity in costs per ride associated with half-day and full-day tickets. The high volume user imposes proportionally fewer administrative costs, improves the ski area's cash position and, in the case of season passes, significantly reduces uncertainty which thereby improves planning. If the decline in cost per ride which occurs as usage rises is rather pronounced, even the volume discounts which have existed in the past may represent discriminatory pricing against the high volume user. On the other hand, if costs decline only modestly with usage, the reverse might be the case and historic rates may reflect PAGENO="0221" 217 discrimination in favor of the high volume user and at the expense of the low volume user. It is clear, then, that the question of whether ski rates are discriminatory cannot be resolved without a careful study of costs and their relation- ship to volume of use. Costs may also vary in a ski area among the various types of slopes being used and the types of people who ski on these slopes. Thus, it is often alleged that maintenance costs per skier are likely to vary with the steepness of the slope and the intensity with which the slope is used. If some slopes within a ski area are steeper or more intensively used than others, it might be desirable to establish rate differentials for using these areas. Uniform rates in all areas would discriminate against skiers using low cost areas in favor of those using high cost areas. The cost of skiing services may also vary depending upon the time of the day and the time of the year. This is because the volume of demand for skiing services is likely to vary with time. Cost will vary with the level of demand for at least three reasons. First, as the volume of demand on a particular slope increases, operating costs of the slope may increase as additional maintenance may be required to main- tain slope quality. Second, if increasing demand for the slope produces crowding, the crowding itself will reduce the quality of the skiing experience. Thus, once crowded condi- tions occur, one of the costs imposed by each additional 67-512 0 . 76 . 15 PAGENO="0222" 218 skier is the reduced quality of the skiing experience for other skiers. The third aspect of the difference in costs between high demand and low demand periods can best be seen by dis- tinguishing between the average and the incremental costs of supplying skiing services. In computing average costs, one simply divides the total cost of supplying all skiers by the number of skiers involved. In computing incremental costs, one determines the effect on total cost of a unit increase in the number of skiers to be serviced. As a general rule, rates based upon charging all users the incremental costs of supply will produce a more efficient level and distribution of usage than if rates are based upon average costs. As demand for a ski area increases, up to a point this demand can be accommodated, without reducing skiing quality, by increasing the facilities in the area--building more liftlines, opening new trails, etc. In planning capital additions for ski slopes, these additions are sized to accom- modate peak demand for the ski area. As peak demand increases, additional capital facilities must be built or new ski areas opened. Thus, the incremental cost of serving an additional unit of demand during peak periods of usage include the costs the capital facilities needed to serve the greater peak demand and thus, ski rates duringperiods of peak demand should re- flect these costs. During off-peak periods, when demand is less than what the ski area can accommodate and still maintain PAGENO="0223" 219 desired quality, the cost of additional skiing demand does not include any capital costs since incremental skiers can be serviced without increasing capital expenditures. Rates during off-peak periods should reflect only the additional costs associated with operating existing facilities. Thus, during periods of *slack demand, a ski operator could shut down particular ski lifts and save on the operating costs of those lifts and the maintenance costs of the slopes which they serve. As demand increases, additional lifts can be opened, thereby increasing operating costs. Charges during these off-peak periods should reflect the incremental cost of operating additional lifts. This difference in the cost of serving peak and off-peak demands is to some extent reflected in the current pricing structure in that season tickets are not applicable during particular seasons of the year, thereby requiring the season ticket holder to pay an additional cost for using the slopes during those periods. Discriminatory pricing may nevertheless exist in that only high volume ski users (those that buy season tickets) are charged differentially during different seasons of the year. Low volume users (those that pay the per diem rate) are charged the same price regardless of when they engage in skiing. Moreover, even such differ- ences in rates which do existby time of year may not reflect the true cost differential between the~ supply of skiing serv- ices during those periods. Finally, if there are variations PAGENO="0224" 220 in skiing intensity during the course of the day, these are not reflected in a measurable rate variation. If historic rates raise questions about discrimina- tory pricing, the rate increase for the coming year clearly intensifies those questions. While the per diem skiing rate has been raised only 10 percent (from $10.00 to $11.00), the rate for a season ticket used in the off-season has risen far more dramatically. In~ place of a $250 charge for unlimited. skiing in the off-season, there is now a $200 charge ~ a per diem rate of $3.00 to $8.00, depending upon the slope used. Thus, a skier who used the slopes 50 days per season and used only the Aspen Highlands ski area would now have to spend $500 to purchase what he formally got for $250--a 100 percent increase. A higher volume user who skied exclusively on Aspen mountain would suffer an even higher rate in increase. On the other hand, if one had previously skied during peak periods of usage, the rate of increase in charges is more modest. A user who previously had a season pass and skied 50 days off-season and 30 days peak-season would spend $750 to ski. The same ski- ing pattern this year would cost $840--a 12 percent increase-- even if all his skiing were on Aspen mountain. Thus, the ef- fect of the current rate increase is markedly to reduce the historic differences in rates between high and low volume use and between peak and off-peak use, while increasing the cost disparities among ski areas. Since costs are unlikely to have changed in so dramatic a fashion over a single year, this clearly PAGENO="0225" 221 reflects not a shift in costs but~a change in rate philosophy. While it is impossible without a detailed cost study to determine which of these structures is the more discriminatory, it is hardly surprising that so dramatic a change in rate structure occur- ring without public hearing or justification would bring about widespread disaffection of local skiers. What I hope to suggest by these comments is that many of the issues which are currently being raised over the equitability of rates charged by ski operators really reflect the question of discriminatory pricing. If the legislation is to deal effectively with these issues, it should include as one of the criteria for ratemaking, the principle that rates charged for skiing services should bear a reasonable relationship to the incremental cost of supplying those serv- ices. If this situation is not already sufficiently com- plicated, let me add an additional area of difficulty. In his introduction to the legislation, Senator Haskell raised the problem that total ticket prices for ski areas have risen to the point where it is very difficult for a family to ski. Undoubtedly, this difficulty increases depending upon the size of the family and its income level. Nothing we have said to date will necessarily solve this problem. Thus, even after establishing an efficient set of prices such that people are actually charged the true cost of serving them, it would continue to be the case that the costs of going skiing would PAGENO="0226" 222 be a greater burden on the poorer than the well-off and, for a given level of income, a greater burden on large families than on small families. Of course, if in the past rates have been. too high because they have supported unreasonable rates of return or rates charged particular users have been too high because they have been discriminatory against, nondis-. crirninatory pricing and reasonable rates of return will tend to mitigate against this problem. But the problem of the relative difference in the burden of prices on low income and high income families will not necessarily be solved. I do not really have any solution to this problem but I would like to suggest two generalizations about it. First, it is a problem which pervades any pricing system and would exist with the same force if skiing services were supplied in a completely competitive market. It is my general feeling that this problem can most efficiently be solved, not by manipulating the prices of individual goods and services, but rather by using taxing policy to redistri- bute income. Consequently, I would caution against including in the legislation or in the ultimate guidelines for setting rates any criteria which distinguish between one group of rate payers and another, solely on the basis of differences in their ability to pay. . . However, having said this, I think, one should recog- nize one particularly difficult anomaly with regard to the setting of skiing rates. While most skiers prefer uncrowded PAGENO="0227" 223 skiing conditions to crowded skiing conditions, the amount which people are willing to pay to avoid crowding is likely to vary from skier to skier. Consequently, the optimal number of skiers using a slope is likely to be an issue about which little consensus can be achieved. Clearly, if one is willing to tolerate relatively crowded skiing conditions, it is possible to have low costs and low rates for skiing. Maintenance of uncrowded conditions will increase these costs. Consequently, the Forest Service, in setting appropriate ski rates, should give substantial consideration to the equity consideration of.alternative definitions of optimal ski con- ditions. One final comment. As this review makes obvious, the problem of setting cost based rates is intensely compli- cated. Regulated industries such as telephone and electric utilities spend billions of dollars each year on the question of appropriate rate policy and this question is really no less complex in the ski industry. It may well be that the Forest Service, despite the best of intentions, is not capable of setting nondiscriminatory ski rates without an un- reasonable investment of time and effort. As an alternative, a program might be developed to encourage more rapid develop- ment of new ski areas and to assure wide distribution of, ownership in these areas. The result might be sufficient competition among local areas to assure a reasonable rate structure. PAGENO="0228" 224 Senator HASKELL. Our next witness' name was inadvertently omitted from the witness list. Dr. Richard G. Walsh, who is a pro- fessor of economics at Colorado State University. STATEMENT OF DR. RICHARD G. WALSH, PROFESSOR OP ECONOMICS, COLORADO STATE UNIVERSITY * Dr. WALSH. Thank you, I am grateful to be here. I would like to comment briefly on inflation and the cost of skiing and then the proposal in that inflation that it is not just lift tickets, it is lodging and a number of other things, and then I would like to comment on the Forest Service policy with regard to fees and on the nature of the subsidies that the Forest Service grants or other uses and re- sources near Forest Service land. I would like to say something about the need for public disclosure in your bill with regard to such things as lift capacity. I would like to comment on pricing, as Dr. Pen, and then something with regard to existing Forest Service policy. Senator HASKELL. Please bear in mind the 5-minute limitation. Dr. WALSH. I am sorry. The main thing was what appeared in Skiing magazine, that skiing costs in Aspen have been running at a percent greater than overall costs, and it is not only lift tickets, it is in the area of lodging and other areas. Most ski area operators do-or, excuse me, not most, a good proportion, 37 percent, do have land development operations at their base for commercial and resi- dential purposes and condominium purposes, but the main point in my presentation, sir, is that I think the Forest Service should con- sider including revenues from land development and rental revenues from lodging in the determination of lift ticket prices for now these very large external benefits- Senator HASKELL. Now. wait a minute, suppose they had land losses? Would you then make the skier pay for the land losses? Dr. WALSH. No, I don't think so. Senator HASKELL. I think you can't have it both ways. Dr. WALSEL Okay, perhaps my thinking on this is not really developed. I really don't know how to put it. I searched a number of pieces of literature in the area of land resource development and regulation and I just don't know how this could be done, but I feel very strongly that large external benefits of Forest Service lift ticket resources are captured by a few fortunate individuals and this inflates ski lift ticket prices artificially, and I believe the principle of equity suggests that part of this appreciation of land values and land improvement should accrue to society, at least to the extent that society's resources create these values, and this external value is similar to grazing permits, which are bid-in prices. Now, the other point I want to make is that the need for informa- tion as to utilization of capacity and how that affects cost, it seems to me on the basis of model plans that I developed, research that I have done, that if you increase the use of ski lifts by 20 percent, and many areas increased the use of ski areas by more than 20 percent last year, then you get something like, and this is very rough, you get something like a 6 or 10 percent reduction in the cost of opera- PAGENO="0229" 225 tions. It seems to me that cost ought to be taken into account when the Forest Service makes decisions about~ ski area pricing. I think with regard to peak pricing that those people that benefit from the peak, say, during the Christmas holiday, ought to pay according . to principles developed in other industries, ought to pay a larger proportion of the overhead costs than those users that pro- vide the skiing during the entire season and ought to be charged the direct varying price, and this is an established principle in regulatory pricing, and I think that this results in much less capacity and much less overhead and less need for increase in ski area prices. Another problem that I do want to mention is that the agency has the jurisdiction over the large development, over a large block of land, but they do not have jurisdiction as I understand it over existing land developers when these are scattered. There are a number of them involved. When the land developers are not the person operating the ski area, then I think your bill ought to remedy that problem so the Forest Service can influence the land developers, because they affect the overall cost and efficiency and overall efl~ects of the operation just as much as do the decisions of the initial lift developer and initial developer of the base commercial area. I think in the long run in an era of resource scarcity and limits of growth that it is very important to consider ways to reduce the investment and reduce the costs of skiing in our society, because if the industry is going to prosper and grow over the next few decades it will be necessary to limit investment and costs, because the way it is going now it is one of the highest users of irreplaceable resources and recreational activities. Senator HASKELL. Thank you very much for your comments, and your statement, of course, will be included in full. I would like, to comment that one of the purposes of the bill is one of the things that you suggested, and that is that before a permit is issued a land use plan prepared by the local county or counties and satisfactory to the Forest Service be adopted to take care of just the situation you were talking about where either the owners of the area themselves or somebody else would go in and construct facilities which would place an intolerable burden on public services-perhaps some kind of real estate development. The bill's provisions may not be suf- ficiently rigorous, but that's certainly the intent. Dr. WALSH. Yes, sir; I agree with that very much. Senator HASKELL. Thank you for appearing very much indeed, sir. [The prepared statement of Dr. Walsh follows:] PAGENO="0230" 226 TESTIMONY AT HEARINGS OF THE SENATE INTERIOR SUBC0MMIT1~EE ON THE ENVIRONMENT AND LAND RESOURCES, ON S 12690, A BILL TO PROVIDE FOR THE ISSUANCE OF PERMITS ON PUBLIC DOMAIN NATIONAL FOREST LANDS FOR COMMERCIAL OUTDOOR RECREATION FACILITIES AND ACTIVITIES, AND FOR OTHER PURPOSES. DENVER, OCTOBER 6, 1975. I am grateful for the opportunity to comment on the proposed legislation. My name is Richard G. Walsh. I am a Professor of Economics at Colorado State University in Fort Collins. My work is primarily in recreation economics and consists of teaching, research and consulting governmental agencies. Most recently, I completed studies of land development near the base of several ski areas in Colorado. Areas studied were Aspen, Estes Park, Breckenridge- Dillon, Steamboat Springs, and Vail. In my testimony, I will draw on the findings in several of these ski areas and on other research that I have done on the costs of resort and ski area operations. Inflation in the Cost of Skiing The average total cost of skiing has been increasing faster than the rise in the consumer price index since 1968. Skiing costs including lodging have risen at a rate nearly 50 percent greater than the index of all consumer purchases. The consumer price index rose by about 55 percent from 1968 to 1974 compared to the costs of skiing at Aspen which climbed 81 percent over the same period of time (Farwell, Ski Area Management, Fall, 1974). Most (92.5 percent) of the Aspen skiers were out-of-state so this comparison does not apply to Colorado resident skiers, for which data are unavailable. The concern about the high cost of skiing in Colorado has led the U.S. Senate to schedule these hearings on a proposed bill to provide full disclosure of the relevant economic data and to allow for more public input in rate making decisions by the U.S. Forest Service. My studies suggest that the price.of PAGENO="0231" 227 lift tickets is only a part of the problem of increased costs of skiing. Costs of condominium ownership and of rental by skiing families are also important. Of 132 ski areas responding to the 1974 survey (Goeldner, Eco- nomic Analysis of North American Ski Areas, 1974), over one-third (37 percent) were engaged in land development, either second home, condominium or commercial land development at the base of their ski slopes. Average total revenue from real estate sales and leases exceeded revenues from ski lift operations, $780,700 compared to $686,500. In addition, over one-fifth of the ski areas surveyed provided lodging accommodations, with average revenues of $214,800 equaling nearly one-fifth of revenues from ski lift operations. The Forest Service should consider including profits from land develop- ment and.rental revenues from lodging in the determination of lift ticket prices. For now these external benefits of Forest Service administered resources are captured by a few fortunate individuals. This inflates ski lift ticket prices artificially. The principle of equity suggests that part of appreciation in values of land and improvements should accrue to society to the extent its resources create these values. This external benefit is similar to the benefit of grazing permits on Bureau of Land Management land, which are bid into the prices of ranches holding BLM permits. At a 1974 cost of $205 per day for a family of 3, skiing in Colorado is becoming less and less accessible to the out-of-state middle class. Con- dominium ownership reduces this cost somewhat. The lodging portion of the average costs per day for Aspen skiing families was $50. Condominium ownership ~in three areas, Vail, Steamboat Springs, and Breckenridge-Dillon, reduced this average of $37 per day. This was about $5.00 per day more than the average rental rates charged for the same condominiums of $32.17. This weights PAGENO="0232" 228 winter and summer rates by owner use in the two seasons. Lodging costs of owners in Breckenridge~.Di11on at $63.60 per day were more than double the rental. alternative, with costs $36.80 more than average rental rates of $26.80 for the sane units. The situation in Vail was in sharp contrast to this. Vail owners have had free use of their condominiums in the past. In 1973, their condominium benefits contributed $10.50 per day of use toward other recreation and.travel expenses. In Steamboat Springs, lodging costs to condominium owners were $11 per day less than the weighted rental rates of $40.50 for the sane units. Nearly 40 percent of the skiers interviewed rented a condominium, compared to 44 percent who rented a lodge, motel, or hotel. Average daily rental rates for the condominiums surveyed were $40.50 in the winter ski season and $23.40 in the summer season. Vail had the highest average winter rates with $51.00 and Breckenridge-Dillon the lowest with $30 per day. Steamboat Springs winter rates were $50. Vail had the lowest summer season rates with $21.50 per day compared to $24 in Steamboat Springs and Breckenridge-Dillon where opportunities for summer recreation may be somewhat greater. The lower summer rates in Vail may also reflect the fact that they were more successful in obtaining renters who occupied the units for longer periods of time. Forty- four percent of Vail rentals were for 180 days or more, while this was the case for only 23 percent of Breckenridge-Dillon and 13 percent of Steamboat Springs rentals. It seems ironic that these savings tend to go to families whose ability to pay is much greater than for most skiers. Skier incomes tend to be above average U.S. household income. Yet, incomes of condominium buyers in Colorado ski areas were even higher than for skiers. Approximately one- half of Aspen skiers had incomes of $25,000 or greater, compared to nearly 90 percent of the condominium owners we sampled in the three study areas. The estimated average income of Aspen skiers was $40,500 compared to $56,400 for PAGENO="0233" 229 Table $. Average annual costs of condominium ownership under recent increases in investment prices and alternative steady and falling investment price trends, Breckenridge- Dillon, Steamboat Springs, and Vail, Coloradol/ Costs Under Alternative Price Trends Breckenridge- Dillon Steamboat Springs Vail Areas Combined Average Total Costs Per Year $5,488.25 5,910.31 7,481.59 $5,310.35 6,776.66 8,470.10 $5,532.49 6,865.71 8,786.78 $5,501.06 6,352.15 8,050.08 Inflationary Prices Steady Prices Depressed Prices Average Total Costs Per Day 129.75 139.72 176.87 187.64 239.45 299.30 . 147.83 180.20 230.62 142.51 164.56 208.55 Inflationary Prices Steady Prices Depressed Prices Average Lodging Costs Per D~y~/ 63.62 73.76 110.90 29.45 81.26 141.10 (-10.47) 21.90 72.32 37.23 59.29 103.28 Inflationary Prices Steady Prices Depressed Prices `fAnnual occupancy was slightly higher for respondents included here who gave complete cost information than for the entire sample of 99. Breckenridge-Dillort: 42.3 days of owner use, 60.7 days of renter use; Steamboat Springs: 28.3 days of owner use, 46.4 days of renter use; Vail: 38.1 days of owner use, 133.4 days of renter use; and Areas Combined: 38.6 days of owner use, 79.9 days of renter- use. - 2/To calculate average cost per user day, divide through by average household size of 3.0 in Breckenridge-Dillon, 3.4 in Steamboat Springs, 3.7 in Vail, and 3.3 overall. PAGENO="0234" 230 condominium owners, Fully 20 percent o~ the skiers had incomes below $15,000 compared to only two percent of the condominium owners studied. If future prices were to stabilize eliminating benefits from annual appreciation in investment values, costs of lodging to condominium owners would rise to $59.30 per day, or $27 more than weighted rental rates for the same units. Vail owners would still incur costs about half those of renting but costs of Breckenridge-Dillon and Steamboat Springs owners would be more than twice those of renting. If the economy became depressed and the market price of condominiums fell 5 percent annually,1 lodging costs to owners would rise to $103.30 per day, or $71 more than weighted rental rates. Under these conditions, Vail owners would incur costs $32 per day greater than rental rates for the same lodging. Breckenridge owners would pay $84 per day more than the renting alternative. Steamboat Springs owners would pay more than $100 per day over rental. Governmental Subsidies to Condominium Devel˘pment Land developments near the base of ski areas in Colorado have received subsidies from various units of government.. The estimated subsidies to condominium owners totaled over $2,000 per year or over $8 million annually in the three study areas. Careful consideration should be given to whether these subsidies achieve socially beneficial results, and whether they should be continued in the future. Local units of government in these areas provide a property tax subsidy estimated at approximately $520 per y~ar~ Thi is the difference between the was reported this summer that prices on vacation homes including condowiniums were running 10 to 15 percent less than in 1974 (Business Week, 1975). PAGENO="0235" 231 average actual level of 1.2 vs. 2.5 percent (Shelton, Land Economics, 1968) for residential property elsewhere in the nation, on $40,000 market value. This affects the ability of local government to provide necessary services. Reassessment is underway in some areas. The Federal and State income tax laws allow deductions of property taxes and mortgage interest, and a proportion of operating expenses and deprecia- tion, up to total rental income. This subsidy was estimated as an average of $785.70 in the three study areas, and nearly $1,300 annually in Vail. There were some offsetting operating costs from rental use, not separable in this study. With a total of 4,145 condominiums in the three study areas, the U.S. Treasury provided about $3.3 million in 1972-1973 to help these rather high income investors buy their condominium properties. In Vail with 1,500 condominiums in 1972-1973, the subsidy was estimated as nearly $2.0 million. Congress may ponder whether to continue the deduction of property taxes and mortgage interest on a second home. In addition, a question may be raised whether any portion of operating costs and depreciation are reasonable deduc- tions on second homes rented out only 80 days per year, the average reported in the three areas. The Federal and State income tax laws also allow capital gains income to be taxed at 50 percent of the tax rate on ordinary income of individuals. This would have averaged at least $648 annually in the three areas, a minimum of $894 in Vail. This subsidy, like the others, is limited to individuals who can afford to invest in real estate, and discriminates against lower and middle income taxpayers whose ordinary income is primarily salary or wages. The Federal and State income tax laws also allow deduction of the cost of travel for business purposes. This subsidy was estimated as $41 per household annually. It averaged $124 in Vail and $63 in Steamboat Springs. PAGENO="0236" 232 A substantial part of the travel by condominium owners in Steamboat Springs and Vail was for business purposes, a minor part of which was to attend con- dominium association meetings and inspection of property. Recently, IRS tightened up allowable travel deductions for condominium ownership meetings and property inspections. Overall, business purposes accounted for 28 percent or two trips by condominium owners to Vail, and 18.4 percent or one trip to Steamboat Springs, but only 9 percent or one trip to Breckenridge-Dillon where most Denver residents engage in year around recreation on weekends. In comparison, a sample of all Aspen skiers showed that business purposes accounted for only 12 percent of their trips (Goeldner, The ~ Skier, 1974). Existing Forest Service regulations with respect to development of ski areas provide a subsidy to owners and developers of private land at the base of ski lifts which are located primarily on public land in the West. Forest Service fees average 2 to 3 percent of gross. receipts from ski lift tickets, ski school and equipment rental, based on the proportion of the lift on public land. This allows base area developers to capture a substantive external benefit from land development. The extent of this subsidy is not known. It would be the annualized difference in the value of land and improvements with and without the opportunity ski on public land nearby, all other things equal. No information was collected in this survey on condominium develop- ment in mountain areas away from ski areas on public land. However, most Dillon condominiums were located a considerable distance (5 to 10 miles) from the Breckenridge Ski area, while most Steamboat Springs and Vail condominiums sampled were within walking distance of the ski slopes there. Comparing Dillon to the other areas provides a very rough estimate of the extent of this Forest Service subsidy to base area condominium development. The differ- ence in the market value of condominiums annualized at 8 percent was $384 PAGENO="0237" 233 for Steamboat Springs and $1,152 for Vail, compared to Dillon, This cannot be considered more than a mere estimate because the proportion of sample condominiums located in Breckenridge and Dillon has not been determined, quality and size varies among areas, and although Dillon condominium owners cannot walk to a ski slope, they can drive to several in less than 20 minutes (Breckenridge, Keystone, Cooper Mountain, Arapahoe Basin, and Loveland). Energy Conservation Condominium owners and skiers who live out of state consumed considerably more energy in travel than those who live in Colorado. Future governmental policies to conserve energy may reduce less essential long distance travel. This could lead to fewer out-of-state skiers in Colorado, with more downhill and cross-country skiing closer to home. Skiers and condominium owners commonly reside in either (1) Denver and drive to the slope on the weekend, or (2) in the Midwest or East and fly in several times a year staying about a week each time. If each household spends 38 days per year at the ski area (Vail, for instance), the Denverite makes about 19 trips while the distant owner, if from Washington, D.C., may make five trips. With average household size at three, and plane occupancy rate at 50 percent, a travel energy consumption per skier-day can be computed: the Denver condominium owner will use 420,000 BTU's per skier-day. The Washington, D.C. owner consumes 4,447,000 BuT's per skier-day. Despite the fact that the owner living 1,800 miles from Vail only makes five trips per year, his energy use is more than 10 times greater than the Denver owner. The travel energy consumption of a condominium owner from Chicago, 1,100 miles away, is 6,5 times that of the Denver skier. The average condominium owner in the three study areas traveled 1,100 miles round trip, thus his travel energy consumption was 3.25 times that of th Denver skier. 67-512 0 - 76 - 16 PAGENO="0238" 234 . Passenger Mode Energy ~ Intensiveness at 100% Load ~ Average Load~ 1970 (o)~ In at Energy ~ tensiveness Average Load Average Speed (mph) Bus 740 46 1.600 45 Railroad 1,100 37 2,900 40 Automobile 1,600 48 3,400 -50 Air 4,100 49 8,400 400 1BTU per passenger-mile. See: (1) Hirst, Eric and John C. Moyers, "Efficiency of Energy Use in the United States," Science 179:1299-1234, 1971; (2) Hirst, Eric, "Transportation Energy Use and Conservation Potential," Science and Public Affairs, Bulletin of the Atomic Scientists 29:36-42, 1973; and (3) Giller, D.P. and K. Luszczynski, "Lost Power," Environment 14:14-22, 1972. Utilization of Lift Capacity There is a need for public disclosure for each division of the ski cor- poration the average total revenue, operating expenses, and the allocation of overhead costs. One important application of such information would be to the question: what are the differences in average cost per skier a-tributable strictly to differences in degree of lift capacity underutilization, and not to differences in size of operations, use of obsolete technologies, or substandard management practiced? U.S. Forest Service data show that Vail operated at 75.7 percent of capacity on its peak day in 1973-1974, Aspen Mountain at 54 percent, Breckenridge at 49.8 percent and Steamboat Springs at 57.8 percent. Utilization of lift capacity was substantially less during the rest of the year. Whether these levels of underutilization of lift capacity, even considering growth last year, should be rewarded with higher lift ticket prices seems questionable. A possible exception is Vail, with about 76 percent utilization of capacity before the growth last year. PAGENO="0239" 235 Also, in a year when utilization of ski areas increases by more than 20 percent as it did in a number of Colorado ski areas in the l976~l975 ski season, economies are realized through increased utilization of existing lift capacity. To estimate the extent of cost savings attributable to this growth in skiing, I developed budgets for hypothetical ski areas using the best available estimates of resource requirements and prices for resources. Hypothetical ski areas of varying sizes were developed in much the same way that an engineer bidding for a construction contract designs a proposed bridge, and estimates the cost of constructing and operating the finished product. This approach was adopted because full cost data are currently unavailable from either the Forest Service or the individual ski corporations. My best estimate from the application of the budgeting technique is that a 20 percent increase in utiliza- tion of ski lift capacity would reduce costs by 6 to 10 percent. This seems to be a large enough savings to offset substantial increases in costs of labor, materials and other costs affected by inflationary pressures. Moreover, the policy of granting the Aspen Ski Corporation a competitive price rise' under conditions where their operations are earning substantial profits, seems questionable.. The practical effect is to make ski ticket prices sufficient to cover the costs of the least efficient competitor. This is hardly a viable standard for public decision making in a competitive economy. Peak Load Prn Another important application of information about operating and overhead costs of ski corporations is to peak load pricing. Most ski areas have a dis- tinct seasonal peak, or series of peaks as, for example, during the Christmas holidays. For purposes of rate making, the peak is defined as those days in which the lift capacity is operated at or close to maximum available lift capacity. PAGENO="0240" 236 Standard models for peak load pricing allocate overhead costs to the peak hours. No capacity costs are assigned to off peak consumption, which is instead charged off peak operating or variable costs. This suggests that the Forest Service should explore the merits of a variable pricing schedule in which regular off peak skiers would pay lift ticket prices substantially below those paid by peak load skiers. This is because peak skiers require substantial investment in lift capacity which stands idle or only partially used during most of the ski season. Also, under peak load pricing, total lift capacity may be substantially reduced. Less capacity is required to meet demand under peak load pricing systems than under uniform pricing systems, as consumers shift from peak time skiing to Off peak skiing to save money. Interest Costs Another important application of information about the operating and overhead costs of ski corporations is to interest on borrowed money. When the prime rate declined recently, interest charges on borrowed capital should have fallen substantially. Colorado Businessmagazine (Sept.-Oct., 1974) reported that Vail paid 12.75 percent interest to the United Bank of Denver, about $427,000 on their investment in 2,200 acres at the base of the proposed Beaver Creek ski area. This was reported as three-quarters of a point over the prime interest rate. When the prime rate fell to 8 percent, interest on borrowed money should have fallen by about one-third (31.4 percent). So long as the Forest Service ski area rate making process takes place under a cloak of confi- dentiality, neither Congress nor the consumer will know whether reduced interest charges are taken into account in lift ticket pricing. Forest Service Policy The Forest Service has the responsibility to consider ways to protect the public interest in moderate costs of private land development and construction PAGENO="0241" 237 of seasonal housing units in mountain subdivisions at the base of ski areas on Forest Service administered land.2 Priority should be given to develop- ments offering medium-priced accommodations and ski services, to both skiers and employees~ The Forest Service can influence the availability of low and medium priced accommodations (condominiums, lodges and apartment rentals) serving some ski slopes on Forest Service land. The agency has jurisdiction over the original ski slope developer who may own a substantial portion of the private land located at the base of the ski slope. However, when ownership of much of the base area land is in the hands of others, the Forest Service may have little or no influence on development decisions. The proposed Senate bill should remedy this deficiency. Meanwhile, other government agencies and private interests should cooperate with the Forest Service in planning low cost housing for skiers and employees and their families, and necessary public services. Local housing codes can require new construction of large condomin- ium or lodge complexes to include quarters for employees and their families. To the extent that increased summer rental of condominiums and lodges in ski areas occurs, it may result in losses of revenues to summer resorts located wholly on Forest Service administered land. The Forest Service has written into its regulations the obligation to consider the effect of its actions on existing concessioners. In an era of resource scarcity and limited growth in the U.S. Economy, forms of outdoor recreation should be encouraged that do not require large 2UPriority will be given to developments offering medium-priced accom- modations and services. A National Forest concession is designed and devel- oped to furnish services to those seeking forest recreation. The facilities themselves do not constitute the recreation attraction. Hence, they will be adequate to provide reasonable comfort and convenience, but with no elaboration which would be out of keeping with the forest environment. They will normally offer accommodations at moderate cost, and special justification will be required for a permit covering exclusively high-priced accommodations and services." Forest Service Manual, Section 2344.03. Amend. 31, December 1968. PAGENO="0242" 238 flows of irreplaceable resources or produce severe environmental degradation (Meadows et al., The Limits to Growth, 1972). Many forms of athletics should be encouraged for this reason. Downhill skiing does not appear to qualify under current investment and cost conditions in the three study areas. Ski- ing may rank among the highest users of irreplaceable resources compared to all outdoor recreation activities. If the industry is to prosper and grow in the next few decades, it will be necessary to seek ways to limit investment and minimize costs, while avoiding severe environmental degradation. PAGENO="0243" 239 Senator HASKELL. Our next witness is Mr. Richard Goetzman, president of the United States Ski Association, Los Angeles, Calif. Mr. RICHARD GOETZMAN. Thank you, Senator. Senator HASKELL. We are pleased to have you with us, Mr. Goetzman. STATEMENT OF RICHARD GOETZMAN, PRESIDENT, U.S. SKI ASSOCIATION, LOS ANGELES, CALIF. Mr. GOETZMAN. I am president of the United States Ski Associa- tion, commonly called the USSA. The USSA is composed of nine divisions represenitng all parts of the United States and has a membership of approximately 110,000 skiers. The USSA over, the last few years has been very much involved in many facets of the development of public lands for skiing. The general position that the USSA has taken in regard to S. 2125 has been put together by our staff, by our officers and directors, and specifically those officers and directors that are knowledgeable in the public land areas. The USSA has taken the overall position that we desire to have a bill or rules and regulations for the Forest Service that give the lowest possible cost for skiing consistent with the absolutely best skiing experience. If we follow this preference, it is our opinion that this is best accomplished by the development of an additional skiing facility, winter recreation facilities including both the Alpine and Nordic disciplines. It is our further premise that with the addition of these additional faciliites that the laws of supply and demand and the laws of competition would probably keep the lift ticket prices down to a reasonable level and that rather than having extensive rules and regulations we would prefer to have the laws of competiiton and laws of supply and demand rule. In discussions with our office manager here in Denver, she asked that we comment specifically on several positions or several points made in the bill and that we offer our suggestions if we see that there are other areas that we would like to have covered, so let me with your permission just touch on three or four points within the bill. The USSA is in strong support of your suggestion to increase the term permits from 30 to 50 years. We see that increasing this frankly makes it more bankable. It makes it easier, more feasible for ai~ area operator to go to the bank and to evolve funds that make it reasonable for him to expand his facilities. Likewise, in the acreage, we find it is again a very desirable feature. We are pleased to see the additional acreage proposed under your bill here. It is again our position with this additional acreage again a banker or lender is much more prone to want to make a loan to a ski area. We find that formalizing the situation of having a specific number of acres on a specific term is preferable as against the current situation of the 80 acres and having the balance on the 1-year renewable and revocable permits. It is generally the position of the USSA as far as the public dis- closure and as of the rate increases that we would like to see the PAGENO="0244" 240 Forest Service issue a set of standards or at least guidelines as to how and what the criteria is for issuing various ski area permits, and again we would like to see the Forest Service put in a position or at least again promulgate those rules and regulations they use to find it fairly reasonable to increase the lift ticket price. However, I allow a lift increase. In these days of increasing costs of living, we think it is again reasonable for the consumer to find that we know exactly what the rules or ground rules for these decisions made by the Forest Service are. On the equitable fees, at the current moment it is because of the variety of ski permits that are out very difficult to decide what is a reasonable return, and in your bill, Senator, you have at least what we interpreted as a somewhat of a contradiction in which there is a requirement for a reasonable return to the government and- Senator HASKELL. That part of the bill is erroneous and, as has been pointed out before, it will be changed. Mr. GOETZMAN. All right, fine. I spent quite a bit of time trying to figure out- Senator HASKELL. That was a mistake. Mr. G0ETZMAN. Ok, it would be our position that we would like to see a much larger share of the gross fees to the Forest Service returned to local governments. There is probably little point this morning in my reiterating what has already been said, but these local governments do have substantial additional costs. We would find it desirable that a larger percentage, if you wanted a specific suggestion, it would be our thought 60 percent, go back to the local government. It is also our suggestion that before the Forest Service be required to return to winter recreation, and I again am specifically speaking of the Alpine and Nordic skiing winter recreation, a much larger percentage of overall fees that go to the Forest Service from winter recreation. It is our understanding at the current moment that a relatively small amount of the user fees that are paid by the ski areas on their rate schedules are actually returned to winter recrea- tion, and it seems fairer to us if you are taxing skiers indirectly that the skiers ultimately as the people that are being taxed should have the benefit of those fees. The last point I would like to make this morning is the last section of your proposed bill, and that regards the exclusion of Mineral King. It is our feeling that when you have a general rules and regulations, an organization type bill such as this, that it is prob- ably not appropriate and not in the best interest of what you are attempting to accomplish here by excluding the possibility of issuing a permit to any more than a ski area. As I am sure the Senator is aware, the Mineral King situation is complex. It has been the subject of substantial discussion and substantial litigation and it appears to us probably the best place to solve this situation, rather than any general legisation on this. Senator HASKELL. I quite agree with you. The purpose, of course, of the Mineral King provision is that I didn't want this legislation to have any effect, favorable or unfavorable or in any way, on that PAGENO="0245" 241 litigation, and I was afraid that if we didn't provide a specific Mineral King exclusion the bill might be interpreted as mooting the case one way or the other. If you have got any suggestions as to how we can do it better, please let me have them. Mr. GOETZMAN. Well, it appears to me that there are periodically bills that crop up in Congress that either address themselves favor- ably or unfavorably to the Mineral King situation, and that where we have a general organization of rules and regulations bill such s this, it doesn't appear that't the appropriate place. Senator HASKELL. Well, I don't want to affect the Mineral King litigation in any way, shape or form. I don't think it is appropriate that the legislation do that. The intent was not to affect it. Mr. GOETZMAN. I see. We have difficulty ascertaining the exact intent here. It was our feeling that this could very easily open up a Pandora's box in which some small special interest group that didn't want a ski area or a winter recreation area in any one location would very easily find it appropriate and based on this precedent to exclude it and be included in some future language. Senator HASKELL. Please submit some language to keep Pandora's box closed then. Mr. GOETZMAN. It will be our pleasure. Thank you very much. Senator HASKELL. Thank you very much for coming to testify. Our next witness is Lou Bowids, president of Rocky Mountain Divi- sion of the U.S. Ski Association, Denver, Cob., accompanied by Marion Robels, Randy Boyd and I~land Sedberry. They are with Thorne Ecological Institute, THK, Inc., and Southwest Ski Council, respectively STATEMENT OP LOU BOWLDS, PRESIDENT, ROCKY MOUNTAIN DIVISION, U.S. SKI ASSOCIATION, DENVER, COLO. Mr. Bowus. Senator, Mr. Sedberry, I believe, could not be here, but I do have the good fortune of being accompanied by two young ladies to back up my testimony. Senator, the Rocky Mountain Division is one of nine regional divi- sions of the U.S. Ski Association and is a growing organization with over 12,000 members, 80 percent which reside in Colorado. Our or- ganization speaks for a wide segment of the skiing public, as our membership ranges from ski town inhabitants, flatland ski clubs, Denver day skiers, to licensed competitors. In addition to organizing all sanctioned Alpine and Nordic ski races in the Rocky Mountains, we are indeed providing a variety of services to recreational skiers. Within the last year, the RMD has recognized a growing need for skiers to be represented on matters of public importance such as this hearing. To this end we have created a Public Affairs Committee to develop the policy of RMD on public issues. It is through their study of 5. 