Detroit Mountain Recreation Area 2010 Feasibility Study

Conducted by Members of the Board of Directors, Detroit Mountain Recreation Area, Inc.

Executive Summary

A rare and historic opportunity exists for Becker County to acquire a 200-acres piece of land, formerly used as a private downhill ski area, and designate it as a general public four-season recreation area.

This vision, to create one of the most unique county recreation areas in Northwestern Minnesota, is now underway and includes a diverse mix of outdoor recreation opportunities.

Thanks to the assistance and tremendous support from the local community, the successful preparation of the Detroit Mountain Recreation Area Feasibility Study is now complete and presented herein. Formed in February of 2010 with a vision to make the Detroit Mountain Recreation Area a reality, Detroit Mountain Recreation Area, Inc. (“DMRA, Inc.” ) is a 501(c)(3) non-profit organization with elected board members comprised of a diverse collection of local business owners and professionals who are passionate about building a healthy and economically viable community through outdoor recreation. DMRA, Inc. is dedicated to assisting Becker County in creating a long-term management and operation plan consistent with the Becker County Master Recreation Plan.

It is important to note the DMRA Feasibility Study was completed with limited resources and on a voluntary basis, and not intended to address all concerns or questions that may arise. DMRA, Inc. would, however, request first opportunity to provide additional information or research data should the county request such information.

The study herein reviewed a select number of development opportunities for the 200-acre site. The opportunities were included based on input from community members, site characteristics, potential for educational programming, positive impact on health and wellness, access, affordability, and economic stimulus to the area.

While the development opportunities reviewed in the study are certainly not the only possible public uses identified for the site, they do provide a representative sample of the most prominent proposed activities. From that review, the study draws the following conclusions:

ii  Alpine Skiing, snow boarding and tubing could be offered with additional improvements to the facility and equipment.

 Minimal improvements and additional equipment would be necessary to offer Nordic skiing, snow shoeing, hiking, birding, mountain biking and a picnic grounds.

 Horseback riding, camping, interpretive trails and disc golf could be offered with varying degrees of additional improvements.

 The optimal ownership and operating structure for the development of Detroit Mountain Recreation Area as not only a ski area offering alpine skiing, cross country skiing, snow boarding and snow tubing but also non revenue generating activities such as hiking, camping, mountain biking and other amenities is some form of public private “Partnership” that will permit the land to be owned by a public entity such as Becker County, Erie Township, the City of Detroit Lakes or some Joint Powers entity created by those governmental entities, while providing for operation of the amenities that require significant infrastructure investments and incur operating expenses, labor and insurance costs to be undertaken by a separate for profit business or non profit organization.

 Private operators can attract private investment, non profit operators can attract charitable donations. Both types of operation can benefit the public, without creating another public bureaucracy with additional public employee expense, political interference with management and an uncertain level of continuing financial support from the public operator.

 The initial investment made by the public for land acquisition is an investment with minimal or no risk. The land over time is unlikely to decrease in value and, given its location, will more likely appreciate in value even without the private investment in infrastructure that will result from the development of the ski operations by a private operator. If nothing were to be done to the site other than to make it a county park, it will still be a valuable asset and attraction our community can offer.

 Our community is and has traditionally been a destination for visitors. To remain competitive in that area, the community needs to continually build on its competitive advantages and attract new visitors. In short, the community needs to give people a multitude of reasons to visit. This facility has the potential to create a destination not only for one or two winter activities, but for year round recreational activities that offer residents and visitors a positive experience in the Detroit Lakes area.

 There will be few, if any, direct operational costs to the public; and, over time the operation may be able to return some operating revenue to the public in the form

iii of payments under a lease or management agreement as an offset to the loss of real estate taxes.

 This facility will not require tax revenue to operate and no tax increases will be necessary. Development and operating expenses will be generated by donations and revenue generating activities.

 Development of this facility will not occur without public involvement. While it is reasonable to expect donations and operating revenue to finance infrastructure development and to pay operating costs, revenue will be insufficient to pay those costs and pay debt service on land acquisition costs. Private enterprise cannot purchase the land, invest in infrastructure, pay debt service, pay operating costs and recover a reasonable rate of return.

 The time to act is now. If the land is sold to a private party for private use the potential community asset will be lost. There is no better time than now. Fifty years from now the community will remark on the foresight our County Commissioners had in acquiring the land.

Over time, the value of the facility will increase as will its potential to foster private investment in additional infrastructure. As the infrastructure is developed, the value of the public’s initial investment will grow with minimal or no additional public investment.

The public, in general, will benefit from the additional recreational opportunities offered by the facility. These opportunities are both in the form of revenue generating activities such as skiing, snow boarding and snow tubing, as well as other non-revenue generating activities afforded by the new public park. Further, it creates an additional draw - a reason for tourists and other visitors to come to the Detroit Lakes area.

This facility will also create another source of private employment for area residents, and has the potential to generate additional capital investment in area businesses to service the draw. Rental shops for skis, snow boards, and bicycles, can be operated by private companies both on and off site. A recreation area creates the market for recreational equipment, including bicycles, ski, and snow board equipment. The initial public investment has the capacity to spawn the growth of public enterprise and give our local residents one more reason to live in Becker County - and our visitors one more reason to spend their vacation dollars in our community.

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DETROIT MOUNTAIN RECREATOIN AREA 2010 Feasibility Study

Prepared for Becker County, Minnesota

May 2010

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TABLE OF CONTENTS

1.0 Project Goals and Objectives ...... 2 1.1 Objective of the Feasibility Study ...... 2 1.2 Mission and Vision...... 2 2.0 Site Overview ...... 3 2.1 DMRA Location ...... 3 2.2 Access & Arrival ...... 4 2.3 Zoning ...... 7 2.4 Physical Description ...... 7 2.5 Infrastructure, Equipment & Systems ...... 8 3.0 Development Concept ...... 11 3.1 Winter (November- March) ...... 12 3.2 Spring & Fall (April-May & Sept-Oct)and Summer (June-August)...... 15 4.0 Ownership and Operating Structure ...... 19 4.1 Private Ownership and Private Operation ...... 19 4.2 Public Private Partnership (PPP) ...... 20 4.3 Public Ownership and Public Operation ...... 24 4.4 Summary and Recommendation ...... 25 5.0 Industry Overview ...... 27 5.1 Demographics and Trends ...... 27 5.2 National Ski Areas Association...... 28 5.3 Ski Resort Information: Minnesota and Surrounding Area ...... 30 6.0 Comparative Financial Analysis and Pro Forma ...... 32 6.1 Estimated Ski Area Start-Up Cost ...... 33 6.2 Foundation Development [501(C)(3)] ...... 33 6.3 Grant Funding ...... 34 6.4 Fundraising ...... 34 7.0 Appendix A - Detroit Mountain Focus Group Summary ...... 36 8.0 Appendix B – Nordic Ski ...... 39 9.0 Appendix C – National Ski Areas Association ...... 41

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1.0 Project Goals and Objectives

1.1 Objective of the Feasibility Study

Detroit Mountain is located in the heart of Detroit Lakes, Minnesota. The original ski resort was family owned for many years before closing. In an effort to examine possibilities for re-opening and enhancing opportunities for the area, a grassroots effort grew quickly resulting in the current feasibility study. The current study outlines the development concept for the Detroit Mountain Recreational Area. The report includes economic considerations, current ski industry overview, financial projections, and resort comparisons. The information in the study will lay the groundwork for determining the future of DMRA.

1.2 Mission and Vision

The mission of Detroit Mountain Recreation Area, Inc. is to promote sound environmental recreation and educational programming to develop the health and wellness of children, families and communities.

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2.0 Site Overview This section provides a description of the proposed recreation area, Detroit Mountain Recreation Area (DMRA), and an overview of the site.

2.1 DMRA Location The proposed site location of Detroit Mountain Recreation Area (DMRA), currently identified as Lookout Properties, consists of three parcels totaling 259.72 acres (Parcel No. 100502000, 100503000, and 100505000). The parcels preside in the southeastern area of Becker County, Minnesota, which are located in Erie Township and are found in the northwest and northeast quarter (1/4) of Section 31-Township 139 on the 40 th Range. The property is bound by 170 th Street to the north and defined as 29409 170 th Street Detroit Lakes, Minnesota. See Exhibit 2.1 Location Map:

Exhibit 2.1.1 Location Map

Parcel No. 100502000 consists of 195 acres and encompasses the east half (1/2) of the east half (1/2) of the northwest quarter (1/4) and the northeast (1/4) of section 31, less 5 acres.

Parcel No. 100503000, consists of 5 acres and encompasses the southeast corner of the north half (1/2) of the northeast quarter (1/4) of section 31, the previously said less five acres of parcel no. 100502000.

Parcel No. 100505000, consists of 59.72 acres and encompasses the north 19.72 acres of Lot 2 and the west half (1/2) of the east half (1/2) of the northwest quarter (1/4) of section 31.

