A vision for a valley – part II
Hitting the wall
By Bob Barnett
By the summer of 1979, less than four years after the Resort Municipality of Whistler was incorporated, there were tangible signs of the destination resort-to-be. Construction was starting on the first buildings around what would become Village Square. If you looked up you could see some of the early runs cut on Blackcomb Mountain. And throughout the valley there was a buzz as people scrambled to take advantage of the opportunities that were unfolding.
Although the physical development of the village and Blackcomb was just starting, the foundation of the resort was laid in the years from 1975 to 1979. The Resort Municipality of Whistler Act, the Blackcomb proposal call, the design of the village, the creation of the Whistler Village Land Company as a non-profit arm of the municipality to facilitate the village development, the establishment of the Whistler Resort Association to market the resort, and the construction of a municipal sewer system had all come to reality in less than four years, with the co-operation of two very different provincial governments.
The creation, management and development of the village had been assigned to the project management team of Doug Sutcliffe, Neil Griggs and Jim Moodie, who also looked after the phase I proposal call: 12 parcels, including the Hearthstone building, Tapley’s Pub, Rainbow building, Blackcomb Professional Building, Blackcomb Lodge and the Fitzsimmons Condos which were now under construction.
In the meantime, aldermen Garry Watson and Al Raine, who had made numerous trips to Colorado resorts to consult with people about Whistler’s plans, had convinced former Vail general manager Terry Minger to become president of the Whistler Village Land Company. In October of 1979 WVLC assumed responsibility for marketing and selling the remaining parcels in the village.
By the spring of 1980 the village, or town centre as many still called it, was becoming a major construction site. WVLC was providing servicing to new parcels which it would offer for sale as part of phase II of the village development, while private developers were working to get the phase I projects finished so that businesses could open for the winter. WVLC also began work on the $5.8 million Resort Centre, a multi-purpose public building which was intended to house an Olympic-size ice rink, pool, restaurant and other facilities.
"In 1980 things were pretty hot around here," recalls Drew Meredith. "Everybody was pretty full of themselves, things were happening, construction was everywhere. There was a lot of excitement about the future and what was going to happen."
There was enough excitement to catch the attention of organized labour, which objected to union and non-union firms working side by side. A strike ensued and work on the town centre slowed while the Labour Relations Board considered union concerns.
That fall the LRB ruled that the village was a common construction site and therefore a union site. Local, non-union contractors were for the most part shut out of the village. Some years later Neil Griggs would call the ruling one of his biggest disappointments, a decision which cost WVLC directly and indirectly.
But the winter of 1980-81 was about to begin and with it the dawn of a new era for Whistler. Blackcomb now provided skiers with a choice of mountains. Whistler Mountain had lifts on its north side, coming out of the village area where a neighbourhood pub, grocery store, provincial liquor store, pharmacy, delicatessen and other new businesses surrounded Village Square. The skiing wasn’t great that winter because there wasn’t much snow, but that allowed contractors to get to work on village projects early in the spring of 1981. Among the construction projects was Peter Gregory’s Mountain Inn, a parcel right next to Whistler Mountain which was to be Whistler’s grandest hotel.
Skiers could see the potential of a place with two huge mountains side by side and, between them, a village taking shape. Bankers could see storm clouds on the horizon.
The penny drops…
In November of 1981 federal Finance Minister Allan McEachen ended the Multiple-Use Residential Building program of tax credits. The MURB program had provided investors with a tax shelter as soon as a foundation was poured. The Whistler Village plan had multiple-use residential on the second and third floors of every building, so many parcel owners poured their foundation and then stepped back. As a result, there were a few more buildings and businesses open for the second winter of the new village, but there was also a lot of rebar sticking out of the snow.
The storm clouds got darker. Nineteen-eighty-two started off with a series of disasters. On January 13 the Keg building, just days away from opening, caught fire and was severely damaged. In February, Doug Sutcliffe died suddenly at his home. And in March a massive wall of snow slid off the roof of the unfinished Resort Centre, shearing off glu-lam fascia boards and causing roof damage. The snow and ice was nearly 2 metres thick on the building roof. Avalanche specialist Herb Bleur was called in to assess the situation and he and his crew had to wear Pieps while on the roof.
Meanwhile, WVLC had put another eight development sites on the market in February but there was no sign of interest whatsoever. There were 27 village sites under construction, but as the recession deepened and investors ran for cover WVLC’s position became more tenuous. The municipally-owned company had debts of between $7 million and $8 million. Liabilities, in the form of the forgivable TIDSA loans, the unfinished Resort Centre and unfinished Arnold Palmer-designed golf course, added up to nearly $20 million — and WVLC’s only assets were land that wasn’t selling.