2125 that this testimony has been prepared, and reaching a consensus was not easy. Our group represents skiers with many differ- ent and sometimes conflicting interest. We have, however, determined a policy which speaks to the needs of all skiers insofar as that is possible We appreciate the opportunity to express our opinion on the draft legislation now being studied by your committee PAGENO="0246" 242 The Rocky Mountain Division applauds your interest in resolving the problems which currently concern all of us who have an interest in the sport of skiing. That sufficient ski area terrain be developed to meet the ever-growing demand is among the vital concerns of the RMD. Hopefully our comments on S. 2125 will help develop a policy which will both protect our mountain environment and recognize the need for further recreational development. We read with interest your comments in the Congressional Record regarding this legislation. We too feel it is time to require that ForestS Service policies regarding the issuance of special use permts be re- viewed. As a spokesman for skiers,' the RMD is also aware that skiers are asking to have a voice in determining that policy. We must question, however, the. transfer of authority from the. Forest Service to Congress which is inherent in this bill. It is our opinion that the interests of the public would be better served by requiring a reevalu- ation of Forest Service policies. The questions we are considering today are complex. Even those of us who have watched the development of skiing in this region for over 30 years have had difficulty staying abreast of the changing picture within the sport. We must conclude, then, that the U.S. For- est Service, with its long experience in dealing with all aspects of the management and development of public lands, is the most quali- fied body to determine policy. We feel, however, that Congress should give some direction in the following areas. There is a glaring need for the permit process to be streamlined. The conflict between its two primary goals, to protect the environ- ment and to provide for the public demand for recreational facilities, has caused problems for developers. As a group of sportsmen~ we are concerned that future development continue, but that it be along prudent and proper lines. We stress that those who wish to invest in the prudent development of recreational facilities `must be en- couraged. No provision of 5. 2125 speaks to current problems caused by the need to invest large sums of capital before a developer in any way is assured a permit will be issued. Consider the dual problem illustrated by the investment of approximately $1 million by Vail Associates in the preliminary phases of Beaver Creek. Fewer and fewer investors are willing to risk that level of capital commitment without some assurance that a permit will be issued. Yet, it is equal- ly difficult for any government agency including the Forest Service to refuse a. permit to an organization with that level of investment. As you can see, the current system defeats both purposes of the per- mit process by pressuring the permit decisions made by the Forest Service and discouraging future investment. The RMD feels that this should be an area of your concern. There is also a need for includ- sion of State and local government in the decisionmaking process and in determining policy. As we understand it, there is currently a system for determining the fees charged to permittees based on a percentage of the permit- tee's return on investment. We also understand that about 25 percent of the fees collected are returned to the counties based' on the amount of public land and use within that county. We would like to see that situation reversed, with the impacted counties receiving 75 percent of the fees charged for ski areas. The PAGENO="0247" 243 concentrated development characteristic of destination areas requires a high level of public services to be provided by communities and counties. Yet these services are used primarily by out-of-State skiers. This point can be~ illustrated by the difference in services needed at the day skier areas like Loveland Basin and a destination area such as Aspen. We acknowledge the need of counties to raise funds for these secondary effects of ski areas. Currently within the State, it has been proposed that counties be allowed to levy a tax on amuse- ments to cover these costs. The RMD feels that a much more equit- able approach would be for a larger portion of the fees paid by ski areas to be* returned to the counties. After all, the need for recrea- tional facilities is a national need, and if that need is to be metS the counties which are impacted need national support to deal with those impacts. A tax on amusements also taxes the State and local residents who are already bearing increased tax assessments due to the increased value of their property. This situation has been espe- cially difficult for long-time residents of ski towns who wish to re- main in their homes, yet must bear the higher levels of taxation. We also suggest your committee investigate the feasibility of a national recreational license covering all sports on public lands. Such a license could be sold annually to sportsmen and women over 16 years of age. Revenue would be returned to the counties where public lands are located on the basis of the amount used. Many of our members are rightfully concerned that they are about to be priced out of their favorite sport. Thus, the RMD is extremely concerned that lift ticket prices be fair and equitable. We therefore applaud your interest in public hearings. We are concerned, however, that as written the bill would create an untenable management situ- ation and add to the price the. consumer must pay for skiing. We recommend that public hearings should not be required in every case, as the bill would now provide, but should be scheduled when a re- quested rate increase is out of line with the cost-of-living index, for example, or when initiated by the public. In the area of public involvement, the RMD has as one of its primary aims the creation of an enlightened public. As you are no doubt aware, the information used in making lift ticket pricing de- cision is already available to the public through the Freedom of Information Act. We believe this makes the public disclosure portion of the bill unnecessary and could in fact develop a conflict- IBell rings.] Senator HASKELL. I'm sorry, I don't know whether your fellow panelists are going to testify or not, but you have an aggregate of time, 15 minutes between the three of you. I don't know how you would like to divide it up. Mr. BowLDs. I have a very short summary. Senator HASKELL. Go ahead, and we will charge your associates. Mr. Bowiis. Thank you. We also fear it will result in increased costs to skiers through the prices they pay for lift tickets. It is our concern that any regulation of the ski area operators be done in a way which does not increase costs to the skier. Hopefully, through our monthly newspaper and other media, the RMD hopes to develop an informed public. In this way, we hope to make our contribution to the quality of input expressed at these PAGENO="0248" 244 public hearings. On the positive side, we do support the extension of permit lifts from 30 to 50 years. We would suggest, however, that a 5-year review policy be instituted so that out-of-State conditions of permits could be brought in line with present situations. The bill, however, does not in its present form speak to many issues which are at the heart of current difficulties. No consideration is made of the secondary growth caused by ski areas. This is the issue which is causing all the problems in ski area development. Likewise, no consideration is given to how much secondary growth, normally on private land, is to be paid for. We have suggested possible meth- ods through the fee structure and recreational license. It is our hope that this issue will be an area of further concern for those of you on this subcommittee. Skiers are deeply concerned about the effect of rising energy costs on their ability to enjoy their sport. The RMD is test-marketing a scheduled bus service for Denver skiers, but those who come to the Rockies from out of State face ever-increasing transportation cost. We fear that in the future it may be the cost of energy and not the price of lift tickets which will be the primary concern of skiers. Hopefully your committee will investigate the effects of this problem on the national need for recreation. In summary, the Rocky Mountain division, ironically representing the group which should most benefit from this legislation, must op- pose this legislation in its present form. Over the past 30 years we have watched the improvements made by the private investors on public lands. We have seen gondolas replace rope tows and trail grooming become a common practice. These things have come about through fierce competition between areas, not Government regula- tion, a.nd in the face of a recession the ski industry continued to grow. It is in the best interest of all skiers that ski area growth continue and we need more development of public land for recreation, and the RMD favors action which will attract private capital to ski area development. We have given you a synopsis of the concerns of skiers for the future of their sport. We hope Congress will look to the long-term health of the ski industry and institute policies which require re- evaluation by the Forest Service of their current policies. As a group which is vitally concerned on the issues we have discussed today, we wish to thank you for the opportunity to be heard, and I would just like to add as a private citizen with over 25 years of participa- tion. in the sport it is now my concern that it costs twice as much to drive to a ski area as 4 years ago and takes 125 percent longer. This ~s far more serious to the average skier than the slight increase in the ski lift prices, and I think the private citizen would rather see an investigation into the profits of oil companies. I imagine Exxon's oil profits over the last year would exceed ski profits over the next 20 years. Senator HASKELL. I am sure you are right. Mr. BOWLDS. As I am sure I think it would take a lot of guts to in- vestigate the oil iiidustry. Senator HASKELL. That's being undertaken. Thank you~ sir. I would like to make one observation. You say the Freedom of Infor- PAGENO="0249" 245 mation Act allows the financial information to become' public. The Forest Service takes the position that the Freedom of Information Act doesn't do that because they say they are included in the excep- tion for trade secrets and commercial and financial information obtained as privileged or confidential. Therefore, they take the posi- tion that none of it would be made public. Mr. BowLDs. But if there is a genuine reason for needing infor- mation, I believe the law requires it be given. Also, I think- Senator HASKELL. I agree with you, and the Forest Service doesn't. Mr. Bowiis. I see. The point is valid, though, that the ski areas are in competition and anyone who has been around the skiing scene for very long would have to realize there is fierce competition be- tween the various ski areas. Senator HASKELL. Thank you, sir, very much. The ladies? Mrs. ROBELS. I think we are here primarily to clarify any ques- tions you might have from our particular viewpoint. Senator HASKELL. Well, I don't have any right now, and if I have any I will write to you. Mrs. ROBELS. Thank you. Senator HASKELL. Thank you very much. Our next witneess is Merill Hastings, publisher, Colorado Magazine. Good morning, Mr. Hastings. STATEMENT OP MERRILL `HASTINGS, PUBLISHER, COLORADO MAGAZINE AND COLORADO BUSINESS MAGAZINE, LAKEWOOD, COLO. Mr. HASTING. Mr. Chairman, my name is Merrill Hastings. I am the publisher of Colorado Magazine, and Colorado Business Mag- azine. I am here to testify in regard to your proposed legislation concerning the Federal licensing of ski operators on public lands, as outlined in your address to the Senate on July 16 of this year. Accordingly, I would like to place several observations on the record in respect to four separate considerations relevant to the matter under review. First, I wish to state that it is my unqualified belief that the U.S. Forest Service in this region, namely, region 2, headquartered here in Denver, has been conscientiously exercising its local admin- istration and supervision of Colorado ski areas in a highly responsible The skiing public has been the benefactor of this careful practices and as a result Colorado has become the skiing center of our Nation, and in fulfilling this mandate of custody of the public lands, the Forest Service has overseen the development of some of the world's finest ski areas right here in Colorado. The agency's standards of operation and criteria for the permit- tees have been consistently based upon the recreational needs of the skiing public, while at the same time protecting the natural resources of the land. Ski area planning and operations by the private sector have regularly involved Forest Service personnel at regional head- quarters as well as week-to-week on-site activity by local Forest supervisors and district rangers. This is clear both in-season and off-season. The standards of winter maintenance, onsite lifts and PAGENO="0250" 246 restaurants, lift safety, crowd control, first aid, public sanitary facili- ties et cetera are of the very highest and are kept that way at the insistence of the regional officer of the forest service, who constantly watches the daily operations. I don't think anywhere else in our country will one find a recreational business on private or public land where there is greater efficiency of operation or greater run- fling or cleaner services than that which the Colorado ski industry is providing for the winter outdoor enthusiast. As the former owner and publisher of the world s largest skiing publication, for over a decade I covered the ski resorts around the world. Nowhere have I ever observed finer skiing opporturnties, neater sanitary facilities, better food service, better medical assist: ance, than those provided to the American public by Colorado ski operators. I know as a fact from the regional forester right down to the local rangers that the quality of ski operation in Colorado is a foremost concern of that agency's daily administration and super- vision, and not only to the ski areas themselves in the wintertime but national summer resorts for millions of Americans who ride the gondolas and chairs to observe the splendors of the Rocky Mountain West and walk down the carefully maintained, vegetated ski runs, where elk and other wildlife browse. In truth, the development of Colorado ski areas under the aegis of the T5.S. Forest Service has brought a new dimension to the mandates of multiple use, that being recreational enjoyment on public lands with an annual harvest of healthy outdoor exercise and aesthetic privileges which these privately developed ski areas make available to millions of citizens. `~I'his brings up my second point, that of public domain. It seems to raise a specter of private enterprise seeming to raise monopolistic businesses at the public's expense. Such a myth is sheer myth and in truth if examined closely proves to be quite the opposite. Any citi- zen, regardless of race, color or creed and at any income level, whether he be wealthy or on welfare, can go to any one of the Qolorado ski areas and enjoy a full day of skiing at absolutely no expense. He can park his car at no charge, he can put on his skis and walk out onto the clear slopes at no charge. He can climb up the manicured trails and ski down at no charge. He can tour cross- country around the area at no charge. He can use expensive and expansive restroom facilities and get a drink of water and warm his hands and get inside at no charge.~ In fact, he and his whole family can eat luncheon they bring along with them and enjoy spectacular views from outside sun decks and inside modern ski shelters at no charge. He can even fall down and break his leg and get immediate help and first aid assistance at no charge. In summary, the citizen can enjoy a full day of outdoor recreation activity on the snow- covered slopes of the land plus many conveniences and amenities completely free of any cost, yet it is the private developer~ the permitholder, the ski area operator, who makes this all possible by gambling with his investment in the free marketplace that others will come to buy his goods and services so that he may operate profitably withi nthe free enterprise system, all of which allows you or me or anyone else to go to any ski area and enjOy a winter holiday of healthy outdoor activity at no charge. PAGENO="0251" 247 Yet, without this prime investment by the ski operator, such opportunity for this type of winter enjoyment by the public would be greatly limited. The people have always been here. The mountains have always been here and snow has, but not until the private enter- prise came along and developed the areas could the public fully utilize these natural resources. There has been a lot of talk about whether or not private business should have exclusive permits to operate on Federal lands to the exclusion of others, should the permitholder cut the monopoly on the ski school, on the lifts, on the restaurant concessions, et cetera. Yet, it is the ski area operator who has developed the overall facili- ties and his investment must be given some protection or else there is no incentive for him to sponsor a public playground. I am sure the senior Senator from Colorado regularly pays his rent for his office space in the Federal building across the street and I am iust as sure the Senator, even though he is in public service and is rent- ing his office space from the Federal Government, would not allow someone else to come into his office and conduct another business there. One can readily imagine what the Senator's staff might say if one particular morning Representative Bill Armstrong came in with a folding chair and card table and started interviewing his constituents inside your office doors. [Bell rings.] Senator HA5KELL. You weren't in the room, Mr. Hastings, to hear the 5-minute limitation, so go ahead. Mr. HASTINGS. Thank you, sir. In regard to the issuing of permits and fixing of fees charged the public, namely the price of lift tickets. it would seem to me that under our American system all operating figures of a permittee doing business on Government land should be readily available to the public, let alone to a U.S. Senator. If the ski area operator does not wish the surveillance of his business by public exposure, then he has the right of independent election to operate on private land and keep his business strictly to himself. but anyone doing business on, with or through any form of publicly owned resources, namely Federal Government land in the case of the ski industry, elects to relinquish the veil of permanent privacy. However, this should apply only to historical figures of actual oper- ation and contractual agreements. Projected figures and statistics which are not part of the contractual agreement should not be in the public domain, since it would be competitively unfair to require a ski operator to disclose his anticipations. The same criteria should be applied to all private users, Senator, all private users of U.S. Forest lands, and perhaps the Senator may wish to look into the public availability of such figures or lack thereof for the timber industry, mining, and grazing permittees and others operating on Federal lands. In regard to profitability of a ski developer's operation as tied into his permit agreement with the Forest Service, certainly the public price of a lift ticket should remain discretionary so as to complete in the open market as long as there is no conspiracy to monopolize and thereby no violation of the antitrust, but under the present contractural procedures there appears to be a method of evaluation which may be unfair to the public customer. It is called comparability, and ski areas of like profile and amenities have a PAGENO="0252" 248 built-in security guarantee of equal opportunity based solely on similarity rather than on performance and efficiency. Let me quote from a typical current 30-year term personal use permit for ski area operators, and I quote: The character of service rendered and rates charged shall be subject to regulation by the Forest Supervisor, provided that no reduction in rates shall be required that will be below a point necessary for a reasonable return on investment or lower than rates charged by comparable private winter sports enterprises. Such language inadvertently sets up the posture of a potential cartel among comparable ski area operators. Under this method it appears that if the Vail ski area is granted a lift ticket increase by the Forest Service because of a justified financial need, then a com- parable area, say at Aspen, is automatically able to raise its lift rates, quite irrespective of that Aspen area's operating margin of profit, and the Forest Service under the present contractural lan- guage is not in a position to deny such a rate increase. Thus, this void in ticket price determination or actual lack of control through a qualitative practice of comparability destroys the free marketplace and there becomes a~ tendency to have a fixed cost of life tickets at the same price among ski areas of like size. This, of course, is con- trary to the antitrust spirit and lends some veracity to the question of whether or not the big ski areas are benefactors of Government- supported prices in the form of parity. In closing, Senator, I wish to state that the Government itself should not be in the ski recreation business, since already private enterprise is providing adequate opportunity. and benefits through their industry. The ski area operators should be allowed to compete freely and openly in the marketplace with a fair return on their investment, without Government restrictions or regulatory controls. For those in the industry that might feel incumbrance by Govern- ment administration and wish to dissent, let them withdraw from operations on public lands and undertake the same risks of other private business by operating on 100 percent privately owned re- sources, but for those who wish to operate under public scrutiny and compete openly and fairly in the marketplace, then they should be allowed to further develop the public land resources under our free enterprise system in a manner to further increase the opportunities for the enjoyment of public outdoor recreation. Thank you, Mr. Chairman, for this opportunity to testify and a dozen copies of my remarks will be delivered to your Denver office within the next 24 hours. I shall be glad to respond to any questions which you might have. Senator HASKELL. Thank you very much, but just to make an ob- servation, our problem here is not really whether ski area services or Forest Service policing of the services is adequate. The real problem i~ apparent lack of objectivity, uniformity in the Forest Service's anplication of its authority to regulate activities on public lands- That is one of the reasons for this hearing to determine the differences in regulation such as you say where the Forest Service states you have got to charge what the next fellow charges (and I don't think that is in the interests of competition). Our problem is not criticism PAGENO="0253" 249 of the services provided. It is the adequacy of the procedures and policies employed in granting permits and in permitting increases in charges for various service which brings this bill into consideration. I just~ wanted to make that observation, Mr. Hastings. I appreciate your remarks very much. Mr. HASTINGS. Thank you, Senator. Senator HASKELL~ Our next witness will be out of order, but I understand Governor Vanderhoof has a time problem. Therefore, I would like to call Hon. John Vanderhoof, president of Club 20, Grand Junction, Cob. I can see, Governor, that you have been skiing. Hon. JOHN VANDERHOOF. Golfing. Senator HASKELL. Golfing, okay. STATEMENT OP GOV. ~1OHN VANDERHOOF, PRESIDENT, CLUB 20, GRAND rUNCTION, COLO Governor VANDERHOOF. Senator Haskell, I appreciate the oppor- tunity to appear here and be out of order. My name is John Vander- hoof, president of Club 20, which is a. federation of county, city, and business interests of the 21 counties of Western Colorado. Also I work in organizations which have worked very closely with Colorado Ski Country and all of the other ski federations. Our 21 counties do 90 percent of the ski business in Colorado. This is a very major part of the economic viability of the Colorado West. Without this winter business, our great summer business couldn't carry the load that it does, carry the load financially, so that our citizens can enjoy a fairly decent ecenomic level of activity. So, it means a lot to us and it means a lot to us when we try to determine why do so many skiers come to Colorado, and I think Mr. Hastings hit upon it. I know we have the best snows available and some of the best range, but the management of our ski resorts is unexcelled anywhere in the world. Consequently, we wish to do all, that we can to see that we progress and continue to provide the very finest in skiing for the visitors who come to us and mean so much us. You have I think through these hearings and. through some of the activity focused on some problems that ought not to exist in simply granting the permits, the establishment of rates and so forth. Hav- ing served for some period time in governmental management, there is so great a tendency today to throw another law at a problem. I think that when you discover problems they can be attacked admini- stratively, and you certainly have brought it to the attention of the administration and to the department affected that there are some I think very weak points in the establishment of the permits, of the fees: and so forth. To throw another law in frightens me because today in Western Colorado we in attempting to improve our trans- portation systems and trying to develop the energy systems, trying to develop water systems, the little projects that 10 or 15 years ago could be funded and moved ahead now take one, two, three times as long due to the bureaucratic red tape which we go through. A little matter of making a four-lane road out of Steamboat out of the ski area has been tied up now and five lives lost over a 2-year period of time while we go through all the redtape that it takes to get that - 67-512 0-75-17 PAGENO="0254" 250 approval for that type of construction, so to me adding, Senator, another law and another regulation-we never intend for them to grow beyond a certain amount, we think they are going to work very effectively and quickly, but when you get down to the operating end, you will find that most of the laws that we have passed in Colorado or passed nationally have a great tendency to hurt the consumer be- cause by the time we ever get around to coming to the same decision 2 years later the cost is escalating 600. We could have built certain highways, Glenwood Canyon, water projects. Prices have doubled, as you well know, on these projects. I feel the same way if we could invite you to do what you can do to try to improve the administration of the Forest Service. Public disclosure, I think all of these things, can be done and I think you can provide it with the pressure you have brought with these hear- ings and at this time I would make an administrative protest and see if it works, and if it doesn t then it may be necessary to carry through with the law. Thank you, Senator. Senator HASKELL. Thank you, Governor Vanderhoof, very much indeed. I appreciate it very much. Thank you. All right, Richard Peterson, Chairman of the Board of Trustees of Colorado Ski County U.S.A. STATEMENT OP RICHARD L. PETERSON, CHAIRMAN, BOARD OP TRUSTEES, COLORADO SKI COUNTRY, U.S.A. Mr. PETERSON. Senator Haskell, as Chairman of the Board of Trustees of Colorado Ski Country U.S.A., I speak today for the 31 ski areas who comprise the membership of this 12-year-old organiza- tion. You can appreciate, there were some honest differences of opin- ion regarding the various elements of the proposed bill, but to the extent that I have dealt with its~ provisions in my testimony, which I submit and am trying to summarize here, you may consider this the organization's official position on the proposed legislation. On the balance, we believe the bill is a thoughtful piece of draft legislation and incorporates a range of concerns and proposals which represent the public interest, skiers, environmentalists and local and Stat egovernment officials, the management agency, and ski area operators. Perhaps the two provisions which most obviously address the long-term concerns of the ski industry are, first of all, to lift the obsolete 80-acre limitation and, second, to extend the permit from 30 to 50 years. While we note you have questioned the need for a 50-year lease, we think both of these provisions have the effect of providing ski area operators with an essential quotient of long-term security. In order to more fully develop the rationale for these two provi- sions, we have asked officers of a leading regional commercial bank and a prominent regional investment banking firm to address these issues, so I won't go any further on them. I also have some comments in my official testimony regarding re- turn standards. Since other witnesses are also addressing that issue, I shall just state that it is our conclusion and our position that rea- PAGENO="0255" 251 sonable return standards are both unnecessary and nonproductive because we believe in our opinion the free marketplace is working in the ski industry in Colorado. This. is true both for setting of fees paid by ski areas to the Federal Government and to the determina- tion of fees charged to the public. We support wholeheartedly, however, with relationship to our fees that we pay to the Federal Government. The suggestion has al- ready been made to you many times and I have heard it this morn- ing a couple of times that the amount of the fee that we pay that is returned to the county be increased substantially and that the restrictions on those fees, which are now as you know limited to schools and roads, be modified so. that that money can be used for whatever way the county determines is in the best interest of the county. We wholeheartedly support that recommendation and hope that can be put into your legislation. In just a minute I shall read for you a resolution unanimously adopted by the Board of Trustees of Ski Country regarding the issue of public disclosure, but first, let me put it and an allied issue, that of public hearings for rate requests, in some perspective. In reviewing the current language. of 5. 2125, we note that the rate review process provides for public hearings. In our judgment it i~ neither realistic nor feasible to hold public hearings on each and every rate request for the multitude of ski areas in this country who operate on public lands. However, we do believe that the public should have an opportunity to participate in the development of the criteria which you have instructed the U.S. Forest Service to develop, and which we agree shoud be developed, and pursuant to which they shall carry out their administrative responsibilities for the rate review process. We believe, moreover, that the oversight function of the Congress coupled with the financial disclosure provision of the bill is adequate protection of the public interest in providing assurances that feder- ally owned lands are being properly managed and that commercial operations are being adequately supervised. At recent meeting of the Board of Trustees of Colorado Ski Coun- try, the following resolution was unanimously adopted: Resolved that the Board of Trustees of Colorado Ski Country endorses a concept of `publi(c disclosure' of historical financial operating data for those companies which operate wholly or in part on federally owned public lands, and that the industry's specific comments on the precise language of this provision of the bill will be made available for the committee's consideration in time for the Washington hearings. In closing, may I say on behalf of our members that we hope this response and the public disclosures resolution jn particular are inter- preted by the public as a commitment from the ski resort industry of Colorado to have a positive and progressive ongoing involvement in responsible public policy. Thank you for providing us with this opportunity to respond to your inquiries and to make our position a matter of public record. I would be glad to answer any questions you might have. Senator HASKELL. Thank you, Mr. Peterson, very much. The prob- lems that Mr. Evans of the Forest Service has apparently set some standards for declining one rate increase and compromising several PAGENO="0256" 252 others. The question really is what are those standards. Is the industry satisfied with them, and, assuming the industry isn't satisfied with them, what standards would you suggest? I suppose I have asked you several questions in one sentence, but are you satisfied-well, first, do you know what the standards were in establishing- Mr. PETERSON. Well, we received a letter. I think it ~ similar to the one I understand you read in Aspen regarding the kind of stand- ards that he used and looked at, made his judgments on rate requests. I think the problem that you brought out, you know, is that there are no criteria nationwide for the application of these standards and we endorsed the fact the Forest Service has these criteria developed. Senator HASKELL. And what criteria wolud you suggest? Mr. PETERSON. The Colorado ski industry is not as much-we are not in a position to comment on that. We have not had the time to review the kind of criteria that we would suggest. As I mentioned, we endorse the concept of the development act criteria. We will par- ticipate in that and we will make our recommendations at that time. Senator HASKELL. You see, here is the problem, Mr. Peterson. No- body seems to be terribly satisfied with what I consider extremely vague standards articulated by one local forest supervisor-people agree that there is no nationwide determinable standard for review- ing rate increase requests-and yet people don't like the suggestion we have made. If you do have real competition, then that's fine but if you don't have real competition I have suggested reasonable re- turn on equity invested capital and some people have objected to that, but I have not seen anybody come forward yet with what we ought to do. You know, it is easy for folks to say no, but I would like to have some suggestions. Mr. PETERSON. If I could, I would like to-I am also president of Vail Associates. Senator HASKELL. Yes; maybe in that capacity you could speak. Mr. PETERSON. In my opinion, Senator, that is the first determina- tion, and I think you have talked on this several times, whether or not the marketplace is operative and whether or not competition is operative, and as I say it is our opinion and conclusion in the testi- mony that you will see that will follow me that it is operating in Colorado and therefore if it is operating we don't see the need for different standards, so I really haven't carried that thought process any further with regard to that. Senator HASKELL. You know, this is a real problem. I hope you will carry it forward, because you know the individual forest super- visors each adopt their own standards and sometimes it almost ap- pears that they kind of operate on hunches by the seat of the pants and I don't think this is very fair to a ski area nor to the public. What it lends itself to is if you get along with your local forest su- pervisor things are peachy, if you don't get along and you are an operator of a ski area, things are tough. So I would hope that either in your capacity as president of Vail or in your capacity as repre- senting Colorado Ski Country you might come forward for the rec- ord with some suggestions. I realize you can't just manufacture them sitting at that table. It takes a lot of thinking, but I would appreciate some suggestions to solve this problem. I think it would be very help- ful if you could. Thank you, Mr. Peterson. PAGENO="0257" 253 I understand that Tod Martin, who is executive director of Col- orado Ski Country, Inc., will precede rather than follow Mr. Hub- bard, so if Mr. Martin is here, please come forward. STATEMENT OP TOD MARTIN, EXECUTIVE DIRECTOR, COLORADO SKI COUNTRY, U.S.A. Mr. MARTIN. Thank you, Senator. A detailed statement of my pres- entation has been presented. My remarks are in summary. Senator HASKELL. And your statements will be in the record. Mr. MARTIN. Fine, thank you very much. As executive director of Colorado Ski Country, the purpose of my testimony is to present his- torical information concerning several of the issues which you have raised, and I will discuss the effectiveness of the marketplace and the Colorado ski business, the cost of measurements. The first chart which we would like to show you, and incidentally there is a black-and-white copy attached to your statement and it might be easier for you to follow, shows that the cost of lift tickets range from $3.75~ up to $11, and that's for an all-day lift ticket. Thern concentric circles shown here are in 50-mile increments and they show a lot of price ranges with that 50- to 100-mile range of the Denver metropolitan area, and then to show what the customer sees the areas are shown by their skier day volumes. The indication down here, that means that the circle shows there were 250,000 or more skier visits in a year. The square means that there were 100,000 up to 250,000 skiers here and the triangle would indicate 0 to 100,000 for small areas. This analysis indicates that the higher priced areas are also among the most popular. Skiers tend to look for a wide range of quality facilities and services. Colorado ski areas must also compete with resorts throughout this country and the entire world. A survey recently conducted by the National Ski Areas Association show the average adult lift ticket at some 73 areas both on public and private land was $9.22. By com- parison, at 16 Colorado areas. which were included in that survey, the average was only $8.66. or about 6 percent less than the national average. Another element of competition is the appeal for discretionary knowledge made by many other recreatoinal interests. The Univer- sity of Colorado recently conducted a study entitled "The Cost of Recreation and Leisure Activities. A copy also has been submitted for the official record of the hearings and for your review, Senator. It shows that skiing compares quite favorably with other recreational pursuits. A few examples, the cost of skiing in 1974 and 1975 on a per-hour basis ranged from 80 cents to $2. That's assuming 5 hours of skiing and a~ normal 8-hour lift operating day. The cost for an hour of tennis ranges from no charges to as much as $6 at private indoor clubs and the cost of an hour of golf ranges from 50 cents up to $2.50 at a variety of municipal courses throughout the State. * Lift tickets are also in line with a number of widely accepted cost price indices. We did a 10-year comparison comparing them with the Consumer Price Index, the construction cost index and the aver- age hourly earnings index, and if I could have somebody help me maybe put that chart right quickly there, the lift ticketing prices PAGENO="0258" 254 which are shown in the black line since about 1967 and 1968, even though they have been increasing faster than the Consumer- Price Index, which is shown by the blue line here, the trend appears to have reversed commencing in about 1973. The hourly earnings, or let's take the composite construction index next, that's the red line and includes labor and materials and so on, that shows ski ticket prices have not increased as rapidly as have the costs. The ski industry, of course, is capital-intensive, meaning that sub- stantial facilities investment must be made before you can start revenue. The last is hourly earnings index. That's the green line here. That includes things like nonsupervisory workers. There is a high degree of comparability between the earnings index and ticket prices. In summary, this testimony I believe shows that the Colorado ski industry offers a competitive marketplace which has produced a wide range of products and prices and recreational experiences for the consumer. In the past 25 years, the number of areas has increased from 6 to 31 here in the State of Colorado, and the quality and quan- ity of the capital improvements, such as lifts and trails and so on, have grown dramatically. This growth has been necessary to meet the demands of the expanding number of skiers and compete against new and different recreation activities. In the process of being competitive, we think the ski areas have maintained a free and open marketplace on which the consumer con- trnues to have a wide and variable array of options. Thank you for the opportunity to appear before the subcommittee on behalf of the Colorado ski area industry. Senator }]IASKELL. May I ask you the same question, Mr. Martin, that I asked