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Exhibit 2.1.2 Parcel Location Map

2.2 Access & Arrival DMRA can be accessed at two entrances from three trip-generating locations.

2.2.1 Arrival via Minnesota State Highway 34 The main entrance on Mountain Road can be accessed from Minnesota State Trunk Highway 34 (MN34) via Otto Zeck Road. Otto Zeck Road is a twenty-six foot wide gravel surface that is currently maintained by Erie Township.

MN34 provides safe arrival through a State maintained major arterial; which, junctions in the City of Detroit Lakes with both U.S. Trunk Highway 10 (US10) and Minnesota State Trunk Highway 59 (MN59). This designated access arrival provides proficient travel for trip-generation source locations from the west (Fargo-Moorhead) via US10, the north (Thief River Falls) via MN59 and the south (Fergus Falls/I-94 Corridor) via MN59.

Although passing the recreation area westbound along US10, trip-generation source locations from the east (St. Cloud) via US10 would still be designated to utilize MN34 via US10.

It is recommended that access to DMRA via MN34 be the designated arrival route, see Exhibit 1.3 Designated Arrival Route.

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2.2.2 Arrival via Mountain Road The proposed recreation area, DMRA, can also be accessed via Mountain Road from Detroit Lakes. Predominantly an access route for local residents, this route is not recommended as it historically has compromised the safety of travelers due to both vertical and horizontal curve alignments. Mountain Road is not highly prioritized for snow removal in the winter and with the close proximity of the edge of the gravel surface to adjacent wetlands, travelers have unintentionally left the travel corridor multiple documented times.

2.2.3 Arrival via Tower Road Tower Road is a convenient arrival route due to its junction with US10; however, the vertical curve alignments and stopping sight distances along the corridor are not adequate and do not support trip-generation attraction traffic volumes. Also, the DMRA can be accessed from Tower Road; however, at this time the access is within private property.

Exhibit 2.2.1 Designated Arrival Route

2.2.4 Mountain Road Entrance The original entrance to DMRA is located on the north side of the property and can be accessed from 170th Street, also known as Mountain Road. The Mountain Road entrance

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is serviced by a twenty-eight foot wide gravel surface that conveys traffic from the access point southeasterly through the property along the west-southwest base of Detroit Mountain. It is recommended that the Mountain Road entrance remain the dedicated entrance at this point as both the entrance to the proposed recreation area and the travel corridor within the property from this entrance are in a safe and sustainable condition.

2.2.5 Tower Road Entrance The property may also be accessed from the south on Tower Road from the 2006 construction of a twenty-four foot wide gravel surface from Tower Road north to the existing lodge. The purpose of the drive was to provide access for properties of a potential development within the proposed recreation area and the John and Mary Bekkerus property. Currently, this access point is a private drive in ownership of John and Mary Bekkerus which at this time is not being considered as part of the proposed recreation area. Although the Tower Road entrance provides access from U.S. Trunk Highway 10, this entrance will have to be re-evaluated at a later point, and time due to ownership rights and safety concerns.

Exhibit 2.2.2 Designated Entrance

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2.3 Zoning Erie Township is predominantly agricultural zoned, 83% of the 1,239 parcels in Erie are agricultural, see Table 1.1 Erie Zoning Distributions. Currently, parcel no.’s 100503000 and 100505000 are zoned agricultural and the larger parcel, parcel no. 100502000, is zoned High Density Residential.

It is recommended that the DMRA is zoned recreational and held by Becker County for tax exemption. This is similar to the Becker County Fairgrounds, the City of Detroit Lakes participation in a public/private partnership with the Kent Freeman Arena, and the Minnesota Flyers Gymnastics.

Zoning the proposed DMRA recreational, would maintain consistency with adjacent parcels and have no adverse effect on people or land uses.

2.4 Physical Description The proposed DMRA currently consists of 259.72 acres of rolling hills, forests, pastures, trails, wetlands, and accessibility travel corridors that connect to common interest structures and parking facilities. The intent of the recreational area supported by DMRA, Inc.’s mission is to maintain four season recreation and its existing natural topography.

2.4.1 Existing Terrain Most recently, the proposed recreation was minimally impacted by a recent attempt to develop the property into high density residential area. Several storm water ponds were constructed to accommodate water quality and rate control requirements by the Pelican River Watershed District for their proposal of increased impervious surfaces. Prior to the previously mentioned intent of the owners, the proposed recreation area was a ski resort owned and operated by the property owner. The topographic terrain of the property includes rolling hills surrounding Detroit Mountain (top elevation 1620 feet with a 186-foot vertical drop) covered by deciduous forests with light underbrush and grass forest floor. The slopes of Detroit Mountain are covered with short grass and separated

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by lines of deciduous trees. The slope of the terrain across the property ranges from five (5) to thirty (30) percent. The north side of the property contains a fresh water emergent wetland and both natural and pre-developed trails migrate throughout the entire property.

2.4.2 Soils The more predominate soil on the property is a Snellman-Sugarbush complex according to the NCSS Soil survey map, see attached. Snellman-Sugarbush is recognized as a well drained soil within the soil type group “B” and an infiltration rate of 0.6 inches per hour.

Exhibit 3.4.2 Soils Map

2.5 Infrastructure, Equipment & Systems The proposed DMRA site previously operated as a ski area under the current owners and a majority of the infrastructure, equipment and systems remain operational.

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2.5.1 Infrastructure The infrastructure within the property has been updated as recent as 2004 and most of the original 1957 infrastructure remains in place today.

2.5.1.1 Structures & Facilities The original lodge was constructed in 1977 as a stick frame construction. The lodge consists of 5,200 square feet. In 1995 the west side of the facility was entirely rehabilitated including new concrete, flooring, rafters, and sheeting. The west side of the facility; which was the rental shop included the installation of automatic glass sliding doors. Directly east of the lodge is a steel building utilized for storage of equipment, the structures integrity is sound at this point. Also, located on the facility is the ski patrol house located east and north of the lodge, the facility was utilized as a base for the volunteer National Ski Patrol.

2.5.1.2 Power Utilities DMRA site is serviced by a three-phase power source supplied by Wild Rice Electric from the north at 170 th Street, 1200 feet east of the main entrance. The three-phase power is adequate to supply any recreational, commercial, and/or residential needs. Power is conveyed south through the property to the top of Detroit Mountain where it splits and continues both south and west, servicing ski lifts and light poles. From the south line, the power travels west once arriving at the bottom of Detroit Mountain and carries services to the well house and lodge.

2.5.2 Equipment & Systems The DMRA accommodates both ski lift and artificial snow production equipment and systems.

2.5.2.1 Surface Ski Lifts Two of the five ski lifts remain operational today. The handle tow lift on “Begginer”, southeast side of Detroit Mountain remains in operation and is powered by the three – phase electrical source. Also in operation is the t- bar lift located between “Alpine” and “Face”, and runs from the top of the mountain southeast. Both lifts would need to be inspected for safety and quality. The lifts have been defined as operational; however, they have not been in operation since 2005.

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2.5.2.2 Artificial Snow Production The heart of the artificial snow production system is a well located at the south east base of the mountain. Previously, a 500 gallon per minute pump serviced up to four snow production machines servicing the entire area. Water pumped from the well house is conveyed via both sub-surface and at-surface pipe. Specifically, water is conveyed via a 3” cast iron watermain from the well h ouse both east and west. At the east point the watermain bears north and ascends Detroit Mountain through a 3” aluminum water main where then bears west and descends to the west base of Detroit Mountain, bottom of “Face”

Exhibit 3.5.1 Infrastructure Location

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3.0 Development Concept Recreational development opportunities are numerous for the Detroit Mountain area. The area would support a great number of activities and opportunities due to the overall land area mass, terrain, and proximity to an urban center. The fact the area formerly held a fully operational ski area cannot be overlooked and would be a mistake not to include when considering future land uses. To only look at the area for the single use of skiing/snowboarding would also be a mistake and greatly restrict the year round potential and added benefits to the local community.

Review of development opportunities for the purpose of this study will include those that are economic in nature such as revenue generating, job creating, and a benefit to the local economy through patronage of service providers such as hotel accommodations, restaurants, fuel, and various other goods suppliers. Also reviewed are non-economic based secondary benefits. Outdoor recreation research over the past 30 years has demonstrated both onsite and offsite benefits that visitors and individuals in communities attain from living near public recreation areas. These benefits can be best viewed in terms of increased quality of life. In addition to increased quality of life, public outdoor recreation areas provide a vehicle for promoting educational opportunities in the area for health, wellness, and environmental stewardship.

To better understand the potential uses of the area a public focus group was held April 8 th at the Detroit Lakes Campus of the Minnesota State Technical and Community College to assist in the completion of the Development Concept section of the Detroit Mountain Recreation Area Feasibility Study. The event was promoted for one week prior through radio, newsprint, and the internet via facebook.com. Approximately 30 area residents participated.

Four groups of eight participants were formed and asked to complete an outline that directed the groups to list potential activities, user months, facility requirements, visitor usage, staffing needs, environmental impact, educational opportunities, fee structure, and concerns and benefits. A space for identifying supporting user groups and organizations and additional comments was also provided. Participants were given 45 minutes to complete the outline.