The feeling in Whistler was if the Resort Centre could just be completed there was an opportunity to build year-round business and perhaps the resort could work its way out of the recession. The cost estimates for finishing the facility were about $5.5 million, not a huge sum by today’s standards but as a measure of the times the municipality’s capital budget went from $1 million in 1981 to $650,000 in 1982. As well, all municipal staff took a 2.5 per cent pay cut and were asked to work three days of the year without pay.
The municipality’s financial situation became more serious in July, when only about 60 per cent of taxes were paid on time. Under provincial law, municipalities were not allowed to charge more than 10 per cent interest on late payments, but the prime rate was already well above 10 per cent — and climbing — so the penalty was moot. The municipality’s cost of borrowing money to make up for the late payments was estimated at up to $70,000.
Things slowed to a standstill. The value of construction in Whistler to the end of July, 1982 was $3.85 million. For the same period the year before it was $18.5 million.
The only bright spot was an announcement in early June that the Royal Bank, the main creditor of WVLC, Peter Gregory’s Delta Mountain Inn and Whistler Mountain, would open a branch in a new $2 million building in the village.
That announcement was tempered at the end of the month when WVLC was scaled down and most of the staff — including Neil Griggs who had taken over from Terry Minger as president — was laid off. With no sales all year, a line of credit due to expire at the end of July, payments of $80,000 per month to service its debt and owing the Whistler Resort Association $75,000 in assessments, there was nothing else to do.
In July the first phase of the Delta Mountain Inn opened, a signal to the growing number of naysayers that Whistler wasn’t dead yet. But later that month all WVLC operations were transferred to the municipality and the few remaining staff laid off. Mayor Pat Carleton became the new president of WVLC. He insisted the land company was still open for business but was equally adamant the municipality was not responsible for WVLC’s debts. Not everyone was so confident.
"There was great concern that they could pierce the corporate veil of the municipality," recalls Meredith, who was on the board of the WRA at the time. "And Pat Carleton had made a promise to the community that there would be no down side of this deal to the taxpayers. So Pat was probably more freaked than anyone — for good reason. Eight million dollars sounds like a pittance today, but in those days it was a huge amount of money, with absolutely no help in sight."
As things started to hit rock bottom the buzzards began to circle. A group calling themselves the Concerned Citizens for Whistler circulated a petition to legalize gambling and suggested a casino would provide the municipality with tax benefits and attract investment. As WVLC was wound down Ruth Lotzkar of the Whistler Ratepayers Association demanded a public investigation of the land company’s and the municipality’s holdings. And, in keeping with the newspaper tradition of coming down out of the hills after the battle to slaughter the wounded, on July 22 an editorial in the Vancouver Sun said in part: "It’s too bad that Whistler’s bubble has burst, but that’s what often happens when people get over-ambitious and try to do too much too soon. If the village hadn’t tried to turn itself into a world class ski resort almost overnight, it wouldn’t be in the difficulties it’s in now."
The excitement and optimism that surrounded the new resort just a couple of years earlier were gone — except among skiers who continued to increase in numbers each winter. Some of the people who had played important roles in the early, formative years were also leaving. The three key members of the first Whistler councils — Garry Watson, Al Raine and Mayor Pat Carleton — would all be out of the picture by the end of 1982.
Watson, who did not seek re-election in 1980, went to work for the provincial government’s B.C. Place Corporation, although he remained on the board of WVLC. The province removed its representative, Raine, from council in January 1982. The Raine family left for a two-year sabbatical in Switzerland in August. And in September Carleton announced he would not seek re-election. However, Carleton’s decision was based on his belief that a solution to Whistler’s troubles — the sale of nine parcels — was imminent.
A Vancouver-based investment group was said to be looking at all nine available sites and the price was rumoured to be about $8 million. That sum was just what was needed to pay off WVLC’s debt, which the Royal Bank was calling at about the same time it was announcing it had decided not to open a branch in Whistler because its plans were "dependent on a more buoyant economy."
"They pulled the pin and we, as directors of the land company, were technically bankrupt," Watson recalls. "So we promoted and accepted an offer from a private party to buy all the remaining lands at a price which would have been sufficient to pay off the debt. But we accepted the offer subject to the approval of the provincial government, because they had a stake in things. And then we lobbied the provincial government."
Rumours circulated, particularly in the Vancouver media, about a provincial bailout, but the extent of the lobbying effort wasn’t well known at the time. Instead, what the public heard was that negotiations for the nine parcels had stalled. At the November all-candidates meeting prior to that month's municipal election, Carleton asked the chair of the meeting to screen any questions about WVLC finances, saying they could affect delicate negotiations between the land company, the province and the federal government. It made for a dull all-candidates meeting.