Mr. Peterson? The Forest Service now, or at least one region of the Forest Service or perhaps only one national forest within the State, has certain standards as set forth in Mr. Evan's letter. Now, are you satified with the standards he articulates in his letter? Mr. MARTIN. Senator, that's somewhat of a difficult question for me to answer. I am a little bit in the position like you of having ovet 2 million constituents and I have 31 areas here in the State. To be honest, I don't know what the standards should be. It is the type of cjecision that I- Senator IJASKELL. Let me ask you as an economist. Mr. MARTIN. I would again pass. I am not an economist, sir. Senator HASKELL. Let me ask you as an individual citizen. Mr. MARTIN. All right, that I am. Senator HASKELL. As an individual citizen, are you satisfied with at least the standard referred to in Tom Evans' letter? Mr. MARTIN. Again, not really being a lift operator, I would say probably not, although I think that we are working in that direction. As Mr. Monaghan for the Governor's office had mentioned yesterday, the Governor has asked the State be better represented in this whole process. Senator HASKELL. Well, moving in what direction? Mr. MARTIN. I think in just moving out the entire process, making sure that the individual citizen has an input earlier. PAGENO="0259" 255 Senator HASKELL. No, that's not what I asked. As an individual citizen, do you think Tom Evans' standards are the right standards that should be used? Mr. MARTIN. I guess I woud just have to say I don't know, because I represent 31 different- Senator HASKELL. Now, answering as an individual citizen, not as representing 31 ski areas. Mr. MARTIN. I would say definitely maybe, not to be facetious, but I think probably part of those are probably important, but I think overall there is much room for improvement, I would say. Senator HASKELL. All right, next question. We all know that standards will vary with whomever happens to be in a different region, maybe some different standards are applied, so it depends on what region you are in. Now, do you think that's a satisfactory situ- thou as an individual citizen? Mr. MARTIN. I guess I would just have to refer back to the- Senator HASKELL. No, let's forget about the charts. Every individ- ual forest supervisor has his own set of standards. Now, do you think that's a good healthy situation? Mr. MARTIN. Well, I would have to base my answer on the fact that if apparently, and I am not sure that really is the case, because* I don't really deal with it, I think there should be the opportunity for local differences to be ßdjusted~ for. I think there ought to be basic standards which draw up and encompass the base rating pro- cedures but I think probably small individual characteristics in local communities should be adapted to. Senator HASKELL. Now, what broad standards would you apply as an individual citizen? Mr. MARTIN. Referring specifically to the permit itself, sir? Senator HASKELL. To the rates that are charged. What standards would you apply? You know, the Forest Service says that they are going to review rate increase requests. We don't have any standards. Now, I am asking you as an individual citizen to suggest to me what would be the appropriate standards in either granting or denying rate increase requests? Mr. MARTIN. I would have to say I don't know. If I did, I would probably be able to solve a lot of problems, but that is something we are working on through Colorado ski country. I think it would make everybody happier from the consumer to the operator to the stewards of the public lands, and I am afraid I don't have that answer. Senator HASKELL. You see, that's my problem. Mr. MARTIN. With you we are working on it, sir, with all things involved, and I guess if it- Senator HASKELL. Do you think a standard such as a reasonable return on equity invested capital sounds like a good idea? Mr. MARTIN. That certainly should be one component of an overall plan, yes. Senator JIASKELL. All right, sir, thank yOu. I didn't mean to put you on the spot. Mr. M4RTIN. It was a difficult question. Senator I ASKELL. Thank you very much indeed. Mr. MARTIN. Tha~ik you f~r the opportunity, sir. [The prepared statement of Mr. M artin follows:] PAGENO="0260" 256 OFFICIAL TESTIMONY OF TOD MARTIN EXECUTIVE DIRECTOR OF COLORADO SKI COUNTRY USA DELIVERED TO ENVIRONMENT AND LAND RESOURCES SUBCOMMITTEE OF SENATE INTERIOR AND INSULAR AFFAIRS COMMITTEE ON MONDAY, OCTOBER 6, 1975 PAGENO="0261" 257 ThE SKIER'S MARKETPLACE Mr. Chairman, I am the Executive Director of CSCUSA. The purpose of my testimony is to present data concerning the dual and related subject of pricing and competition. In that regard, I shall discuss: (1) The effectiveness of the marketplace in the Colorado ski area business, and, in particular, a focus on pricing structure; (2) A brief look at the cost of skiing as compared with other forms of recreational and leisure activities (3) A historical comoarison of Colorado lift ticket prices as measured against other national cost and price indices ThE SKIER'S MARKETPLACE--DOES IT OPERATE EFFECTIVELY? We hear a great deal of discussion about the free market system and the role of competition in business. But, not all businesses are competitive, and therefore the need is to determine which have the essential elements of competition and which do not. In the case of the Colorado ski area industry, we think the data regarding "consumer options" tell an interesting story about: - -The number of firms and products competing for the consumer's discretionary leisure dollars; - -The location of the areas; --The degree of product differentiation and market segmentation within the state; - -And, the implications to be drawn from an analysis of ski resort popularity as measured by "skier days" at each area. Let me focus your attention briefly on a chart which visualizes these factors. On the Skier's Marketplace chart, we show the name, location and PAGENO="0262" 258 -2- highest lift ticket price to be charged (i.e. the all-day adult ticket) by each of the 31 areas of Colorado in the 1975-76 season. The color-coding system categorizes the areas in terms of the "price submarket" to which, they belong according to their all-day adult ticket price--low ($6 and under), medium ($6 to $9) and high ($9 to $11). The chart shows that the cost of these products in the upcoming ski season will range from $3.75 to $11.00 for an all-day adult lift ticket. As you might, expect, these areas vary in scope and dimension from large, international destination resorts like ~Aspen, Vail and Steamboat to smaller, day-skier areas such as Squaw Pass, Berthoud Pass and Lake Eldora. The point to be made is that the market is composed of a wide range of price and facility options. Having shown the extent of market segmentation, the next questions to address are those of proximity and geography. That is, do these resorts show any geographical pattern according to price categories--so that, for instance, higher priced areas are located in a particular section of the state, or whether the sane might be true for the lower priced areas. The concentric circles on the chart indicate distances of 50 miles moving from the Denver metropolitan market to the Western slope. The data show that there are a range of price options (refer to the color code) within a 50 and 100 mile radius of the major metropolitan markets of the Front Range. (These are considered acceptable driving distances for the day-skier market). In addition, it shows that there does not appear to be any strong or distinct pattern with respect to geographic concentration within any of the three price categories. Finally, having established; --How many areas there are; - -How much they charge; PAGENO="0263" 259 -3- - -And where they are located. Now, we will show; --IVhere the customer skis. This additional categorization of the 31 ski areas can be matched against the first measure--ranking resorts according to price. The outlined color code on this chart rank areas by their skier-day volume. RED 250,000 or more per day BLUE 100,000 to 249,999 GREEN 0 to 99,999 One result of. this analysis is tc) see that the higher priced areas are generally the most popular. We do not pretend for one moment that this is because skiers favor higher prices but rather that they tend to look for a wide range of quality facilities and services--efficient, modern lifts, a well groomed network of interesting trails--for which they are willing to phy more money, and for which the area operator had to expend substantial capital. IS SKIING (YJMPETITIVE WITH OTHER FORMS OF RECREATION/LEISURE? On the subject of competition, let me also point out that Colorado firms must compete with resorts throughout this country and other sections of the world, especially Canada and Europe. By way of comparison, in a survey recently conducted by the National Ski Areas Association, it was shown that the average adult daily lift ticket at 73 areas across the country was $9.22. By comparison, at the 16 Colorado areas included in the survey, the average was $8.66 or about 6~ less than the national average. Another element of competition which we think is germane to an examination of the ski industry, is the appeal for discretionary dollars made by other recreational and/or leisure interests - - indoor tennis, warm weather vacation packages and the like. PAGENO="0264" 260 -4- While I shall not deal in any detail with this subject in my testimony before you today, I will highlight a few findings from an August, 1975 study conducted by the Business Research Division of the~ Graduate School of Business Administration of the University of Colorado entitled, "The Cost of Recreation and Leisure Activities.t A copy of this has been submitted for the official record of the hearings and for your review. The study shOws, for example, that the cost of skiing compares very favorably with other participatant sports on a per day, per hour or per event basis. To cite a few specifics: --The cost of skiing in 1974-75, on a per hour basis, ranged from $.80 to $2.00; this by the way assumes only 5 hours of skiing in a normal 8 hour lift operating day; --The cost of an hour of tennis, by comparison, ranges from no charge at outdoor public facilities to as much as $6.00 at private, indoor clubs(which sometimes require additional charges for initiation and membership fees). --The cost of an hour of golf ranged from $ .50 to $2.50 at a variety of municipal courses throughout the state. Other data in the study relate to a wide range of activities- -in public facilities and on private land; for participatory activities and spectator events; for athletic pursuits and cultural offerings. In sum, we think the results indicate another important measure of public concern--whether or not the cost of skiing is comparable with other activities which can be done in place of, instead of, or for the sane benefits as the sport itself. HOW EXPENSIVE HAS SKIING BECONE? Another way to analyze the issue of lift ticket prices is to compare them with other widely accepted national price and cost indices. While we understand that the inflationary trends of the recent past have had a PAGENO="0265" 261 -5- spiralling effect on many aspects of our leisure life, we should determine whether ski lift ticket prices are generally in line with~ these national trends. In order to address this question, a study was made comparing the consumer price index, composite construction cost index and the average hourly earnings index. The weighted averages for lift ticket prices were used to mere accurately and fairly reflect the average prices being paid by Co'lorado skiers. The Historical Comparison chart shows that lift ticket prices rose faster than the Consumer Price Index from 1967-1973, but that since that time the trend appears to have reversed. With regard to the Composite Construction Cost Index (labor, materials, etc.) the trend shows that ski ticket prices have not increased at as rapidly as have costs in this sector of the economy. As you know, the ski resort industry is highly "capital intensive" in nature, meaning that substantial investments * in facilities must be made in order to produce operating revenues. Thus a * comparison with construction costs in meaningful. The hourly earnings index monitors increases in labor costs for all non-farmer, non-government, non-supervisory workers. Since the ski industry, like all "service" businesses, is also labor intensive, this comparison is relevant. The data show that there is a high degree of comparability between the earnings index and lift ticket prices, but that earnings have increased at a slightly faster rate. SUM'~kRY * It is my hope that this testimony has shown that the Colorado ski area industry is a competitive marketplace which has produced, over the years, a wide range of products, prices and recreational experiences for the consumer. In the last 25 years, the number of areas has increased from 6 to 31; and, PAGENO="0266" 262 -6- the quality and quantity of necessary capital improvements--lifts, trails, etc. has also grown dramatically. This growth has been necessary to meet the demands of the expanding number of skiers, and to effectively compete against new and different recreational and leisure-time activities. In the process of being competitive, we think the ski areas have maintained a~ free and open marketplace in which consumers continue to have a wide and enjoyable array of options at prices comparable to other types of recreation. Thank you, Mr. Chairman, for this opportunity to appear before your Land And Environmental Resources Subcommittee on behalf of the Colorado ski area `industry. Attachments: 2 Charts Survey. PAGENO="0267" 263 THE COST OF RECREATION AND LEISURE ACTIVITIES by C. R. Goeldner Working Paper #1 Business Research Division Graduate School of Business Administration University of Colorado Boulder, Colorado PAGENO="0268" 264 THE COST OF RECREATION AND LEISURE ACTIVITIES Introduction The purpose of this paper is to examine the cost of various recreation and leisure time pursuits. The objective of this endeavor is to make com- parisons of the costs of certain recreation and leisure tine activities to determine if they rank high or low on a cost basis. The effort was under- taken at the request of Colorado Ski Country U.S.A. in an attempt to answer the question: Is skiing really a high-cost sport in comparison with other recreational activities? There is little question that skiing has the image of being "high cost," but is this image really justified? The following pages present cost figures which were obtained by tele- phoning various organizations during the month of August 1975 in an attempt to provide some cost comparisons. While the question raised above appears to be relatively simple, like most things in our society one finds the answer somewhat complex. Comparisons prove difficult, selection of items to be compared is arbitrary, consumers' value systems differ, and one can argue over what standard should be used for measurement purposes. In the marketplace for recreation and leisure time activities one finds many levels of costs, with both public and private organizations offering activities and appealing to many market segments. It appears that the recreation-leisure industry is similar to the other service industries with establishments catering to various market segments. In retailing we have a range from Neusteters and Gano Downs to K-Mart. In lodging we find a range PAGENO="0269" 265 2 from the Broadmoor to Motel 6. This same range or appeal to various market segments exists in the recreation industry as well, hut with one noticeable difference. A great deal of recreation is publicly supported or subsidized. It is quite common for cities to have a parks and recreation department and offer activities free or at a very low cost. Recreation activities run. the cost gamut from expensive country clubs to free municipal programs. Virtually whatever activities are discussed are available at a wide range of prices and quality. This makes comparisons dif- ficult, but the presentation of some of the costs adds considerable dimension to the situation and will allow the reader to draw his own conclusions, or restructure the data to do further analysis. Appendix A presents results from the National Recreation Survey con- ducted in 1972 showing popular recreational activities. This table (1-A) was used as a guide to select popular activities and determine participation times for activities. When Colorado organizations could provide more pre- cise participation times these were used. Many of the popular high parti- cipation activities as picnicing, sightseeing, driving for pleasure, and walking for pleasure are available without charge. Others are available at varying charges. Tables 1-9 present costs of various recreation activities, and Tables 10 and 11 summarize this information on a cost per day or event and a cost per hour basis. All tables follow the text material. SkiinA Just as -is the case with other products and services, the Colorado ski industry offers the consumer a fairly wide range of prices and amenities. Lift ticket costs for the 1974-1975 season are shown in Table 1. The cost of an all-day ticket at Aspen and Vail was $10 while the cost at Squaw Pass was $4.00. Half-day prices ranged from $7 at Aspen and Vail to $3.50 at 67-512 0 - 76 - 18 PAGENO="0270" 266 3 Berthoud, Ski Cooper, and Squaw. Children's all-day tickets ranged from $5 at Vail to $3 at Aspen to $2.75 at Squaw Pass. Since many recreational activities are charged for on an hourly basis, Table 1 also presents the cost per hour for a day's skiing. Most Colorado ski areas operate from 9:30 a.m. to 4:30 p.m. or a 7-hour period. A hearty skier can manage 7 hours of skiing on an all-day lift ticket if he chooses; however, it is considered more realistic to consider a 5 or 6 hour day for the recreational experience. Table 1 presents costs on the assumption "the crack of dawn and no lunch skiers" is not typical and calculations are made on the basis of a 5-hour day. On half-day tickets, a 3-hour time period was arbitrarily chosen for calculation purposes. Oman hourly basis, assuming a 5-hour day, it costs $2 an hour to ski at Vail and Aspen, based on 1974-1975 rates. If one were to assume a full 7-hour skiing experience, the rate would be $1.43 per hour. For a 6-hour day the rate would be $1.67 per hour. In examining Table 1, a dilemma arises as to what figures to use for comparison purposes with other recreation-leisure time activities. Should one choose the "Cadillac level" such as Vail and Aspen, or the "compact car level" such as Hidden Valley, Ski Cooper and Squaw Pass? For comparison purposes, it was decided to use Aspen and Vail lift ticket prices for most comparisons. Tennis Tennis, called by many as America's fastest growing sport, can be played on municipal courts without charge or at a nominal charge; at racquet clubs oriented toward tennis with membership fees and charges for court time; at vacation resorts; and at swank country clubs. Table 2 shows some charges for playing tennis at various locations in Colorado. Tennis is typically charged for on a per hour basis and for this reason per hour costs for other PAGENO="0271" 267 4 recreational leisure activities have been calculated to facilitate compari- son. It appears that when one plays tennis at private facilities the cost per hour exceeds that of most other recreational activities. Golf The cost of playing golf varies substantially as with tennis. It can be played at country clubs with high membership fees or at relatively in- expensive municipal courses. Table 3 presents some information on the cost of playing golf at various Colorado locations. Since it is difficult to determine how long it will take to play a round of golf, cost per hour figures were calculated assuming that 18 holes would be played in 4 hours, and weekend rates were utilized. Horseback Ridin~g * Horseback riding is a popular activity participated in by 5 percent of the National Recreation Survey respondents. Horseback riding is usually purchased by the hour with Colorado rates ranging from $3.00 to $5.00 for the first hour, as shown in Table 4. A full day ranges from $15.00 to $25.00. River Raft Tr~p~ Table 5 presents information on river raft trips at selected locations for trips of one day or less. A one day trip typically costs about $18.00 and includes lunch. Jeep Tours Jeep tours are offered in most mountain recreation communities and are handled in several ways. Specific tours have been organized to various loca- tions with individual charges while other tours operate only with a minimum PAGENO="0272" 268 5 of four people. A typical all-day jeep tour would run $20 per person. Some jeep tour price information is shown in Table 6. Other Activities Swimming is one of the most popular activities in the country from the standpoint of participation. It is also one of the most economical activi- ties to engage in. Some typical swimming costs are shown in Table 7, along with some ice skating rates. Spectator Sports The costs of attending some of the more popular spectator sports are shown in Table 8. There is a wide variation in prices depending on the level of competition and seating arrangements. The best seats at a Bronco football game cost $8.50, at a Spurs hockey game $13.20, and at a Nuggets basketball game $7.70. Other Entertainment Table 9 shows information on some other popular entertainment activi- ties in Colorado. Again, one will note there is a broad range of prices among performances and seat location. The best seats at the Central City Opera are $15.00, while the less desirable ones are $6.50. At the Denver Auditorium Theatre prices range from $3.00 to $12.00, while at Elitch's Theatre they range from $4.75 to $7.25. Summary A host of activities and their prices have been shown in Tables 1 through 9. Some of this information is summarized in Tables 10 and 11. Table 10 shows the cost of selected recreation activities per day or per event and permits the comparison with a cost of a day's skiing at Aspen or PAGENO="0273" 269 6 Vail. Table 11 compares the activities on a per hour basis and gives the ranges based on the lowest cost to engage in the activity to the highest cost without regard to quality. It appears that a day's skiing at Aspen and Vail is comparable to a round of golf at a resort area such as the Broadmoor, Vail or Snowmass and on a per hour basis, skiing compares favor- ably with many recreational opportunities. PAGENO="0274" 270 a Weekend rate TABLE 1 COST TO SKI, 1974-1975 RATES Weekend Day Halt-Day Child - 1974- Cost/hour 1974- Cost/hour 1974- Cost/hour 1975 5-hour day -~ 1975 3-hour day 1975 5-hour day VACATION AREAS Aspen Highlands $10.00 $2.00 $7.00 $2.33 $3.00 $ .60 Aspen Ski Corp. 10.00 2.00 7.00 2.33 3.00 .60 Breckenridge 7.50 1.50 5.00 1.67 3.00 .60 Copper Mountain 9.00 1.80 6.00 2.00 4.00 .80 Crested Butte 9.50 1.90 7.50 2.50 5.00 1.00 Keystone 8.00 1.60 6.00 2.00 4.50 .90 Steamboat 9.50 1.90 7.00 2.33 4.50 .90 Vail 10.00 2.00 7.00 2.33 5.00 1.00 Telluride 8.50 1.70 6.50 2.17 4.00 .80 Winter Park 7.50 1.50 5.00 1.67 3.50 .70 9.14 1.83 6.50 2.17 3.86 .77 Average OTHER DAILY AREAS A-Basin Geneva Basin Hidden Valley Lake Eldora Loveland Basin Monarch Powderhorn Purgatory Ski Broadmoor Ski Idlewild Stagecoach Sunlight Wolf Creek Average WEEKEND AREAS Berthoud Pass Ski Cooper Pikes Peak Squaw Pass Average $ 7.50 $1.50 $5.50 $1.83 $5.00 $1.00 6.00 1.20 4.50 1.50 3.50 .70 5.50 1.10 4.00 1.33 4.00 .80 6.50 1.30 5.00 1.67 4.00 .80 7.50 1.50 5.50 1.83 4.00 .80 7.00 1.40 5.00 1.67 4.50 .90 8.00 1.60 6.00 2.00 4.00 .80 8.00 6.00 1.60 1.20 6.00 350a 2.00 1.17 4.00 - .80 - 6.00 1.20 4.50 1.50 4.00 .80 7.00 1.40 5.50 1.83 4.00 .80 6.50 1.30 4.50 1.50 3.50 .70 7.13 1.43 5.20 1.73 4.07 .81 $ 4.50 5.00 5.00 4.00 4.63 $ .90 1.00 1.00 .80 .93 $3.50 $1.17 3.50 1.17 4.25 1.42 3.50 1.17 3.69 1.23 $3.00 2.50 2.75 2.75 $ .60 .50 .55 .55 Source: Colorado Ski Country U.S.A., 1461 Lariner Square, Denver, Colorado 80202. PAGENO="0275" 271 8 TABLE 2 COST TO PLAY TENNIS Hourly Court Membership Fee Time Charge Cost Per Per Person Hour/Singles Aspen Highlands (members) $70 $ 4.00 $2.00 (others) 6.00 3.00 Aspen Meadows 4.00 2.00 Aspen Municipal Tennis Court 3.00 1.50 Aspen Racquet Club 6.00 3.00 Plum Tree 3.00 1.50 Snowmass Country Club (guests) 6.00 3.00 (others) 10.00 5.00 Boulder Boulder Valley Racquet Club $100 $ 9.00 $4.50 7.00 3.50 City Courts Free .00 University Courts Free .00 Breckenridg~, (weekdays) $ l.OO $ .50 (weekends) 2.00 1.00 Broadmoor (must be in hotel) $ 6.00 $3.00 Copper Mountain ($4.00/l.5 hours) $ 2.67 $1.34 Denver City Courts Free $ .00 Heatheridge $350/year $ 6.00 3.00 8.00 4.00 Meadow Creek $80 8.00 4.00 Tennis World $100 + 10.00 5.00 $50 initiation 12.00 6.00 Keystone John Gardiner (guests) $ 3.00 $1.50 (others) 5.00 2.50 Steamboat Spring~ City Courts $ 1.50 $ .75 Cliff Bucholz Tennis Camp 12.00 6.00 Steamboat Village Inn (guests) 2.00 1.00 (others) 4.00 2.00 Vail Eagle Vail $ 4.00 $2.00 The Murk 4.00 2.00 Racquet Club $1,200 + $15/month Town of Vail Courts 4.00 2.00 Source: Telephone calls to organizations listed. PAGENO="0276" 272 a Mt rent cart for $10 as well. Source: Telephone calls to organizations listed. TABLE 3 COST TO PLAY GOLF 9 9 Holes 18 Holes Cost/hr. Weekday Weekend Weekday Weekend at 4 hrs. Aspen Municipal Course $3.25 $3.25 $ 5.50 $ 5.50 $1.38 Snowmass Country Club 5.00 5.00 10.00 10.00 2.50 Boulder Flatirons $2.50 $3.25 $ 3.50 $ 4.25 $1.06 Haystack 2.25 3.25 Lake Valley 4.00 5.00 1.25 Broadmoor (must be in hotel) $10.00 $10.00 $2.50 Denver Area Adams County $2.00 $2.50 $ 3.00 $ 3.50 $ .88 Applewood 3.00 4.00 1.00 Aurora Municipal 2.00 2.50 3.00 4.00 1.00 Chatfield 2.00 2.25 2.75 3.75 .94 Denver - All City Foothills 1.75 2.25 2.00 2.50 3.00 4.00 3.25 4.25 .81 1.06 Heather Gardens 2.25 3.25 Hyland Hills Indian Tree 2.00 2.25 3.00 2.75 2.75 3.25 4.00 4.25 1.00 1.06 Kennedy Lake Arbor 2.00 2.25 2.25 3.00 3.50 3.25 3.75 4.25 .94 1.06 Northglenn Overland 1.75 1.75 2.00 2.00 3.00 3.25 .81 Park Hill 3.50 4.75 S. Suburban 2.00 2.50 3.00 4.00 1.00 Springhill Twilight Wellshire 1.25 1.75 2.00 2.25 2.00 2.25 2.00 3.50 (after 6 p.m.) 3.75 .50 .94 Steamboat $6.00 $7.50 $ 8.00 $10.00 $2.50 Tamaran a $10.00 $2.50 Vail Eagle Vail Vail Municipal Course (June 15-September 15) $7.00 $7.00 $10.00 $10.00 $2.50 10.00 10.00 2.50 PAGENO="0277" 273 10 TABLE 4 HORSEBACK RIDING Addi- Full Half First tional Day Day Hour Hours Elk Mountain Lodge (Ashcroft) $18.00 $12.00 $4.00 Pomegranate Stables 19.00 12.50 3.50 Snowmass Stable 20.00 15.00 4.00 T Lazy 7 20.00 12.00 4.00 $3.00 Boulder Hidden Valley $18.00 $10.00 $4.00 $2.00 Sombrero Ranch 15.00 9.00 3.00 3.00 Breckenrid~ Breckenridge Stables N.A. N.A. $4.00 Denver Flowing J & S Riding Academy - - $3.50 $3.00 Glora Coma Stables N.A. N.A. 3~00 N.A. Ralston Creek Stables $25.00 - 3.50 - Steamboat Spri~g~ Sombrero Stables $16.00 $11.00 $4.00 $3.00 Vail Pioneer High Country - - $5.00 $4.00 Sombrero Ranches $15.00 $10.00 4.00 - Vail Jeep Guides (1 hour riding, 1 hour fishing) 14.75 Source: Telephone calls to organizations listed. PAGENO="0278" 274 11 TABLE 5 RAFT TRIPS Adults Children Aspen Aspen High Country River Tours $18.00 $12.50 Aspen Whitewater 18.00 Colorado River Trips 18.00 13.50 Half-day trip 12.00 Eclipse Enterprises 18.00 15.00 Snowniass Resort 18.00 15.00 Steamboat Springs Colorado Adventure $17.00 $14.00 Vail Anderson River Expeditions (half-day) Vail Jeep Guides $15.00 $l4.75-17.75 $10.00 $l2.75-l4.75 Source: Telephone calls to organizations listed. PAGENO="0279" 275 TABLE 6 JEEP TOURS 12 * Full Day Half Day Cost/ Hour Elk Mountain Jeep Tours (minimum 4 people) $ 7.50 $ 5.00 $ .94 Breckenri4g~ $5/hour/person (minimum 4 people) $5.00 Steamboat Spripg~ Colorado Adventure $20.00 $14.00 $4.00 Vail . Vail Jeep Guides Benchmark Red and White Mountain Ptarmigan $19.25 5.75 (2 hours) 8.50 (3 hours) 11.25 (4 hours) $2.41 2.88 2.83 2,81 Source: Telephone calls to organizations listed. PAGENO="0280" 276 13 TABLE 7 OTHER ACTIVITIES Cost! Activity Cost Hour Swimming Aspen - James Moore Pool $1.00 Adults $ .36 .50 Children .18 Boulder City Pools .75 Adults .27 .50 Teenagers .18 .35 Children .13 Denver Celebrity Sports Center 1.00 Adults .36 .75 Children .27 Ice Skating Aspen Ice Palace (approximately 2- $2.00 Adults $1.00 hour session) 1.50 Children .75 Boulder - Flatirons Ice Arena, Inc. (approximately 4 hour session) 1.50 Adults .38 1.00 Under 18 .25 Source: Telephone calls to organizations listed. PAGENO="0281" 277 14 TABLE 8 SPECTATOR SPORTS Single Season Cost/ Sport Game Pass Hour a Baseball Denver Bears $ 3.00 $132.50 $1.50 2.25 l14~00 1.13 2.00 1.00 a Basketball Colorado State University $ 4.00 $1.50 3.00 2.00 Denver Nuggets 7.70 $291.06 3.30 6.60 249.48 3.30 5.50 207.90 2.75 4.40 166.32 2.20 University of Colorado 3.50 36.00 1.75 Footballb Boulder High School $ 2.00 $ .67 Colorado State University 7.50 35.00 2.50 6.00 28.00 2.00 Denver Broncos 8.50 59.50 2.83 6.00 42.00 2.00 School of Mines 2.50 .83 2.00 .67 University of Colorado 7.00 42.00 2.33 University of Northern Colorado 3.00 20.00 1.00 2.50 .83 b Hockey Denver Spurs $13.20 $552.40 $4.40 9.90 413.80 3.30 8.80 367.60 2.93 6.60 275.20 2.20 5.50 229.00 1.83 4.40 182.80 1.46 a Cost/hour is based on a 2-hour single game. b Cost/hour is based on a 3-hour single game. Source: Telephone calls to organizations listed. PAGENO="0282" 278 15 TABLE 9 OTHER ENTERTAINMENT Event Ticket Cost Cost/ Houra Bonfils Theatre $ 4.50 $1.50 Broadmoor International Theatre $ 8.00 7.00 6.00 $2.67 2.33 2.00 Central City Opera $15.00 6.50 $5.00 2.17 Denver Auditorium Theatre $12.00 3.00 $4.00 1.00 Denver Symphony (Average) $ 7.00 $2.33 Elitch Theatre $ 7.25 4.75 $2.42 1.58 a Based on a 3-hour performance. Source: Telephone calls to organizations listed. PAGENO="0283" 279 TABLE 10 COST OF SELECTED RECREATION ACTIVITIES PER DAY OR EVENT 16 Activity Cost Skiing at Aspen or Vail Play tennis at John Gardiner Tennis Camp, Keystone (non-guest) Play tennis at Broadmoor (guest) Play golf at Sno~imass, Vail or Steamboat Horseback Riding, Snowmass Stables Horseback Riding, Vail Raft Trips, Aspen Jeep Tour, Vail Swimming Attend Bronco football game Attend CU football game Attend Nuggets basketball game Attend Spurs hockey game Attend Bears baseball game Attend Central City Opera Attend Denver Auditorium Theatre Attend Denver Symphony (Average) Attend Bonf ills Theatre Attend Elitch Theatre $10.00 5.00/hour 6.00/hour 10.00 20.00 15.00 18.00 19.25 1.00 6.00-8.50 7.00 4.40-7.70 4.40-13.20 2.00-3.00 6.50-15.00 3.00-12.00 7.00 4.50 4.75-7.25 Source: Tables 1-9. PAGENO="0284" 280 17 TABLE 11 COMPARISON OF RECREATION/LEISURE ACTIVITIES ON A PER HOUR COST Cost Activity per Hour Skiing $ .80-2.00 Tennis .00-6.00 Golf .50-2.50 Horseback Riding 3.00-5.00 Raft Trips 2.50 Jeep Tours .94-5.00 Swinuning .27- .36 Ice Skating .38-1.00 Denver Broncos (football) 2.00-2.83 Denver Nuggets (basketball) 2.20-3.85 Denver Spurs (hockey) 1.37-4.40 Denver Bears (baseball) 1.00-1.50 Central City Opera 2.17-5.00 Denver Auditorium Theatre 1.00-4.00 Denver Symphony 2.33 Bonfils Theatre 1.50 Elitch Theatre 1.58-2.42 Source: Tables 1-9. PAGENO="0285" 281 190 180 170 160 150 140 130 C C) C) C) a. 110 100 90 80 Historical Comparisons Lift Ticket Prices vs. National Price/Cost Indices 1966-1 975 70 60 50 This graph, covering a 10-year period, compares a weighted average lift ticket price index to the con- sumer price index, the coraposite construction cost index, and an average houriy.earnings index. (Graph provided by Colorado Ski Country USA) 67-512 0 - 76 - 19 PAGENO="0286" The Skiers' Marketplace 282 The "Skiers Marketplace" rendering presents the 31 major ski areas in Colorado, their da~.y adult lift ticket prices, their approximate straight-line distance from major Colorado population centers, and their popularity based upon lift tickets issued (1974-75 ski season). (Diagram provided by Colorado Ski Country USA) PAGENO="0287" 283 Senator HASKELL. Our next witness is Graydon D. Hubbard Jr. of Arthur Andersen & Co~ STATEMENT OP GRAYDON D. HUBBARD, 1R., AUDIT DIVISION, ARTHUR ANDERSEN & CO., DENVER, COLO. Mr. HUBBARD. Thank you, Senator. I appreciate the opportunity to appear before you today. My principal purpose in being here is to provide you with some hard facts. I understand you have some difficulty in getting those on the operation of ski areas in Colorado, dealing principally with profitability and ticket prices. I would also like to pass along some general impressions and some of my own comments on the proposed legislation. This is based upon 15 years in providing, auditing and accounting services to the operators in the area of Colorado. First, as to the Colorado ski area profile on profitability, profit- ability has not until recently been very attractive. Heavy losses are typieal of the new Colorado area. The prospects of better than mar- ginal operations are not good unless the area does have the potential of developing into a resort on the magnitude of those operated by Aspen or by Vail. The demand for higher facilities and a demand for repayment of prior borrowings has caused those areas that are profitable to continue to reinvest their earnings. Most areas have had to develop new sources of capital to fund the expansion necessary to meet demands. Distributions in the form of returns to stockhold- ers to those who have provided the high risk equity investment have been minimal. For the last 5 years, detailed information on ski area operations has been gathered and studied by questionnaires sent to area opera- tors first by the United Bank of Denver for 3 years, the last 3 years by the University of Colorado. During this period, Colorado skiing visits measured by skiing man-days have increased the following percentages. Beginning with the 1970-71 season, that year 9.4 percent increases over the prior year; increased 8.7 percent the following year; 21.8 percent the following year; dropped to an increase rate of 8.3 percent the succeeding year and in this last season there was an increase of 20.7 percent. Profitability data for the first 3 years of this period has not been accumulated in Colorado alone; so I do not have it to give you. How- ever, a composite for all Rocky Mountain operators, which includes some of the adjacent States, has been developed by these studies~ which indicates approximate return compared to investment and gross fixed assets as follows: 1970-71, 1.4 percent; 1971-72, 7.9 per- cent; and 1972-73, 1.4 percent. SenatOr HASKELL. What would that be related to equity invested capital? Mr. HUBBARD. This is the capital investment in the facilities them- selves as opposed to- Senator HASKELL. Yes, do you have the figures on equity? Mr. HUBBARD . Yes, I do.I have some figures on the current period, not On the .~receding 2 years. * SenatOr HAsKE LL~ You have developed them on the preceding 3 years? . . PAGENO="0288" 284 Mr. HUBBAIW. I think that information is available, but I don't have it with me. Senator HASKELL. But you could provide it? Mr. HUBBARD. Yes, I could. Senator HASKELL. Thank you. [Subsequent to the hearing the following information was re- ceived:] ARTHUR ANDERSEN & Co., Denver, Cob., October 23, 1975. Hon. FLOYD HASKELL, U.S. Senate, Dirksen Senate Office Buibding, Washington, D.C. Re: Ski Area Hearings of Environment and Land Resources Subcommittee of Senate Interior and Insular Affairs Committee. DEAR SENATOR HASKELL: When I testified before your subcommittee hearing in Denver on October 6, you requested that .1 provide your. offlee with informa- tion as to the return on equity investment of the ski areas participating in the ski area operator studies for the seasons 1970 through 1973. The published rates of return on equity investment for the reporting ski areas operating in the Rocky Mountain area (the study did not separate out the Colorado ski area) were as follows: Season: . Percent 1970-71 3.4 1971-72 23. 5 1972-73 3. 5 Complete copies of these studies, compiled by the United Bank of Denver, for these years may have already been made available to your staff. If not, I am sure additional copies can be obtained directly from the Bank. Please let me know if I can be of further assistance. Very truly yours, G. D. HUBBARD, Jr. Mr. HUBBARD. I do have the data for the last 3 years. This data indicates that the industry operated ski area facilities at a loss in 1973-74. That was the year there was a dip in the increase of ski. business to Colorado. The year 1974-75, however, was the best eco- nomically ever reported by skiers in Colorado. The composite de- posits of those reporting was 7.8 percent revenues, 11.8 percent of stockholders investment, which is the figure you. asked abOut, and 6.6 perecent return on the investment of gross fixed assets, which is the return comparable to the number I have for the preceding 3 years. In my view, there are more ways of determining low rates of return to the enterprise. At that, the picture presented by the data may be brighter because of the absence of 1974-75 data from one large area, which is believed to be operating at a loss.. In the area of prices, those who ski in Colorado may select from a variety of areas and a variety of lift ticket prices. Lift revenues per skier per day, which is a composite measure of ticket prices, and this averages the higher price and lower price and discOunts, averaged $6.80 for the 1974-75 season and $6.31 for the previous period. The range was from $2.74 for the lowest area and $8.53 for the highest. Interestingly, the prices charged by the major de~tinatiOii ski re- sorts such as those operated by Aspen and Vail have .iiot increased rn recent years as rapidly as those by other ski areas. PAGENO="0289" 285 In reviewing the price data by one of the destination resorts, it is apparent that the daily adult lift ticket price has yet not kept pace with increases in the cost of operating facilities. Despite the general observation that this is one of the more profitable operations in the State of Colorado, the operating costs of this area have increased per skier day 80 percent in the last 5 years, while it has been able to increase the daily adult lift ticket price only 25 percent. I should point out that this area has been able to increase its total revenues, total mountain revenues per skier day by 60 percent during the same period. They have been able to increase some of the other ticket prices. I can well understand the concern that downhill skiing may be headed, toward the wealthy man's sport designation and this may be in conflict with the objective of making facilities on Federal lands available for the enjoyment of all. However, if downhill skiing is destined to become mostly for the affluent, it will become so not be- cause of increasing lift ticket prices. This is really only a minor part of the cost to a citizen to participate in downhill skiing. The costs' of equipment, transportation, food and lodging overshadow lift ticket prices in impact on the skier's pocketbook. It is the behavior `of these costs which probably determines who will and who won't go skiing, both now and in the future. With respect to public disclosure, I have spent most of my pro- fessional `life in the public arena, so I would like to encourage the ski area operators to authorize public access to historical financial operating data furnished to the Forest Service. I would hope this could be done without additional legislatiOn. Perhaps it cannot. We seem to live in a time when the restriction of public access to data, no matter how' sincerely motivated by desirable rights of confiden- tiality, does breed suspicion, misunderstanding and loss of credibility, frequently in unjustified proportions. The release of financial data by the ski industry will make the industry vulnerable to those few who seek only basic data which they can use to support a preconceived judgment. However, I think this is a risk worth taking in the interest of providing information to `assess those seeking facts in advance of making `judgments and to improve understanding of the financial operations of the industry. I would also like to comment on the requirement that the Secre- tary of Agriculture develop criteria or formulae for determination of use fees and for permitting or rejecting price changes requested by permitees. I think in this area the Secretary' and the Forest Serv- ice must be left with considerable room for judgment. In `my view, the individual components of this industry, namely each ski area, simply do not have sufficiently uniform operating characteristics or operating results to permit the reasonable development at this time- IBell rings.] Senator HASKELL. Were you in the room when I announced the 5-minute rule? Mr. HUBBARD. I don't know the fii~t time, but I have heard you express that since then Senator HASKELL. Well,, could you quickly summarize? PAGENO="0290" 286 Mr. HUBBARD. All right. I would like to conclude then with a few comparative observations on price regulation. Unlike many price reg- ulated industries, this one does not provide a necessity of life. Un- like many, this is no mutual monopoly serving a specific area. Unlike some other industries which are price regulated, this one has not had the benefits of substantial Government subsidies to fund losses dur- ing the early years of service to the public, and I think the develop- ment of criteria, detailed criteria, for evaluating price changes will be very difficult for this industry, particularly because it is really only barely out of its infancy, and it may in its application be the most difficult practical problem in area operator regulation. I do question if the Government is qualified to determine prices. I just don't know who is expert enough to say what is the proper price to charge for a life ticket. I do think the public is qualified to do that, but only through its willingness to pay a lift ticket price that is determined not by Government but by the traditional competitive- ness created by the system. I thank you for your attention today. I have provided copies of my testimony before the committee. Senator HASKELL. I appreciate it. Your testimony will be included in the record. Certainly the rates of return that you wrote out that your clients make are by no matter of means excessive. As a matter of fact, I would say they were extremely modest. The problem, how- ever, here is operating on public lands, concealing information from the public, ad hoc decisions by the Forest Service, depending where you are and I guess how you get along with the supervisor. Therefore, I am glad to hear you say that you think in this day and age that there should be disclosure of historical financial information. I gather I heard you right, didn't I? Mr. HUBBARD. Yes, I strongly advocate it. Senator HASKELL. Because I think this could do a lot. Now, let me point to a. problem. You say that free enterprise will determine prices, but it doesn't now. The Forest Service determines prices. For example, the Forest Service turned down an interim rate increase re- quest of your clients and then compromised a prospective increase, and if you read that letter from Tom Evans and you can tell me how he arrived at his decision,if I had a hat I would eat it. I don't think this is helpful. I think it is desirable that objective criteria be arrived at for a number of different reasons, so your clients can have their day in court if necessary, so the public can have its day in court if necessary, and that's what this is all about, and if you don't answer now off the top of your head- Mr. HUBBARD. I have heard you ask the question a couple of times. Senator HASKELL. Well, have you got any suggestions on what the criteria ought to be? Mr. HUBBARD. I have one and I don't know if it will really help. I think the real problem here is that the Forest Service and the in- dustry has growii up with a requirement which really may not be applicable to many, many ski areas, and that is at the outset when the area operators contracted or received their permits from the Forest Service they did in different language give the Forest Service PAGENO="0291" 287 the right to review and approve their prices, and I really think that that's the problem, that in trying to deal with their responsibilities, regardless of whether their control or approval of prices is justified, hut in trying to deal with that responsibility the Forest Service has developed a variety of what you might call criteria or standards, and I would think in my own opinion that the thrust of any instruction to the Forest Service adversely be along the lines, "Justify your ex- erices of your right to improve prices before you start improving them. If they are iiot justified, don't do it." I agree if they feel they are justified, then you get into the problem of determining how they do it. Senator HASKELL. And that's the big problem. Mr. HUBBARD. It is, and the return on irvestment concept, I know some other areas of rate regulation get into that and they have had great difficulties. If that's not done, I know the ski operators scream beacuse they feel they are entitled to a faii rate of return. *Senator~ HASKELL. If you can come up with something-well1 I will tell you, I am looking for ideas. If you caii come up with some- thing to help. We want public confidence. We want the industry to make a healthy profit. We don't want the industry to monopolize ticket prices and rip off the public. We are all agreed on that, but we want to strike that balance where they are able to make a profit, where we do have competition, where we don't have to perhaps resort to regulation, because I think that's the best form of regulation, competition. So if you have any ideas in this area I would certainly welcome them and if you send them to me the hearing record is go- ing to stay open. Mr. HUBBARD. I will be glad to do that. Senator HASKELL. Thaiik you very much. [The prepared statement of Mr. Hubbard and subsequent informa- tion follows:] STATEMENT OF GRAYDON D. HUBBARD, JR., PARTNER IN CHARGE-AUDIT DIvIsIoN, ARTHUR ANDERSEN & CO.