All suggested uses and activities were evaluated for their compatibility with the mission statement, the overall site location, environment, and other uses. Similar uses or activities available within a 25 mile radius were reviewed for competition as well as support.

Summary of Data Collected

 57 different uses and activities were identified.  10 of those uses were identified as four season, 36 uses were identified as three season, 7 were identified as winter only, 3 as summer only, and 1 spring only.

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 22 uses and activities would require paid staffing and another 12 would provide volunteer opportunities.  38 activities support the goal of providing healthy fitness activity or educational opportunities.  11 activities or uses have potential for creating an annual event or attraction for the area.

Survey Comments

 Local academic institutions could be involved in the education process, specifically in the sciences and recreational development. Students help with design and layout.  Scout organizations participate in service projects.  Condo/timeshare with access to facilities. Rental cabins similar to Andes Tower Hills.  Chalet used for visitor/nature center, weddings, reunions, business retreats.

Input was open and varied. A complete list of suggested activities and uses can be found in Appendix A. Because this feasibility study was completed by DMRA, Inc., all suggested uses and activities were evaluated for their compatibility with the mission statement. The following section is a review of some of the initial outdoor recreational activities DMRA, Inc. feels are viable based on compatibility with the mission statement, expressed community need, supported by local community members or recognized citizen organizations, and have the potential to offer economic stimulus to the community. Again, this provides a sampling of development possibilities and is not intended to be an inclusive or definitive list.

3.1 Winter (November- March)

3.1.1 Alpine (Down-Hill) Skiing and Snowboarding The primary winter time activity for DMRA centers around both skiing and snowboarding. The area was originally developed for this use and has undergone significant site improvements over the years to accommodate adequate ski and snowboard activity. The area also includes a lodge structure, and two support buildings as well as two surface lifts. The electric motor for one lift was replaced in 2000 and is believed to be operational with little investment. Additional inspection of equipment and structures is needed and was beyond the scope of this study. See, 6.1 Operation Costs, Section six provides detail on additional infrastructure and operating expenses.

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The popularity of the sport and the current industry trends can be found in section 5.0. In short, the 2007/08 end of season survey conducted by the National Ski Areas Association noted that the season brought over 60 million visits to resorts nationwide.1

Snowboarding compliments downhill skiing by providing an equally exciting snow sport. Snowboarding has been one of the fastest growing sports in the United States over the last decade. It is often described as “surfing” on the snow a nd holds the interest of over seven million participants nationwide. The sport does not require any additional infrastructure or requirements to a mountain, unless desired. Snowboarding includes both freeride and freestyle forms. Freeride, like skiing, involves simply descending down ski slopes. Conversely, freestyle involves jumps, spins, the halfpipe and other “terrain park” activities. Specialized snowboarder facilities and terrain parks do not require large-scale mountains. For example, the General Manager of Mountain High in southern California notes: My market doesn’t much care whether the hill is 300 or 3,000 vertical feet, it’s the quality of the park and the innovation of the terrain features, coupled with convenient access and aggressive pricing that draws the rider market. I can offer that here, one hour out of LA, and I can do it with man made snow. 2

With its tremendous growth in popularity, most ski resorts now have dedicated terrain parks for freestyle snowboarding.

Supporting organizations include National Ski Area Association (NSAA), Midwest Ski Area Association, Midwest Collegiate Ski and Snowboard Association, National Ski Patrol NSP, United States Collegiate Ski and Snowboard Association (USCSA), United States of America Snowboard Association (USASA).

3.1.2 Nordic (cross-country) Skiing Similar to alpine skiing, Detroit Mountain has been developed for Nordic skiing and has had extensive site development for this activity. The site is well suited for Nordic skiing due to the abundance and variety of trails and close proximity to additional trail systems. Becker County is home to several Nordic ski trails and Nordic ski centers. The county currently maintains trails at Dunton Locks County Park and the new Mountain View Recreational Area which opened fall of 2009. The trail use varies from skiers just learning to ski to skiers that are training for marathon citizen races or high school and

1 NSAA, RCA, Incorporated (2006). 2006/07 Ski Resort Industry Research Compendium: A summary of major research projects conducted for National Ski Areas Association. Retrieved April 28, 2010 from https://www.nsaa.org/nsaa/members/0607-research-compendium.pdf

2 Kapuscinski, K. (2005) in BBC Research & Consulting (2005) Retrieved April 28, 2010 from https://www.nsaa.org/nsaa/members/research/docs/2005-industry-update-ff.pdf

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collegiate competition. The cost of maintenance is relatively low in comparison to many other winter activities.

Nearly 700 miles of cross country ski trails are located throughout the state of Minnesota. They are primarily maintained through the DNR Cross-Country Ski Trails Grant-in-Aid Program, which was created by the State Legislature in 1973 and is funded from the sale of cross-country ski trail passes. Eligible projects include cross-country ski trail development, maintenance, winter grooming and trail administration, among others. Bodies who may apply for aid include counties, cities, townships and private trail organizations sponsored by a local unit of government3

Minnesota is home to several national and international recognized Nordic ski races each year, such as the Mora Vasaloppet, the Pepsi Challenge in Biwabik, the City of Lake Loppet in Minneapolis, and the Minnesota Finlandia in Bemidji, to name a few. These events draw thousands of state and local recreational skiers to national and international elite racers.

Minnesota has a large network of Nordic skiers ranging from recreational day skiers to Olympic competitors. Minnesota has the largest high school sanctioned Nordic ski program in the country and a large well organized youth skiing program. Nordic skiing has numerous benefits to offer an active population. Nordic skiing is a low impact aerobic exercise that most people can enjoy in the wintertime.

According to a 2008 study 2.6 million Nordic skiers spent an average of 7.8 days skiing during the 2006-2007 season. Of these 2.6 million skiers 49.3% were female and 50.7% were male. The typical Nordic skier is college educated between the ages of 35 and 54 with a household income of over $100.000.00 per year.4 Further demographic information on Nordic skiing can be found in Appendix B.

Supporting organizations include Cross Country Ski Areas Association, Minnesota Nordic Ski Association, Prairies Edge Nordic Skiers, Midwest Collegiate Ski and Snowboard Association, National Ski Patrol NSP, United States Collegiate Ski and Snowboard Association (USCSA).

3.1.3 Snow Tubing Although this activity was not previously offered, Detroit Mountain has adequate terrain to provide snow tubing use. An existing surface lift could be utilized for this activity. A study conducted by the NSAA noted that small resorts are able to differentiate

3 Hulls, M. (2007). DNR Maintenance Forecast. Retrieved Feb. 28, 2010 from http://newsite.mnnordicski.org

4 Wiesel, Jonathan. “Demographics of Cross Country Skiers 2007 Calendar Year”. Nordic Network. August 2008.

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themselves and reach out to children and families with varied forms of snow related activities. In 2005, it was noted that more than 40 percent of ski areas responding to the NSAA survey offer snow tubing. 5 Tubing and similar low skill level programs provide an outdoor activity that the whole family can do together regardless of experience or athletic ability. There are no specialized clothing requirements and costs are modest. Most importantly, tubing and similar activities introduce new participants to outdoor winter recreation with the prospect of conversion to boarding and skiing.

Supporting organizations include NSAA, Midwest Ski Area Association

3.2 Spring & Fall (April-May & Sept-Oct)and Summer (June-August)

3.2.1 Mountain Biking According to The Economics and Benefits of Mountain Biking, by the number of outings, biking is the favorite outdoor activity of children ages 6-17 years. It also continues to be a growing outdoor activity among all user groups. Once thought of as a sport made up of twenty-something males, the demographic is consistent with skiing and snowboarding according to Rob McSkimming, VP of Business Development for Whistler/Blackcomb Resort. In America there are more mountain bikers than golfers, 50 million to 29 million.6

The economic impacts of Mountain Biking are as impressive as their numbers. Mountain Biking delivers an estimated $26 billion to the American economy. Both regionally and nationally, the greater the number of areas located in close proximity, the greater the use. In an IMBA survey of destination mountain bikers, the second highest ranked item of importance was the number of trails. 7 Providing additional trails within Becker County that compliment already existing trails at Maplelag and Mountain View will translate into greater use and extended visits to the area.

A strong example of investment in mountain bike trails systems is Cayuna Country State Recreation Area in Crow Wing County. As part of their multiple use plan, they are building 37.5 miles of single track mountain bike trails. It is estimated to bring 300,000 annual visitors and have an economic impact of $3.1 million8

5 BBC Research & Consulting (2005) Retrieved April 28, 2010 from https://www.nsaa.org/nsaa/members/research/docs/2005-industry-update-ff.pdf

6 International Mountain Biking Association and Shimano American Corporation (n.d.). Retrieved 10 April 2010 from http://www.nemba.org/documents/ShimanoEconImpactsDocument 7 Ibid. 8 Richardson, R. (2010) Peddling pedals pays. Retrieved 1April 2010, from http://www.brainerddispatch.com/stories/050110/bus_20100501005.shtml

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Supporting organizations include International Mountain Bike Association (IMBA) and the Minnesota Off-road Cyclist (MORC). The Minnesota Mountain Bike Series, (MNMBS), formerly the Minnesota State Championship Series, grew 30% in participation in 2009 from 2008. Additionally, the Wisconsin Off Road Series (WORS) is the largest mountain bike series in the nation.