That same week, plumber Arpi Beleznai expressed his frustration with the recession, the lack of work in the village and the general criticism of Whistler in a letter to the editor of the Whistler Question. He wasn’t working anyway, Beleznai wrote, so he was offering his services, for free, to help finish the Resort Centre. In the following weeks more letters from people making similar offers were published.
Five days before the municipal election, candidates Ruth Lotzkar and Denver Snider, two of the strongest critics of WVLC and the municipality, called a press conference after receiving leaked, unaudited financial statements of WVLC. Their reading of the statements raised more questions but no indication of wrong-doing. The attempt at political intrigue didn’t seem to help them in the polls; neither was elected.
Mark Angus succeeded Carleton as Whistler’s mayor and assumed responsibility for getting WVLC and the municipality back on their feet, or so he thought.
The province steps in…
Unbeknownst to most, Whistler had gone, cap in hand, to the provincial government earlier in the year and asked the government to get involved. The province sent Chris Gray out to assess the situation.
"Chris Gray was the assistant deputy minister of Lands, Parks and Housing and he was the front man who came in and analyzed how bad things were in 1982," says Drew Meredith.
"On the one hand he was a good person, on the other hand…
"He was able to go in and sell a bill of goods to cabinet that Whistler was going down the tubes — I mean really down the tubes — if they didn't come in and backstop the deal. I mean, that's the political way, you paint the worst possible scenario you can to get guys' attention."
Gray has been described as "abrasive," "a little Napoleon," and someone who "smoked like a chimney, drank scotch by the quart and lived — when he was on this side of Georgia Strait — in the Four Seasons."
"He drove council and staff nuts," Meredith recalls. "He would arrange a meeting and show up an hour late, every time."
He also got to the bottom of the situation, confirmed the debts and obligations of WVLC and developed a rescue plan to present to cabinet. But all of it was done behind closed doors. The first the public heard of the province's involvement in Whistler was on January 6, 1983, when deputy minister of Lands, Parks and Housing John Johnston announced a new Crown corporation, WLC Developments, had been proposed to take over the assets and liabilities of the Whistler Village Land Company.
"Our sense, right from the start, was the provincial government was a partner in the project," Watson says. "It was a partnership because they put up the land, they did come in through the TIDSA financing program, and they were committed to seeing (Whistler's) success."
In retrospect, Watson, Meredith and others feel WVLC was grossly under-financed from the beginning.
"I've always said that when the government gave us the TIDSA money, $10.5 million, that they gave us just enough to hang ourselves," Meredith says. "The allocation of funds was not right in that in any new venture there's going to be huge amounts of money to start up for marketing."
"It was all borrowed money, and the economic downturn of 1981-82 was so profound it just stopped everything," Watson recalls. "At 20 per cent financing you can't develop real estate, or build confidence that somebody could come in and start the kind of businesses that we needed."
Whether it was under-funded or not, Whistler was hanging. The Royal Bank wasn't going to accept anything short of a provincial government guarantee on its money. Whistler wanted to see the village plan it had worked so hard to develop maintained, rather than sold off to one developer who might try to mess with the plan.
And the province needed to see Whistler succeed.
Gray's report to cabinet laid out the plan for the new WLC Developments to take over WVLC, but prior to that Watson was working from his position as a board member of WVLC and counsel to the Crown corporation B.C. Place.
"We started with the development corporation, B.C. Building Corporation — Crown corporations which had substantial funding and were in the field," Watson says. "We weren't getting any support at all until finally the people in the Lands Ministry took notice — they had a stake because it was Crown land. The deputy minister, John Johnston, saw the picture, as did Larry Bell, deputy minister of Finance, and they worked out the structure of forming a new corporation called WLC Developments. It was owned by the province and would acquire the shares of WVLC from the municipality."
While the deal brought a massive, collective sigh of relief from Whistler, it was largely condemned elsewhere. An editorial cartoon in a Vancouver newspaper depicted Premier Bill Bennett in a rocking chair under a caption reading "Whistler's Mother."
Johnston defended the proposed deal, saying: "Whistler does create jobs, it does create revenue. We think Whistler has a good multiplier effect." He also predicted profits of $5 million-$10 million for WLC Developments over 7-10 years.
Mayor Mark Angus said: "Certainly it's assistance, but I wouldn't call it a bailout. It's a firm and fair business deal which in the long run will prove to be a great investment for the province."
The terms of the proposed deal were that WLC Developments would assume all assets and liabilities of WVLC, including the unfinished golf course and Resort Centre. WLC also assumed WVLC's two votes on the board of directors of the Whistler Resort Association and could call upon the votes of Whistler and Blackcomb mountains to, in effect, control the board.
At the same time the Lands Ministry assumed title to the Club Cabins site in Nordic Estates. Separate from the village development, the municipality had borrowed several million dollars from the Royal Bank to provide servicing to the site with the intention of selling the land. But with no means of paying the debt and no one buying land it was another liability.