-DENVER, CoLo. I appreciate the opportunity to appear before you today. My principal purpose in being here is to provide you with some hard facts on the opera- tion of ski areas in Colorado, dealing principally with profitability and ticket pricing. I would also like to pass along some general impressions and ~om- ments on the proposed legislation based on my I~ years of experience in providing accounting and auditing services to ski area operators. PROFITABILITY The Colorado ski area profile on profitability has not, until quite recently been very attractive. Heavy losses for several years after opening are typical. The prospects for better than marginal profits are not good unless the area has the potential of developing into a resort on the scale of those operated by Aspen or Vail. The demand for expanded facilities and the need to repay prior borrowings has caused those areas that are profitable to continue to reinvest their earnings. Most areas has had to develop new sources of capital to fund the expanison necessary to meet demand. Distributions to those who have provided the high risk equity investment in this industry have been minimal. It was not until this year that the Aspen Ski Corporation was able to return a first dividend to its stockholders, despite many years of profitable operations. Detailed information on ski area operations has been gathered and studied, though questionnaires sent to area operators, for the last five years, first by PAGENO="0292" 288 the United Bank of Denver and then by the University of Colorado. During this period, Colorado skiing visits, measured by "ski man day," have in- creased the following percent: Season: Percent 1970-71 9. 4 1971-72 8. 7 1972-73 21. 8 1973-74 8.3 1974-75 20. 7 Profitability data for the first three years of this period has not been ac- cumulated for Colorado alone; however, a composite for all Rocky Mountain operators reporting was developed by the studies which indicated profit re- turns compared to investment in gross fixed assets as follows: Return on OFA Season: (percent) 1970-71 1. 4 1071-72 7. 9 1972-78 1. 4 For the last two years, a composite on Colorado ski areas has been devel- oped. This data indicates that the skiing industry operated its skiing facilities at a loss in 1973-74. The year 1974-75 was the best, economically, ever reported by ski areas. Composite profits of those areas reporting were 7.8 percent of revenues, 11.8 percent of stockholders' investment, and 6.6 percent return on the investment in gross fixed assets. These are low rates of return for this kind of high risk enterprise. At that, the picture presented by the data may be brighter than is actually the case, because of the absence of 1974-75 data from one large area believed to be operating at a loss. During the last ski season, the reporting operators for each $100 Of profit paid $169 in taxes and USFS fees and another $349 in salaries to those directly employed in the operation of lift facilities. It is apparent that the ski area owners are not retaining a large part of the skiers' lift ticket dollars as profit. PROFIT Those who ski in Colorado may select from a variety of areas and a variety of lift ticket prices. Lift revenues per skier day, which is a composite measure of ticket prices, this year ranged from $2.74 to $8.53 for the reporting areas, averaging $6.80 for the 1974-75 season and $6.31 for the previous period. In general, areas closer to Denver also have lower lift ticket prices. Higher prices are more characteristic of the "destination" ski resorts which typically rely more heavily on the vacation skier and less on the casual day skier driving over from Denver. Interestingly, the prices charged by the major ski resorts operated by Aspen and Vail have not increased, in recent years, as rapidly as those charged by other ski areas. In reviewing cost and price data of one of the destination resorts, it is apparent that the daily adult life ticket price has not kept pace with in- creases in the cost of operating the facilities. Despite the general observation that this is one of the more profitable operations in the State of Colorado, its operating costs per skier-day have increased 80% in the last 5 years while it has been able to inicrease the daily life ticket price only 25 percent. This area has, however, been able to increase its total mountain revenue per visitor-day by 60 percent. I can well understand the concern of many that downhill skiing may be headed toward the "wealthy man's sport" designation and that this may be in conflict with the objective of making facilities on Federal lands available for the enjoyment of all. However, if downhill skiing is destined to become mostly for the affluent, it will become so not because of increasing lift ticket prices. This is really only a minor part of the cost to a citizen to participate PAGENO="0293" 289 in downhil skiing. The costs of equipment, transportation, food and lodging overshadow lift ticket prices in impact on the skier's pocketbook. It is the behavior of these costs which probably determines who will and who won't go skiing, both now and in the future. THE PROPOSED LEGI5LATION I would like to make some comments on the proposed legislation in two areas: I would encourage the ski operators to authorize public access to his- torical finanp2ial operating data furnished to the Forest Service. I would hope this could be done without additional legislation. Perhaps it cannot. We seem to~ live in a time when the restriction of public access to data, no matter how sincerely motivated by desirable rights of confidentiality, does breed Suspicion, misunderstanding and loss of credibility, frequently in unjustified proportions. The release of financial data by the ski industry will make the industry vulnerable to those few who seek only bits of data which they can use to support a preconceived judgment. However, I think this is a risk worth tak- ing in the interests of providing information to assist those seeking fa~ts in advance of making judgments and to improve understanding of the finan- cial operations of the industry. I would also like to comment on the requirement that the Secretary of Agri- culture develop criteria or formulae for determination of use fees and for permiting or rejecting price changes requested by permittees. I think in this area, the Secretary and the Forest Service must be left with considerable room for judgment. In my view, the individual components of this industry, i.e., each ski area, simply do not have sufficiently uniform operating characteristics or operating results to permit the reasonable development at this time of a "single method" for use fees. Detailed criteria for evaluating price change requests may also be impracticable. Let me use an example. The use permits I am familiar with require the Forest Service to allow the permittee a reasonable return on investment in approving ticket prices. If the Forest Service in establishing detailed criteria used say 20% as the requlated return rate, the Colorado area already report- ing the highest ticket prices would be entitled to raise its prices several dollars a day and another area already $2.50 per day lower would have to reduce prices several dollars. That doesn't make a lot of sense. But if the Forest Service does not establish a single return rate in response to the proposed legislation, then they are probably faced with establishing and justifying dif- ferent return rates for different areas, and oh what a mess that will be. I think the problem is that there is really no correlation yet (and there may never be) between prices, profits, and returns on investment in this in- dustry. I doubt that we would see such a correlation even with a uniform system of accounting. Until there is better correlation between these factors, it will be virtually impossible for the Forest Service to develop uniform price control criteria and be able to apply them consistently. I would like to conclude with a few other observations on the price regula- tion of this industry. The concept of "reasonable return" on investment is widely used in rate regulation by government and I have tried to point out some practical problems in its application to this industry. I also have a concern that any reasonable return "guidelines" or "standards" set by government for this industry, and that presently appears to be a re- quirement of the proposed legislation, recognize the significant differences in the characteristics of this industry compared with industries more conveniently price regulated by government. Unlike many price regulated industries, this one does not provide a necessity of life. Substantial risks are taken by those who provide the money to develop this kind of recreation facility and try to make a profit on a capital intensive business which can operate only for about 150 days out of the year. The risk period is still not over, even for those who have been in the business for many years. Unlike many regulated industries, there is no virtual monopoly by one company serving a specific area. The Denverite who wants to go skiing on PAGENO="0294" 290 Saturday can still choose between a dozen or more operators. Unlike some other industries which are price regulated, this one has not had the benefit of substantial government subsidies to fund losses during the early years of service to the public. As I have indicated, the determination of "reasonable return" guidelines will be very difficult for this industry, which is really only barely out of infancy, and may, in its application, be the most difficult practical problem in area operator regulation. I do not wish to antagonize anyone, but I do question if government is qualified to make a "reasonable return" judgment. I just don't know who is expert enough to say what is a reasonable return for risk in this industry. I do think that the "public" may be qualified to do so but only through its willingness to pay a lift ticket price which is determined not by government but by traditional competitive free enterprise system. Thank you for your attention this afternoon. I have previously provided for the committee's use a package of statistical data on which much of my presentation was based. I would be pleased to answer any questions you might have. CoLonADo SKI AREA SURVEY, FINANCIAL INFORMATION, AUGUST, 1975 SURVEY COVERAGE, IN TERMS OF SKIER DAYS 1973-74 1974-75 Total covered Total colorado Percent coverage 3, 636,335 4, 304, 787 84.47 4, 443, 816 5, 194, 720 85. 54 SOURCES OF DATA All financial data relative to specific ski areas has been extracted from the annual NSAA ski area survey conducted by the University of Colorado Busi- ness Research Center. The survey is conducted under the direction of Dr. Charles Goeldner who is in charge of activities at the research center. Written authorizations have been obtained from all areas shown for the release of the survey information. Lift ticket prices by area as well as skier-days by area for the years 1960-66 were taken from statistics compiled by Colorado Ski Country USA from USFS records. These figures may be unreliable as they are inconsistent and incom- plete. The same information for the years 1967-68 through 1974-75 was com- piled by Colorado Ski Country USA and is considered consistent and com- plete. These figures may be found in CSCUCA's STATISTICS publication. All Consumer Price Index Figures were taken from the 1974 edition of the U.S. Department of Labor publication entitled 1974 Labor Statistics. Figures included in the Average Hourly Earnings Index prior to 1967 were computed from average hourly earnings as shown in 1974 La1~'or Statistics, using the 1967 figure as 100%. Index figures from 1967-74 were computed by the gov- ernment also using the 1967 figure as 100%. The Composite Construction Cost Index was found in a periodical entitled Construction Review. Figures prior to 1965 were computed using 1957-59 as the base period and then converted to 1967-68 based percentages. Figures subsequent to 1965 were computed using 1967-68 as the base year. The most recent 1975 figures have been in- cluded where obtainable for all indices. Before considering the data presented herein, it must be noted that the survey information has not been audited except in the cases where publicly owned companies have released audited statements. Consequently the infor- mation must be regarded as unaudited. This study was conducted by a committee of Colorado Ski Country USA. PAGENO="0295" ~, CD g~ ~ > o CD~ 0. o C0~!.o (/) 3~CD C,, ~ 00 00 ~ C,) 0)U1~ ~C,)C0CO ~ .~*.4O) ~0OC0C) ~CC)CD UI 0C)~ 0)~-1Q0 ;D ~ _Co !`~~-`~~ ~ ~4 C~C~)t3I~)(0 N)C~)~ 0)N3CJ~OCC) 00 ~ ~o~-JC,)~ ~N3~%~ 3 0 ~ -.~. ~ 330)333~33a~ 030)00. C0~00 -4 (0 00 0)00 0)-J00-J ~ 00 C) 0 C- 0 0 0 C', C,) N3 ~0)00t~3 ~ -~ (0 PAGENO="0296" C, 0 0 0 0 ci) C,, 0 C,, 0 0 C~ -~ 0 C,, -C C,, C,) 0 33~33~33~~ ~ ~ 33 33 ~33~ 33~3 :~i 33~~ ,~ ~ ~ `:~ 333~ ~ C,, ~-J ~ ~O'~O)~C~ -i PAGENO="0297" 293 COLORADO SKI AREA SURVEY-RETURN ON GROSS FIXED ASSETS,1 1974-75 SEASON Area Gross fixed assets at cost~ (thou- sands) Mountain net profit interest3 before (Thousands) Percent A B C D E F G H I K I M $16, 630 6,254 3,904 3, 345 2,221 8,049 9,258 1,978 1,716 1,061 1,148 1,442 822 $1, 330 854 703 489 279 420 147 190 107 71 50 49 18 7.9 13.6 18.0 14. 6 12.5 5.2 1.5 9.6 6.2 6.6 4.4 3.3 2.1 N 468 16 3.4 O P Q R 2,556 5,241 5,699 3,046 75 162 182 (230) 2.9 3.1 3.2 (7.6) Totals 1974-75 74,838 4,912 6.6 Totals 1973-74 61,213 2,145 3.5 1 Gross fixed assets. Gross fixed assets in this case are all fixed assets used to carry on the skiing business and related activities excluding those used for accommodations or held as real estate. Why is return on GFA used? The adequacy of earnings is generally measured in terms of (1) the rate earned on sales, (2) the rate earned on the stockholders' eqwty, and (3) the rate earned on fixed assets. However, the rate earned on fixed assets (return on GFA), is the most meaningful measure of the efficiency of operations since its relates the dollars of profit to the dollars of assets used in the business, thereby measuring how efficiently the assets are used. 2 Gross fixed assets, at cost. These figures are shown at historical cost, which in most cases is significantly less than today's replacement cost. 3 Mountain net profit before interest. Net profit has been increased by the amount of interest expense (net of income taxes) in order to remove the effect of leverage. COLORADO SKI AREA SURVEY-RETURN ON EQUITY 1, 1974-75 SEASON [Dollars in thousands] Area Net worth or equity2 Net profit Return on equity (percent) A B C D E F G H $7,841 3,568 1,959 7,028 1,326 (352) 4,304 417 $1,241 843 677 488 278 268 147 144 15.8 23.6 34.6 6.9 20.9 (3) 3.4 34.5 I 156 86 55.1 568 62 10.9 K 414 34 8.5 L 406 9 2.2 M 161 7 4.3 N 99 4 4.0 O P Q R Totals 1974-75 Totals 1973-74 221 (480) 302 1,466 (8) (86) (231) (429) (3.6) (3) (76.4 (29.3 29, 404 3, 474 11.8 25, 320 543 2. 1 1 Return on equity. Return on equity, like return on gross fixed assets, acts as a measure of the adequacy of earnings, but only when reviewed along side the return on sales (revenues) and the return on assets. This rate of return reflects the use of leverage to generate net income. Rate of return on equity, however, can be a misleading concept in situations where capital contributions and retained earnings are low and leverage is high. This is especially true when borrowed funds are guaranteed by the stockholders. 2 Net worth or equity. Net worth or equity has been computed by adding (a) invested capital, and (b) retained earnings, as reported on the NSAA questionnaires. ~ Not available. PAGENO="0298" 294 COLORADO SKI AREA SURVEY-FINANCIAL STATISTICS PER SKIER-DAY, 1974-75 SEASON Gross fixed Lift Mountain net assets per Area skier-day' revenue per skier-day2 profit per skier-day Totals 1973-74 16. 84 Total skier-days for areas surveyed 4,443, 816 Total gross fixed assets for areas surveyed $74, 838, 000 Total lift revenue for areas surveyed $30, 231, 000 Total mountain net profit for areas surveyed $3, 112, 000 1 Gross fixed assets per skier-day. "GFA per skier-day" is an attempt to show how much capital must be invested for each skier for each day he skis. Generally speaking, this figure is higher for the newer areas since they have built facil- ities at `today's" costs, whereas more mature areas have built the majority of their facilities at `yesterday's" costs. In all cases the numbers are quite high, and these costs must be recovered over the course of time-over and above the recovery of everday costs of doing business. 2 Lift revenue per skier-day. This rate is really the "effective" lift ticket rate at each area, often called the "average revenue per skier." This effective rate shows the combined effects of child passes, package plans, and other marketing incentives. 3 Mountain net profit per skier-day. This figure restates profit or loss in terms of skier-days to indicate the average profit or loss generated by an area for each day an individual skied. A B C F G l~1 L M N O P Q R Totals 1974-75 $20.40 $8.53 $1.09 11.00 7.91 1.48 8.84 5.93 1.53 12.19 7.77 1.78 10.36 7.87 1.29 18.40 6.68 .48 25.78 5.75 .41 11.45 5.54 .83 13.87 5.75 .69 16.32 2.74 .95 33.44 6.76 1.01 13.75 5.81 .09 18.83 4.74 .15 13.07 4.50 .11 15.78 5.22 (.05) 22.69 4.74 (.40) 19.18 6.84 (.79) 48. 72 5.23 (6. 86) 16. 84 6. 80 .70 6.31 (.07) PAGENO="0299" 295 COLORADO SKI AREA SURVEY-SUMMARY OF PAYMENTS TO THE "PUBLIC", 1j974_75 SEASON [Dollars in thousandsi Direct labor (excluding Percent of Estimated marketing Total mountain Property income and G & A payments net Mountain Area USFS fees taxes2 taxes 3 to "public" revenues net profit A $172 $214 $889 $2,817 $4,092 45.2 $890 B 111 43 843 745 1,742 38.7 843 C 88 48 678 590 1,404 48.9 677 D 13 32 487 1,255 1,787 52.9 488 E 66 16 277 378 737 37.9 278 F 34 67 208 969 1, 278 36.2 208 G 43 147 `~39 729 32.4 147 H 20 28 144 429 621 38.7 144 I 8 37 85 286 416 35.7 86 24 11 62 325 422 30.5 62 K 1 9 35 53 98 39.2 34 I 21 10 9 246 286 29.8 9 M 3 6 6 93 108 43.0 7 N 1 2 4 82 89 31.3 4 O 28 23 439 490 36.8 (8) P 29 47 488 564 29.4 (92) Q 50 44 948 1,042 37.9 (236) R 4 18 165 187 50.5 (429) Totals 716 655 3, 874 10, 847 16, 092 40. 5 3, 112 Percent of mountain net profit 23.0 21.0 124.5 348.6 517.1 100.0 Percent of mountain revenues 1.8 1. 6 9.7 27.3 40. 5 7. 8 I Payments to the "public". This schedule is an attempt to show the relative mangitude of payments by ski areas to entities which may be considered to represent the public in one form or another. Fees and taxes amount to a relatively small proportion of revenues but a significant percentage of profits. Most areas, other than the few resort quality areas, could not pay more without experiencing even lower returns or even grcater losses, as the case may be. 2 Propetty taxes. Some of these taxes may apply to properties held for real estate purposes because the questionnaire failed to distinguish between taxes on mountain related property improvements and real estate property. In 1974-75, only three areas reported any real estate activity at all and two of these reported only relatively minor activities. In addition, most real estate taxes on land held for development are capitalized and therefore would not be included in property tax expense. 3 Direct labor (excluding mat keting and G&A wages). It may be argued that direct labor is simply a cost of doing business n the same sense that USFS fees are really just "rent." However, direct labor is shown simply to make the point that every dollar spent on labor is re-spent by the laborer in the community near the area and in turn is re-spent several times in the state, thereby generating additional tax revenues for the rest of the community (or state). Other costs essentially go to individuals in the private sector in one form or another. PAGENO="0300" Co ~7 š~-~ 9 70 7/ ~`Z 77 7d U' t~7 ~? (`7 71~ 7/ 7z- 73 7~ 7~r' /~ NOTES Lift Ticket Price Graphs (1) Weighted average lift ticket prices are averages of the lift prices at each area weighted by the number of skier-days at that area during the given `~ year. Weighted averages were used to more accurately and fairly show the average prices being paid by skiers in Colorado. The large dip in the weighted average lift ticket price index around 1967-68 was caused by large price decreases by Aspen in that year. Note that the last point on the same line fails in 1974-75, while more recent data has been obtained for the other indices. It can be readily seen that all other indices are already well above the 1974-75 level. (2) Ticket prices have increased (since 1967-68) faster than the Consumer Price Index. But it can be seen that since 1973 the CPI has been raising faster (the line is steeper) than ticket prices. 296 We igI- -/-ed ~4verag e L~ 1z~ Pr,c& f~c/ex (2) 7? 1 / Cansu~~ier rcice J-'1o~e)š (3)~~~ ~ ~ ~ ~ #0U~/ //7i~yS ~ (2) z cj 70 PAGENO="0301" 297 (3) The skiing industry is capital intensire in that extreme `investm~ents in facilities must be made befoj~e any revenue may be derived The cost of these facihties are mirrored by the Composite Construction Cost Index labor ma terials etc) and can be seen to be rising much faster than ticket rates The industry must somehow be able to recover these costs in addition to the everyd~iy costs of running the areas. (4) These, everyday costs are :~ade up.of vario~is.costs-~but by~far the major component is labor Thus skiing is labor intensive with respect to everyday operating costs These labor costs are reflected by the Average Hourly Earnings Index which monitors increases in labor costs for all non farm non government non supervisory workers This index has been keeping pace with lift ticket prices (or vice-versa) and already is seen to be very high in 1975 Senator HASKELL. Our next witness is Tom `Swanson, vice presi- dent, United Bank of Denver. Mr. Swanson, good morning. STATEMENT OP TOM SWANSON, VICE PRESIDENT, UNITED BANE OP DENVER, DENVER, COLO. Mr. SWANSON. Senator Haskell, I am appearing before you today to discuss how one commercial bank views the risk inherent in financing ski areas and resort complexes, the reasons the United Bank of Denver supports this .type of business, and last, why I view the lifting of the `80-acre limitation for permits for ski `facilities and the extension of ski permits from 30 to 50 years as positive legislation that will result in more viable and qualitative ski facilities I am a group vice president. of the United Bank of Denver, which is Colorado's second largest bank, and which we feel plays .a `leading role in the State's economic development. In 1963, the bank under- took, a study to determine whether lending depositors' funds to ski area developers made good economic sense. Our conclusions were that while loans to ski areas were of a high risk nature, the potential contribution to the economic development of the State as well as our confidence in our ability to structure and administer this type of credit made it desirable for our bank to support the ski industry. Since then, to the best of our knowledge, United Bank of `Denver has invested more dollars in the ski industry than any other regional `bank, and we feel we know its character well. Because Colorado's skiing facilities' are acknowledged as being among the finest in the' world `and because their acceptance has resulted in tremendous growth of the industry in this State, some of the early risks of financing ski areas have been lessened. Never- theless, the risk to owners, investors, and lenders in this business remain substantial. In my opinion these risks are; First: Weather. Few other industries' success is as affected by the elements as skiing. `The threat of a poor snow year is always a con- sideration and will continue to be one of the prime risks within the industry. Secondly: Seasonality. Skiing begins in late November and ends sometime in April. Therefore, the area operators must generate most of their income in a short period of time, which in my opinion increases the risk dramatically Hence, to protect against these two uncontrollable risks of seasonality and weather, the ski area operator needs to conserve any excess cash flow from a good year as a cushion for use in a bad year. 67-~5i2-76----2O PAGENO="0302" ~298 `Third: Th~ capital' intefl~iv~: nature of the business. Ski area developments require abnormally high front end expenditures to become operative In addition, funds must be generated not merely to meet immediate needs but also to provide for future capital ex penditures to build additional capacity as the number of skiers in- crease Ski areas cannot ignore the need to plan and spend for capacity to meet skier demand which may or may not materialize ~rt some future time, but most probably will As previously mentioned, this `high `initial investment `can only be recovered from cash flow generated in a short 14- to `20-week period~ The heavy initial `and `ongoing eapital requirements of `the industry, added to the high' risk nature"of the business, make it reasonable that the operator be com- pensated by a higher average rate of return. Four Economic conditions Dollars spent on skiing vacations and day skiing are disposable dollars. Historically, these dollars ~re not only subject to negative economic impacts such as downturns `in the ecOnomy, increased unemployment, and. gas shortages,, but they are fickle dollars, dollars for which other forms of entertainment compete heavily. It is in this area that the maintenance of a high- quality recreational experience is paramount. Lastly: The Forest Service permits. The present permit. system ~has always been of concern to the bank when analyzing ski resort financing needs. Of particular concern is the special use perm:~t. Because of the heavy term financing needs that' areas `have, bank lOans normally have a maturity in excess of 1 year. We ba.nke ~s find ourselves in a position where theoretically an annual ~erm'it could expire prior to the loan being repaid, and, of course, without the permit the loan would most likely not be repaid. The 30-year permit is not as critical to the bank because we can adjust our maturities to be prior to the expiration of the permit. However, this flexibility would' not be available to long-term lender~, such as insurance companies or bond holders or to equity investors investing or making loans for an extended period of time~ It woull also become much more difficult for banks to support ski companies as the exepiration date for the term permit approaches. Basically, the closer an area gets to the expiration date of the term permit, th~ more risk is inherent in providing funds to the development. The United Bank of Denver has chosen to aggressively support ski area companies despite' the current permit structure because of our confidence in the areas. we finance and because of the Forest Service's policy of renewing the initial special use permit annually. [ will say that we still are very selective in those areas we do busines~; with. However, I do know of financial institutions, not as familiar as United Bank of Denver with the industry, who view this as ~ serious problem. I also feel long term or prospective purchases of or investors in ski areas would be much more comfortable with the pro posed change in the system. . `In conclusiOn, the United Bank of Denver views ski area financing as high risk lending. We have supported and will continue to support ski area development in Colorado. While the United Bank of Denver's support: of the State's ski industry is firm but selective; I PAGENO="0303" 299 PeeI ~t~hŔYe is ~. continuing needS tO reduce the `risk of lending, ~Q, .in-~ vesting and managing this type of business The minimization of risk should result in lower costs on borrowed funds, and more attractive sources of equity moneys, with the hope that the consumer would ultimately benefit from higher quality faŔilities and reasonable rates. 1 believe the proposed legislation as it relates to increasing the 80-acre limitation . and extending the 30- year permit will' go a long *ay toward encouraging continuity, and stability within Colorado's ski industry. Thank you for giving me the opportunity to appear before. the committee. I shall be happy to anSwer any questions you may have. Senator TIASKELL. Thank' you, Mr. Swanson. .1 do have some ques- tions and I am going to ask you not to name your client, because until this bill or some portion or some version thei eof becomes law I can understand why you would be reluctant to. reveal the name of any customer, but I am interested in how or what "the. . capital structure of let's just take any one of your customers. is.' Let the ask you this. What is the longest term loan, you . have ever made to a Colorado ski area? . . . ` . Mr. SWANSON. We have made a' combination of what we call work- ing capital and term loan, which .is known in the. banking trade as~ revolving credit, for up to 8 years. Additionally, they would be loans, that had little amortization in the first. 3, years because of the high capital requirements and then would be amortized over a 5~year. period, so I would conclude by saying 8 years . is the longest I have known aily bank to make. a~ loan to a Bki area.. Senator IJASKELL. Okay., 8 years is the longest term your bank or as far as . you know `any bank has made. In dealing with your customer I presume you have knowledge of their other sources of, financing? . ` , ` Mr. SWANSON. That's correct. Senator HASKELL. Did that particular ski area borrow money from other sources that had a longer term than 8 years? Mr. SwANSON. In one case, .the. area did, yes. .. ` Senator HASKELL. Just what was the nature of the lending? Was it an insurance compaiiy or what? Mr. SWANSON. The nature, initially it was an insurance, company7 secondly borrowing through debentures, which is a form of equity~ Senator HASKELL. Right, but-. . Mr. SWANSON. To a banker, who would be viewing the .loan as sinking fund requirements and trust requirements. Senator HASKELL. This was done with an insurance company? Mr. SWANSON. One with an insurance company as well as through~ private investors~ who purchased bonds. ` . . . Senator HASKELL. Let's take the insurance company. What was the' term of the loan to the insurance company? ., . . . Mr. SwANSoN. As I recall, the term of the loan was' approximately 15 years. , . Senator HASKELL. And what was the magnitude of the insurance company loan versus your bank's loan? .. . , . ` ` Mr. SWANSON. Because they didn't-they did overlap, Senator, the insurance company loan was approximately twice the size' o~ the PAGENO="0304" 300 bank credit in the beginning. As the insurance company loan paid down, we began to build up in `the bank `loan, so they were nev~r that-4he'maxithumofeither one was; not'outstanding: at any one. time. Senator HASKELL. So the insurance company had earlier `amortiza- tiOn? Mr. SWANSON. That's correct. When we began to provide `our funds, they were in the later years of amortization. Senator HASKELL. Was that loan made by the insurance company personally~ guaranteed by anybody? `Mr. SWANSON. `No. Senator HASKELL. So it was strictly a debt. Mr. SWANSON. It was' secured, `however. Senator HASKELL. Secured by the assets of the `ski corporation? Mr. SWANSON. I believe it was. I would want to check that before Iput that on the record. Senator HASKELL. But not' secured: by `assets other than those be- longing to the' ski company? Mr. SWANSON. No guarantees or outside assets. Senator HASKELL. ~So then to your knowledge there has only heeii one situation where-correct me if I am wrong-where a loan longer than 8 years has been made by any lender? Am `I correct in that? I am trying to find `out what credit is available to ski areas. Mr. SWANSON. I understand your question to mean our bank'a participation. Senator HASKELL. Yes. Mr. SWANSON. I understand that there are areas both within Colorado and outside of Colorado that have had longer terms than 8 years. I `would use as an example borrowing from SBA or possibly with SBA guarantees. I understand that there were areas principally in Wyoming for which the State of Wyoming provided economic development loans. Senator HASKELL. That's different. I am thinking of private sources. Mr. SWANSON. To. my knowledge, our only participation would be what we have just discussed. Senator HASKELL. So~ really, when we are looking at private sources, we are looking at by and large the longest bank loan being 8 years and we are looking at one situation you know of when an~ insurance company made a longer term loan. Mr. SWANSON. That's correct. Senator HASKELL. And you do not know of any other insurance company loan? Mr. SWANSON. No. Senator HASKELL. I think I have a great deal of sympathy with the proposition of making the permit apply to larger land areas. I am not sure how much sympathy I have with going beyond 30 years, because that's a long time, but I am in great sympathy with the proposition of covering larger land areas, because I thii~k you would be holding your breath as a banker from year to year a~ to whether the yearly permit would be renewed.. PAGENO="0305" 301 Let me ask you this. As a banker, what interest differential do you think could, be obtained if, for example, we had a larger land area so you weren't holding your breath from year to year? Give me a percentage, because it will bear obviously on the money market at a given time, but give me a percentage idea. Mr SWANSON I don't believe that the United Bank of Denver at this time with the area that we do business with, that we. have confidence* in that are more mature areas, successful areas, that the lifting of the 80 acre limitation would result in an immediate re duction. Rather, I feel that it might be more: important, in. their search for equity moneys over a longer period of time whether those equity instruments, either common stock or bonds, might be easier to sell with this limitation removed. Senator HASKELL. You think it would help an insurance company loan? Mr. SWANSON. I think it might. T think it certainly helps or would be-have a greater impact on those companies that we are as con- fident in their ability to structure and develop ski type areas as we are and those companies making purely an investment. As I men- tioned earlier, a partial reason for our commitment is because we are in Colorado. We believe in the growth of skiing in Colorado, and there are other reasons than just where we put our funds to get a rate of return. I would also emphasize that in my opinion the term is important, I think some of my associates would agree, as the conditions under which the term could be terminated. We are very much interested in understanding those conditions and feeling in fact comfortable that the permit will be granted and be extended at the time. Senator HASKELL. Now, you mentioned what you call mature ski areas and the fact that prob'ibly a permit for a lai ge land area wouldn't affect rates. Have you ever loaned money initially to a ski area trying: to start up.? Mr. SWANSON. Yes, we have. Senator HASKELL. Now, under those circumstances, would the interest factor be affected: if the permit covered considerably larger than 80 acres? Mr~ SWANSON. I think it might have a bearing on it. Senator HASKELL. Well, .thank you, Mr. Swanson .1 think you have been very helpful I appreciate it very much indeed I think in view of the fact that our next witness is going to dis- cuss financing matters at considerable length and is exempted from the 5-minute hmit we have had to apply to everybody, this would be a good time to adjourn the hearings until 1:30 p.m.~ { Whereupon the hearing was recessed, to reconvene at 1 30 p m] AFTERNOON SESSION Senator HASKELL We will reconvene the he'irmgs and Wade Kennedy of Boettcher & Co is the first witness this afternoon Be- c'tuse it was requested in adv'tnce Mr Kennedy, you have, within reason, as much time as you want. In other words, the 5-minute. rule doesn't apply... . .` ~. PAGENO="0306" 02 ~STATEMENT OP `WADE KENNEDY, INVESTME~T BANKER, BOETTCHER & CO, DENVER, COLO Mr KENNEDY Senator Haskell, I appreciate being able to give this entire talk. I won't be too lengthy. I Senator HASKELL. Could you pull the microphone a little closer to you, and I think people will be able to hear Mr KENNEDY As an investment banker, I have had the 0J) pOrtunity to contrast and value the relative risks and' benefits' cf long term capital investments in many industries This experience has been from among the largest of this country's. public utilities to among the smallest of Colorado's ski resorts. I greatly appreciate this opportunity to present to the Senata Interior Subcommittee on Environment and Land iResouices m ~ interpretation of certain of these experiences. I am appearing her3 at the request of the industry association,' Colorado Ski Country, and it is my hope that these remarks will be both to your benefi; as well as theirs. , As further~ background, with respect to my qualifications and biases, you should know that I count certain of' the ski cirporation~ in this area as my friends and clients., Although, as, an investment banker any financial interest' I might have' in the industry will be earned only when it is successful at raising capital, to attract and benefit its customers, the skiers. The draft bill, 5. 2125, to be critiqued and `reworked during this process, has very commendably `identified the time and acreage limitations in, the present U.S. Forest Service permit system as a serious concern of investors in the ski business. The best way to articulate this concern is to cite certain passages of disclosure in- cluded in a preliminary statement for a long-term bond financing currently beiiig attempted by Vail Associates, Inc. I quote: Term Special Use Permits are generally granted for 30-year terms b~t are -`terminable upon 30 days' written notice by the Forest Service if it determines --that the public interest requires such termination. Special Use Permits are --terminable at will by the Forest Service. If the Forest Service were to termi- - -nate the Company's permits, the Company could not continue to operate its -`Vail ski area * * ~ The law does `not expressly provide for the granting of permits other than `Term Special Use Permits to use up to 80 acres of National Forest land for recreational purposes. The legality of the permit system presently used by the -~Forest Service has recently been questioned in litigation * * `The prospective investor in improvements to Vail's mountain ;~operations is being informed that the company, in effect, does not own or control the single asset, the mountain, which is to pay for' the prospective investment. What's more, the ski area's right to use substantially all of that asset; (1) may not be legal and (2) may be terminated each year regardless of performance by the company. Fortunately, there is also considerable good news squeezed be- tween' these disclosure passages,' and' we are confident that this fianacing can be successfully accomplished. The buyers of the bonds'i will put their money at risk on the faith, which isn't even stated,. that the Forest Service use permits will be .renewed' and renewed without ~ny limitations which would strain the company's. ability PAGENO="0307" 303 totvice the `debt. It is inpbrtnnt.to not~, though, th~t ~a1e of these bonds will in large part be due to the accommodation of the town of Vail, Cob, that the bonds will be exempt from income tax Also, it is unlikely that- Senator HASKELL Excuse me, how would bonds issued by Vul Associates be free of income tax ~ Mr KENNEDY The specific provision within the State statute for sports facilities that is industrial revenue bond purposes The money is all going to be used for expansion and addition to facilities on the m˘untain,"expanding its use and expanding employment in the State of Colorado. `: Senator HASKELL. So you say it' is* exempt from. ,not ]ust' Colorado tax- Mr KENNEDY Federal income tax Senator HASKELL. Thank you. Mr. KENNEDY. I think without that the interest rate required to sell the bonds would probably be prohibitive for the company. It is also unlikely that any but a few of the ski corporations in this State' could succeed at such a financing. I know `of no other industry which does not have . a noncancelable' right to the use of its. principal earning asset. Public utilities, re- gardless of the quality of their performance, including even those operating as monopolies within their market, are not denied cle'ar title to their considerable investment `in assets nor threatened with~ loss of their captive customer franchise. Even public broadcasters',. operating under license from the FCC have a 3-year operating period in which their license cannot be canceled, and renewal of that license is disallowed only for proven cause. Exp~nsi6n of the acreage cOvered by long-term Forest Service use permits from 80 acres to cover the entire area actually in use would not `significantly `impact the prospects for the Vail financing or most any financing by established ski resorts. But rather, it is essential to protect the good faith that past `and prospective investors'believe, perhaps mistakenly, `is inherent in the existing permit system. The other aspeŰt of the use permit system raised for considera- `Senator `HASKELL. Are you saying or did you say that expanding the 80-acre limitatiOn to some larger area wouldn't have any effect whatsoever on financing? Is that what you told me? Mr. KENNEDY. That's `what I said. I think that ,inherent in the investments `which are made in these particular bonds and past investments is the business assumption or belief that these 1-year special use permits will in fact be renewed and if there were any reservation or loss of this faith, none of these financings would be available. Senator HASKELL. I see, so you don't ~feel it is necessary then to broaden the 80-acre base, I gather? Mr. KENNEDY. No, `I think it is essential to protect investments that have already been made. I think they have been made on a business faith which doesn't exist in the law. Senator HASKELL. Maybe I am misunderstanding you. I thought you said-I thought~ that broadening' the acreage base would be helpful, but I thought ~you just said~ that it wasn't necessary. PAGENO="0308" 304 Mr. K NI~ithY. I think what you are trying; to do is something isrhich i~ essential to protect and preserve the faith on which pa ~t and current investments are actually being made If you will, ti e financial markets are somewhat myopic. They like to look at-they are willing to take business risks and then they measure that risk on immediate experience If, as an example, a ticket ski area were to have its 1 year special use permit terminated, it would be cats - strophic to the financing of any future ski investments, so the point is I thank that the market here has a certain faith which is not substantiated' by the law at the present time, and the law clearly should make that provision. SenatOr HASKELL. So you do not object then to broadening the acreage based on 80 acres? Mr. KENNEDY. No, I very, very strongly endorse it. I think it is essential. Senator HASKELTJ. I misunderstood you. Excuse me. Mr. KENNEDY. The reason I backed into that was simply to em~ phasize from my point of view the importance of this and it ha~ the essence of investments which are even being paid today. I think if the investOr really believed the Forest Service were going to can- eel any of these or it was a very real prospect, the laws today would not allow for any balance in any type of industry. The other aspect of the use permit system raised for consideration is extension of the ski permit lives from 30 to 50 years. This con- sideration is really a moot point at this time ;since most ski resorts in the Western States are effectively operating* substantially under 1-year permits rather than 30. Clearly, after remedy. of the acreage limitations, a longer permit life would give comfOrt to, and accord- ingly facilitate attraction of, long-term investors in the ski business. Ho'wever, consider, that regardless of its initial term every use permit at some point in its life will have only 30 years, then 10 years, and finally 1 year left to run, and every use permit throughout its life will be subject to cancellation. Therefore, our essential con- cern should be the conditions under which these permits are con- tinued rather than their theoretical term at date of issue. The draft bill anticipates