3.2.2 Camping The Detroit Mountain area has potential for both semi-primitive and pull up camp sites. Many regional and county parks within the state offer limited semi-primitive camping and vehicle camping for a daily fee. It is the recommendation of DMRA Inc., that further research be conducted to optimize the number of available sites while limiting environmental impact.

A review of available camping within close proximity to the urban center of Detroit Lakes offers limited choices and appears to demonstrate a need for additional tent camping in semi-primitive settings. Current camping vendors include The American Legion Camp Ground, Country Campground, Long Lake Campsite and RV Resort, and Shorewood Campground on Long Bridge Road. Three of the above listings offer tent camping. None of the above sites offer primitive or semi-primitive tent camping in a natural setting.

It is presumed if semi-primitive tent camping were offered on Detroit Mountain a daily camping fee of $10-$20 per site would be collected. Additionally, primary occupancy would likely come from those using the area for other activities. During holiday weekends and weekends with local special events that draw additional tourists, demand would increase.

3.2.3 Hiking Hiking, like a number of outdoor recreational activities, continues to become more popular. With little to no cost to participate, and the increased emphasis on becoming a healthier nation, it is not a surprise. Hiking is also popular because it is both a group and individual activity, appealing to a broad spectrum of people.

With over 200-acres, Detroit Mountain would be an ideal location for hiking trails due to the mixed difficulty terrain and ability to customize trail length. Detroit Mountain is unique from other hiking trails in the area due to the elevation gain and ability to offer overlooks and vistas. It was recommended by the focus group that an observation deck or tower be incorporated and this could be a heavily promoted destination for trails. Detroit Mountain is an important historical point. It is significant to local history and dates to the Anishinabe people who used the mountain top to watch over their land.

Supporting Organization: Minnesota Rovers Outing Club

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3.2.4 Horseback Riding The state of Minnesota has 19 designated horseback riding trails within the state park system. Trails vary in length from 5 to 75 miles. There are an additional 13 state designated trails of varying length and terrain. Of the 13 trails, only the Heartland Trail is located in the Northwest portion of the state. With proper trail management practices, DMRA, Inc. feels the area may be able to offer limited on-site use.

The Becker County Mounted Posse has expressed interested in being able to use the area as a training, meeting and staging area. With support and involvement of this group, equestrian educational opportunities could exist. They have committed initial financial assistance in the amount of $3500 for site, facility and trail development along with ongoing support through fund raising activities.

Supporting organizations include Becker County Mounted Posse and Trailblazers Saddle Club

3.2.5 Bird Watching, Wildlife Viewing, Nature Walking Bird watching is an activity that has high participation rates among all age groups. Based on a 2001 US Fish and Wildlife Service (USFWS) survey, 18.5 million Americans actively view birds away from home with a total of 46 million birders. Minnesota has the fourth highest participation rate of all states. The top reported viewing location is public woodland areas.9

Another USFWS survey, "2006 National Survey of Fishing, Hunting, and Wildlife- Associated Recreation" reported wildlife watching (where birding is the lion's share), the trends were all headed upward. From 2001 to 2006, the increase in both around home and away-from-home wildlife watching rose, respectively, 8% and 5%. Of the 71 million people who enjoyed wildlife watching in 2006, almost a third (32%) took trips more than a mile away from home.10

Nature walking is often associated with both bird watching and wildlife viewing. It is also considered a less strenuous form of hiking. Walking in nature has a number of therapeutic advantages such as stress reduction, improving overall health and wellness and when incorporated with interpretive signage can be educational.

If Detroit Mountain were a public recreation area, all of these activities would be provided at little or no cost. The 2001 USFWS survey best illustrates the economic impacts of providing these activities near an urban center According to the 2001 USFWS

9 La Rouche, G. (2002) Birding in the United States: A Demographic and Economic Analysis. Retrieved 5 March 2010 from http://www.fs.fed.us/outdoors/naturewatch/start/economics/Economic-Analysis-for-Birding.pdf

10 National survey of fishing, hunting, and wildlife associated recreation. Economics and Statistics Administration. Retrieved 5 March 2010 from http://www.census.gov/prod/2008pubs/fhw06-ia.pdf

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survey, an estimated $32 billion in retail sales, $85 billion in overall economic output, and $13 billion in state and federal income taxes.11 These national numbers are believable in light of the success of Detroit Lakes Festival of Birds, an annual four day event now in its 13th year.

Supporting organizations include Minnesota Audubon Society, Agassiz Audubon Society, National Audubon Society, and Pine to Prairie Birding trail

3.2.6 Disc golf Frisbee golf has been a steadily growing sport and outdoor activity since its creation in the 1960’s. There are over 3,000 courses in the US with 17 in North Dakota and 147 in MN.12 The City of Detroit Lakes has its own 9 hole course that sees hundreds of visitors each week during peak seasons.

Two notable 18 hole courses in Minnesota are located on ski areas. One at Giants Ridge (Biwabik, MN) and the other at Hyland Ski and Snowboard Area (Bloomington, MN). Disc golf courses are ideally suited for ski areas due to the elevation change, availability of acreage, and the ability to design the course around existing structures and terrain. Most courses are available to play for little or no cost due to the minimal infrastructure cost. Courses require a small throwing tee pad and a metal basket. An average 18 hole course will take three hours to play and cover up to three miles of walking. Given this, the health benefit to cost ratio is superior.

Although disc golf courses may generate little to no on-site revenue there is an economic benefit. In 2007 the Great Lakes Disc Golf Club was a host partner for the 2007 Professional Disc Golf Association (PDGA) Amateur World Championships in Milwaukee. Over 500 competitors from around the globe participated. The weeklong event provided a tremendous boost to the popularity of Milwaukee disc golf and generated over $1 million for the local economy. Small annual disc golf events like this are common at well designed courses and attract 200-300 participants. These two to three day events incorporate competition in disc golf, freestyle Frisbee, and ultimate Frisbee.

Supporting organizations include Minnesota Frisbee Association, St. Cloud Disc Golf Club, North Dakota Disc Golf Association (NDDGA), and the Professional Disc Golf Association (PDGA)

11 La Rouche, G. (2002) Birding in the United States: A Demographic and Economic Analysis. Retrieved 5 March 2010 from http://www.fs.fed.us/outdoors/naturewatch/start/economics/Economic-Analysis-for-Birding.pdf

12 2010. About Disc Golf page (2010). http://www.pdga.com/

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4.0 Ownership and Operating Structure One issue facing the potential development of Detroit Mountain as a viable recreation area is the choice of the optimal ownership and operating structure. While there are a multitude of possibilities, most community recreation areas fit into one of the following three categories:

1. Private Ownership and Private Operation 2. Public Private Partnership (PPP) 3. Public Ownership and Public Operation.

This section of the study will focus on the advantages and disadvantages of each of these categories.

4.1 Private Ownership and Private Operation

This is the structure that was used by Detroit Mountain during its past operation. The property was owned first by private individuals and eventually by members of the same family group, some of whom continue to have an ownership interest in the property. Capital was raised through revenue of the operation and through private bank financing. The owner/operators were responsible for payment of real estate taxes, insurance and for all other employee and operational costs. See the historical data section of this study for information on past operation of Detroit Mountain.

Examples of other regional ski areas using this structure are:

4.1.1 Andes Tower Hills (Alexandria) This area is owned and operated by a family owned corporation on land that is owned by that corporation but has been in family ownership for many years. There are no land acquisition costs. Fees are charged for all of these activities. Since this is private property, there is no public access. The property pays real estate taxes in the approximate sum of $11,638.00 (2010) and insurance for operations. Capital improvements are financed through operations revenue and commercial bank loans. Andes Tower Hills is operated as a private for profit business.

4.1.2 Buena Vista (Bemidji) The land upon which the ski area sits has been owned by the same family since 1936 and thus there are no land acquisition costs. Since this is private property, there is no public access. The property pays real estate taxes in the approximate sum of $4,864.00 (2010) and insurance for operations. Capital is raised through operations revenue and commercial bank loans. Buena Vista is operated as a private for profit business.

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4.1.3 Advantages Private ownership and private operations remove all risks to public entity. Private ownership and private operation can have obvious benefits if the cash flow is sufficient to generate profit in excess of capital and operating costs. In both of the examples noted above, there are no land acquisition costs and thus no debt service payments for land acquisition drawing upon revenue, leaving the revenue of the operation available for capital investments in infrastructure, maintenance, utilities, insurance, real estate taxes and employee costs.