The fly in the ointment…
Salvation seemed at hand. WLC Developments proposed to borrow $21 million to complete the golf course, Resort Centre and various other bits and pieces of the village. The province guaranteed the bank loans and the municipality was back in business. But the deal also needed the approval of WRA members, and some didn’t like the terms.
The Whistler Resort Association had a budget shortfall of $100,000 in 1982, largely because WVLC couldn't pay its $75,000 in membership fees. Gray announced the WRA budget needed to be increased if the resort was to be successful, from about $300,000 to close to $1 million. WLC would contribute 25 per cent, the mountains would contribute 25 per cent each and the rest would be made up by increasing member fees.
An extraordinary general meeting of the resort association was scheduled for Feb. 24, 1983 at the Sheraton Landmark in Vancouver where WRA members were to vote on the WLC deal. Prior to the meeting a group of owners in the Tantalus Lodge — Gordon Campbell, May Brown and David Cannell — circulated a letter urging a "no" vote. Meredith, then president of the WRA, called them "Totally irresponsible" and said they had "the whole fate of Whistler in their hands."
"There was a lot of very serious, high level yelling and screaming going on and negotiations in hotel rooms — it was tense," Meredith recalls. "Because the government said ‘Look, if you don’t do this deal we’re out of here. And if you don’t do this deal on this day, we’re out of here’."
The Campbell group wanted more information on how the WRA proposed to spend its marketing budget, a more equitable dues structure and an assurance that the WRA would not be responsible for any operating deficits of the golf course or Resort Centre.
It took considerable lobbying prior to the meeting, explaining the proposal in detail and promising to review the equity of assessments, but the final vote was 193-2 in favour of the WLC offer.
"In the end, Gordon Campbell got up and said notwithstanding that we don’t like what we see here, we appreciate that it’s in the best interests of the community," Meredith recalls. "And that was a big deal. They had us totally scared. We figured they were going to sink on us."
If the vote had gone the other way?
"Good question. The only option would have been to flog off Village North to a private developer and the conference centre would still be sitting there," Meredith says.
Understanding the future…
The Village North lands were the key to the deal. Although the original village was barely two years old and only partially built the province saw the Village North lands as its future return on investment — provided the resort got back on its feet. But it took a while to convince Gray and later the board of directors of WLC Developments of the merits of Whistler’s plan.
"Chris Gray came in, you know, ‘You guys are a bunch of pot-smoking hippies, you’ve screwed up terribly and we’re coming in to clean it up’," Meredith says. "And then he got to the point where, ‘Well gee, you know, there really is something here. I see where you’re coming from.’ It took a while to get them infected.
"Chester Johnson was even worse. He was a black and white kind of guy. He came in — they wanted to take Village North, buck it up into quarter acre lots and flog it out the door."
Chester Johnson was the president and CEO of West Fraser Timber when Bill Bennett asked him to be chairman of the board of WLC Developments.
"I’d known Bill Bennett for 35 years and he asked me to go up there and clean up the mess — because it was a mess," Johnson recalls. "When I first went up there I had to basically get a feeling of what the problems were and where they were. It didn’t take me very long. The conference centre was just a pile of dirt, basically. It just wasn’t what they needed up there."
Johnson and his board understood the merits of the village plan, but found fault in the execution. One of the first things they did was re-program the Resort Centre to a conference centre.
"I said to one of the directors of the land company, ‘This isn’t a conference centre, it’s a play thing. You’re going to put an ice rink in here? Who’s going to pay for it?’" Johnson recalls.
Without talking to anyone in Whistler, Johnson hired a convention business consultant and a Los Angeles architectural firm to rebuild the Resort Centre as the Whistler Conference Centre.
"You needed to have a year-round facility," Johnson says. "We finished the golf course, the conference centre and then we started to look into all the problems we had there, and everywhere we looked there was a problem. The buildings were half built…. Gradually we got the problems put aside and began selling the land."
"They appointed an independent board of people who had no involvement in Whistler," Watson recalls of WLC Developments. "That’s fine in the sense they had no conflicts, but they didn’t very well understand. They were well connected Socreds, and fine, they took the job. But they completed that conference centre at a cost of $18.5 million — big bill. They recovered that but… at least they bought into the potential for the resort. They saw that a conference facility would be a major contributing factor, bringing in conventions."
Meredith believes the cost of retrofitting the conference centre was closer to $14 million — still the largest chunk of the $21 million the province borrowed to get Whistler turned around. But it worked.
"Once WLC had stopped the bleeding — got rid of the debt and got the conference centre moving and the golf course happening — then they turned their attention totally and completely to Village North," Meredith says. "That was the payoff."
Next: The vision realized