one aspect of this concern in' its provision. that, in the event of termination of a lease, the United States shall be obligated to reimbmu'rse the asset holders by an equitable cOn- sideration. This' is an important recornmendaiton. If you will recall th'e passages read earlier from the offering statement, conSider how' differently, a.nd frOm an investor's viewpoint how mtich' better, they' wOuld read if the provision for' equit'able reimbursement were appli- cable to all the improvements on: the mountain. In addition, I strongly urge that consider'ition of this provision be am''~n'd~d by the additiOn of the following' two pOints. These points would significantly expand the types and number of investors that would entrust the savings of their family, shareholders" or' fiducial beneficiary in the improvement of the ski industry: One: Specification of those causes for which use permits may be terminated; Two If any of those causes are to be out of the control of the management of the' respective ski: area, fOr exaiiple, as ciirr&itly' PAGENO="0309" 305 provided, "in the public inetrest, the lands are needed for anpther use," there should be required (a) a notice period of at least 5 years, ~and (b) a specified procedure for the affected public, including skiers and residents as well as investors, to ratify the Forest Service's determination of the public interest; Again, it is my belief that these provisions are required, in the first instance, just to substantiate the unstated good faith upon which all past investments have already been made. So far, my report has dealt with the imp'ict of land use regulation by the Forest Service on the ability of the ski industry to attract capital investment. I want now to consider another element of the draft bill, the proposed regulation of lift ticket pricing While the acreage and time limitations of the Forest Service's use permits cause significant constraints on investment in the ski industry, these con- ctr'unts are secondary to the business risks inherent in a seasonal resort operation The theory and supportive evidence of these risks have received considerable attention from many of the other wit- nesses here today; and I will repeat those arguments only briefly to emphasize those characteristics of the industry which have the greatest impact on its ability, to attract long-term capital investment. Ski resort operations are intensely competitive. They compete with all forms of hobbies and leisure time activities and the many ski areas across the country and throughout the world compete amongst themselves for skier visits. The fact that skiing is seasonal Loncentrates this competition into only about a third of the year, which is actually concentrated even further into a few weeks around Christmas and during the spring school vacations. Let's consider that we are planning a day, a weekend or a week's *skiing trip. Whether we are coming from Denver, Missouri, or Mexico City, the number of ski resorts available to us is manyfold larger than the total number of ski areas that any one of us could list. How then do we choose? We could take into account how easy it is to get to each resort and what it would cost to get there; also there is the availability, cost and style of accommodations and the `extent and condition of skiing trails. We might also consider lift ticket prices which in the State of Colorado vary from as low a~ 83.75 to $11 for one adult for 1 day. In my own experience, I would `have considered first the cost of transportation and accommodations. Next to those, lift ticket prices are an afterthought. The experience of all of those skiers who visit resorts in Colorado has been compiled by the industry association, Colorado Ski Country, and presented here previously. The relative popularity of those various resorts shows no correlation with the cost of lift tickets. Instead, there is a very strong correlation with size and quality of skiing terrain and accommodations. This quality is expensive to the customer, but he' is obviously very willing to' pay for it and, ` if not, there are very adequate les sexpensive alternaitves. It's in- teresting to note that lift ticket prices available today at' some of .the smaller ski areas in the State are equal to or less than what a skier would h'tve p'ud at one of the larger are'Ls 15 years `~go The quality and size of the ski resort is what the customer wants, therefore, to compete effectively for these customers, the ski areas PAGENO="0310" 306 must raise the extensive amounts of capitai investment required~to provide for such facilities In effect, the industry competes `with capital investment. This then is an industry that operates in the public domian, which on the one hand competes vigorously for its customers, and on I he other hand makes use of national forest land, which is a limited public resource and therefore regulated as to the location, extent, and quality of use These characteristics provide an interesting con- trast with~ other inajor regulated industries, utilities, broadcasters, and transportatiOn. The utility industry provides an essental product and, within a~ broad range, does not compete for the customers who need that product. Price regulation is therefore needed in this industry to assure that the monopoly operator cannot take advantage of the dependent public. Within the broadcasting industry, the competition for authenc~e time is intense. The product makes advantage of a limited public resource, airwave broadcast frequencies, but it is not an essenti iT item. These characteristics are similar to those of the skiing bii~i- ness. Broadcasters are regulated as to the accessibility and quality of channel use, but pricing is not regulated but rather contained by free competition. The transportation industry, airlines and railroads, similarly compete vigorously for their customers and use public air routes, the availability of which is federally controlled. Unlike broa.dcastei~ and the skiing industry, though, we have also controlled the ahilit~ of the* airlines and the railroads to compete with price. What techniques then do these businesses use as they compete between themselves? The answer is simple. They use the quality of their service and the capital investment required to provide that qualit~T of service. When times are good, all works well. The airlines add more and more new planes, each with a new degree of comfort in the sky. The railroads improve roadbeds, upgrade eqiupment an~[ devise computerized scheduling efficiencies. This certainly seems to be a desired result for the public customers. However, there arE two very real drawbacks. Access to the business potential new competitors is virtually prohibited because the existing operatorE are already years and billions of dollars ahead in the capital in- vestment competition and, too, when economic conditions are not good, the only recourse these businesses have is, again, to adjust their quality of service and the capital investment related to that service. Railroads curtail roadbed maintenance, allow a greater degree of equipment disrepair, reduce scheduling and, as we have seen over the last couple of decades, ignore the passenger customer enitrely. The airlines drop movies, then meals; then they significantly curtail frequency of flights and, finally, they start selling~ their air- planes or even seek ways to sell entire companies. We can easily extend the consequences of this type of competition to the ski industry. First, with respect to the ease of entry of new competition into the industry, the greatest competitive advanage a new ski resort could have would be that the competition priced itself out of a great portion of the market. Imposition of lift ticket PAGENO="0311" 307. price, ceilings ~rill gr~atly disadvantage, the new and developing resorts and measurably constrict sources of capital investment needed to compete with the established resorts Second, with respect to the quality and extent of the service provided, there is no question that limitation of pricing flexibility would affect the skiing experience of the pubic. If faced wth economic, pressures like thOse of the past 5 years, together with an artificial constraint on lift ticket pricing, ski resorts would have no choice but to ˇffsÚt increasing costs by' reduced maintenance and invest- ment in its ski facilities. Lift capacities and availability of accom- modations would not compare with those now available; and. be- cause thes~ are precisely those features that the skiing public wants, there is no `question in my mind that it is the skiing' public that would have been most disadvantaged' in these `circumstances. Let me cite another disclosure passage from the Vail Associates offering statement. "If the Forest Service were unwilling to approve In- creases in lift rates `during periods' of rising costs and inflationary. pressures, it could have a material adverse effect on the company." We have all read and heard a great' deal ~of rhetoric regarding, the inability of regulated industries to raise adequate amounts of investment capital. Many of these arguments,. I believe, will prove valid over' the long run. However, the immediacy of the problem is very much clouded when one~ considers that, despite all. of this. rhetoric, the public utility industry has successfully raised $24 biT- lion of new investment capital during the' past 18 months. I will conclude my remarks today' by emphasizing th~t the. attraction of investment `capital to the skiing industry is not just a potentiaY concern; it is a critical problem `right now. * Thern very considerable business risks inherent in a ski resort:. operation. are being discussed today in theory by other witnesses.~ During the past 2 years, I have ha.d certain practical experienceS with the industry that I would like' to' summarize for you. Within the Rocky Mountain States, there are at least nine ski resorts, of which I am aware, that are for sal~, or are seeking investmeiit partners. `In each case, the reason for sale is the need for large amounts of capital. Now, what's even more remarkable is that most of these ski areas cannot be sold. Virtually, all of the other' resorts in these States have an interest in additional financing. Some may be able to obtain short-term investment from their commercial banks, but most will have to wait for a very significant improvement in general economic conditions before they can raise any amounts. There are a few of the ski resorts in the area that have recently or are currently raising long-term funds. `But each of `these `has had to rely upon benefits to the investor beyond the credit' worthiness of the mountain operations themselves. They have used tax exemption facilities of their local community, base~l the credit on guarantees of significantly larger controlling corporations, or attached' lift ticket passes to the financing- in effect selling their service rathei~ than their credit worthiness. Even with the added benefits, these are still very difficult financing projects.' Furthermore, the statistical financial summary of the Colorado ski areas, prepared by Colorado ski country, reveals that several PAGENO="0312" 308 of these resorts lose money :or are only marginally profitable. This fact alone, would be risk enough to inhibit most permanent invest- ment in the business, and this concern becomes much greater whe~i you realize that several of these areas are the newer `resorts whose ~xteiisive capital investments have been made at today's high costs rather than at lower, historical costs. In effect, the rates of income. today are inadequate to cover the costs of investment today. With such financial pressures, I must conclude that many of the ski areas in the State of Colorado would be charging more for their lifi; tickets if it weren't for the free market competitive pressures withir~ the business. The ski industry makes use of Naitonal Forest Land, which is a limited public resource. Clearly the advisability and extent of this usage deserves regulation and limitation, and perhaps pricing regu- lation would be appropriate if the industry had monopolistic ad- vantages and the skiing public did not have a considerable choice among alternative costs and facilities. But, like the broadcasters using the public air waves, these customers do have such choice and they are competed for vigorously. Thank you. Senator HASKELL. Well, now, specifically, Mr. Kennedy, what are you recommending, in a nutshell? Mr. KENNEDY. I think the provisions and maybe some additions or amendment~s to those provisions with respect to the continuity of ski area use permits would be most advisable. I would also suggest that with respect to regulation of lift ticket prices that the Forest Service, which is expert in protecting the Forest for those like myself who love to use the National Forests, that they not be involved in price regulation of the industry. In fact- Senator HASKELL. Let me interrupt you there. Would you prefer then, that the present system of regulating prices by the Forest Service continue? Mr. KENNEDY. Let me give a rather long answer to that. When I look at this chart which is now lying sideways over here and see that lift ticket prices have risen almost perfectly in line with the increased cost of providing facilities as well as the average hourly earnings in this country, I am not sure that there is any additional pressure that needs to be brought to bear on these prices. That's one- Senator HASKELL.' question is simple. Would you prefer that the present system continue vis-a-vis the way the Forest Service grants or disallows rate increases? Mr. KENNEDY. What has been happening I think works, as evi- denced by the data, and it is also my understanding that- Senator HASKELL. Excuse me, really, I am just trying to get a yes or no answer. Would you recommend tha.t the present system con- tinue? It is simple. Either you do or don't. Mr. KENNEDY. Senator, it would be simple for me if I really knew what the present system is. It has been my impression that the Forest Service has in the past generally not been that involved in the lift ticket pricing decisions until a year ago,' iii which a very well publicized debate took place in which an application for $12 was denied and a compromise of $11 or $10 was allowed. PAGENO="0313" 309 Senator TIASKELL. My question still stands. Would you like to continue the present system ~ You know, I think you can answer it yes or no Mr KENNEDY If the present system is the $11 compromise ap proach, I would not like that tO continue. If the ,present system has been the basic, the majority of the experience in the ski industry with lift ticket price applications, then that should continue. What went on in the Aspen denial of the $12 price increase I think is unfortunate. There are areas within Aspen Valley right now which are considering development of ski areas down there and the greatest advantage to those, to that added competition, would be that im- mediate value would have been to allow Aspen to continue raising prices. Senator HASKELL. Do I understand then that you don't want the present system to continue? Mr. KENNEDY. I do. not want the present system to continue as it was evidenced by this recent denial of the $12 request in Aspen. Senator HASKELL. So what you are really saying is you don't want the Forest Service involved in any way, shape, or form in approving or disapproving rate increases? Mr. KENNEDY. Except to the extent that they feel that it involves the quality of the use of the national forest lands. I think that's their expertise, and that's what I look to them for. Senator HASKELL. But as far as pricing, you don't want them involved in any way, shape, or form, is that correct? Mr. KENNEDY. I think the pricing of the ski area affects the quality, the crowding, et cetera. Therefore, I don't think they can blind themselves. They should perhaps have a veto power and- Senator HASKELL. Well, that's what they just exercised. I am really trying to find out what you are recommending, and I may be thick, but I'm having a heck of a time figuring it out. Do you want them completely hands off as far as pricing goes? Mr. KENNEDY. The answer would be no. I want that to be a secondary. If that enters into their view of the quality of the use of that area, then they should be involved. If it is their desire to determine whether this is a competitive price or a fair price or what the skier should pay, then they should have their hands off that type of analysis. Senator HASKELL. OK, I still don't think it comes through to me. I think what you are saying is that they should have, their hands off of anything to do with pricing, but they should say you shouldn't let too many folks on the slopes, is that right? Mr. KENNEDY. I don't know whether too: many- Senator HASKELL. I am trying to find out what your thinking is. Where should they specifically-where should they interfere? Mr. KENNEDY. Their consideration of renewal and initial appli-. cations should be involved with the quality of the use of the forest, how much should be wild and how much recreation, and I wish `that could he divorced from competitive pricing. I do* not necessarily think it is The crowding or lack of use are functions of pricmg Therefore, I . do not think we can take it com~ietely out of their hands. ,: It should, be, a secondary `consideration in ~hich their PAGENO="0314" 310 mandate is the quality of the experience, not, whether the skier spends too much. Senator HASKELL. What do you mean by the quality of the e.~- perience? You have got a hill and a tow. You are talking about use of that hill. Would you want them to interfere and say, "You are not maintaining it properly?" Mr~ KENNEDY. Surely. Senator HASKELL.. Would you want them to interfere and say, "You are letting too many people on?" Mr. KENNEDY. Surely. * Senator HASKELL. OK, so you would permit them that, but you wouldn't permit them to have anything to say about rate structurs or rate amounts? Mr. KENNEDY. Correct. Senator HASKELL. OK, I get your point, and then to continue, dD you feel that the permit should `encompass a broader territorial area than the present 80 acres? Mr. KENNEDY. Very much so. Senator HASKELL. All right, sir, thank you very much. Mr. KENNEDY. I appreciate it. Senator HASKELL. Our next witness I understand is here~ She wasn't here this morning but she was told she would be on this; afternoon by the office, so I would hope that Miss Sally Ranney would be `able to come forward. Glad to have you here. I under- stand that the office told you you, would be on this afteronon rather than this morning. , Mrs. RANNEY. Right, that's correct, I would also like to make au apology for Ted T'omasi of the Colorado `Space Council. He is out of town today and therefore won't be here. Senator H~scari4. All right. STATEMENT OP SALLY RANNEY, REPRESENTING THE WILDERNESS SOCIETY, DENVER, COLO. - Mrs. RANNEY. Senator Haskell, thank you for this opportunity to express our views. I am Sally Ranney and I represent the Wilderness Society. The Wilderness Society strongly, supports your efforts to reform the system of issuing `and administering permits for ski facilities and other outdoor recreation facilities on national forest lands created from the, public domain. The present system, or lack thereof, is woefully inadequate, with- out equitable standards or determining criteria of denial or issuance of permits. It allows questionable practices regarding rate increases to the public for~ skiing recreation use permit areas and does not allow for public participation in the entire process of issuing per- mits on public domain national forest lands. We strongly support your efforts to reform the present permit ~system. However, Wilderness Society feels that some provisions of ▒he bill need clarification, revision, or deletion. in section 3(a) it appears that with only discretionary congres- sional review of 1,280 acre to 5,000 acre permits within a 60-day PAGENO="0315" 311: tIme period, the l~urden of proof is. placed upon those opposed. to an undesirable permit, instead of being placed properly on the appli- cants It is our position that any permit over 1,280 acres should only be issued on affirmative action of Congress If a resolution of disapproval is not passed by the appropriate committees within the 60-day period, it could be construed as congressional approval. The 5,000 acre minimum for permits required to undergo man- datory congressional review is excessive. For example, the contro- versial Beaver Creek proposed development requires approximately 3000 acres of permitted national forest l~nd Vail in 1969 was only 6,707 acres and lays claim to being one of the largest ski areas in, the country. Crested `Butte has a 2,121 acre permit; Loveland Basin 2,280 acres, Arapahoe Basin 1,300 acres, Keystone 2,280 acres, Aspen- Snowmass 6,298 acres, Aspen-Highlands 4,221 acres, and Purgatory 1~500 acres. `W~ feel that this acreage limit should be reduced to 1,280 acres or maj or ski areas, such as most of those mentioned above, would, evade review. Also, clarification of language `should be included regarding intent, a.nd that the permit area be contiguous and com-, pact which would mean all runs', facilities, cleared and developed areas are contained within the external boundaries. Specific `guidelines should be established and included as to the requirements that must be met before a permit is issued, such as the following: .. The Secretary should' require a posting of bond to provide for restoration of the area if the development fails, goes out of business, or is abandoned. ` The Secretary should require a study to determine if there is, nideed, a. need for the facility. Before any part of a wilderness resource area-roadless area- of 5,000 acres or more, including all those areas inventoried in the U.S. Forest Service roadless area review of 1973, is included in a permit area, a wilderness study in accordance with the Wilderness. Act should be completed. No permit should be granted until Con- gress has acted on the wilderness recommendations. Now, an example is that there are presently 92 inventoried winter sport sites in Colorado. Of these, 31 inventoried sites are within nonselected roadless areas. In other words, those roadless areas are not on `the wilderness study areas list. SENATOR HASKELL. What do you mean when you say there are 92? These' are' prospective? Mrs. RANNEY. Bight. Senator HASKELL. Ski areas in addition to the ones that now exist? Mrs. BANNEr. In addition to the ones that exist. These are poten- tial. Senator HASKELL. And determined to be potential by whom? The Forest Service? Mrs. RANNEY. The Forest Service. `Senator HASKELL. I see. Thank you. Mrs. RANNEY. 16 are .within new wilderness study areas and one has even been inventoried in a primitive area, so our primary con- ceril is that these wild resource lands deserve a study and recom- PAGENO="0316" 312 inendation before any other type of use is permitted that would foreclose the option of wilderness designation A complete inventory and study of the developmental impacts~ on other forest lands and resources within the proximity of the per mit area should be rÚqŘired, such as impacts on watersheds and.. wildlife. The Secretary should be required to show that local and State governments have the authority and capability to regulate develop- me˝t on nearby private lands. Zoning and `development regulations should be determined before the permit is issued to insure develop- ment compatibility Senator HASKELL. Now, the bill 1 believe does contain a provision. that it would be a condition precedent to the Issuahce of the permit that `a satisfactor~r overall land-use plan be adopted by the local government-either county or city. I think that's in the bill right now~ Mrs. RANNEY. Does that specifically state that the zo!ning `as far as- Senator HASKELL. Probably doesn't state zoning. It probably does; not, yo~ are right. Mrs. R~**r~r. The Secretary shOuld be required *to show, that rate adjustments, and we are talking about lift tickets, will not', discrhniLtŔ against one type of `skier in preference to another type Of skier, for example, `the day skier versus owners of accommodations or lodging or participants in organized groups. The Wilderness Society' strOngly endOrses public hearings `on rate increases charged to the public for use of the permittees' recreational facilities, since' it is the public's land the permittee has the privilege of using. We feel that a 50-year permit `term is much `too long. As presently written, 5. 2125 provides no provisions for reassessment of a permit term. Specific language is needed to determine reevaluation of. a. permit term. `ConditiOns change, the development may prove to be not in the best `interest of the public, or cause too many adverse environmental `effects. Permit requirements may need to be changed. to accommodate new situations and future problems. Possibly an alternative could be a permit term of 10 to 15 years,. with a "preferential right of renewal" by the permittee could be an alternative if the operations are meeting the requirements `of the permit and `continuance is in `the best interest of the public. We feel that it is unwise to be locked into a 50-year permit with- o˝t prOvisions for reevaluation, changes, `or termination. Specific language and assurances should be outlined for the corn-- phance of air and water quality requirements. The Wilderness Society feels that the U.S. Government, hence the taxpayers, should not be required to compensate the permittee' for improvements if the permit has to be terminated because' of failure to comply with, the re4uirements of the permit. Also, `as; stated in section 3(d), termination of such a permit `for another use which may prove in the better interest `of the `public would te- quire compensation by the U.S. Government. This `could cause such,, financial burden `on `the U.S. taxpayer that `termination of `a permit~ would `become `almost impossible. PAGENO="0317" 3~:3 SŔnato~r HASKELL. ~xcuse me, but don't you think th~t if the? Gover˝n~nt i~ininated the permit before the end and terminated.. it not through the fault o~f the ~pe~ktot, really, you could bankrupt the operator unless you compensated him foi~ his investment? It seems to me a little harsh to say that the Government couid~ say at the end of 5 years terminate the permit because they wanted to use the land for something else. That would be pretty tough, don't yow think? Mrs. RANNEY. Could there possibly be some arrangement made~ where the permittee could be compensated, for instance, if he is still interested in continuing the Ski de~eiopffient of a~ alternative site or something like that? Senator HASKELL. Well, I thilik what you probably have to do- it seems to me to be fair to compensate him if you kick him Off' because you want to use it for something else and he has done everything he can and he has in fact lived up to the permit. It seems to me fair to compensate him for what his loss of investment would be which probably would be the then appreciated cost of his im- provements I am in accord with you that 50 years is too long I don't have any trouble with tha~t, a~d if There ~s a termination because of a failure to comply with his obligations then that presents: a different situation. I ~ where I depart from your thinking is where he has done everything he can and he has lived up to his end of the bargain but then the Government decides it would be' better to give it to, let's say, timber purchasers or better to put it in wilderness or any number of uses. I just comment there. I think maybe I depart from your thinking on that That's all Mrs. RANNEY. Possibly language could be included to contemplate how compensation could take place. Senator HASKELL. Oh. yes. Mrs. RANNEY. I think my disagreement with the bill in that is: that there needs to be more specific language on many of the meas- sures, including this compensation one, because we felt that it was too open-ended the way it stood now. Senator HASKELL. I see. Mrs. RANNEY. Section 8 states that the "Secretary may furnish on a reimbursement basis all types of utility services to conces-~ sioners, contracotrs, permittees, or other users of such services with- in the National Forest reserves * * ~ This indicates that the TJ.S. Goveinment, hence the taxpayers, will front end the cost of utility services to the permittee for the f'tcilities which he will own in the permit area. Since utility costs are one of the major expenses for recreational development, I feel that this possibly encourages a. policy of developed recreation versus nondeveloped recreation in. sites where possibly it would be better to have nondeve~oped recre- ation. Also, no specific language is included regarding type of reim-- bursement, interest rates, or duration of appropriation. I feel that the bill should be specifically limited `tO ski area. development permits only. As written now it appears that it would allow and possibly promote other types of recreational develop-- ments. 67-512-76-------21 PAGENO="0318" 314 The bill should provide that permits would not be issued to in- clude any or all of an area designated for or inventoried as a wild- life. preserve, natural area, research area, or other areas established to protect unimpaired natural values. `Thank you. Senator HASKELL. Thank you' very much. Let me ask you a ques- tion This is not in the bill at all I would just like to have your reaction. Many of the areas in our State and throughout the Nation because `of the tremendous investments that the people have put into them have to `charge a fairly high price just to recover their investment and make a reasonable profit, and this has eliminated a lot of people at least in my view from access to skiing. I wonder what your reaction and the reaction of your organization would be if some language were included in the bill ~that the Forest Service shall consider a~ipiopriate lower cost `are'a~ that have to `be adjacent to or nearby population centers. These facilities would not be unsafe facilities, of course, but just wouldn't be as fancy,, and thus would allow more people `the opportunity to ski. In other words, urge the Forest Service in this direction with the idea of providing accessi- bility to skiing for more of the public. Do you have any reaction to that? Mrs. RANNEY. I feel that is a sound alternative and a good point. However, in promoting a type of area like that, I would still say that all the requirements, environmental protective requirements, would have to- Senator HASKELL. Oh, yes. Mrs. RANNEY [continuing]. Still to be followed, and I feeL too, that a nondevelopment type of recreation, specifically, skiing, should have more emphasis or could have more emphasis than the develop- ment type of skiing, which is, of course, cross-country, and that requires trail' beds and trail development, trail access, but a rela- tively primitive accommodation or facilities can accommodate those `who are interested' in that activity. Senator HASKELL. All right, thank you very much indeed~ and thank you for appearing. We are going, to have a recess here for a few minutes. I have a telephone call I have got to make, but I will be back as soon as I make it. [Short recess.] Senator HAsKEr~L. I apologize for the interruption. Our next wit- ness I am very pleased to welcOme, Billy Kidd, who is a former Olym- pic champion, and we look forward with a great deal of pleasure to hearing from him. STATEMENT `OP BILLY KIDD, PORMER' OLYMPIC CHAMPION, COLORADO Mr. KIDD. Mr. Chairman, I appreciate the opportunity to appear before you on these hearings today. My purpose is ,to talk about the value of skiing to the American public and the use of America based on my lifelong experience in the' sport. First, I would like to give you a brief background, personal back- ground. I was born and raised and started skiing at age 5 in Ver- PAGENO="0319" 315 mont. I competed interiiationally as ~ member' of the U.S. ski team ~for9 years,' won a silver medal `in the 1964 Olympics, the world -championships in amateur and professional in 1970. I graduated ~from the University of Colorado and presenly am director of skiing at Steamboat. I am a member of the President's Council on Physical `FitiTess and Sports. I just~compleind `a bookon "How To Learn To :Ski in Six Days," which should be coming off the press today. Senator HASKELL. Put me on the list, will you ~ Mr~ KinD. In the last ~ years I have worked in various companies developing equipment, coaching, talking to people all over the coun- "try, both skiers and' not, and a general overview of skiing as a sport and business., I would like to talk about the value of skiing to the individual, :especiany kids. Unlike any sport American `kids are `encouraged to participate in, you can ski all your life. For example, I *as coach- ing at a racing camp in Montana and there was a 67-year-old man `up there along with 12- and 14-year-old `kids. I thought he was born on skis but he told `me he started skiing 2 years ago~ Kids like this `sport because they can do it on their own and on their own speed `and there is a strong feeling of individual freedom which is seldom available in football or basketball. It is a famil~ sport. The modern ski area. design has contributed `to skiing as a family sport. There are trails for different `abilities so that the whole `family can ski the same area and' have a. choice of trails suitable to the excitement and pleasure for each individual. When a family goes skiing, they share common experiences such as *skiing a trail, riding a lift together or relating their skiing, experi- ences. This sharing of common experiences can help bridge the gen- * eration gap that we heard so much about' a short while ago. Most -other sports are not shared in the same way. For example,. in base- `bail the kids play and parents watch. I would like to talk about the cost of skiing. It is not necessary to go to major ski resorts to learn to skin, as you can learn just as well on a small hill. I learned in my backyard in Vermont. Many -ski areas are available in close proximity to major cities such as Chicago, Detroit, et cetera, where the cost of life tickets and travel is low. It is not necessary to have fancy ski equipment or expensive clothing. I skied for many years `in my blue jeans. In my book. I -suggest that beginning skiers ,rent their equipment instead of buy it and kids use Scotchguard on their jeans to cut down the expenses. Even good skiers can benefit by skiing on a small hill by practicing `~to improve technique, by getting involved in competition racing, such as Nascar and free-style competition. A good example is Cindy Nelson, who won the Gold Medal in Innsbruck. Cindy received `most of her training on a small hill in Minnesota that has a vertical -drop of approximately 600 feet. The other day in Dallas at the Dallas Ski Show, I met a young lady about 17 or 18 who organized the high school ski club i~nd is planning a trip to Aspen, and surprisingly price was not one of the - -main considerations but she wants the best ski trip to combine good ``skiing and fun. ` There are many programs~ in the count'ry today where school kids go skiing as part of the physical education program. The buses PAGENO="0320" 316 take the kids to ski areas~ within, a, half hour. of the cities. I would: like to see more similar programs developed to . give many more~ kids an opportunity ~to try the sport of skiing~, As 1 mentioned previously, I am a. member of the President's; Council on Physical Fitness and Sports. The. President's CounciF tries to bring awareness of physical fitness and sports to the Amer- ican people. It encourages and rewards participation rather than stressing winning. `I encourage people. to get involved in skiing because when they. do they know it is a physically demanding sport and therefore set up an exercise program throughout the year t~* keep in shape. A skier needs the strength and flexibility and this promotes physical fitness all year around. Other sports such as football and baseball are not participation or live sports. The less opportunity there is to participate, the older you get you become more of a. spectator, which contributes little to your physical fitness. New horizons are opened to new and different lifestyles. For in- stance, 3 years I participated in the two drug rehabilitation pro- grams at the Odyssey House in New York. I was reluctant at first since they were mainly poor and black kids, but I felt if they de- veloped interest in this sport they would provide a goal and thus; help in getting out of the ghetto, perhaps a new way of life they previously never thought about. Regarding value, I think when you go skiing it is not only physi- cally good, but .good for your mental health as well. Most people's- lifestyles are hectic, full of pressure and confusion and congestiom of the cities. You get completely~ away from these problems. You enjoy the peace and tranquility of the mountains and clean air when you go skiing. Also this sport takes complete concentration so you can't be thinking of your business problems. You get totally in- volved in the sport. Skiing can survive the economic crunch because it is part of people's lives. I was discussing this with a sporting goods owner who said that he thinks people feel sports are now a necessary part of their lives.. It is no longer a. .secondary requirement but a neces- sity, not just for phyical activity but a chance to escape problems; of every day life. Ski resorts provide year-round recreation. Many people use ski l~fts to get to `the top of the mountain even in .the summer. Ski resort lifts provide an opportunity for those people who are not physically able to ski to see the top of the mountain. People can get out in the environment who understand environmental concerns much better than only reading about them in the newspapers. Once .you . have been to the mountains and experienced them, especially in the sport of .skiing, you have a much stronger feeling of concern for the en- vironment. Ski areas are not necessarily polluting or damaging: to~ the environment. People involved are very much concerned in the `development since, they live in it' and take proper care in seeing' ,that planning will not pollute or, destroy .the mountain beauty. The attitudes of peop'le who ski toward winter' have changed~ They no longer are irritated at having to shovel, snow~. but are~ happy to see it .for skiing. . , ` PAGENO="0321" 317 SenatOr~ I hope that my views have made a slight contribution to your hearings and hopefully show the value of skiing to an indi- vidual. I' sincerely hope `the `sport o.f skiing will grow and a lot more people have the opportunity to enjoy and benefit from the ~spoi~t, as I have. Thank you. Senator HASKELL. Thank you, Mr. Kidd. I share your views. You would, never know it if you saw me ski, but I have skied since I `was 6 years old and I'hope more and more people can enjoy it. I think `that's one of the things we want to work for. Thank you very much for :appearing. Our next witness is Charles Schafer of the Sierra Club, Denver, `Colo. Mr.' SCHAFER. Good afternoon, Senator. Senator HASKELL. Mr. Schafer. `STATEMENT 0F CHARLES SCHAFER, ON BEHALF OF THE SIERRA CLUB, DENVER, COLO. Mr. SCHAFER. Senator, again I introduce myself. My name is ~Charles Schafer. I am appearing here at the request of Mr~ Sorenson for the Sierra Club. I appreciate the opportunity to make a few comments today. Incidentally, do you have a copy of the club's written testimony? Senator HASKELL. I don't know. We do not. Mr. SCHAFER. Well, let me assure you it will be forthcoming with- in the 2 weeks. Senator HASKELL. For 2 weeks the hearing record stays open. Mr. SCHAFER. I would like to make several brief comments with respect to three aspects of the proposed legislation. No. 1, it seems that you in writing your initial bill are very concerned, as you should be, with emphasizing some form of reasonable assurance to per- mittees as to security on their investment. This is a large invest- ment and we all understand that. The 50-year provision I would think is more the equivalent of an ownership than- Senator HASKELL. I agree. I happen to think it is too long, too. `Mr. SCHAFER. Thank you, and I believe the Chief Forester has ~already mentioned or written in, the form of a memorandum that future ski areas will be considered major Federal actions and thereby fall under the National Environmental Policy Act, and as `a result there will be certain requirements that will have to be met before these developments are okayed. Nevertheless, once the lease is granted, we have to revert to the Organic Act of 1898 or as to that `foTlowup act of March 1915, or any standards whatsoever that insure some kind of continuing sensitivity to environmental stand- ~trds and considerations. I know that I have `studied very carefully over the course of about ~ months, this was' `during 1973, some Of the alleged permit viola- tions that had taken place at the Colorado ski areas,' and there were quite a few instances where trees were cleared in a way than was less favorable as opposed to more favorable and visual aesthetics could have been given a major instead of a less major, priority in certain cases. Erosion, revegetation, water, sewage, garbage disposal PAGENO="0322" 318 present' `i~ problem in some areas, and yet~ once ~ pentht is grant~d~. it seems we have to revert to these antiquated acts with very vague~ standards to be insured that these permits are maintained and the regulations under those permits are maintained. I have been told now by high Forest officials here in Denver at the regional office level that dating from 1947 when the first Colorado permit was issued to Winter Park until the season before last- now, this does not include the 1974-75 season-that, no permit was ever revoked and that ui: fact none `.of the special use permits~ of' which there are many, were ever disallowed once they had been. granted, so it seems that `if we were to allow this 50-year-old or longer term lease provision to become a part of your bill that abuses that have arisen in the past may arise again and they may persist and that irreversible environmental damage may result, `lesser qual- ity of service may result to the public, and we would really be in the position where' effectively nothing can' be done until the expira- tion of the lease terms. As a suggestion, I am well aware that you are in need of some suggestions today as to how to handle that provision, we would rec- ommend that a 10-year lease be considered with a preferential re- view ~for the original developer if no violations of the permit are alleged. If there is a formal complaint that is registered with a body that would be set up or designated by your secretary, opportunities for public hearings might be made available at this time. Again, if no violations were found, preferential review and treatment would be afforded these original operators, and if violations were found and were proven then perhaps other operators might be given' an opportunity to step in their shoes and try to do better. Second, I would like to speak also, as Mrs. Ranney did, to the acreage provisions. The Forest Service regional official mentioned to me, a.s they did to you, that an inventory has been made of pros- pective sites within all of the national forests in Colorado and that 92 prospective sites have been listed. I believe at this point there are two or three of those sites that are listed as outstanding. There are larger sites for future development. Others have all. sorts of problems, ranging from. geological instability .to aesthetic factors. I think in light of what Forest Service officials have also suggested, we don't see the development of the smaller areas in the future, areas like Wolf Creek, like Monarch, Pikes Peak, Geneva Basin. These aren't the areas that service or meet the increasing demand of the public for outdoor recreational facilities. We will instead see' the development of these four-season complexes like Aspen and Vail, areas that encompass anywhere from 2,000 to 7,000 acres. I would first of all define exactly what the acreage provisions. pertain to. There is some question now and I know the argument has been made in the case of Vail, for instance, only 20 acres of their 80-acre permit have actually been used, these 20 acres being' the acres upon which improvements were made, and the acreage' provisions not having anything to do with the numbers of acres cleared for trails, so I would suggest that whatever constitutes or is made up on this acreage provision be very carefully set forth in. the legislation, and I would also recommend on behalf of the Sierra PAGENO="0323" ~3l9 Club that the limit of the outer boundaries be the definition of this to be set forth I also recommend that the special use permits be discontinued in the future Now, as they are just right now retroactively nothing can be done and should not be done, but in the future areas, to pre- ~ ent the possibility of expansion I think it would be a good idea that these special use permits be discontinued in total. I think it is obvious that this bill will have a tremendous impact on the av'ulabthty of outdoor recreational facilities as well as im pact on