4.1.4 Disadvantages Public entity loses all control of maintaining area as being open to the public. The negative consequences of this type of structure arise when the revenue from fee based activities is not sufficient to pay the ownership and operation costs such as debt service on land and capital improvements, employee costs, utilities, insurance and real estate taxes. Recreational facilities that would otherwise provide a valuable public service either do not exist or cease to exist because they cannot generate sufficient profits to pay necessary debt service and operating costs. At its heart, this is the reason for the failure of the previous Detroit Mountain. This type of structure also results in a focus on only those recreational activities for which fees can be charged and effectively collected, omitting a wide spectrum of public recreation that would otherwise benefit the health and welfare of the community. The task is to find an ownership and operational structure that can reduce ownership and operational costs in order to reduce the operating revenue necessary to make the facility viable and to enable the facility to offer activities that do not necessarily afford the opportunity to generate revenue.

4.2 Public Private Partnership (PPP) A PPP is a collaborative, mutually beneficial venture between two or more partners in pursuit of jointly agreed upon goals, with a division of risks and labor based on the contributions and expertise of each partner.

The following goals were set for the investigation and analysis of Public Private Partnerships (PPP) for the Detroit Mountain Recreation Area (DMRA):  Maintain long-term public ownership of the Detroit Mountain Recreation Area (DMRA): viewed as part of the public’s basic strategy of ensuring the full public benefits of the DMRA as part of the public’s recreational network.

 Ensure provisions for quality, effective recreational opportunities: controlled through fundamental ownership or contractual structuring.  Allocate operating and revenue risks away from the public entity to the maximum extent possible: must be commensurate with the potential to allocate rewards to the public entity.

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 Make the greatest use of private sector financing opportunities: revolves around leveraging private funds for infrastructure improvements and operations.

Examples of Public Private Partnership (PPP) facilities in the Detroit Lakes area include the Detroit Country Club, Detroit Lakes Community and Cultural Center, Legion Campground, and the Detroit Lakes Airport.

Numerous ski resorts and a variety of recreational facilities are owned by public entities such as the state, county or a municipality and operated by private entities. These facilities are not limited to ski areas but include National/State Parks with various amenities such as lodging, dining or equipment rental operated by private concessionaires, public golf courses, public campgrounds and community centers. These facilities are typically open to the public on a no fee or fee basis, with certain amenities or activities operated by a concessionaire that can be confined to a limited location where there can be gate control in order to charge additional fees for use. It is beyond the scope of this study to investigate and compare all of these various types of recreational facilities.

The consistent theme running through all of these examples is public ownership of the land and physical improvements with private operation of all or a portion of the recreational facility by a private for profit business or a non profit organization through use of a lease or a management agreement that achieve a proper balance of risks and benefits. The land is either already owned by the public or acquired by the public through donation, purchase or tax forfeiture. The infrastructure is constructed and installed through a combination of public financing and donations and is thereafter owned by the public. The private for profit or non profit organization operating the facility uses the revenue of the operation to pay operational costs such as employee expenses, maintenance and insurance and, if revenue is sufficient, may also contribute to the cost of capital investments in infrastructure and payment of real estate taxes or some other lease fee or management fee to the public owner. Non profit operators may also have access to tax deductible donations if they are structured as a 501 (c) (3) entity.

The key here is that the operating entity does not have land acquisition costs, and thus no debt service payments for land acquisition drawing upon revenue, leaving the revenue of the operation available for maintenance, utilities, insurance, employee costs and perhaps capital investments in infrastructure.

Regional examples of community ski areas using this structure are:

4.2.1 Mount Itasca (Coleraine/Grand Rapids) Mount Itasca is operated since 1906 by Itasca Ski and Outing Club, Inc., a Minnesota non profit corporation on land that is owned by the City of Coleraine. Since the land is owned by a municipality, there are no land acquisition costs and no real estate taxes generated. The non profit corporation generates revenue and uses that revenue to pay maintenance, employee costs and other operating costs, capital improvements and

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insurance. Capital is raised through donations and membership fees. This is primarily a winter facility, but as municipal property is it open to the public and available for hiking in the summer. See Section 6 of this study for financial information (do we have this?).

4.2.2 Ski Gull (Brainerd) Ski Gull is operated by Ski Gull, Inc., a Minnesota non profit corporation on land that it leases from the State of Minnesota and from a private conservation club. Since this is partially private property, there is no public access. The property pays real estate taxes in the approximate sum of $3,434.00 (2010) on the privately owned property and insurance for operations. Capital is raised through operations revenue, bank loans and donations. Ski Gull is operated as a 501 (c) (3) charitable organization. The organization pays a lease fee to the owner of the private property and to the State of Minnesota. See Section 6 of this study for financial information.

4.2.3 Detroit Country Club Nearly one hundred years ago in 1916 members of the Detroit Lakes community had the foresight to see the need for a golf course to provide recreation to local residents and to provide an attraction to visitors in this growing tourist community. Through a variety of means including purchase and donation land out side of the City was acquired by the City of Detroit Lakes and the Detroit Country Club was born. Over the years facilities have been developed, expanded and infrastructure created by use of a combination of operating revenue and loans from the City of Detroit Lakes. The Detroit Country Club is operated by non profit corporation under a management agreement with the City of Detroit Lakes.

4.2.4 Legion Campground The area of the City of Detroit Lakes known as the Legion Campground has been owned by the City of Detroit Lakes for many years and operated as a seasonal campground by the American Legion. The property generates revenue for the American Legion Club under a set fee management agreement with the City of Detroit Lakes that also provides a set amount of revenue to be paid to the City. Excess revenues are held for capital improvements.

4.2.5 Detroit Lakes Community and Cultural Center This is the most recent example of a Public Private Partnership (PPP) within the City of Detroit Lakes. The land upon which the facility exists was originally owned by the Detroit Lakes school district and later transferred to the City of Detroit Lakes when a new school was constructed. It remains owned by the City. After years of disuse the facility was expanded and improved by a partnership between the City of Detroit Lakes and Holmes Center, Inc., a Minnesota non profit corporation formed for that purpose.

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Donations assisted with the construction and development of the facility and continue to assist with the cost of continuous operations.

4.2.6 Wething Field Although not a pubic recreation area, this is the regional airport facility owned by the City of Detroit Lakes and operated through a Joint Powers agreement between the City and Becker County. All real property and facility improvements are owned by the public. The joint powers commission leases certain facilities to a private fixed base operator that operates the airport on a for profit basis.

4.2.7 Advantages Incentive clauses can be included to ensure proper operations and the public entity is removed from some risks. The benefits of this type of structure are primarily the possibility for public access, availability of non revenue generating recreational activities in addition to the ski operation (such as Mt. Itasca offers), the potential for reduced operating costs due to no land acquisition costs or debt service, limited or no real estate taxation, and the potential for recreational use immunity from tort liability or municipal tort liability limits so that those non revenue generating public recreational activities can exist. In effect, this structure can permit the area to be a public park offering both revenue generating activities and non revenue generating activities, with the potential tort liability for those non revenue generating activities limited. The scope of recreational activities can be focused on public service and the benefit to the health and welfare of the community rather than limited to those that result in revenue generation. This type of ownership and operational structure can reduce ownership and operational costs by limiting or eliminating real estate taxes in order to reduce the operating revenue necessary to make the facility viable. Insurance costs to the operating entity can be focused on the ski, snow board and tubing facilities operated under a lease or management agreement. In addition, a non-profit organization may have the capacity to raise capital through charitable or other donations in addition to operational revenue.

4.2.8 Disadvantages Down sides to this type of structure usually focus on organizational continuity, a lack of access to capital investment and commercial bank financing that a private for profit owner would have, and the loss of real estate tax revenue as a result of the public ownership of the property and infrastructure. These negative consequences can be offset by provisions in the lease or management agreement that provide for public representation on the board of the lessee or management company and that dedicate operational revenue to operational costs and capital investment with any excess revenue paid to the public owner.

This type of ownership and operational structure is not new to the Detroit Lakes area. As noted above, Public Private Partnerships (PPP) already exist and have existed for many

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years in the area as a means to accomplish a public service or create a local amenity that the public deems worthy, but that does not promise the potential for sufficient revenue and profit to entice private enterprise to provide the service.

4.3 Public Ownership and Public Operation The most common examples of recreational facilities owned and operated by the public are public parks. These facilities may or may not charge an entrance fee or use or participation fee for some specific amenity. Often the public will be encouraged to purchase an annual pass for access to the facility or some sort of daily or annual vehicle pass. Examples include national parks and monuments, state parks and campgrounds, some alpine ski areas and many public access trails used by cross country skiers and others, county parks and municipal parks.

Local examples of these facilities include the Dunton Locks County Park, Mountain View Recreational Trails (County), the Detroit Lakes City Park and the Detroit Lakes City Beach, tennis courts, Pavilion and Recreation Center. In these local examples limited fees are charged for participation in certain activities at the recreation center and for use of the pavilion. However, fee revenue is minimal. Lack of effective gate control or enforcement makes it impossible to generate direct revenue from these amenities. However, these facilities do provide a valuable service to the residents of the community and an attraction to visitors, with the secondary benefit that those people utilizing the facilities do also support local businesses, thus generating jobs and secondary tax revenue.

