IS ROYAL GORGE LLC WALTZING ON THE PRECIPICE?

Last week brought unwelcome tidings to ski resort operators, and wannabe resort developers. As part of a general ski industry slowdown, Vail Resort's (Heavenly Mountain Resort) stock headed down the mountain, after news it had been downgraded by two influential analysts. The analysts, as quoted by the Sierra Sun, blamed "difficult domestic economic environment and softer spending trends among the ski resort's luxury clientele." 

Ouch. 

Kirk Syme, Todd and Mark Foster, and their dance team of investors must be starting to feel like they're dancing the 'wrong timing' polka-- and all the oompa has gone out of their oompa band. Or maybe they're slow waltzing on the precipice, as the over-bloated luxury ski market teeters precariously on the brink of a massive downturn.

First off, it's been a full year since Royal Gorge LLC earnestly turned in their packet of plans to Placer County, and promptly got sent home to address glaring inadequacies. During that time it's become even more apparent that fire safety, water supplies (especially with Serene Lakes being practically frozen solid during the winter months), and sewage are difficult, if not intractable problems, something which should  seemingly have been clear to Royal Gorge LLC had they done their due diligence with Placer County prior to their lashing out what in today's market seems a bucket of money for a cross country ski resort their employee Mike Livak has identified in several news accounts as a "money-pit" from the get-go, or some similar confidence inspiring term.

Second, the melt down of mortgage money, and even banks (try IndyMac), means that not a lot of money is chasing luxury second home development. The second home developments that are already being completed are hoping  that positive press (wonder how much that costs?), and enticing golf courses will help them weather the storm. However, even the market for golf courses has become saturated, and many courses are resorting to desperate measures to entice players, while staving off the specter of foreclosure. "Google" 'Diablo Grande', or 'golf course bankruptcy', and you get a view of the tip of the iceberg.

Up here at Donner Summit, a golf course has as much chance of success as, I don't know-- how about the odds of my border collie staying in a boat?  It's the luxury ski market, and housing market Royal Gorge LLC has been chasing, but after Sugar Bowl pulled out of that lift connection agreement, that market started to look like a fading dream--

Here's the money question. If Vail Resorts, who knows their way around a mountain or two, is having trouble making money out of a world class downhill resort like Heavenly, then how is Royal Gorge LLC going to make money developing hotels, and up to 1000 units at Donner Summit, around a cross country resort?

This is a question Placer County should be looking at very seriously, because if they grant zoning changes and approve a project that ends up a money loser, they will have helped create a new form of rural blight-- chewed up wilderness, and near wilderness, and huge debts on bonds, the burden of which will ultimately be borne by all Placer County residents in the form of a trashed credit rating for the county.

If this sounds dire, and unlikely, take a look at the implosion going on in Florida right now-- developers (even Foster Enterprises) covered the map with subdivisions carved out of wetlands, and right now you can't give these places away. They don't even get to the level of "jingle-mail", that is, overwhelmed defaulting purchasers mailing in their keys, because no one is buying them in the first place.

I don't know if likening Royal Gorge LLC's proposed development to dancing on the edge of an economic precipice is fair--it's more like they, and probably many,many other developers in the nation are all dancing on the same sinking boat, as the orchestra saws valiantly on. And just like "Waltzing Matilda", I don't think it ends well... although at least water was found at the end of that song...