Colorado's diminishing ~wild country, and as a result- [Bell rings.] Senator HASKELL. Sorry, there is our 5 minutes. Finish your sen~ tence, and I will finish your thought. Mr. SCHAFER. As a result, I think your pocket-needs or pocket- approval idea is somewhat inadequate as these kinds of development of this magnitude will certainly permit affirmative congressional approval and we recommend in the case of an area the outer bound'-- aries. of which are to include more than 3,000 acres such Congres- sional approval be recommended. Senator HASKELL. The same as Ms. Banney? Mr. SCHAFER. That's right. Senator, may I mention one thing. I flew in from Durango and was not told about any 5-minute liin- itation. Senator HASKELL. The trouble is-I will, if you came in from' Durango, and thei~i the next person has a perfect right, so please' be as brief as you can. Mr. SCHAFER. I will. Thank yOu very much. We are concerned. over whether it is right and proper to guarantee a permittee the reasonable rate of return in the bill through the manipulation of .permittees and otherwise. Obviously, one of the identifying aspects. of private enterprises is to gamble. If you are going to couple this guaranteed return- Senator HA5KELL. Just a second. I think your man that showed `up in Aspen seemed tO have the s~tme misconception. The thought is when you talk about a reasonable rate of return you do not guar- antee them that. If the public won't pay- Mr. SCHAFER. I apologize for that. That was not my under- standing. Senatoi HASKELL As suggested today, we may well modify that to try to get in' a concept where you truly have competition, you. make that finding, and that's all you have to make, because at least my theory is that if you have got real . competition you have got reg- ulation by ,competition and that, of course, would make it better.. If it is possible to amend the bill to only have a finding in it of no' competition, then this formula goes into effect. Mr. SOHAFER. That's fine. One of the other theories we wouli! suggest is that, of course, books and financial records be made much more readily accessible. I think a lot of people have agreed with. that. Also public hearings be held in the event an area feels a rate' increase is justived. If the rate is in fact justified, there should be no hesitation to disclose this at a public hearing by the operators, and one other consideration., that is I..would think that in the event PAGENO="0324" 320 futu~e areas are considered by promoters, when they get together ~with local Rangers on their initial stage 1 planning, public. work- shops might be held at this point and might be very helpful to get some public input. Thank you very much, Senator. Senator HASKELL. Thank you very much, and you will submit your organization's written testimony: that has comments on the bill, your suggestions `is to changes and statutory language, that `kind of thing? Mr. SCHAFER. That's right. Senator HASKELL. Our next witness is David Farny, president of ~Little Annie Ski Corp., Aspen, Cob. STATEMENT OF DAVID FARNY, PRESIDENT, LITTLE ANNIE SKI CORP., ASPEN, COLO. Mr. FARNY. Thank you, Senator Haskell, for being allowed to -speak at these hearings today. My interest is a little d~ffereiit from those who have spoken before me. For the last 17 years I have worked on the ski mountains of Aspen, Cob I hold certification as `a ski instructor in the Rocky Mountain and professional and inter- national techniques, and for the past 5 years I have been cothrector ~of the Aspen Highlands. Ski School. At this juncture I am trying to open a new ski area in Aspen. This I found to be a formidable task. The area in question is known as Little Annie. I was given the go-ahead by the Forest Service as early as 1966 and it comes to the ridge of south of Aspen Mountain. The ski capacities, as everybody knows, of Aspen overexceeds the -capacities developed for skiing. The Forest Service sees the need for expanded skiing, but the growth rate this year is reaching 24 percent in the Aspen Valley. Little Annie is a logical expansion f9r ~skung for the town of Aspen. Today with all the environmental advantage Little Annie has going for it, why is a permit so hard to come by? There seems to be no clearcut regulation, no governmental agencies offering advice other than to come back in 3 years. Could it be that ~to start a new area one would need a nearby city or government as a partner or be affiliated with a large ongoing corporation? I hope -not. The new Mary Jane area at Winter Park is advertised at so much `a day. Since this is owned by the city of Denver, I wonder what `taxes are paid to the city, State or local governments. *Our sympathy goes out to the Forest Service. I can't always agree with them. I do understand many of `the complex problems they are trying to accommodate in this ever-changing world in which we live. I welcome anyone in this room to prepare an environmental impact study, or better yet to try to make the decision to okay or `turn down a project after reading an EIS. The judgment of any * individual can always be questioned by some one person or organiza- -tion, and when it comes to ski areas it is really not too difficult to find some criticism. There will be those who oppose it if they can't ~ski free. This is federally owned land that belongs to them, regard- less of the gigantic `investment in opening the competitive ski area. PAGENO="0325" 321 I ask you, if you are forced to ~nter, would you want to take on the' criticism you would' receive in' granting any kind of ski area? And this brings me back to my famous 17 years. We will give- cOmpetition, ~iid we are located next to the two ~trongest areas iii the world. Skiing really is a world market and I believe it is impor- tant to keep American ski vacation dollars in America. It used to' be Easter skiers found it ,cheaper to ski' in Europe. As' Europe be- came more expensive, they found out our' skiing was better in many ways. Let's stay competitive. This bill we are discussing today has good points~ such as vears-~ and size of permits, but the parts I fear are possibly governmental regulations' which `would be costly to have enforced. The people~ closest to the problems know them best, whereas a man in Washing- ton might not. I do not propose giving a low season `pass to em-~ ployees of Aspen, or a discount, `but I do oppose the government~ stepping in' and telling me what I must charge on my investment. I would see, as you said so well, Senator Haskell, in Aspen, a marketplace in the competition~ If given a chance to build Little~ Annie we will live up to the standards set by nearby competitors. We need more ski areas, but because of their basic fear of the Forest Service I think we need to' once again come under an agree- - ment of men working under trust to the benefit of all men and women who love skiing. I am reminded of the cowboy who sat on his horse atop a moun- tain and'looked off and said, "This is your America, and this is my' America. We don't own one damn bit of it." This is what skiing is~ all about, and the importance to the Americans who come and view' the scenery and feel the country from the top of the mountain peak. Thank you. Senator HASKELL. Thank you very much indeed, Mr. Farny. I - appreciate your coming. Our next witness is Dick Dorworth of Olympic Valley, Calif. SPATEMENT OP DICK DORWORTH, PROPESSIONAL SKI INSTRUCTOR Mr. DORWORTH. I am glad to be here. Senator HASKELL. Good to have you `here. Mr. DORWORTH. I would like to thank you for the opportunity to'- speak here today. My name is Dick Dorworth. I have been seriously involved in skiing since 1950. As an amateur ski racer I was a member of the all-American' ski team and the national training team and I co-held the world record for speed on skis. I have been a professional ski instructor and coach since 1963. I was certified by' the Far West Ski Instructors Association in 1968. I was certified' by the National Ski School of France~ in 1970.. I have., taught and' coached skiing in Europe, South America, and North America. I' was the Can-Am coach for the U.S. men's ski team in 1970-71. In 1973 and 1974 I was an examiner for the certification of ski instruc- tors in the Far West Ski Instructors Association. In 1974 I ~as selected to be one of two examiners for the first "masters" level of ski instructors certification in the United States. In 197.5 I was an examiner for the Far West Ski Coaches Association. I am a free--. PAGENO="0326" 322: lance' wHtei', and my `writings~ on skiing have appeared' in "Ski," "Skiing," and "Ski Ra~ing,"nnd "Mountain Gazette." I am presently; editor of "Competition Ski News" Ski `instruction in `the United States exists within a feudal system. Because of the present Forest Service land `use. permit policy, the ~wnŰr of a permit has a' virtual strangehold on ski instruction in the area, and despite all `of the testimony "about' the open market today,: there is no open market in ski instruction. Most American ski schools. exist under one of three systems: The school is owned outright by the permit holder, and the' director, supervisors,,, and all instructors `work for the ski area. Aspen and Sun Valley have this sort of sys- `tern. Two, the school is leased as a concession to an independent director or directors for `a' bargained for percentage of the gross, ~nd the `instructors work for the school. "Squaw Valley and Bear Valley in California use this method. Three, a few areas don't want to' bother with the problems of a school, though they recognize its iiecessity. Some areas, either in place of or in addition to the reg- ular ski school, open their slopes to any; organized ,group that wishes to teach skiing. These operators recognize that whatever' brings people to an area will sell lift tickets. The same areas that do allow groups outside the regular ski school to teach skiing do not allow individuals outside the regular ski school to teach' skiing. The average working ski school instructor `is lucky to take home one-third of the money paid the ski school by the customer, who is, in fact, paying for~ the instructor's knowledge. Most instructors get less' than one-third. There are certification~ programs in all the geographical divisions of U.S. skiing, but they are not unified. There is nothing in Forest'S Service regulations that says a ski instructor, or even~ a ski school instructor, has to be certified. In practice, many working instructOrs are not certified, and there are even ski school directors, including the directors~ of large ski `schools, who are not certified. Most ski schools calling themselves "fully certified" are practicing false ad- vertising. In every ski area in America' there ai~e `f idly certified ski instructors who are unable to find employment because of political, personality, philosophical or ` technical differences between them- selves and the `ski school directors of and/or the management levels of ski areas. There are many qualified ,ski teachers who have left the profession because the economics of two-thirds for the ski school and one-third for the working instructor makes life difficult not only for the practical man, but as well for the man of conscience. A re- lated practice of American ski schools is to hire non-U.S. citizens to teach skiing while refusing to employ fully qualified and certified resident instructors. This is, I believe, against U.S. Department of Labor law, but is practiced in most ski areas of the country. One major ski area sidesteps the law concerning hiring non-U S citizens over resident ski instructors by including the `ability to speak' Ger- man or French in the job requisites. ` Ski instruction in France, which, in my opinion, has the best system in the world so far, is very different. Every instructor in France goes through two 5-week courses at L'Ecole National de Ski et Alpinisme in Cham'onix. This school is part of the Ministry of PAGENO="0327" 323 ~Sports, a department of the French Government. Once. a~ person thas been certified in France, he has lifetime free lift privileges anywhere in France, is fr?e to teach skiing at any area, either for the local ski school or as an independent, and, unlike in America he i~ a member of a profession through which he can earn his living As a qualified person, he does not have to join .a ski school in order to practice his profession. French ski school directors are elected each year by the members of the particular ski school, a healthy, democratic practice that eliminates severaL weaknesses of the Amer- lean system. In France, about 90 percent of the money collected from the paying customer goes to the. instructor. The other 10 per- cent is used for ski school expenses, insurance, secretaries, et cetera. ~This has two beneficial aspects: the public pays less for ski instruc- ~tion, thus bringing skiing within the means of more people; and it ~gives the working instructor more money for his labors, thus giving Thim a reliable profession. The present system costs the public much more than it needs to. `The lack of certificati~rn regulations eliminates the public's guarantee `of quality. Because independent instructors are not allowed to work, iregardless of their qualifications, the public is forced to hire instruc- tors through the area ski school, which does not necessarily offer the ~best service available. The present system does not encourage. pur- suing ski instruction as a profession, and the public loses many of ~the better instructors because of it. The American instructor makes more money for the ski school ~than he does for himself. Since the money is paid for the instruc- ~ knowledge, this is not only offensive to any rational thought, `but it discourages many of the best teachers from continuing ski ~teaching. Any t.eacher who does not agree with the local ski schoQl `director is out of a job, regardless of. qualifications. This independent ski instructor who, if he is qualified, can give better service to the ~sknng `public fo.r less. money is forced to practice his profession underground. The ski school working instructor, completely de- `pendent on the land use permit holder for his livelihood is, in most ~cases, reluctant to speak out or stand up for any movement toward ~changing t.he present system. I have five points here that I would like to propose for you to ~think about that might improve this situation. The first one is to ~grant Forest Service land use permits to qualified independent in- ~structors who wish to work for themselves, instead of the local ski :schools. - Two, create a national school for training ski instructors, perhaps based on the. French concept, perhaps federally financed, perhaps :State financed, I don't know. Three, make certification mandatory for ski school directors, su- pervisors, . independent rnstructors, and for a certain percentage, say 50 percent, of all ski school staff. .Four, ski school directors should by law be elected through secret ballot by members of the ski. school.'. . . Five, price of ski school lessons should be cut down and a larger percentage, say, 90 percent, should go to the instructor doing the iwork. . . ` . . . . PAGENO="0328" 324 Thank you. Any questions? Senator HASKELL. Thank you, I do. I thought that, just to develop these facts, instructors had to be certified. Mr. DORWOETH. No, that's not true. That's up to the individual ski school, the director of the ski school or whoever is running it, and offhand I would say that presently less than one-third of the ski instructors in the ski schools are fully certified. That would be my hazard of a guess. Senator HASKELL. Who now does the certification, if anybody? Mr. DOJrSVORTH. Every division oft the PSIA, Professional Ski Instructors of America, there are geographical divisions, and each. division has its own program. I am from the Far West, Far West Ski Instructors Association, and we have a program. There is one in the Rocky Mountain, one in the East and one in the Central. They are not unified and they come from the professional skiers within each division, and they examine. Senator HASKELL. A Rocky Mountain instructor would get cer- tified by the Rocky Mountain Professional Ski Association? Mr. DORWORTH. Right. Senator HASKELL. And it is your suggestion that anybody who is so certified be permitted to teach on any hill? That's basically-. Mr. DORWORTH. Yes. Yes, I think that's the best that we have right now, is our certification for quality, and I think that's it. Senator HASKELL. And some of the people teaching in the various and sundry ski areas all over the Nation are. not certified, is that correct? Mr. DORWORTH. Not some people. Most people. Senator, I have a breakdown here of members of the PSIA, if you would like to hear those. Senator HASKELL. Yes, I would. Mr. DonwouTH. Okay, these are approximate, but they are pretty close. There are 6,000 members, PSIA~ There are-wait a minute- okay, there are about 3,500 who are certified, and not very many of those on a percentage basis, not all of those people, are working instructors now. There are 600 of those that are ski school directors; 325 of those are assistant directors or supervisors, which means they are not working instructors any longer. They are administrative ski school, so that cuts it down considerably as to the number of certified instructors who are eligible to be working, and there are a lot more instructors than that in the country. Senator HASKELL. Well, how about the people that-I suppose in your view, all of the people certified by that association would Obviously be eligible for a permit to teach on Forest Service land ~ That would be your view? Mr. D0RWORTH. Yes, that's correct. Senator HASKELL. It sounds reasonable to me. Now, how about these people who work in the various ski schoo1s~ whether it be in Idaho, Montana, Colorado or New England? What generally do they get and how many hours do they work? How are they selected?' Mr. DonwonTn. Well, their selection is up to the ski school direc- tor, and that varies. You know, every ski school tries to get the best people they can, of course, but as I mentioned there are people wh~ PAGENO="0329" 325 come on one level or another level. They will hire someone less ;qualified, hut once you ~work for a~ki school there are several ways of doing it. There are more part-time instructOrs than full time, and that's the way it has to be: But a ski instructor will work 4 hours .a day for the `ski school ~generally and tben t~he rest of the time during the day he can work ou -private lessons. How .that's paid for depends. I understand that Aspen pays by the hour, regardless ~f whether you aie teaching on regular ski school time or a piivate lesson, and the top instructor in Aspen I believe gets $9 and the low pay scale I ~believe is $6 an hour, something right ,aropnd there. In the East, `if you are a. contract instructor, you are paid .a sal- ary, for which you owe the ski school 4 hours a day, 6~ays a week, and. then you can teach privates'.and you will get 50 percent of your privates generally. This varies, too. You can get, say, 50 percent of your privates on the other 2 or 3 hours a day that you, have. Senator HASKELL. What would be the .mechanisn~ to keep ,inde- `pendent instructors up to their previous certification? In other words, I could see some concern. If I ran a ski area, I would :want to he sure the people teaching on the area were competent. . Certainly -they are competent if they .are certified, but who would keep . on top of it. to see that they continue'to be? Mr. DORWORTH. Well, I'm not familiar with the .Rocky Mountain, but in the Far West every other year you must attend a. convention that we have every spring, and . at . that . convention, which goes on for 4 or 5 days, there . are a series of clinics you . must attend .and you sign u.p and you are given credit for those clinics, race clinics, avalanche clinics, technique clinics, all sorts of things I believe it is the same in the :Rocky Mountain, but I am :not sure. Senator HASKELL.' Well,, if the .Forest Service, for instance, en- gaged in~ giving a permit; to an individual , as an~ instructor I am sure there ought to be certain requirements such as carrying liability insurance. Would you have any .other suggestiolis as to require- `ment.s they ought to- Mr. DORWORTIL Yes, I would say a person should , be fully certi- fied at the time and must keep up~ with the credentials, must have liability . insurance, must comply the. same as any other instructor, must comply with the .~ same rules and regulations as any other pay- ing member of the. public. 1 mean he can't go. out on the hill and ski around. Probably it would be a. good idea for him to wear some *sort of identification, not necessarily-personally, I think not even wisely the same identification . as . the ski school~ in question-but an identification~ that said he~~ wa.s teaching shiing as an independent, so they would know. Senator HASKELL. Well, thank . you~ very . much indeed. This~ mat- ter came up in the hearing in Aspen. I don't .know whether you `were there. Mr. DORWORTU. ~ was there. Senator HASKELL. .This matter came up and I think it .is some- `thing that the Forest Service should pursue. I am not sure that this is a matter to `put in the~ legislation but it would seem to. me to be sort of healthy competition to .the operators of a- ski, school to have this gomg on and for that reason it would be desirable I thank you very . much `for coming: .and. testifying. PAGENO="0330" 32~ Mr. DďR~0RTH. Tknnk your Senator HASKELL The next witness is Richard Spiegel, president of LaMur, mc, Mmneapohs, Minn STAThTY'IENT OP RICHARD SPIEGEL, PRESIDENT, LaMAUR, INC., MINNEAPOLIS, MINN Mr SPIEGEL Good afternoon, Senator I thank you very much. `for this oppOrtunity. My "nathe is Dick Spiegel. I am from Minne- apohs, Minn, and I am here this afternoon to share with this `hearing some' of `my thoughts as tO ~hy `I fe~l that a fully certified~ `qualified persOn' should be issued a skiing instructor's permit, when `he Or `she is nOt employed by a particular `area ski school. I think the' best way' for me to' do that is tO give you' a little history of' my personal expŔrie˝ce and the reasons' why' I feel the `way I do~ This really came to a. head for me last year when I was in Aspen with my family over Christmas and I asked a friend `of mine there who I could go to, who could I see to `get myself and my children some `very `fihe skiing instruction. We had some not very pleasant experiences' in `the past. I was told I' could contact an individual who had just recently, though, had some~ trouble with the Forest Service' in that he had been taken off the slope for teaching `without a per- mit, and' his lift ticket had been `taken away. Even with that thought in mind and the foreknowledge of that I did contact this individual, and after talking with him I was really impressed with the type of person he was, and when I first heard about it I `couldn't believe it because I knew of his' qualifications and I felt, I really feel this way and it may be anachronistic, if you will, that a. person should have the ability within reasonable limits to use, their own creativity and talent to run their own business, to be free to make a living in the way he or she chooses, and I particularly felt strongly about this in that these permits were given for use of public, lands, which I amongst the general public feel that this type of use should be made. I want you to know that I have used the Aspen Ski School in the `past and they have always been very courteous, particularly when I have called during the heavy times, during the Christmas season, but it had been extremely difficult for me to arrange private lessons there. The particular instructors that I wanted were very, very busy and it would have been quite an inconvenience for me to call them back. That's one of the things I liked about contacting this par- ticular individual. I knew I could arrange some times ahead so I could meet this individual' and have prescheduled those days" in- structions for the times I would be there. In fact, I would be willing to pay some slight extra. charge if that would be necessary. In my case, that would be preferential. I am really not in the way of what, you understand, is putting down the sport, I mean the whole concept of ski schools, but I am saying that I think a person should have the opportunity to either go to the ski school or perhaps engage a. private instructor. Another reason why I went to this particular individual is be- cause I understood `that~ he had developed some several unique tech~ niques `that I thought would be advantageous to me. It seemed log- ical and it turned out this was quite~ true and helped my skiing im- PAGENO="0331" 327 mensely. ~I really feel that's `pa~t of private enterprise,' where som~- body ~does have .greaterl incentive, it seems to me,.to. develop innov~- five ways of, bringing in their business.' , Another reason I liked: this idea is that I could contact this mdi-. vidual and he or she would meet me in an area ~ outside ~of* the particular area where' they normally reside. For: example, if I wanted' to. meet this individual in Salt Lake, where .1 ~,a.lso.happen to like to ski, that could be possible and I could'. contmue the Same type of instruction. . I' reali'ze that `any corporation' developing an. area, has to make a major investment. . I also' realize that they `are responsible for the maintenance of the area, and I am sure that's. quite possible and 1 believe that' they. should have: the ability, at least if they `run their business properly,' .to return a reasonable, amount on their `invest- ment, but I also believe .for the' reasons I `have given that individual instructors should also be in a position a earn a livelihood and, * provide a. needed land worthwhile service to the public. I am not suggesting that there be no fee charged of the individual instructors. Perhaps that would `be necessary to avoid any undue' hardships to the corporation. Also possibly there might want to be' a limited number of individual permits issued, and certainly rigorous standards must' be `met. Due to the difficulties incurred' in this particular case~ of which I have personal knowledge and attempted to work out with the' Forest Service on an individual `skiing instructor permit, I feel perhaps it might ~in some way be a.ppropriate in your legislation to.. state that, one of .the intended' uses of our public lands is to allow the public' the .advantage of such private instructors. I really do feel that is quite an advantage. , ` That ends my comments. I tha.nk you for the opportunity. If you have any, questions, I will be glad to answer them. Senator HASKELL. Thank you, Mr. Spiegel. I am interested, what': is your primary business? Obviously, you are not in the ski instruc- tor business. Mr. SPIEGEL. I am in the cosmetic business. Senator HASKELL. And so you are going to Aspen or places in: Colorado and other places and you are an interested skier? Mr. SPIEGEL. Yes, I am, both myself and my family. We find it". a wonderful family sport. Senator HASKELL. Well, I thank you for taking the time. Mr. Loesch suggests, and it is probably an excellent question, you are the only person notl connected with the industry" from out of town. What do you think about the concept-have you sat through the hearing today? ` " ` , Mr. SPIEGEL. Yes, I have. Senator HASKELL. Well, you have' heard me ask a number of' people the question and I haven't received an answer yet. There doesn't seem to be a great deal of satisfaction with the way things are~ because the Forest Service hasn't seemed to evolve any dlefinitive~ standards for reviewing rate increase requests. Some people go over' the, mountain maybe once. Other people visit the `community, and' `up in Aspen there are very strong feelings that people that live in' the community, since that's the only place they can ski, certainly' PAGENO="0332" 328 ~should have a season pass. The whole problem of when you ask for a rate increase is what kind of objective standards should be applied? Now, that's a series of questions I have asked you, but since you are the only person who has shown up from outside the State and not connected one way or the other with the industry, I would be interested in your views. That's a lot, of questions, I know. Mr. SPIEGEL. That sure is a lot of questions. I am going to think before I am ready to start. Senator HASKELL. Right. Mr. SPIEGEL. First of all, I feel that there should be some very objectionable criteria set up by the Forest Service and, No. 1, we should get a permit, qualifications, financial as well as the limit on the environmental impact. I think these are very necessary pre- requisites to issuing a permit. I really can't shed much light on, you Tknow, how the fees, the rate structure, should be. I really do not think I am qualified to do that. Senator HASKELL. `Well, Mr. Loesc'h would like me to ask the question I am not sure that this goes to the issue Overall, not lust in Colorado, but I assume you have skied in California and other States as welb- Mr. SPIEGEL. I skied in other States. Senator HASKELL. Do you have any observations as to t'he reason- ableness or unreasonableness of the various places of the price of tickets? Mr. SPIEGEL. I really can't say `that I do. Senator HASKELL. Actually, really the thrust of this hearing is not to say whether prices are reasonable or unreasonable. We don't know this precisely' `because we don't have the financial information or objective standards. I appreciate your coming and directing your remarks to what you did, because there are very few places in the TJnited States where you can be an individual entrepreneur with very little capital. Running a taxicab is one of them. You don't- Mr. SPIEGEL. Some places you do. Senator HASKELL. In some places you do, I ,know.' Personal services, however, is an area where you can, and ski instructing is one of them, and I must say your viewpoint appeals to me a great deal. Thanks very much `for coming. Mr. SPIEGEL. Thank you very much. Senator HASKELL. Our next witness is Gladys Oppenheiver of Parker. STATEMENT OP GLADYS OPPENHEIMER, PARKER, COLO.' Mrs. OPPENHEIMER. Thank you, Senator Haskell, ,for permitting me to appear today. Senator HASKELL. I'm very glad to hear from you. Mrs. OPPENHEIMER. The remarks I would like `to make are addi- tional, to the. material which I already, submitted to your staff. Senator H4sKELL. Right, and they will be included in full. irs. OPPENHEIMER. Thank you, and what 1 am going to continue on will, pertain to the independent qualified ski instructors and the monopoly that seems to be exercised by the aki schools. Parenthet- ically, I am not ,a member of the ski', industry in any way. PAGENO="0333" 329 I think it is extremely important for us, the skiing public, myself included, as well as for the independent qualified ski instructor, that we have the opportunity to pursue this teaching profession. It is absolutely unconscienable to me that a handful of corporations can have complete control over the livelihood of all ski instructors. Many of the ski slopes are operated by the same' corporation or corporations, and these operations often cross state boundaries. The control is loosely based on monetary investments, but sometimes it does seem to be exerted by a certain kind of subtle pressure or influence. The independent ski instructor can only ski where the slopes are, where the snow is, and during that short pe.riod for skiing. They cannot exercise their professional skills at any other place nor at any other time. If the decision about who teaches skiing is left en- tirely to the corporations and the ski schools, there can be no free private enterprise in this industry. The talents of these highly qualified independent instructors are lost and their chances for a livelihood are. destroyed on a national basis. The losers in all this are we, the skiing public. It is obvious that the independent qualified ski instructors must be highly skilled technically. They must also have a unique ability and the desire to establish good rapport and understanding with their clients. They must be unusually skilled in their profession in order to earn that kind of widespread excellent reputation which makes clients constantly seek them out. I personally find them highly motivated and appreciate the kind of special treatment and services which they can extend. If they were not superior instructors, they could never compete and never succeed. It is not in the public's interest for the ski schools to exercise so tight a monopoly on all ski instruction. It certainly does not stimu- late the schools' desire to improce, but spurred by the high quality of service offered by the independent the quality of all ski instruc- tion is thereby raised and we the public will benefit from all of this. I have never been able to understand why the discrimination on public lands, why the independent ski instructor, a member of the public, has to be relegated to the role of a pariah. As I have stated in my original testimony, I feel sure tha.t the technicalities of this problem can be solved. What is needed is a completely new approach in establishing what is good for the public and in the public's in- terest. Who is going to determine what that good is? The corpo- rations using the public lands or the public itself, which is why these hearings are so important. I am definitely of the opinion that the independent ski instructor performs a service for those members of the skiing public who desire such services and skills. I hope that it will be possible before not too long that I will be able to ski again with a highly competent pro- fessional ski instructor of my choice, one of those particularly highly qualified independents whom I am convinced, after everything I have seen and with the many I have skied with, are the finest ski instructors there are. I thank you. Senator HASKELL. Thank you very much for appearing indeed. We appreciate it. [The prepared statement of Mrs. Oppenheimer follows:] 67-512 0 - 76 - 22 PAGENO="0334" 330 STATEMENT OF GLADYS OPPENHEIMER, PARKux, CoLo. I appreciate your granting me the opportunity to appear before this Senate Interior Subcommittee on Environmental and Land Resources, and to submit written testimony. I am greatly concerned about the permit system, with respect to ski in- struction on the slopes and particularly the Independent Qualified Ski In- structor. I started skiing barely ten years ago, and have skiied at various areas in Colorado as well as in Austria. I always prefer skiing with an instructor. However, the past two or three years, I have hardly skiied at all, since my right to ski with an independent qualified ski instructor of my choice has been so sharply curtailed. It seems to me that the problem which has developed between the ski slope operators of the ski schools and the independent qualified ski instructors, is not only unnecessary but not in the best interests of the American public. I do not believe that the ski slope/lift operations and the ski schools should necessarily have to be handled by the same corportaions. These two services can be and should be viewed as completely separate and distinct enterprises. However, if the ski slope operators do obtain authorization to conduct ski schools, then that should not be the only authorized ski instruction. A monopoly is created whenever all services are exclusively and solely held by the same organization. The result is that the quality of services offered has a decided tendency to deteriorate. Without the stimulation of healthy competition, there is no incentive to maintain a high quality of service, much less to strive to improve the service that is being offered. Therefore, if the ski slope corporation is also authorized and permitted to maintain a ski school at the site, other ski instructors such as that offered by the high qualified independent ski instructors should also be permitted and available. This would certainly be in the public's best interest. There is no doubt that the ski slope/lift corporations do have a tremendous investment in these operations. However, the price of the lift tickets should be sufficient to remunerate them for the establishment and maintenance of the ski facilities. The price of the lift tickets should be able to cover their costs and a reasonable percentage of profit. The price of ski instruction should have nothing to do with this phase of skiing, and should be related only to the service of ski instruction itself. When the independent qualified ski instructor gives a lesson, he purchases his lift ticket like other members of the skiing public. On the other hand the* ski school instructors do not. They ride the lifts free. Therefore, the inde- pendent qualified ski instructor is providing additional income and is paying his proportionate share towards the operation of the ski slopes. The various clients of the independent qualified ski instructors also purchase their lift tickets, and many of these clients, including myself, would not ski at all, or certainly not much, unless we have the choice of skiing with those independent ski instructors whom we know are highly qualified, and with whom we have skiied for years. Therefore, again this is additional income to the slope/lift operators. In no way can the independent instructors and their clients inflict any damage to the slope. Anyone who skis knows full well, that the problems which often arise on the slope, come from those members of the skiing public who go "bombing" down the slope, out of control. Certainly, the independent qualified ski instructors are not about to destroy the basis of their income. These recreational ski facilities are being operated on government property. They are therefore for the use of the entire skiing public. They are not private clubs. Therefore, they cannot discriminate against any member of the public, including the independent ski instructor. Consequently, the public has the right to determine with whom they wish to ski when taking instruction. It cannot be doubted that it is a tremendous economic advantage to have a ski school right on the slopes. But this advantage should not be permitted to be- come a monopoly to the detriment of the public. The interest of the public lies in choosing among the various teaching services available. This spurs all PAGENO="0335" 331 of those in the field of ski instruction to improve, and the public is the one to benefit from continually better instruction. Therefore, various ski instruc- tion services must be permitted to be made available. The ski slope operators, if they choose to maintain a ski school and obtain such authorization, should be able to co-exist peacefully with the independent qualified ski instructors. They may be excellent ski instructors who much prefer the shelter and security of the schopls and in addition enjoy the school's programs. But for those qualified ski instructors who wish to assume the risk of private enterprise, and who must depend on their own professional reputations to survive as instructors in a highly competitive business, there is absolutely no reason why they must submit to being members of a corporation, and then only if the corporation wishes to employ them. If not, there would be no other alternative for them. They would lose the opportunity to offer their personal unique skills to the public, and the public in the long run would be the loser. Whether there are three or four qualified ski instructors, or two dozen is immateria. What is at stake is the principle of private enterprise, and the freedom of choice on the part of the public. Many skiiers prefer to learn at ski schools, and with the ski instructors em- ployed by these schools. But there are others like myself, who prefer skiing with the individual instructors of our choice, and if he or she happens to be an independent instructor, can see no reason why our choice should be arbi- trarily abridged. Everyone wants to ski with the instructor with whom one feels safest on the slopes. In addition, there are many advantages to being able to ski with the independent qualified ski instructor; such advantages in- clude having skis and poles rented and ready for skiing immediately upon arrival and being driven to and from the slopes after exhausting lessons. There is also the matter of price per lesson. It is possible that the school can satisfy one individual's requirements in this matter. But it is also possible that the independent qualified ski instructor can satisfy others much better. Each of us must equate the cost per lesson against the services offered and the quality of teaching involved, along with the feeling of confidence one has on the slopes. Only the individual members of the skiing public can possibly make this determination. Because these recreational facilities are maintained on public lands, the public must have free access to these ski areas, and to the ski instruction available, whether that is by a ski school instructor or by the independent qualified ski instructor. Furthermore, the independent ski instructor, also as a member of the skiing public, has to have the same right of access to those skiing facilities, as well as the right to teach those who wish to employ their services. This should include the same right of ski school instructors, to cut the lift 1ine~ These independent instructors should not be discriminated against in favor of the instructors of the lift operators' ski schools. One cannot define the word "public" by placing limitations upon it, and the private businesses which operate these public facilities, cannot be allowed to water down the public's right to the full enjoyment of these public lands. The details involved in resolving the many issues such as ski instructor qualifications, compensation for the use of ski facilities, the cutting of lift lines by ski instructors, availability of season tickets as against day lift tickets by the various independent instructors and other members of the public, areas which should be set aside for beginners, are all technicalities, which should all be capable of solutions. What is necessary, is a basic belief and attitude that the use of these recreational facilities on public lands remain open to the public; that these recreational facilities must be operated in the public's interest, one of which would be the availability of the best teachers possible, irrespective of the fact that he or she may be an independent qualified ski instructor. I believe that a workable formula can be found whereby the qualified in- dependent ski instructor can be allowed to teach, and that the American pub- lic, if it so chooses, has the right to employ their services and talents. It seems to me that such use would be entirely consistent with the purposes of the proposed legislation. Senator HASKELL. The next witness is Mrs. Rex Jennings, presi- dent, Denver Chamber of Commerce. PAGENO="0336" 332 STATEMENT OP REX JENNINGS, PRESIDENT, DENVER CHAMBER OP COMMERCE, DENVER, COLO. Mr. JENNINGS. Thank you very much, Senator. As you have stated, my name is Rex Jennings and I work with the Denver Chamber of Commerce. Very briefly, let me state that my testimony in connection with Senate bill 2125 is not intended to oppose or support the legislation per Se. Neither will I offer any alternative or specific language suggestions. However, in view of the significant impact on Colorado's economy of the ski and outdoor recreation industry, I have some observations to make which I hope will be of some possible interest and of some assistance to your commit- tee's deliberation. The chamber believes that it is important that the committee is fully aware of the economic impact that the ski and the outdoor recreation industry has on the economy of Colorado and the sig- nificant contribution it makes in developing employment oppor- tunities and desirable growth pattern throughout the State. We be- lieve that economic growth and environmental quality are mutually compatible if pursued with balance in mind. We think the growth of the ski industry over the past decade is a good illustration of a growth industry which is also environmentally clean. We think it should and can continue to grow under effective and reasonable methods. During the years, as the chamber of commerce has directed its efforts to attract desirable new industry to Colorado, we have been impressed by the importance company officials directed to the so- called "quality of life." Our meetings and discussions with these firms bring out the fact that many companies prefer Colorado over other States largely because of such amenities as a fine ski industry and first-class skiing facilities. I emphasize that the companies to which I am referring have no direct interest in the ski industry, such as equipment and clothing suppliers, but feel that immediate access to skiing and outdoor recreation opportunities for their em- ployees enables them to recruit, retain, and get higher productivity from their workers. . In addition, there are, of course, those people who have established or moved businesses to Colorado who are directly connected with the ski industry and provide an important number of jobs for Colorado workers. In addition, there are, of course, those people