There is at least one example of a ski area both owned and operated by the public:

4.3.1 Giants Ridge This facility, located near the iron range town of Biwabak, is owned by the Iron Range Rehabilitation and Recovery Board (IRRRB), a State of Minnesota agency funded by taconite taxes. The land was originally in private hands but was purchased by the IRRRB in 1984 with the goal of diversifying the area’s economy and t o encourage tourism. While the ski area is both owned and operated by the IRRRB, to some extent the area is increasingly taking on the characteristics of a Public Private Partnership (PPP) in that while owned by the IRRRB, the golf courses as well as the resort’s food and beverage operations are managed by a private for profit corporation. The private corporation pays the IRRRB a base fee plus a share of the gross revenues. Another local concessionaire manages the rental and repair shop for the ski area as well as canoes and kayaks during the summer, paying a percentage of gross revenues to the IRRRB. In addition, the lodging facilities are owned and operated by a private company on IRRRB land under a long term lease arrangement. This type of structure has been successful in that it permits private investment in the amenities and reduces labor costs versus the labor costs incurred by the IRRRB in running the ski area. Long term goals for the IRRRB are to transition the ski operation to a private operator as well.

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4.3.2 Advantages It would collect all revenue directly. Public ownership and public operation fosters public access and is effective to establish and promote the availability of non revenue generating recreational activities that would not be available but for the direct involvement of governmental entities. These facilities offer the public an amenity and are protected either fully or partially by recreational use immunity from tort liability and the municipal tort liability limits, without which these non revenue generating public recreational activities would not exist. In effect, this structure is best suited to public parks. Whether those public parks offer both revenue generating activities and non revenue generating activities is a decision the public owner must weigh, with the trend being that revenue generating activities are more and more being operated not by the public entity, but by a private for profit or non profit entity under a lease or management agreement. This leaves the facilities that cannot generate revenue to be a public service offered and operated by the public for the benefit of the health and welfare of the community.

4.3.3 Disadvantages The public entity would assume all risks and/or costs associated with the success and/or failure of DMRA. Down sides to this type of structure usually focus on relatively high labor costs and inflexibility as to management decisions, political interference and lack of stability due to budget fluctuations of the public entity that owns and operates the facility.

4.4 Summary and Recommendation

4.4.1 Private Ownership and Private Operation Private ownership and private operation removes all risks to public entity. However, the public entity loses all control of maintaining the Detroit Mountain Recreational Area as a resource for the entire community. The possibility of Detroit Mountain being bought by a private entity and being used for purposes other than as a valuable community resource is very high. Another risk is that the private entity, if they were to open it as a recreational facility, would eventually experience the same failure as the previous owners did. Smaller recreational areas such as Detroit Mountain are more sensitive to down turns in seasonal events, due to the burden of their initial investments. It is very likely that the wide spectrum of public recreation that would otherwise benefit the health and welfare of the entire community would be lost forever.

4.4.2 Public Private Partnership’s Public private partnership disadvantages include the possibility of not finding the correct balance of risks and benefits between the public and private entity or not capitalizing on the strengths and weaknesses of each entity. With a properly negotiated contract these concerns can be minimized. The advantages of a Public Private Partnership include maintaining the Detroit Mountain Recreational Area as a resource for the entire

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community at a low risk to the public, while providing profit generating resources to a private entity and the possibility of generating numerous benefits to the public entity including capital, economic growth and jobs all the while protecting a long term asset and one of the more valuable resources in Becker County.

4.4.3 Public Ownership and Public Operation Public ownership and public operation advantages include that it would collect all revenue directly and would protect the Detroit Mountain as a long term asset and valuable resource. However, public ownership and public operation would put the risks and/or costs associated with the success and/or failure of DMRA solely on the public entity. Down sides to this type of structure usually focus on relatively high labor costs and inflexibility as to management decisions, political interference and lack of stability due to budget fluctuations of the public entity that owns and operates the facility.

4.4.4 Recommendations Recommendations include a type of Public Private Partnership (PPP) to be negotiated between potential private for profit or non-profit operators and the public entity that invests in the ownership of the land that will become the recreation area. There are merits to a lease and merits to the use of a management agreement. It is beyond the scope of this study to weigh those relative merits, but it is clear that the use of some form of Public Private Partnership (PPP) is both a necessary requirement for the development of the Detroit Mountain Recreation Area and the optimal arrangement for its future success.

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5.0 Industry Overview This section provides an overview of the nation’s current ski industry.

5.1 Demographics and Trends Although the ski industry has decreased in the number of resorts over the last 20 years, (from 727 to 481), the sheer number of skiers has increased. The following highlights important industry facts:

 The 2007/2008 ski season welcomed over 60.05 million skier/snowboarder visits.13

 There are approximately 6.4 million skiers and 5.2 million snow borders in the United states.14

 The average age of participants is 36.5 years. Skiers of the Baby Boom generation and their parents make up 33% of al skiers.15

 Although it varies by region, men make up a little over have of the ski market; women, 40-49%.

 In the 2007/2008 season, 72% of skiers had incomes greater than $50,000/year and 48% greater than $100,000/year. This is a helpful demographic b/c this target can be accessed for real estate development, amenities, and terrain improvements.16

 This may also relate to skiers being large consumers of ski/snowboarding equipment and accessories such as skis, boots, and clothing.17

 18 Skiers tend to be regular travelers and are willing to travel to enjoy skiing.

 The sale of season passes has increased 150% from 1998-2002 which translated into increased skier/snowboarder visits. Pass holders ski/snowboarder twice as much as non-pass holders; 25 days for season pass holders as compared to 11 days for non-pass holders.19

13 National Ski Areas Association: Kottke National End of Season Survey; 2008 14 Ski Area Citizens’ Coalition (2008). National Ski Industry Demographics and Trends 2008. Retrieved April 1, 2010 from www.skiareacitizens.com. 15 National Ski & Snowboard Retailers Association: Snowboarding and Skiing Participation; 2006. 16 Ski Area Citizens’ Coalition (2008). Nationa l Ski Industry Demographics and Trends 2008. 17 Formichelli, M. (2010) Skiers: Hitting the Slopes. Retrieved from www.tarketmarketingmag.com 18 ibid 19 National Ski Areas Association: 2002/03 National Demographic Study; 2003.

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5.2 National Ski Areas Association The National Ski Areas Association (NSAA) is a trade association for ski owners and operators. It represents 325 alpine resorts that account for more than 90 % of the skier/snowboarder visits nationwide. The NSAA is an important source for future information for Detroit Mountain. The association provides the following information and tools:

 Annual ski industry statistics  Annual conferences and tradeshows  Bi-monthly industry publication  State/Federal Government affairs  Educational, employee, and management information (i.e., industry regulations and compliance, environmental regulations, state regulatory requirements, resort operation material).

The current feasibility study was able to access a limited amount of information from the association by paying membership fees. However, much of the financial and statistical details are only available at cost and therefore out of the scope of this project. Below is a summary20 of the Economic Analysis report which is an annual research project conducted annually by the NSAA. Two additional annual report summaries can be found in Appendix C. Full reports are available for a fee by the NSAA.

5.2.1 Economic Analysis of US Ski Areas. This study documents economic and financial trends and patterns of interest in the ski resort industry both nationally and regionally, with an emphasis on revenues, expenses, and margins assets, liabilities, and shareholder’s equity; revenue and expense per skier visit; return on equity and operating profit on fixed assets; and other financial ratios and measures.21

Key Highlights

 Overall Increase in Average Gross Revenue. In 2006/07, average resort revenue grew by 2.7 percent, to a total of $23.0 million per resort on average (indicative of lift ticket pricing strength, greater penetration in certain departments such as lessons, food & beverage, retail efforts and up-selling guests).

20 NSAA, RCA, Incorporated (2006). 2006/07 Ski Resort Industry Research Compendium: A summary of major research projects conducted for National Ski Areas Association. Retrieved April 28, 2010 from https://www.nsaa.org/nsaa/members/0607-research-compendium.pdf

21 NSAA (2006) Research compendium – A summary of major research projects. Retrieved April 4, 2010 from www.nsaa.org

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 Strong Profitability Figures. Industry-wide, operating profit increased to $5.7 million per resort from $5.5 million, an increase of 4.2 percent. Overall operating profit margin was 24.8 percent nationally, up slightly from 24.4 percent the prior year. As well, pre-tax profit rose to $2.8 million per area (up from $2.7 million); pre-tax profit margin increased to 12.3 percent from 12.1 percent in 2005/06.  Strong Performance. Largest resorts up 29.2%; other three sizes up between 13- 17%.

 Longer-Term Improvement for Industry. Gross revenue has grown by 21.5 percent (average of 4.3 percent per year), operating profit by 27.9 percent (average of 5.6 percent per year), and pre-tax profit by 66.4 percent (average of 13.3 percent per year).