who have established or moved businesses to Colorado who are directly connected with the ski industry and provide an important number of jobs for Colorado workers. Our research department recently identified a number of firms fi~om Colorado through a review of the "Standard Industrial Classi- fication Codes," which was published in the "1974-75 Directory of Colorado Manufacturers," who are directly involved in the manu- facture of clothing and sporting goods equipment and found there are 84 companies now in Colorado engaged in this type of manu- facturing, employing somewhere around 4,000 employees. PAGENO="0337" 333 In addition, the location of these firms is spread throughout the State ,and I think this is significant, in numerous counties on both sides of the Continental Divide. As an example, the 38 firms which manufacture sporting and athletic goods are located in 11 different counties from Rio Blanco and Gunnison on the western slope to Las Animas, Weld, El Paso, Denver, and Boulder on the eastern slope. The payrolls of these companies represent very important eco- nomic support of their respective communities, running into mil- lions of dollars which are spent throughout the whole range of services and retail and wholesale activities. The Colorado ski and outdoor recreation industry is the type of business which attracts these kinds of clean, environmentally desirable manufacturing companies. Also, I believe it is important to emphasize that manufacturing companies such as the above 84 that I have mentioned are classified as the basic job, for which a standard rule of thumb in the economic development profession is that one basim manufacturing job creates three additional support jobs, so here we are talking about 4,000 basic jobs or a total of 11,000 or 12,000 or 15,000 additional jobs. In addition to the impact on the economy of the above companies, there are other important contributions to a healthy business climate which results from the skiing and outdoor recreation industries. Statistics developed over the past 8 years illustrate the fact that the ski industry in Colorado is growing each year. "Colorado Ski and Winter Recreation Statistics, 1974" published by the University Of Colorado for the 31 ski areas in Colorado, shows a 205.25 percent increase in life tickets issued between 1966-67 and 1973-74. This represents an increase from 1,410,234 tickets back in 1966-67 to 4,304,787 in 1973-74, for a numerical increase of 2,894,553. This growth is significant and has an important impact on economic indicators in those counties having ski areas as well as significant effects on other business in the State, including common carrier transportation, air, rail, and motor carrier, housing units, restaurants, lodging, retail sales, banking, miscellaneous services, as well as tax revenues fOr local, State, and Federal governments. There are 18 counties in Colorado which have ski areas located in them, plus four additional counties which then benefit from those in nearby counties, for a total of 22 counties or about one-third of the. total counties of the whole State of Colorado. In conclusion, I appreciate this opportunity to appear before you today and bring to you our concern in connection with the pro- posed legislation and our conviction that a healthy and growing ski and outdoor recreation industry is vital and appropriate for the State of Colorado. Senator HASKELL. Thank you, Mr. Jennings, very much, and I ~igree with you. Thank you very much, sir. Our next witness Gordon Autrey, president of Rocky Mountain Airways. I guess Mr. Autrey isn't present. Then it would be Don Collins, president of Federal Employees PAGENO="0338" 334 Ski Club. Is Mr. Collins present? I guess not. Then John Higgins of Denver. He is not present. Hans Patch of Denver, is he present? STATEMENT OP HANS PATCH, DENVER, COLO. Mr. PATCH. Thank you, Senator, for the chance you give me to talk here. My name is Hans Patch. I am the missing link here. I am a skier. I have skied all my life and I was born in Austria. I skied in Austria and Switzerland and France and all over the United States and have lived in the United States for a long time, and I have seen the growth of this skiing here and I love it. That's why why I came to live here. I'm a skier who lines up and I am not a skier who can hire a ski teacher who gets him through the lift line. I have to wait in the lift line, and this is some of the problems there are, because if the ski areas, are held too small, because more and more people ski, therefore any legislation which comes up should consider growth of the ski industry, the number of skiers which are added every year to the skiing, and the growth of this industry of the skiing area should be geared to this development. Therefore, too much regulation, too much hemming-in is very bad, because it will make skiing eventually, if this will keep on, a sport for the elite which can afford tickets, can afford to go far away from the cities weekends, travel very, very far to get to the ski area. The National Forest, when you realize the registration came upon them there was no skiing, but skiing now in the national forest has to be considered by the authorities and by the national forest super- vision as something to substantially integrate with the enjoyment people have, with nature. I was last Saturday in Vail, for instance, and we hiked all of the mountains for hours, for many hours, and it was as enjoyable as skiing; but it can only be done with the de- veloping a large ski area, but when we hear now that some ask ski areas to restrict the same skiing, and this is only something which benefits the elite, if you can plan ahead, you can go out on the weekend and go skiing when you elect. But after you buy a ski ticket in advance, in order to go on the hill you have to wait on the lift line. I think in the interest of skiers, millions of people, that should be recommended there should be provisions which will enable the average people to enjoy skiing without waiting, therefore open up more areas with all the protection and with all the necessary controllers of whatever is necessary with controlling for environment and even the space. Even how much it costs to play tennis, how much it costs to ski, this isn't true, because when you play tennis you come to the point in time to play your tennis, so the cost of tennis courts a.nd golf courses is nothing compared to the cost of skiing, because you wait in line an awful long time so you can't say this is recreation. This is work sometimes. PAGENO="0339" 335 As to the lift ticket prices, I am not absolutely familiar but I think it is a wonderful organized area and I think Vail does a fantastic job in what they are doing, many, many others, operators, it is what they are doing for the skiing public. But is it necessary that Vail Associates as a corporation has a real estate corporation thrown in? Their development depends very much today upon how well they can sell their real estate. The inference is, for instance, how their balance sheet shows up. I think that skiing and the liftS operation, the operation of the mountain, should be absolutely sapa- rate from any real estate corporation whatsoever, because that would force a much different picture, and the lift prices are com- paratively high. Take Europe, I have a brochure about skiing which gives you all the different ski areas in Europe as to lift tickets, as to ski schools, and so forth. Most of it is much, much cheaper, whereas hotels are higher. Senator HASKELL. This is interesting. Why don't you leave it with the committee? Mr. PATCH. It is enlightening, I think. The guidelines in it are very important because of the nature of what we have. It should be preserved for all people, not just for anybody who thinks everybody has to be left alone, that a few can hide from far back, but not all people can do that, all people have the time. It has to be done in a reasonable way for the masses to enjoy the sport. Your suggestion which I heard previously, should there be special ski areas, that is very, very good. I think from the viewpoint of the average skiers it is a very good one, because ~the family who skis~ say four or five people, and to go out and pay for each one a lift ticket for $11, it is very expensive, plus the trip, plus everything else, and it is a long trip. If it could be done with ski areas even sujsidized once for intermediate schools in the vicinity of cities big enough or organized enough thatt he people can enjoy it, it would be really great. It would be v~ery, very good. There are some ski areas on the profit sheets that really are far and away less expensive, not crowded, but generally speaking I think these areas do not appeal to the skiers because they have been badly planned, because the good ski areas, the interesting ones, they are all crowded in the season, absolutely, and the prices of ski schools and ski lessons, welL this is a question. Sometimes I think it is pretty high and it should be controlled. It should be that the price structure should be controlled because areas should not be able to take advantage of, say, the President is there and therefore it is fashionable, but as much as I love Vail there are certain things that don't have to be done. Thank you very much for listening to me. Senator HASKELL. Thank you for coming up and letting us see a real-life skier. I think maybe that has been missing. Mr. PATCH. That's how I felt. Senator HASKELL. Thank you for coming. That concludes our witness list and the record will be open for 2 weeks for any submissions. Thank you very much. [Whereupon, at 3:47 p.m., the hearing was adjourned, subject to the call of the Chair.] PAGENO="0340" PAGENO="0341" OUTDOOR RECREATION AND SKI PERMITS ON NATIONAL FOREST LANDS MONDAY, NOVEMBER 17, 1975 U.S. SENATE, Sm300MMIrraE ON THE ENVIRONMENT AND LAND REsouacEs; OF THE COMMITTEE ON INTERIOR AND INSULAR AFFAIRS, Washington, D.C. The subcommittee met, pursuant to notice, at 10 a.m. in room 3110, Dirksen Office Building, Hon. Floyd K. Haskell presiding. Present: Senators Haskell and Fannin. Also present: Steven P. Quarles, counsel; and Harrison Loesch, minority counsel. OPENING STATEMENT OP HON. FLOYD K. EASKELL, A U.S. SENATOR PROM THE STATE OP COLORADO Senator HASKELL. The hearing on S. 2125 will commence. This is the third hea.ring the subcommittee has held on this bill. On October 4 and 6, field hearings were held in Aspen and Denver and there we heard from virtually every segment of the industry, ski area operators, the financial community, State and local govern- ments, ski instructors, skiing students, environmental organizations~ and the general public. As yet, however, we have not heard from the Forest Service which is charged with permitting the commercial outdoor recreation in- dustry to use national forest lands. Forest Service policy is not to present testimony on legislation outside of Washington and, therefore, the principal purpose of today's hearing is to hear from the Chief of the Forest Service, Chief McGuire. A second purpose of today's hearings is to learn from the industry whether the issues raised in the field hearings are universal or peculiar to Colorado. Additionally, we will hear from the industry on certain matters which have been raised with them. And I hope to get some answers to those questions. As sometimes occurs in the drafting of legislation, this bill orig- inated from a specific incident and several problems involving a limited number of constituents. We sought to resolve these problems through informal procedures, but found them to be indications of a more fundamental issue which could only be addressed by legis- lation. Early this year numerous Colorado citizens brought to my atten- tion a proposal of three Colorado ski areas to simultaneously in- (337) PAGENO="0342" 338 crease by 20 percent the daily adult tow ticket rate. Skiing in Col- orado is already a very expensive form of recreation and I was concerned that so large an increase would put skiing beyond the reach of many Coloradoans. Therefore, I wanted to be sure that the requested increase was justified. But I found it was virtually impossible to make such a determination. The Forest Service does not hold public hearings on requested rate increases nor does it release the financial data upon which the permittee's request and the agency's decision are based. I was astonished to learn that the decision on any rate increase request is the province of the local forest supervisor and that he is given no objective formula or criteria for making that determination. It appears absurd, at least to me, that forest supervisors, usually untrained in economic matters, are asked by the Forest Service to make such decisions on apparently purely subjective grounds. In the case of the rate increase request in Colorado, one set of rates was ultimately denied by the forest supervisor and another was compromised. Yet even today, several months later, neither the industry nor the public knows in detail what criteria Forest Service Personnel used in determining whether the rate increases were justi- fied or unjustified. As I began to explore the Forest Service's system of granting and administering ski permits, I discovered that the lack of uniform objectives and specific standards pervades the entire system. For example, ski permits are often saddled with stipulations and con- ditions which differ both among and within the national forest regions. This absence of uniform standards can play havoc with the financial planning of permit applicants and holders and may jeopardize their existing and planned investment. It clearly frus- trates any public review of the adequacy of Forest Service decision- making. I also learned that the statutory basis for the present permit system is so full of holes that the Forest Service has adopted a numbe.r of questionable practices to meet the public demand for outdoor recreation facilities. Perhaps the most serious of these practices is that of issuing to a* single ski operator a 30-year permit for 80 acres-the statutory limit-then supplementing it with a large number of 1 year special use permits for additional acreage. Of course, the maximum of only 80 acres is simply too small for ski operations today. I am reminded of the history of the Alaskan pipeline. After much litigation over the adequacy of the environmental impact statement, the entire pipeline project was brought to its knees by a minor provision in the Mineral Leasing Act of 1920 which lim- i~e~l the width of rights-of-ways which could be issued by the In- terior Department. In that situation the Department had attempted to use special use permits to sidestep the statutory width require- ments. The courts found invalid that use of special use permits. I see no reason why, given that finding, the courts would not also question the legality of using special use permits to avoid legal roadblocks to the issuance of permits for ski areas. In short, after investigating the Forest Service permit system for ski and other recreation facilities, I am convinced it needs reform- PAGENO="0343" 339 ing. The system is based on two very antiquated laws: The Organic Administration Act of 1915 and the Term Permit Act of 1915. The latest amendment to either of these laws occurred in 1956. The nature of the industry is far different today than when those. laws were first enacted and last amended. Before this hearing begins, however, I want to emphasize two things. First: The bill before us is a rough draft only. On introducing the bill on July of this year, I said that it was a draft bill to be criticized and reworked during the hearing process. And I am still of that opinion. I've already expressed my doubts concerning the appropriateness arid workability of a number of the bill's provisions and have suggested provisions which might be added in supplement. Second: I would particularly like to clarify the underlying pur- pose of the legislation. I have heard described as the purpose of this bill the regulation of the ski industry as a utility and the forced reduction of the rates that industry may charge the public. This is patently wrong. What I hope to achieve by the enactment of this measure is not necessarily an increase in Forest Service regula- tory powers, but rather the exercise of existing powers in a uniform, objective manner. If this is not clear in the provisions of the draft bill, let's try to rewrite those provisions to meet that purpose. Our first witness today is the Honorable John B. McGuire, Chief of the United States Forest Service. Chief McGuire, it is a pleasure to have you here today. STATEMENT OP HON. IOHN R. McGUIRE, CHIEF, FOREST SERVICE, DEPARTMENT OP AGRICULTURE; ACCOMPANIED BY MELVIN LOVERIDGE, FOREST SERVICE Chief McGrmu~. Thank you, Mr. Chairman. With your permission I would like to have Mr. Melvin Loveridge of the Forest Service ac- company me. Senator HASKELL. Very pleased to have him. Chief McGunu~. Mr. Chairman, I can brief my testimony some what but it contains quite a bit of detail. Senator HASKELL. It will be included in the record in full. Chief McGrrmE. Thank you, sir. We welcome this opportunity to appear before the committee to discuss Forest Service policy, procedures, and authority for the is- suance of permits for commercial outdoor recreation facilities and activities. As the committee is aware, we cooperate with the private sector to provide certain needed facilities and services. Use of the national forest lands is authorized under a permit system. There are now about 1,900 concessioner permittees on the national forests. Their investment comes to about $270 million. And the major part of this investment is in winter sports areas. .The, national forests are the largest suppliers of skiing in the cop.n- try with about 200 winter sports areas. Since we recommend that S. 2125 not be enacted, I will express our concerns with that bill. And since the bill would primarily effect ski area permits; therefore, I will concentrate on that aspect. PAGENO="0344" 340 The act of June 4, 1897, authorizes the Secretary of Agriculture to regulate occupancy and use of the national forests. In addition, the act of March 4, 1915, authorizes the Secretary to issue permits for the use and occupancy of suitable areas of land for recreation facili- ties. The combination of these present authorities has in our opinion proved sufficient; therefore, we have not sought to modify the 80- acre or 30-year limitations contained in the 1915 act. In addition to these two acts, we also rely on the act of April 24, 1950 to provide authority for the use of structures owned by the government. The provisions of section 3(a) and 3(b) of 5. 2125 which provide for congressional review and publishing of regulations appear to be directed at a concern that proposals for major ski developments be subject to open public review and complete analysis of potential beneficial and adverse effects prior to issuance of the permit. In our opinio~ such proposals are now subject to detailed agency analysIs and to public review, for example, under the National Environmental Policy Act. In addition, we object to the provisions of section 3(a) which would allow the committee, by a disapproval resolution, to prevent the issuance of permits involving more than 1,280 acres, up to 5,000 acres and the further requirement that permits involving more than 5,000 acres could not be issued until the committees had adopted a resolution of approval. The Department of Justice has consistently advised that similar requirements are unconstitutional. And just recently that Department tš~stified on this subject before the Senate Judiciary Subcommittee on Separation of Powers. With regard to the fee system, the Forest Service has been im- plementing since 1972 a new system with respect to winter sports operations. The new system considers the amount of sales that are generated in relationship to the commissioner's gross fixed assets. Minimum rates have been set which are applicable to all permits. Starting with a minimum, rates progress upward as sales rise in comparison to gross fixed assets. Rates as established give the con- cessioner an opportunity to realize approximately 15 percent profit when his sales are equal to twice his operating costs. This level of profit is based on national averages and would apply to a concessioner of average operating efficiency in a normal season. However, the system neither guarantees nor limits the profit of any individual concessioner. It does, however, return a reasonable land rent to the landowner commensurate with the value of the use author- ized. We are concerned that sections 3(c) (1) and 4(c) of 5. 2125 would base the annual fees and allowable charges on equity investment. This would require major revision of our present system and we are not aware of any advantages which would result in such a revision. Senator HASKELL. I might interpret you there, Chief. I think you'll recall that in that regard I agree with you. Chief MCGtTTRE. Thank you, Mr. Chairman. With regard to permittee charges and public information, section 4 of the bill provides that all data supplied by a permittee relating PAGENO="0345" 341 to a proposed increase or decrease in charges to the public be made available for public inspection. We believe the broad disclosure of all financial information required in this section could act possibly as a deterrent in securing further private investment. The Freedom of Information Act as amended now applies to the availability to the public of such information and we strongly prefer that rnforma- tom on all permits be handled under that existing law. With regard to the review of permittee charges for services and use of facilities, the terms of existing permits specify the services to be provided and provide for our approval of charges and our in- spection of the quality of service. We view this approach as sufficient to protect the public interest. With regard to improvements and extension or renewal of permits, the structural improvements on Federal lands are the property of the permittee and may be sold when the permit terminates or may be removed by the permittee. Many Forest Service permits have ex- perienced a change in ownership and in nearly all cases, a permit has been issued to the new owner. In a few cases, improvements have been abandoned and have become the property of the United States. Under present authorities, no extension or renewal beyond the permit term is stated or implied. However, upon the expiration of the permit, if the use responds to a continuing public need and is consistent with established land use objectives for the area and if the permittee has fulfilled his obligations, a new permit is normally issued to the owner of the improvements. In those situations where it is necessary to terminate a permit, uring its term, for another use, the Federal Government obligates itself to pay compensation. This obligation is expressed in each per- mit issued under the 1915 act. But we've seldom found it necessary to terminate a permit during its term, except by mutual consent. The provisions of the bill with regard to improvements and renew- al or extension of permits would not substantially change present procedures. \Ve think it's important to maintain the present secre- tarial discretion to specify the specific terms and conditions in each permit. We do not support the provision which would exclude the Mineral King Valley from the legislation. It appears that this section is intended to be the controlling provision and override the sole author- ity provision in section 7; thus, any permit for ski activities or facili- ties in Mineral King Valley would have to be issued under the 1897 and 1915 acts. We believe all areas should be subject to the same basic law. That concludes my statement, Mr. Chairman. Senator HASKELL. Thank you, Chief. If my recollection serves me correctly, you have appeared to have changed your opinion from the morning you, the majority and minority counsel-Mr. Quarles and Mr. Loesch-and I sat down and talked about this% But let me .j~ ask you a few questions addressing public policy. In your opinion, does an operator who is using public lands have greater, lesser, or the same obligations as the operator using private lands? Chief McGtrniE. I would say he has greater obligations than an operator using private lands. For one thing, he has been given, the PAGENO="0346" 342 privilege of using these lands and in return I think the public, which owns these lands would expect him to perform, probably, to higher standards than a private land operator. Senator HA5KELL. As a matter of policy, Chief, do you think the Forest Service has any obligation to assist in any way to see that competition exists within the industry vis-a-vis considering the issu- ance of permits and the administration of permits? Do you feel that you have any obligation to help insure that true competition exists between these areas? * Chief McGimu~. We have a very large responsibility in that re- gard because we administer a very large portion of the total supply of suitable areas. So this, we feel, is a very important responsibility of the Forest Service. Senator HASKELL. When you bring large numbers of people to an activity on Federal lands, in my view you necessarily have an im- pact upon local government whether it be county or municipality. I suppose I should first ask you whether you agree with my premise ~ Chief MOGUIRE. I fully agree with your premise, Mr. Chairman. Senator HASKELL. If you agree with my premise, do you feel that it is any responsibility of the US. Government operating through the Forest Sevrice to ameliorate the impacts on local government? Chief McGUIRE. We think it is up to the two levels of government to consider what might be done to reduce that impact. There are impacts that are both beneficia.l and disadvantageous to the local community and the problem with both levels of government is to achieve- Senator HASKELL. When you say both levels of government, would you identify- Chief MoGuiiu~. The Federal level and the local level. So I would say that we do have a responsibility here to work with the local government in ameliorating impacts. Senator HASKELL. What under current law and policy is being done in that regard by the Forest Service? Chief MCGUIRE. In most of the national forests, the Forest Service is. attempting to coordinate its land use planning, planning for the use of the national forest lands with the planning that the local gov- ernment may be doing. It is also attempting to encourage local governments to staff and equip themselves to do a more extensive job of planning uses of the priva.te lands. We try to coordinate, in other words, the two planning processes. Senator HASKELL. What portion, if any, of the fee paid to the United States by the operator in an area is in turn paid by the For- est Service to a local community? Chief MGGUIRE. National forest receipts from all kinds of activi- ties, including winter sports operations, are placed in miscellaneous receipts of the treasury in the national forest fund. Twenty-five percent of those receipts from all sources are distributed to the States to be passed on to the counties in proportion to the acreage Qf national forest land in the county. This insures some sharing of school and road costs between the Federal Government and the local government. In addition, 10 percent of the receipts are spent in these local areas for roads and trails. PAGENO="0347" 343 Senator HASKELL. Ten percent of the receipts by the Forest Service are turned over for roads? Chief MOGUIRE. They are not turned over. They are spent by the Forest Service for construction and maintenance of roads and trails within the national forests. Senator HASKELL. I see. And the road construction, is that on Forest Service land or on local government or fee land? Chief McGunii~. Generally, it's on Forest Service land. We may possibly have an occasional road where we need access to national forest land. Senator HASKELL. And 25 percent of the receipts for the fee are turned over to the State for distribution in such manner as they desire to the local government? Chief MCGUIRE. Yes, the State is required, Mr. Chairman, to dis- tribute this 25 percent share in relation to the acreage of national forest land, and the money must be used for schools and roads by the local government. Senator HASKELL. And limited to that? Chief MoGtrnu~. And limited to that. Senator HASKELL. Do you happen to know whether this is more, less or the same percentage as is distributed in the case of timber sales? Chief MCGUIRE. This is the same percentage, sir. Senator HASKELL. How about minerals? Chief MCGUIRE. With minerals, the situation varies. In the case of the public domain, leased minerals outside of Alaska, I believe the share distributed by the Secretary of the Interior from minerals leased on national forest lands is 371/2 percent. In the case of acquired lands, primarily in the East, those mineral leasing receipts are placed in the national forests fund and are dis- tributed along with other national forest receipts. I believe there's still another arrangement in Alaska and there are other arrange- ments for other kinds of receipts. It presents a very complex situa- tion, as you know. Senator HASKELL. In view of the fact that private organizations are operating pursuant to the permit system on public lands, do you think that the Forest Service has the obligation to see that the public is adequately served? Chief MCGUIRE. Yes, we do. A very great obligation. Senator HASKELL. Could you spell out your understanding of that obligation? Chief MCGUIRE. One of our objectives is to make sure that the private concessioner provides an adequate service to the public. This means that he must be able to obtain enough returns so that he can justify his investment and perhaps increase it as public demands increase. On the other hand, we do not want to get into a situation where the private concessioner begins to obtain extreme benefits from the adequate supplies of the Service. We want to be sure that we provide for increasing the supply in pace with the increases in the public's demands for the service. So, our job is to attempt to balance-on the one hand a viable in- dustry that can serve the public and has the money to do it-and on the other hand, to provide enough supplies, enough opportunities so PAGENO="0348" 344 that there is continuing competition and the public will benefit from getting the service at the best possible price from the consumer's point of view. Senator HASKELL. If I recollect your prepared testimony correctly, you felt that a public disclosure of operating statements or balance sheets, I assume, would not be in the best interest of the operator. Am I correct in that? Chief MCGUIRE. We think we can go much farther than we have gone in the past, Mr. Chairman. We think more can be disclosed than we really thought possible in the past. But there is a point here at which it becomes somewhat dangerous, in our view, to go too far in disclosing some details that might tend to put the operator at a disadvantage with his competitors both on public and private land. So I think we can find some middle ground here under the Free- dom of Information Act that will serve the purpose. Senator HASKELL. Would it be possible for you to describe the middle ground? Chief MCGUIRE. I think the details have been fairly well laid out in a recent judicial interpretation of the Freedom of Information Act involving concessions in the national parks. Senator HASKELL. And this is your opinion? I mean I don't mind your referring to a~ court as long as you are incorporating it in your opinion. Chief MCGTJIRE. This is also our opinion and we have talked to our counsel about this as a way of defining what might be released and what should not be released. As a result of this discussion with our counsel in examination of this judicial interpretation, we feel that either of two criteria must be used to determine confidentiality of financial data on a case by case basis. First: We must answer the question: Will disclosure of this par- ticular item of financial data impair the Government's ability to obtain future information from the operator. Second: Will discio- sure cause substantial harm to the competitive position of the parties supplying the data? Senator HASKELL. Taking your first test, I assume the Government in this particular case would have the right to get any information it wanted to because it would make that a condition of issuance of the permit. So that eliminates the first test. So then we come to your second test and in your second test, would you read it again, please? Chief MCGuIRE. Will disclosure cause substantial harm to the competitive position of the parties supplying the data? Senator HASKELL. So that is the test that you would impose? Chief MCGUTRE. That is correct. Senator HASKELL. I would assume though that you would consider the public has some right to know here? Or would you not assume? Or is that an erroneous assumption? Chief MeGuniE. I think the public has a great right to know. Senator HASKELL. Thank you. We've established here that the percentage going to local governments from ski areas are the same as the percentage going to local governments from timber sales. Arid yet it's my view-and I would like to know whether you share my view-that a far greater impact comes to local areas from ski opera- PAGENO="0349" 345 tions than from timber operations. Now do you share my view or not? Chief MCGUIRE. I think that is generally true, Mr. Chairman. Of course, there are some small ski operations with just a rope tow. But the typical good size operation has far more impact on the local community. Senator HASKELL. Chief, one thing occurred to me during the hearings both in Aspen, Cob, and Denver, Cob, and that is that by and large many areas because it may be to their financial best inter- est to do so have put in very excellent, first-class, and very expensive facilities. And this may or may not-I've never seen a financial state- ment so I don't know-but let's assume it does mean that they must make a charge for a ski tow ticket which is very difficult for the average family to pay. And probably it does. Do you consider that the U.S. Forest Service has any obligation as a matter of policy to see that a ski area which is located near a large population center-I want to emphasize that-has a balanced set of facilities for which different charges might be made? Chief MCGUIRE. We think we do have such an obhgation~ Mr. Chairman. However, we are confronted with a variety of situations. Sometimes it's better, or possible at least, to provide a. spectrum of facilities by increasing the supply of areas accessible to the center of population. In other places, it may be possible to get a single operator to pro- vide a spectrum of facilities. For example, a long time ago we im- pressed on the ski area operators the need to provide more facilities for people who do not ski-so-called now bunnies, for example. And the industry has been quite responsive in providing those kinds of opportunities. Senator HASKELL. Assuming, and I don't dispute you in any way, that there are certain times when one operator cannot for some reason provide a spectrum-nevertheless, I gather it would be your opinion that, near a large population center and assuming you had some very high costs and high-class ski areas, it might be incumbent upon the Forest Service to look perhaps with more favor to an applicant who proposes to put in a low-cost facility. Would that be correct? Chief MCGUIRE. That would be correct. Senator HASKELL. Can you describe for the record, Chief, the meth- odology employed by a given forest supervisor in determining wheth- er a rate increase is or is not justified? Chief MOGmEE. May I ask Mr. Loveridge to answer that question, Mr. Chairman? Senator HASKELL. I would be pleased. Mr. LOVERIDGE. We don't have any specific formula as such. We do recognize the opportunity for profit that he has experienced, his managerial ability, the increased cost of doing business. We have provided, in general, the guidelines that indicate that a permit would not be required to charge less than somebody who was in competition with him. We also provide an opportunity for reasonable profit. We have described a particular level of reasonable profit as Mr. McGuire just indicated. The comparability of areas as far as the services and facilities that are provided, the more sophisticated areas give a person more for their money and, therefore, warrant a higher charge to the user than a small rope-tow type area. PAGENO="0350" 346 They have higher costs involved, too. These are the kinds of con- siderations that a forest supervisor utilizes when he looks at a re- 4uest for change in rates. Senator HASKELL. Is the forest supervisor's decision reviewed? Chief MCG1JIRE. The forest supervisor's decision can be appealed under the administrative review process. Senator HASKELL. Is there any automatic review of his decision provided for within the regulations of the Forest Service? Chief MCGUIRE. Only in connection with our general administra- tive review of this whole recreation operation. We do this periodi- cally when we look at all of his recreation and administration work. But that's only done in a general way. And only every 4 years or so. Senator HASKELL. Chief, you might want Mr. Loveridge to an- swer this question. In applying these very generalized suggestions that you made, Mr. Loveridge, do you require a financial statement to be submitted which segregates tow operations from other opera- tions? Mr. LOVERIDGE. In preparing information to substantiate the changes that might be required, we asked for the information that relates to just that area that we are concerned with. Senator HASKELL. And what is that area? Mr. LOVERIDGE. The particular ski area itself and the profitability of that ski area as it stands upon its own, not land sales or land speculation. Senator HASKELL. Have you, in your experience, ever audited a statement submitted to you by a ski area? Mr. LOVERIDGE. Yes, sir. Senator HASKELL. Do you have in your department people-I gather you must otherwise you wouldn't say it-who are competent to do that? Mr. LOVERIDGE. Yes, sir. We have very competent cost accountants who periodically audit all of our concessioners' books. Senator HASKELL. Would you submit for the record, Mr. Loveridge, specific instances in which prior to granting an increase in charges made to the public, auditors of the Forest Service audited the state- ments submitted by the operator? Would you submit that for the record? Mr. LOVERIDGE. I think we can submit that for the record, sir. Senator HASKELL. You would be able to, Chief? Chief MGGUIRE. We will be able to do that, Mr. Chairman. [Subsequent to the hearing the following was submitted:] U.S. DEPARTMENT OF AGRICULTURE, FOREST SERVICE, Washington~, D.C., January 2, 1975. Hon. FLOYD D. HASKELL, Chairman, Subcommittee on Environment and Land Re8ources, U.S. Senate. DEAR MR. CHAIRMAN: During the hearing on S. 2125, you requested that we provide for the record specific instances where we conducted audits of ski area records. We enclose a summary table of recent audits of ski areas in Colorado, Washington, Oregon, California, and Wyoming. The table indicates the general purpose of the audit which was usually to establish the level of gross fixed asets and to verify revenue. We also indicate in the table whether the audit could have been used to assess requests for an increase in prices. Generally, the audits could aid in such an asessment; however, they were not conducted solely for that purpose. The audits were conducted by government employees in the professional accountant series at the GS-11 to GS-13 levels. PAGENO="0351" 34. If you need aditional information on the nature and extent of our audits, we will be happy to discuss the matter further with you or the Committee staff. Sincerely, HERB CAMPBELL, (for John R. McGuire, Chaff). Enclosure. SUMMARY TABLE OF RECENT SKI AREA PERMIT AUDITS I Could audit have been used directly or indirectly to assess requests for Ski area and location Period covered by audit Purpose of audit increased prices? Aspen Highlands, Aspen Cob. White Nov 1, 1970 to Oct. 31, 1974_ Establish GFA2 and verify Partially. River National Forest, R-2. revenues. LTV Recreation Development, Inc., Jan. 1, 1972 to Dec. 31, 1974 do Do. Steamboat Springs, Cob. Routt - National Forest, R-2. Alpental, Inc., Snoqualmie Pass, June 30, 1972 to Apr. 30, do No. Wash., R-6. 1975. Ski Lifts, Inc., Snoqualmie Pass, Oct. 1 1973 to Sept. 30, do Partially. Wash., R-6. 1974. HyakSkiCorp.,Hyak,Wash.,R-6 June 1, 1974 to May 31, do Do. Stevens Pass, Inc., Stevens Pass, 1969 to 1972 do Do. Wash., R-6. July 1, 1973 to June 30, 1974. Mt. Baker Recreation, Co., Mt. Baker, 1970 to 1974 do Do. Wash., R-6. Mt. Ashland Ski Area, Jackson County, July 1, 1974 to June 30, Verify of revenues evaI~ Do. Oreg., R-6. 1975. uated internal control. South Oregon Ski, sublessee, R-6 Nov. 1, 1974 to Oct. 30, do Do. 1975. Ski Shasta, Inc., Mt. Shasta, Calif., Jan. 1, 1972 to June 30, Verify revenues and GFA Could have been R-5. 1975. update. used to review fee increase. Kirkwood Meadows, Inc., Kirkwood May 1, 1974 to Apr.30, 1975 Establish GFA and verify Could help in part Meadows, Calif., R-5. sales revenues, to review rate increase request. Cooper Mountain Inc., Wheeler Junc- Jan. 1, 1973 to Apr. 30, 1974 Verify revenue and update Partially. tion, Cob., Arapaho National Forest, GFA. R-2. Keystone International, Inc., Keystone, June 1,1972 to May 31,1974 do Do. Cob., Arapaho National Forest, R-2. Geneva Basin Ski Corp., Grant, Cob., July 1, 1970 to July 31, 1974_ Verify revenue Do. Pike National Forest, R-2. Monarch Winter Sports, Inc., Garfield, June 1, 1969to May 31, 1974 do Do. Cob., San Isabel National Forest, R-2. Cooper Hill Ski Area, Leadville, Cob., Jan. 1, 1969 to May 31, 1974 Establish GFA and verify Do. San Isabel National Forest, R-2. revenues. Wolf Creek Ski Area, South Fork, Cob., July 1, 1969 to June 30, 1974 New permit Do. Rio Grande National Forest, R-2. Ski Happy Jack, Inc., Laramje, Wyo., Aug. 7,1970 to May 16, 1974 Establish GFA-verify and Do. Medicine Bow National Forest, R-2. establish new 5-year flat fee. Lake Eldoro Corp., Nederland, Cob. July 1, 1972 to June 30, 1975 Establish GFA and verify re- Do. Roosevelt National Forest, R-2. ported revenues. Durango Ski Corp., Durango, Cob., San Oct. 1, 1971 to Sept.30, 1974 do Do. Juan National Forest, R-2. Horn Ski Corp., Grand Junction, Cob., May 1, 1972 to Apr.30, 1974 Update GFA and verify rev- Do. Grand Mesa National Forest, R-2. enues. Winter Park Recreation Association, May 1, 1973 to May 4, 1974 do Do. Winter Park, Cob., Arapaho National Forest, R-2. Pikes Peak Ski Corp., Colorado Nov.1,l97OtoOct.31,1974 Establish GFA and verify Do. Springs, Cob., Pike National Forest, revenues. R-2. Berthoud Pass ski area, (operator) Oct. 1, 1973 to Sept. 30, Update GFA and verify re- Do. Anderson Concessions, Inc., Ber- 1974. ported revenues. thoud Pass, Cob., Arapaho National Forest, R-2. Bosen, Inc., Dillon, Cob., Arapaho Julyl,l973toJune3O,1975 Establish GFA and verify Do. National Forest, R-2. revenues. Vail Associates, Vail, Cob., White River May 1, 1973 to Apr. 30, 1974 ~do Do. National Forest, R-2. i Audits were conducted by a Government employee in the professional accountant series at the GS-11 to 13 level. 