 Increase in Total Revenue per Skier Visit. One of the most important metrics for a ski resort is total revenue per skier visit – or how much money, on average, the resort brings in per customer. This season, industry averaged $74.94 in total revenue per skier visit, up strongly from the year prior ($67.93, up 10.3 percent).

 Increase in Ticket Prices. Lift tickets are the single largest revenue producer for the industry. Average rose again this season for both adult and children. This trend has continued over the last several years with no ill effect.

 Balance Sheet Accounts. Overall, average assets and liabilities were up compared to last season.

 Makeup of Revenues and Expenses. The average proportion of total revenue from lift ticket sales has been steady around 46 percent. Most major revenue centers increased average gross departmental revenue this year, including lift tickets (up 1.5 percent), lessons (up 10.2 percent), retail stores (up 2.2 percent), and food & beverage (up 2.2 percent). Declines were evident in rental shops (down 2.1 percent) and accommodations (down 1.4 percent). In general, operating expenses grew in the ski resort industry (up 2.2 percent on average), though less than gross revenues (up 2.7 percent). Thus, as a percent of revenue, some expense line items actually declined, most significantly insurance, depreciation, and payroll taxes; on the other hand, interest, direct labor, other direct, and cost of goods sold increased as a percent of revenue.

 Summer Revenues. Nationally, 77 percent of ski areas report revenue from summer operations. The average proportion of total revenues from summer operations among all reporting ski areas is 7.6 percent. Among those ski areas with summer revenues (excluding the 23 percent without summer operations), average revenue during the summer months was $2.8 million.

 Improvement of Debt to Cash Flow measured 2.09 years in 2006/07, an improvement from 2.17 years in 2005/06. This result means that the industry as a

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whole would take two years to retire its current level of long-term debt at the current levels of cash flow. This ratio has been relatively stable for the past three years (around 2.00), suggesting a more secure and stable financial position for the industry as a whole.

5.3 Ski Resort Information: Minnesota and Surrounding Area MN Ski Distance Season Single Areas Size Acres # Lifts other Location From DL Pass Day Tubing Summer Hastings, Afton Alps 300 18 3 carpets MN 55033 235 439/319 40/29 X X Andes Tower Alexandria, Hills 45/900 4 MN 56343 93 339/289 35/30 X X Burnsville, Buck Hill 45 7 1 carpet MN 55306 226 385/295 38/28 X Buena Bemidji, MN Vista 16 runs 4 terrain pk 56601 92 160/220 27/32 X Elm Creek Winter Maple Recreatio Grove, MN n Area multiple 55369 189 199 15 X X Giants Biwabik, MN Ridge 36 runs 6 terrain pk 55708 211 by season X X Hyland Ski and Bloomingto Snowboar n, MN d multiple 6 55438 215 199 15 Lutsen crpt/terrai Lutsen, MN Mountain 92 runs 8 n 55612 306 by season X X Mount Frontenac, Frontenac 17 runs 6 terrain pk MN 55026 269 by season Mount Mankato, Kato 19 runs 8 terrain pk MN 56001 280 220/1000 20/33 X X Powder Kimball, MN Ridge 15 runs 7 terrain pk 55353 157 189/279 22/35 X X Nisswa, MN Ski Gull 13 runs 3 56468 105 155/200 27/47 Spirit Duluth, MN Mountain 24 8 terrain pk 55810 204 225/705 18/29 X Quanda Hill City, MN 55748 Mountain multiple 6 terrain pk 118 246/574 20/52 X X Welch Welch, MN Village 37 runs 10 terrain pk 55089 252 by season 32/47 Taylors Wild Falls, MN Mountain 23 10 terrain pk 55084 214 260/360 22/40 X X

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Distance Season Single W I Ski Areas Size Acres # Lifts other Location From DL Pass Day Tubing Summer C offe Mill crpt/terrai Wabasha, Ski Area 10 runs 2 n WI 55981 287 200/700 15/30 G ranite Wausau, P eak 75 runs 10 terrain pk WI 54402 400 244/944 30/40 M ont du Superior, Lac 8 runs 1 terrain pk WI 210 n/a 29-Dec X X T he W hitecap Mountains 43 runs 6 terrain pk Upson, WI 312 693/1122 22/45 X X 22 T rollhauge runs/90 Dresser, WI n ac 3 terrain pk 54009 238 340/890 25/41 X

M I Ski Areas B ig P owderhor Bessemer, n Mt 23 runs 8 2 terr.pks MI 49911 321 200/300 30/40 X I ndianhea Wakefield, d Mt 25 8 terrain pk MI 49968 327 181/269 35/47 X N D Ski Areas Bottineau, B ottineau North W inter Park 40 5 Dakota 334 n/a 15/22 X Walhalla, North F rost Fire 10 runs 2 terrain pk Dakota 238 n/a 20/32 X X Mandan, North H uff Hills 10 runs 4 Dakota 249 180/520 2-/25 X

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6.0 Comparative Financial Analysis and Pro Forma Comparative Performance Projections (with similar resorts) Detroit Mountain - Pro Forma Scenario 1Scenario 2Scenario 3Scenario 4Scenario 5Scenario 6Scenario 7 Operations Lift Tickets $71,125 $80,016 $88,906 $97,797 $106,688 $115,578 $124,469

Operations-Season Pass$100,000 $100,000 $100,000 $100,000 $100,000 $100,000 $100,000

Operations -Rental $49,245 $55,401 $61,557 $67,713 $73,868 $80,024 $86,180

operations Tubing $26,737 $30,080 $33,422 $36,764 $40,106 $43,448 $46,790 Operations- Ski School $3,559 $4,003 $4,448 $4,893 $5,338 $5,783 $6,228 Operations - Concessions$41,542 $46,735 $51,928 $57,121 $62,314 $67,506 $72,699 Fundraising Donations $50,000 $50,0 00 $50,000 $50,000 $50,000 $50,000 $50,000 Programs $30,456 $34,263 $38,070 $41,877 $45,684 $49,491 $53,298 Gaming $6,757 $7,601 $8,446 $9,290 $10,135 $10,979 $11,824 Total Sales $379,421 $408,099 $436,776 $465,454 $494,132 $522,809 $551,487 Concessions $20,771 $23,368 $25,964 $28,560 $31,157 $33,753 $36,350

Gross Profit $358,650 $384,731 $410,813 $436,894 $462,975 $489,056 $515,138 Advertising and Promo $5,459 $5,872 $6,284 $6,697 $7,109 $7,522 $7,935 Bank Service Charges $141 $141 $141 $141 $141 $141 $141 Contract Services $5,808 $6,247 $6,686 $7,125 $7,564 $8,003 $8,442 Dues and Memberships $878 $878 $878 $878 $878 $878 $878

Education and Training $1,203 $1,203 $1,203 $1,203 $1,203 $1,203 $1,203

Insurance Expenses $17,286 $18,593 $19,899 $21,206 $22,512 $23,819 $25,125

Interest Expense $2,627 $2,826 $3,024 $3,223 $3,422 $3,620 $3,819 Leases $12,515 $13,461 $14,407 $15,353 $16,299 $17,245 $18,190 Permits $612 $612 $612 $612 $612 $612 $612 Repairs and Maint Outsid$e17,490 $18,812 $20,134 $21,456 $22,778 $24,100 $25,422 Meals and Ent $1,118 $1,202 $1,287 $1,371 $1,456 $1,540 $1,625 Mileage Reimbursement $2,805 $2,805 $2,805 $2,805 $2,805 $2,805 $2,805 Merchant Fee $2,944 $3,166 $3,388 $3,611 $3,833 $4,056 $4,278 Postage and Deliver $1,277 $1,374 $1,470 $1,567 $1,663 $1,760 $1,857 Printing and Reproduction$1,306 $1,405 $1,504 $1,603 $1,701 $1,800 $1,899 Professional Fees $11,223 $11,223 $11,223 $11,223 $11,223 $11,223 $11,223 Real Estate Taxes $5,957 $6,407 $6,857 $7,308 $7,758 $8,208 $8,658 Repairs and Maint Buildin$g1s3,326 $14,333 $15,340 $16,347 $17,354 $18,361 $19,369

Supplies Expense $7,517 $8,086 $8,654 $9,222 $9,790 $10,358 $10,927

Telephone and Internet $2,677 $2,677 $2,677 $2,677 $2,677 $2,677 $2,677

Utilities $28,142 $28,142 $28,142 $28,142 $28,142 $28,142 $28,142 Wages and Salaries $130,572 $140,441 $150,310 $160,179 $170,048 $179,917 $189,786 Total Expenses $272,885 $289,907 $306,928 $323,950 $340,971 $357,992 $375,014 Net Ordinary Income $85,765 $94,824 $103,884 $112,944 $122,004 $131,064 $140,124

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6.1 Estimated Ski Area Start-Up Cost Operational costs were estimated by Paul Nordland, General Manager of Eagle Ridge Resort, Lutsen, Minnesota.