2 Gross fixed assets. PAGENO="0352" 348 Senator HASKELL. Now, I gather really that, Chief, you are not concerned about this 80-acre, 30-year permit and one year supplemen- tary permits despite the judicial decisions concerning that Alaskan pipline and the Monangahela National Forest in West Virginia. I realize you are not a lawyer but your counsel doesn't indicate any concern. Chief McGuniE. Our counsel does not indicate concern. Of course, we would prefer, in a bureaucratic way to have complete discretion. But we have lived with this arrangement for many years. It's worked fairly well. Perhaps Congress would want to consider some higher ceiling than 80 acres. That would certainly be satisfactory. But we still probably need to use the dual system. In any event, we have now some ski areas that require over 6,000 acres. Others being contemplated might go up to 13,000 or 14,000 acres. If there are new developments in consumer preferences here; for example, if cross country skiing became even more popular, I can see where we might require 20,000 or 25,000 acres under some kind of permit. Also, it would be easier administratively to have all of the area under one permit. Senator HASKELL. Thank you. I gather that your counsel is pretty optimistic about the outcome of the pending litigation. Don't answer that question. You don't have to. Chief MCGUniE. It depends on what lawyer you are talking to. Senator HASKELL. That's right. I have no further questions at the moment. Senator Fannin. Senator FANNIN. Thank you, Mr. Chairman. And, Chief McGuire, I am glad to have you with us here today. We know some of the problems which seem to be current in Colorado. The distinguished Senator from Colorado has them to contend with; and I wish we were blessed with them in Arizona. We need some of these problems of greater impact to certain areas. We need the business. But seriously, one of our most serious problems in the State of Arizona is having some ski areas that are not profitable. If you have a formula on your percentage basis, it's going to almost make it im- practical for them to operate. At least, I'm wondering if you operated on a percentage basis do you feel they would be entitled to earn more because they've had some loss years-how do you handle those years after they do get into the profit side? Chief MCGUrRE. Well, we try to average them out, Senator. We recognize this problem. It's peculiar not only to Arizona but to other parts of the country. Some areas just don't have a good season every year. And we attempt to recognize that fact. Senator FANNIN. So you do average it out. There is a basis for it. I would think it would be very unfair not to do so inasmuch as they may have one profitable year in three. I know that we have gotten one out of two and I think sometimes it's one out of three that we almost expect. I may feel a little differently because of the particular situation in Arizona but I do not feel that the Congress has neither the time nor should they devote their efforts to reviewing all of these different programs that you initiate and on which you issue permits. PAGENO="0353" 349 Mr. Chairman, maybe I differ from you because of my different situation but we are looking for the Forest Service to do more in the way of encouragement of holding back these permits. So perhaps, I would not be in the same position as the Senator from Colorado. I think that we have our work to do and we set out the guidelines. And then I feel that you should carry through. And, of course, you bring out the constitutionality of the issue. I'm not going to argue that. But just from the standpoint of practicality, I think it would be on your side. Now I do have some other questions-that are along the same line when you are talking about what you charge, and the basis of 2 per- cent of appraised value of nonprofit organizations. And you charge commercial users the 5 percent. However, the basic 2 percent charge, sometimes, is rather devastating to some organizations-I'm taking information from a letter that I wrote to Secretary Butz and I think a copy to you regarding a particular problem we had and I would ask the Chairman if he could just permit me to bring this one matter up because I think it does pertain to the 5 percent and the 2 percent and what is involved. The Forest Service reappraised the value of two Boy Scout campsites in Arizona. The amounts jumped from $61 to a new charge of $1,138 on one campsite. And from $71 to $3,086 on another. It seems to me there would be a greater consideration of just what is involved. 1 think this has been brought to your attention by this letter and also by others. Raising the fees so substantially is certainly going to be prohibitive to the average Boy Scout. I just wonder if you have any comments in that regard. * Chief MCGTJIRE. I'm familiar with that letter, Senator Fannin. And we have suggested that one* way of reducing the fees is to reduce the area under permit. The surrounding area could still be used by the Scouts. We have the general problem here of equity. Of course, many Boy Scout councils do not benefit from the use of the national forest. To be fair, if we are going to make special concessions, we ought to see that all the Scout councils benefit equally rather than those that happen to have a particular geographic ad- vantage. We think there are ways of bringing these fees downs but, as long as land values keep going up, the Scouts are going to have to face reality that their costs are going to rise. In the past we have encouraged councils to acquire private land for base facilities and to use the national forest just like any other citi- zen. Thereby they may avoid this problem of continuing escalation of cost. That may be one way. In this particular instance, I think we can bring the fees down substantially by reducing the size of the area under permit. Senator FANNIN. Excuse me. I don't think your analogy that one council would be opposed to giving a privilege to the Scouts under another council is correct. There are other advantages that the par- ticular council would not be involved. And the forest lands might be involved in some other particular governmental program in which they have advantages. So I would think that any considerations you would give to one council would be appreciated by the others. PAGENO="0354" 350 Chief McGunu~. Well, probably so, Senator. I'm just saying- Senator FANNIN~ I don't think it's a competitive proposition in that regard. Chief McGunu~. We have to find some way of distinguishing be- tween the different kinds of organizations. Now to those, for exam- ple, that concentrate their activities on the underprivileged or the handicapped, we would give a greater discount to than to. those who did not do that. I think we can find some way of living with this particular problem. Senator FANNIN. As I understand it, I certainly would have no rea- son to be opposed to other groups that take care of youths or take care of the handicapped being given privileges. But I do think the Federal Government-we have an obligation to try to encourage these programs and where we have this chance without any burden upon the department involved, I think we should go forward. And I just hope that we can. I just bring that up because I was rather shocked when I saw the percentage of increase that came about and realizing that the Scouts and all other youth organizations and the organizations servicing the handicapped and others certainly do not have the funds to carry through with their programs. So this is just one way in which the Government could assist without any undo burden. I would hope you would give this every consideration and I'm pleased to have your explanation that you have considered it. As I understand it, they would be privileged to utilize the other areas but they would be brought down to a certain size space for their en- campments and facilities of that type? Chief McGunu~. That's the approach which we have recommended~ Senator. We think that probably they do not need exclusive use of the entire large area they have had in the past. Senator FANNIN. Thank you very much. Thank you, Mr. Chair- man. Senator HASKELL. Just a couple of more questions. Chief, at the Denver hearings, if my memory serves me correctly-at least, this is counsel's recollection so I'll adopt his recol- lection as mine-only somewhat less than 50 percent of ski school instructions were certified by the appropriate ski instructor's association. Now, does this disturb you at all that the public are being taught by people who don't have the proper- Chief MCGUIRE. We have been talking to the professional ski in- structor associations for some time about this particular problem. I believe we are in fairly good agreement that there are advantages in having uniform methods of ski instruction in order that the skiers can move freely from one region to another and continue their in- struction. However, we think that the way the association is going, that is~ the professional ski instructors' association, in not requiring their members to limit their instruction to one technique is satisfactory. Because a person who wants to try some other technique can always PAGENO="0355" 351 go to some other area and find that technique there. The ski instruc- tors have done a pretty good job of recommending to the students where they might go for ~ different technique. Senator HASKELL. I'm no expert on this but as I understand it, the professionals are certifying people as to their ability to be in- structors. And I must say that it's a little bothersome to me if the facts are supported that over 50 percent of the people who are actu- ally teaching members of the public don't have the certification of their professional organization. Assuming those facts to be correct, would this concern you at all? Chief MCGiuRE. As long as the public knows what it's buying, I don't think I would be too concerned here. Senator HASKELL. Maybe they should put signs up, "not certi- fied?" Chief McGuniE. Well, I think those who are certified would prob- ably advertise that fact and the consumer, a wise consumer, would look for that certification. Senator HASKELL. Caveat emptor, as I recall it. Chief, in regard to the same area of certification, I addressed a letter to you on October 29 asking you to consider as a matter of policy, not as a matter of legality or authority provided the Forest Service, whether or not you should issue with appropriate restric- ions permits to allow individuals to teach who are properly certified but who are independent of area's ski schools. Have you come to conclusion as to what your answer to my letter might be? Chief MCGUIRE. We have not yet come to a conclusion, Mr. Chair- men. We are taking a look at that both from the policy side and the legal side. The additional reason for getting into this subject is that the courts have remanded to the Secretary a case which is now before the lower court. Senator HASKELL. You realize that I'm not asking you to express an opinion as to whether you can refuse to issue a permit. My question is, as a matter of policy is it desirable or not desirable to issue such permit. Chief MoGimiE. That is the question that we are looking at. Senator HASKELL. Well, I would appreciate an answer as soon as you can arrive at it. Chief McGrrnu~. We hope that perhaps we can have an answer in ~January of next year. Senator HASKELL. This is going to be a little late to let some of those folks teach this coming winter, isn't it? Chief McGtrniE. That's true, sir. But on the other hand this is quite an important question. Senator HASKELL. I think when you put that together with the fact that apparently 50 percent of the people who are teaching don't have certifications, I would say it's very important. Well, I thank you, Chief. I think we will keep the hearing record open for the 2 weeks. I may have some questions, Senator Fannin, or PAGENO="0356" 352 other members of the committee may have some questions to address to you. Thank you. [The October 29, 1975, letters from Senator Haskell to Chief McGuire and his November 13, 1975 response which was received after the hearing are set forth below:] U.S. SENATE, COMMITTEE ON INTERIOR AND INSULAR AFFAIRS, Washington, D.C., October 29. 1975. Hon. JOHN R. MCGUIBE Chief, Forest Service, Department of Agriculture, Washington, D.C. DEAR CHIEF MCGUIRE: As you will recall on March 25, 1975, I co-signed, with Senator Hart and Representative Schroeder, a letter concerning the case of a Colorado resident, Don Lemos, and the issue of whether independent ski instruc- tors s~iould be permitted to teach at ski areas on national forest lands. This issue arose again during the recent public hearings on S. 2125 in Aspen and Denver, Colorado. As a result of those hearings, I am writing to urge the Forest Service to consider implementation, before the coming ski season, of procedures allow- ing qualified independent ski instructors to teach on areas of the national forest under permit for ski activities and facilities. I realize that a case is pending before the District Court in Denver to deter- mine whether the Forest Service has the legal right to deny access to such ski areas for independent ski instructors. I understand that this case has been re- manded by the Circuit Court to the District Court for a rehearing and that the State has filed a petition to intervene on behalf of the independent ski instruc- tors. But I consider the overriding issue not to be. one of legal right but rather of the right policy. I cannot believe it is in the public interest to deny properly certified independent ski instructors access to national forest lands to practice their profession, thereby denying the public the freedom to select the ski in- structors and instruction techniques of their choice and to make that selection in a situation where price competition prevails. The testimony at the October 4 and 6 hearings on 5. 2125 has led me to conclude that the public would be best served by a policy permitting independent ski instructors to compete freely for students. Such a policy would, of course, require access to ski facilities located on national forest lands. I might add that those advocating such access for independent ski instructors have set forth a very rea- sonable set of conditions concerning, among other things, certification, liability insurance, limitations on group instruction and advertising. I believe these would answer most, if not all, objections raised against independent ski instructors. They would insure highly qualified ski instruction on national forest lands and would minimize any detrimental economic impacts which independent ski instruc- tion might have on the holders of ski activities and facilities permits. Your prompt and favorable attention to this matter would be greatly appreci- ated. A you know, we have scheduled an additional hearing on 5. 2125 for November 17. As you or your representative will likely wish to testily at that hearing, I suggest that a response from you prior to that date would be beneficial to both of us. Best wishes, Sincerely, FLoYD K. HASKELL, Chairman, Subcommittee on Environmental and Land Resources. PAGENO="0357" 353 U.S. DxPABTMENT OF AGRIcuI~ruRE, FOREST SERVICE, Washington, D.C., November 18, 1975. Hon. FLOYD K. HASKELL, Chairman,, Subcommittee on Environment aiul Land Resources, Committee on Interior and Insular Affairs, U.S. Senate. DEAR SENATOR HASKELL: This is in reply to your October 29 letter suggesting that the independent ski instructor question is not so much a matter of legal right, but rather the right policy. As you noted in your letter, the matter of Sabin vs Butz (Don Lemos) is still before the court. The appropriateness of the policy is the specific matter before the court `at this time. Although we do not have a copy of a recently issued court order on the subject, we expect to receive it soon. We understand, however, that it requires a reexamination and reconsideration of our single operator policy and the application from independent ski instructors. We believe that our current policy was well thought out and has been sustained over time. We will, however, be looking at the whole matter again and, in SO doing, will determine whether there are other factors to be considered. We will be responsive to the court and your request that we consider the issue. Decisions on this matter will hopefully be made before the next ski season. We appreciate your expressed concern and the fact that this was brought to your attention during the recent Colorado hearings. Since the question before the court Was brought by those interested in independent ski instructors, it should run its course in that forum. Sincerely, JOHN R. MCGTJIRE, Chief. Chief MCGUIRE. Thank you, Senator. [The prepared statement of Chief McGuire follows:] PAGENO="0358" 354 STATEMENT OF JOHN R. McGUIRE, CHIEF, FOREST sERvrcE, U.S. DEPARTNENT OF AGRICULTURE, BEFORE THE SUBCOMMITIEE ON THE ENVIRONMENT AND LAND RESOURCES, COMMITTEE ON T~TtWIOR AND INSULAR AFFAIRS, SENATE, ON PERMITS FOR COMMERCIAL OUTDU REc~REATION FX~T[ITIES, S. 2125, ~FF1OVEMBER 17, 1975. MR. CHAIRMAN AND MEMBERS OF THE COMMITTEE: I welcome this opportunity to appear before the Committee to discuss the Forest Service policy, procedures, and authority for the issuance of permits for commercial outdoor recreation facilities and activities. As you are aware, outdoor recreation is a major activity on National Forest System lands. Much of the recreation use is afforded through the use of trails, streams, and the natural environment of the forest. To complement this use the Forest Service administers a wide range of facilities for camping, picnicking, boating,' swimming, and winter sports. In many areas, we cooperate with the private sector to provide needed facilities and services. Use of National Forest lands is authorized under a permit system. We now administer about i900 concessioner permits for the construction and/or operation of recreational facilities and services. This involves about $270 million of privately invested capital. The major part of this investment is in winter sports areas. The National Forests are the largest suppliers of skiing in the country with some 216 winter sports areas. I would like to discuss briefly some of the aspects of our administration of concessioner permits. Since we recommend that S. 2125 not be enacted, 1 will tie this discussion to our concerns with S. 2125. The provisions of 5. 2125 would primarily affect ski area permits; therefore, I ~iil concentrate my discussion on that area of pormit administration. PAGENO="0359" 355 2 Present Authority The Act of June 4, 1897, authorizes the Secretary of Agriculture to regulate occupancy and use of the National Forests. We view this authority as authorizing us to issue a permit for any proper and lawful use. Such permits are revocable at the Secretary's discretion. In addition, the Act of March 4, 1915. authorizes the Secretary of Agriculture to issue permits for the use and occupancy of suitable areas of land for the purpose of constructing hotels, resorts, or other recreation facilities. Permits issued under this authority may cover areas of land not exceeding 80 acres and may be issued for periods of not more than 30 years. We use both the 1897 Act and the 1915 Act as authority for the issuance of permits. In the case of an extensive winter sports area, a permit issued under the 1915 Act would cover the major fa~ilities and an additional permit issued under the 1897 Act would cover the larger area and associated dispersed facilities. The combination of authorities has proved sufficient; therefore, we have not sought new authority to modify the 80 acres, or 30-year limitations contained in the 1915 Act. In addition to the 1897 and 1915 Acts, we also rely on the Act of April 24, 1950, to provide authority to allow the use of structures owned by the government. ~rhis situation exists on less than two percent of the concessioner permits and on only two ski area permits. The two ski areas where Federally-owned structures are involved are the Timberline Lodge in Oregen and Caberfae in Michigan. The permits for these two areas are based on a combination of the 1915 Act and 1950 Act authorities. Procedure for Review and Approval of Permits The provisions of section 3(a) and (b) of S. 2125 which provide for Congressional review and publishing of regulations appear to be directed PAGENO="0360" 356 3 at a concern that proposals for major ski developments be subject to open p~iblic review and complete analysis of potential beneficial and adverse effects prior to issuance of the permit. Such proposals are now subject to detailed agency analysis and public review. Under guidelines issued pursuant to the National Environmental Policy Act, proposals with significant environmental impacts are subject to a complete review and analysis including the preparation of environmental statements. Through this process officials of State and local governments, interested agencies and individuals are kept informed and given an opportunity to review and comment on proposed actions. We view this review process as providing the needed input by interested parties in the consideration of proposed ski developments. In addition, we object to the provisions of section 3(a) which would allow the Committee on Interior and Insular Affairs by a disapproval resolution to prevent the issuance of permits involving 1,280 to 5,000 acres and the further requirement that permits involving more than 5,000 acres could-not be issued until the Committees had adopted a resolution of approval. The Department of Justice has consistently found that similar requirements are unconstitutional. The Department of Justice testified against similar provisions as recently as May 15, 1975, in appearing before the Senate Subcommittee on Separation of Powers of the Judiciary Committee. Fee System In the past, fees paid to the Federal Government were based on a percentage of net sales. In some cases, these fees were converted to a single flat. fee. During the early 1960's we determined that the application PAGENO="0361" 357 4 of a single percentage rate against sales developed inequitable fees. After an exhaustive study of concession operations a new system of determining fees was instituted in 1968. Major implementation of the new system to winter sports operations began in 1972. Because of the long-term nature of these permits, it will be a number of years before all the permits are converted to the new system. The new system considers the amount of sales that are generated in relationship to the concessioners gross fixed assets in structures, fixtures, and equipment needed to generate income. Minimum rates have been set which are applicable to all permits. Starting with a minimum, rates progress upward as sales rise in comparison to gross fixed assets. Rates as established give the concessioner an opportunity to realize approximately 15 percent profit a,t a level when his sales are equal to twice the operating costs. This level of profit has been calculated based on national averages and would apply to a concessioner of average operating efficiency experiencing a normal season. The system neither guarantees nor limits the profit of an individual concessioner. It does, however, return a reasonable land rent to the landowner commensurate with the value of the use authorized. We are concerned that sections 3(c)(l) and 4(c) of S. 2125 would base the annual fees and allowable charges on equity investment.' Development of a fee system based on equity investment would require a major revision of our present system. We are not aware of any advantages which would result from such a revision. We strongly urge that the present fee system be retained. We believe our present system meets the direction set forth in the Independent Offices Appropriation Act of 1952 and the Executive direction issued pursuant to that Act. PAGENO="0362" 358 Permittee Charges and Public Information Section 4 of S. 2125 provides that all data supplied by a permittee relating to a proposed increase or decrease in charges to the public be made available for public inspection. We believe the broad disclosure of all financial.information required in section 4 could act as a deterrent in securing further private investment in developing needed public recreation facilities. The Freedom of Information Act as amended now applies to the availability to the public of such information. We strongly prefer that information on all permits be handled under the existing law. With regard to the review of permittee charges for services and use of facilities, the terms of existing permits specify services to be provided and provide for our approval of cha'rges and inspection of the quality of service. We view this approach as sufficient to protect the public interest. Improvements and Extension or Renewal of Permits Structural improvements on Federal lands are the property of the permittee and may be sold on permit termination or be removed by the permittee. Many Forest Service permits have experienced a change in ownership and in nearly all cases a permit was issued to the new owner. In a few cases, improvements have been abandoned and have become the property of the United States. Under present authorities, no extension or renewal beyond the permit term is stated or implied. However, upon the expiration of the permit, if the use responds to a continuing public need and is consistent with established land use objectives for the area and if the permittee has fulfilled his PAGENO="0363" 359 6 obligations, a new permit is normally issued to the owner of the improvements. In those situations where it is necessary to terminate a permit during its term for another use, the Federal Government obligates itself to pay an equitable amount for the privately-owned improvements. This obligation is expressed in each permit issued under the 1915 Act. We have seldom found it necessary to terminate a permit during its term except by mutual consent. The provisions of S. 2125 with regard to improvements and renewal or extension of permits would not substantially change present procedures under the 1915 Act. We believe it is important to maintain the present Secretarial discretion to specify the specific terms and conditions in each permit with regard to improvements and duration of permits. Mineral King Valley We do not support the provision in section 9(b) of S. 2125 which would exclude the Mineral King Valley from the provisions of the proposed legislation. It appears that section 9(b) is intended to be the controlling provision and override the sole authority provision in section 7; thus, any permit for ski activities or facilities in Mineral King Valley would have to be issued under the 1897 and 1915 Acts. We believe all areas should be subject to the same basic law. . . This concludes my formal statement. I will be happy to respond to questions you may have. PAGENO="0364" 360 Senator HASKELL. Our next witness is Mr. Gilbert Butler, vice president, investments division, Morgan Guaranty Trust Company, New York. STATEMENT OP GILBERT BUTLER, VICE PRESIDENT, TRUSTS AND INVESTMENTS DIVISION, MORGAN GUARANTY TRUST COMPANY, NEW YORK, N.Y. Mr. BUTLER. Senator Haskell, other members of the committee and staff members, I am Gilbert Butler, a vice president of the Morgan Guaranty Trust Company of New York's Trust and Investment Di- vision. Our division manager over $20 billion of assets, and I head a subgroup managing pension fund investments in long-term corpor- ate loans and real estate, all of which totals about $1 billion. We have been an investor in the U.S. ski industry for about S years. We have invested in the Greater Park City Co., which operates a ski area on privately owned land and we own common shares and convertible debentures of Vail Associates Inc., and common shares of Aspen Ski Corp. These investments cost our pension ~fund clients about $10 million. The current market value of these investments currently is substan- tially less, and we have a large unrealized loss to date of these invest- ments. I am delighted and honored to comment on the draft bill as I think that it is important to all affected by it to revise the current out- moded and impractical way of doing business betweenthe U.S. Gov- ernment and the ski industry. To the extent that I can be helpful to you in developing a more suitable arrangement for leasing Forest Service lands to responsible ski operators, I would hope to aid in accomplishing the following achievements. One: Substantially increase revenues to the U.S. Government and State and local governments through increased lease revenues and income tax collections. Two: The opportunity for the ski industry to achieve a return on investment high enough and sustainable enough to attract needed private capital. Three: Develop enough new uphill ski life capacity to meet the demand of the American skiing public and forestall a serious capac- ity shortage which is rapidly developing. Such a shortage could drive our skiers abroad at a detriment to our balance of payments and deprive them of one of their more favorite uses of National Forest lands. I wish to be brief and will comment only on those provisions about which I feel capable of contributing some expertise based on our years of experience as perhaps the largest long-term institutional in- vestor in the industry. Certainly, the most important reform introduced by the draft bill is putting the lease on a 50-year basis. Without this provision it is difficult and overly expensive to raise long-term debt. It also makes equity financing difficult since there is always the risk that the equity investment will become worthless if a short-term permit is not rolled over. PAGENO="0365" 361 In turn the problem of raising a proper equity base increases the ~difficulty and cost of borrowing funds. The bill quite correctly pre- serves the right of cancellation of a lease by the government if there is a breach of contract by the operator. The bill's condemnation pro- vision is a step in the right direction. By condemnation, I mean the awards of the leases not renewed or canceled. But the compensation formula should he revised to reflect the economic value of a going concern. If a pension fund, for example, paid $10 a share for Vail stock because it was earning say $1.25 and the Vail leases were canceled, total compensation of say $2 per share representing the cost of steel and concrete wulod not be regarded as fair cmpensation. In fact nonrenewal or lease cancellation would be a financial dis- aster and the fear of it should be mitigated through an objective set of automatic renewal criteria. Renewal should be provided for at least 10 years prior to expiration of the initial term. This would facilitate financing by the operation in the decade preceding expira- tion of the initial lease. Obviously, if a lender sees the lease is going to run out in 5 years, he's not going to make a 10-year loan. The testimony of Mr. Wade. Kennedy and Mr. Tom Swanson of the Denver bank have argued this point well enough so that I do not need to elaborate. The draft bill correctly expands the acreage permitted under a ski area lease to recognize the requirements of a modern economic ski area. No further comment is needed for me on this important re- form. I am pleased to have been told that it is intended to withdraw the clause requiring the permit fees be computed on the bsis of "a rea- soriable return on equity investment." Such a clause would confirm that the government was regulating the industry. This, in my opinion, would close down the industry to long-term sources of capital. In such case, either the Government would have to finance new ski developments or the growing capacity shortage would become so acute that skiers would have to go abroad or face horrendous lift lines and overcrowding. The ski industry on the whole is not very profitable and the Gov- ernment is not qualified to determine rates of return in this industry. Let the less adept go broke and let the best have an open-ended op- portunity to make a profit for their shareholders. The most important reform that is now needed, which is not in- corporated in the draft bill, is the need to remove all control of lift ticket pricing from the Government. As a guid proquo the fee sched- ule across the country should be raised to a scale that imposes a 5- percent fee on all lift ticket revenues for mature western ski areas. New areas and less profitable eastern areas could be scaled down from this level and fees on nonlift ticket income should also be scaled down. There would result a large increase in revenues to the Government not only from increased rents but also from increased income tax col- lection. Remember the IRS and the States are .50 percent partners in the pretax income. The destination skiers will benefit by having 67-512 0 - 76 - 24 PAGENO="0366" 362 increased capacity which can only be financed by higher retained earnings. Institutions will lend more money to ski areas if the income avail- able for interest coverage rises to prudent levels. The. number of skier days in the western States is growing rapidly, perhaps doubling in the next `1 years. Few, if any, new areas are on the drawing boards except for Vail's Beaver Creek. Several areas are on the verge of bankruptcy and cannot finance new lifts. If, say, the most popular areas lift their daily ticket prices from $11 to $12 in a free pricing environment, the cost of a 2-week skiing vacation for a. New Yorker which is now say $1,000 will increase by $14 or 1.4 percent. Destination skiers will prefer this to having their large vacation expense wasted in the future by long lift lines, skied-out mountains, and an overcrowded environment. The only people who will not benefit are the locals at the most popular areas that can raise prices. However, the locals at less popular or more unknown areas, like Teluride, Cob, will gain business which they desperately need as the higher cost areas lose customers seeking better values. In any case, it is improper to subsidize cheap skiing for the locals in the most successful ski areas at the expense of increased revenues for the United States and State Governments and the financing of new capacity. The local real estate owners and business community have pros- pered from the large investments of the most successful *ski area operators and the latter should not be forced to subsidize the former's labor costs by giving cheap tickets to their employees. The local market is an important one for the ski areas which should be allowed .to make their own pricing packages to service this market. It is not by coincidence that regulated industries have become synonymous with financially troubled industries. These are anathema to investors and lenders and a pain in the neck to the Government. Since the ski industry is not a monopoly situation involving a neces- sary service, the Government should concentrate its supervision here on the necessary areas of environmental factors, safety, and a fair financial return on forest lands leased out to responsible operators. One other suggestion that I strongly urge for this landmark bill is that a maximum lease rate be set as a percent of lift ticket revenue. In other words, that the maximum rate could be 5 percent. That should not be increased over the term. The advantages of a long-term lease will be emasculated if the Government is free to raise rates beyond a set maximum, which I suggested would be set at 5 percent. A long-term lender could see his interest coverage seriously reduced if the percentage lease rate were raised. An equity investor after years of trying to break into the black or investing a large amount of money in expansion could have his profit taken away by a rent ra.te increase. Thank you all for giving me an opportunity to testify on the draft bill. It represents a lot of hard work and study and forms a basis for introducing badly needed reforms. If I can be of any further assistance, please do not hesitate to call on me. PAGENO="0367" 363 Senator HASKELL. Thank you very much, Mr. Butler. I gather you would endorse at least a portion of the bill which would increase the geographical scope of the permit beyond 80 acres. Mr. Btrru~R. Aboslutely. Senator ITASKELL. Assuming, and your bank has loaned money to ski areas as you've testified- Mr. BUTLER. Right. Senator HASKELL. Assume that the geographical area of the permit were broadened beyond the 80 acres; what would be the effect on the interest rate that your bank would charge ski areas? Mr. BUTLER. Unfortunately, you can't take any one area out of context for the whole package. Just like in evaluating any company and any industry. There's no one thing that would certainly help. And your recommended lengthening of the lease term is extremely important also. Both of those would help. Senator HASKELL. You can't say whether or not it would increase or decrease interest rates? Mr. BUTLER. No, not by itself. Senator HASKELL. Thank you very much. I have no further ques- tions. Senator FANNIN. Thank you, Mr. Chairman. I commend you for your statement, Mr. Butler. I think I understand your intent on the first page where you have three recommendations. But it would seem to me that they oppose each other, especially No. 1. You mention substantially increased revenues for the U.S. Government and State governments through increased revenues and income tax collection," and in the next one, you indicate you did not intend to infer that there would be addi- tional facilities that would be made available; and that you would expand the amount of land to be leased. Is that what you intend? Mr. BUTLER. Well, by allowing the higher return on investrne~nt, I tihnk it would encourage more investment. Senator FANNIN. So you would have a greater number of facilities available? Mr. BUTLER. Right. Senator FANNIN. Well, that ties together. But unless you tie it together with the increased number of facilities that would be made available, it would seem it would work in reverse. I understand now that they do not expect to collect additional income tax from the present operators nor do you expect- Mr. BUTLER. Yes sir. They were deregulated and they could raise prices- Senator FANNIN. I agree with you on that but you feel that addi- ~iona1 facilities will really bring in the increased revenue from leasing. You are not advocating- Mr. BUTLER. Both. I mean if rates go up 10 percent then the Government share to the leasing arrangements, say 5 percent, will go up just from the old areas. Senator FANNIN. If the old areas are deregulated. - Mr. EUTLER. Right. PAGENO="0368" 364 Senator FANNIN. And could operate more efficiently and to a greater advantage, of course. The number of people served and all that, your figures would work out. I thank you very much, Mr. Butler. Senator HASKELL. The next witness is Sherman Adams, Loon Moun- tain, Lincoln, N.H. STATEMENT OP SHERMAN ADAMS, REPRESENTING LOON MOUNTAIN RECREATION CORPORATION, LINCOLN, N.H. Mr. ADAMS. Mr. Chairman, my name is Sherman Adams. I live in Lincoln, N.H. I appear here as president of the Loon Mountain recreation proposition, a middle-sized ski area and general recrea- tion area in the upper central part of my State. I ask the chairman permission to revise and extend my remarks in respect to the subject bill. Chairman HASKELL. Certainly. And the hearing record will stay open for 2 weeks for that purpose. Mr. ADAMS. Mr. Chairman, I have, as you may know-have had some experience in the business of Government. Prior to that for 25 years I was actively engaged in the harvesting and the sawing and the pulping of national forest timber. Actually, this experience began somewhat over 50 years ago. And I've had a fair, close as- sociation with the Forest Service. And at one time a position with the Forest Service and particularly with regard to timber sales and the method by which timber is offered to the public and the condi- tions of the subject contracts are and were formally very familiar to me. I was speaker of the New Hampshire House, a member of the `T9th Congress. I served two terms as Governor of New Hampshire and was for 6 year assistant to the President of the United States. Mr. Chairman, I would like to as indicative of the concern which is expressed by the Senator as to the profitability of the industry to say that it is very difficult for a witness from New England- New Hampshire being of an area that probably could be com- fortably incorporated in one of your state's counties and with some territory, perhaps, left over to organize my remarks from the point of view of a person who lives in a small State that represents a rather important segment of the economy and of that-I mean obviously the recreation industry. I once asked your governor what the most beautiful place in the world was and he said without hesitation it was Loray, Cob. I replied obviously that he hadn't seen the White Mountains. Senator HASKELL. He hadn't been to White Mountain I gather. Mr. ADAMS. Where the wind has been known to blow at something like 230 miles per hour or the highest wind velocity that's ever been recorded in the world. I think that's our only distinction. While we can say that it's superlative, that we are the tops. Mr. Chairman, we have four areas in my State that are all or partially located on national forest land. And they would be in the order in reference to the three areas that you have mentioned in PAGENO="0369" 365 Colorado; 1 to 10 or 1 to 12 in the size of their income and their skier day populations. That gives you some idea of New England and the skiing world in total and the total number of skier days is rather important to the State in which these areas exist as indeed is in Vermont where I was born. And along the Atlantic seaboard from the Appalachians to the White Mountains, there are 350 ski areas in operation. And there are 30-approximately 30- in my State. I repeat, only four of which are located partially on public land. I would like to put into the record, if I may, that in the case of my own company in the year 1965; I organized a corporation for the purpose of building and maintaining and operating a ski area. And during 9 years, the total lifting and sales have been slightly over $5 million. And the net or the retained earnings are 6i/2 percent of that figure. And of the total income, that figure, $6 million, $516,000 or 5 percent. As that bears to the total fixed assets, that would be approximately 2 percent of returned earnings of the total fixed assets, about $2 million. Now, Mr. Chairman, this may not be typical, but in my opinion, this area has probably done as well as any area in the Northeast so far as profitability is concerned. After the difficulty that we had in 1974 in respect to the fuel and energy situation, there were several bankruptcies in New Hampshire and in the Northeast, in ski areas that were not able to tough it out during that particular season in which it was difficult to maintain enough patronage in order to survive. The relevency of this testimony is that quite the reverse of the figures that are in your possession in regard to the profitability of the areas in Colorado, our difficulty is viability and the ability to- so to speak-keep our heads out of the water. Mr. Chairman, this suggestion that you've made in your bill of complete historical financial disclosure would, in my judgement, have an adverse effect upon the industry, in the Northeast and along the eastern seaboard and all areas east of the Mississippi in which I am quite familiar. In the first place, a showing of red ink which we've been in- geniously capable of creating in the industry would not be conducive to our credit, our ability or procuring the commodities, goods, and services that we need, and also. would have an uneasy effect upon the people who work for us who at some total or other, a considerable number of employees throughout the Northeast. Unfortunately, in my State, and this holds true in some other States where a good deal of area is supported by recreation. In other words, the ability of people to move. That is their criteria of survival so far as the economy is con- cerned. And once deprived of mobility, the recreation industry is not only unprofitable but extremely difficult to maintain. Senator, you hit upon several things that need straightening out. If the Forest Service, over my experience with them, with their people and the secretaries to various chiefs of the Forest Service, PAGENO="0370" 366 many of whom I've knewn personally and the district chiefs and the supervisors of the various forests have been able people. Their directives, in general, have been carried out to the best of their ability subject to the acts of Congress. But the guidelines have not been very clear in many respects and you suggest in your bills means of straightening out some of those guidelines. I think in respect to public disclosure, it ought to be clear to the committee and I hope that it is that reading from our term, special use permit, that the permitee will send to the forest supervisor oii or before each June 30 of each year a statement of net sales or other income resulting from the operation under this permit or a profit and loss statement or other evidence satisfactory to the Forest Service to the business transacted by the permitee. Now, the next section says that the Forest Service may require that any such statement be sworn to and shall have the further right to examine the permittee's accounting records and supporting documents. And next, shall have the right to require the permittee to main~ tam an acceptable accounting system and at its expense to have its books audited by an accountant and require a copy to the Forest Service of the report. Our company has had several audits by capable auditors of the Forest Service. But the Service over the years-and the early years in my experience with respect to the Sky area particularly has not been one of being so much interested in the profitability or whether you made a loss as it is, as a criteria of what we owe the Forest Service which was based on a percentage of the total in- come. And this is now, as you may know, Senator, being changed by the Forest Service to include income or revenue or payments that are made to ski companies on adjacent lands which are not on public land but the improvements there on there because of their proximity to the permitted area. Going back. for a minute to the timber sales agreements. It has never been the custom-and I have been told that it is not now the custom to legally inquire into a purchase of national forest timber. What he used the timber for, what the products were that he man- ufactured from it, to whom it was sold, what he received for it, or whether or not he lost or gained. But a provision was incorporated and it's still incorporated in the timber sales permit to the effect that the Forest Service does have the right to inquire into those costs. But have only done so in many of the years in w