Description Price 06 Pisten Bully PB200 Terrain Park Edition groomer/2700hour$s 1 35,000.00 Snow Guns used $ 3 0 ,000.00 Revamp pump house and pipeline $ 2 5 ,000.00 Revamp electrical for snow making $ 1 0 ,000.00 Skis $ 3 0 ,000.00 Ski Boots $ 2 5 ,000.00 Poles $ 5 , 000.00 Snowboards $ 8 , 000.00 SB Boots $ 5 , 000.00 Ski/SnowboardTunimg Equipment $ 2 5 ,000.00 Borer Handle Tow $ 4 0 ,000.00 Safety signage, bamboo, fencing etc. $ 5 , 000.00 Ski Patrol Equipment $ 5 , 000.00 Terrain Park Features $ 5 , 000.00 Lift ticket print and tracking system. $ 1 7 ,000.00 Tow Rope $ 1 0 ,000.00 Tow Rope $ 1 0 ,000.00 Total $ 3 80,000.00

6.2 Foundation Development [501(C)(3)]

Developing a fundraising model for the DMRA will be necessary for initial costs and annual operations, as noted in the pro forma. With this in mind, one of the initial decisions of the DMRA grassroots group was to establish an organization with 501c3 IRS status. As such, the following steps have been completed.

The DMRA was organized to help explore the feasibility of re-opening Detroit Mountain as a year round recreational area. The group consists of 15 board members. The officers and members are noted below. By June 2010 the 501-c-3 nonprofit status application paperwork will be filed with the Internal Revenue Service. Articles of Incorporation have been created and reviewed with appropriate signatures of incorporators. In addition, by- laws have been approved and are currently in place.

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Board Members

Officers: Jeff Staley, president Mark Fritz, vice president Cyndi Anderson, secretary/treasurer

Chris Bergen Bob Bristlen Steve Daggett Dan Josephson Aaron Lauinger Ron Paskey Charlie Ramstad Steven Schmit Tony Schmitz Shelly Stowman Milt Wilson Deb Wimmer

6.3 Grant Funding Funding for fitness initiatives has become more prevalent as awareness on obesity in America has increased. First lady Michelle Obama launched her initiative called Let's Move in early February. Noting that one in three children is overweight or obese – a daunting statistic continues to be highlighted in the media. The dollars the first lady proposed to address the issue is $10 billion over 10 years. 22 Exploring grant possibilities will be an important strategy for the DMRA to be successful. Initiatives on fitness are just one area to explore. To date, the DMRA group has identified other potential opportunities.

Otto Bremer Foundation $200,000 Legacy Amendment Funding $100,000 USDA (RBEG – Rural Business Enterprise Grant) $99,000-$250,000 Mardag Foundation $50,000 Detroit Lakes Area Community Foundation $10,000-$50,000

6.4 Fundraising Developing a fundraising model for the DMRA will be necessary for initial costs and annual operations.

22 Givhan, R. “First lady also aims for fitness priority for kids” The Washington Post. Washinton, D. C. (February 24, 2010).

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At present, no fundraising has been conducted; however, there have been individuals and organizations who have expressed interest in supporting funding efforts. For example, the executive director of SkiDUCK contacted the DMRA group noting the following

To help you succeed in bringing Detroit Mountain back as a community resource, SkiDUCK will commit to raising $10,000 of their the next 10 years to give financially underprivileged children in the Detroit lakes and surrounding communities the opportunity to learn to ski and snow board23

As noted on their website, SkiDUCK is a non-profit organization dedicated to “enriching the lives of disabled and underprivileged children by sharing the joys of skiing and snowboarding”24

23 Lunde, C. Offer of support for Detroit Mountain – SkiDUCK. Facebook posting. 25 Feb 2010. 24 Lunde, C. Home page. (n.d). SkiDUCK retrieved 3 May 2010 from www.SkiDUCK.org.

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7.0 Appendix A - Detroit Mountain Focus Group Summary The focus group was held April 8 th at the Detroit Lakes Campus of the Minnesota State Technical and Community College to assist in the completion of the Development Concept section of the Detroit Mountain Recreation Area Feasibility Study. The event was promoted for one week prior through radio, newsprint, and the internet via facebook.com. Approximately 30 area residents participated.

Four groups of eight participants were formed and asked to complete an outline that directed the groups to list potential activities, user months, facility requirements, visitor usage, staffing needs, environmental impact, educational opportunities, fee structure, and concerns and benefits. A space for identifying supporting user groups and organizations and additional comments was also provided. Participants were given 45 minutes to complete the outline.

All suggested uses and activities will be evaluated for their compatibility with the mission statement, the overall site location, environment, and other uses. Similar uses or activities available within a 25 mile radius will be reviewed for competition as well as support.

Completion of the focus group will determine a cost/benefit analysis of each proposed use or activity that meets the above requirements.

Data Collection

 57 different uses and activities were identified.  10 of those uses were identified as four season, 36 uses were identified as three season, 7 were identified as winter only, 3 as summer only, and 1 spring only.  22 uses and activities would require paid staffing and another 12 would provide volunteer opportunities.  38 activities support the goal of providing healthy fitness activity or educational opportunities.  11 activities or uses have potential for creating an annual event or attraction for the area.

Survey Comments

 Local academic institutions could be involved in the education process, specifically in the sciences and recreational development. Students help with design and layout.  Scout organizations participate in service projects.  Condo/timeshare with access to facilities. Rental cabins similar to Andes Tower Hills.  Chalet used for visitor/nature center, weddings, reunions, business retreats.

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Detroit Mountain Focus Group Results User Months 1=Spring Annual 2=Summer Paid/ Festival 3=Fall Volunteer Fee Event for Activity 4=Winter Staffing Required Concerns Benefits Fee Maple Syrup 1 Volunteer NO Instruction X Amphitheater 2 YES Cost Instruction X Water Park 2 Paid YES Cost Water Slide 2 Paid YES Cost/Liability Outdoor Ice Rink 4 Paid NO Fitness Ski Jumping 4 Paid YES Cost Fitness

Snowboarding 4 Paid YES Cost/Liability Fitness X

Snowmobile Trailhead 4 Paid NO Parking Space Snowshoeing 4 Paid NO Fitness Tubing 4 Paid YES X-Country Skiing 4 Paid NO Fitness X Adventure Games 1, 2, 3 Paid/Volunteer YES Fitness Alpine Slide 1, 2, 3 Paid YES Cost Archery 1, 2, 3 Volunteer NO Liability Instruction X

ATV Trailhead 1, 2, 3 Volunteer NO Parking space

Ball Rolling 1, 2, 3 Paid YES Liability Basketball Courts 1, 2, 3 NO Birding 1, 2, 3 NO Education X BMX 1, 2, 3 Volunteer YES Impact on Site Fitness Driving Range 1, 2, 3 Paid YES Available SpaceInstruction Frisbee Golf 1, 2, 3 NO Fitness X Geocaching 1, 2, 3 NO Education

Hiking 1, 2, 3 NO Fitness

Horseback Trailhead 1, 2, 3 Volunteer NO Parking Space Horshoes 1, 2, 3 NO Fitness Interpretive Trail/Center1, 2, 3 Volunteer NO Education Kite Flying 1, 2, 3 NO Fitness Mini Golf 1, 2, 3 Paid YES Available Space Moto-Cross 1, 2, 3 Paid YES Impact/Noise Mtn. Biking 1, 2, 3 NO* Fitness X

Orienteering 1, 2, 3 NO Fitness

Paint Ball 1, 2, 3 Paid YES Impact Fitness Picnicking 1, 2, 3 NO Playground 1, 2, 3 NO Fitness Pow-Wow 1, 2, 3 NO Education X

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Detroit Mountain Focus Group Results

User Months 1=Spring Annual 2=Summer Paid/ Festival 3=Fall Volunteer Fee Event for Activity 4=Winter Staffing Required Concerns Benefits Fee Primitive Horse Camping 1, 2, 3 YES Impact Pump Track (Mtn.Bike) 1, 2, 3 NO Fitness RC Cars 1, 2, 3 NO Rock Climbing 1, 2, 3 YES Cost Fitness

Roller Skiing 1, 2, 3 NO Impact/Cost Fitness

Ropes Course 1, 2, 3 Paid YES Cost Education Sandboarding 1, 2, 3 YES Impact Fitness Shooting Range 1, 2, 3 Volunteer NO Liability Instruction Trail Running 1, 2, 3 NO Fitness X VolleyBall 1, 2, 3 NO Fitness X-treme Roller Bladding/Mtn1., B2o, a3rding YES* Liability Fitness Zip line/Slack line 1, 2, 3 YES Dog Park 1, 2, 3, 4 Volunteer NO

Internet Café/Web Cam1, 2, 3, 4 Paid NO

Meeting Space 1, 2, 3, 4 Paid YES Cost Instruction X

Natural Habitat Area/Prese1r,v 2e, 3, 4 Volunteer NO Education Observation Deck/Look Ou1t, T2o, w3,e 4r NO* Education Observatory 1, 2, 3, 4 Volunteer YES Education Primitive Camping 1, 2, 3, 4 YES Impact Rental Shop 1, 2, 3, 4 Paid YES Education Restaurant/Dining 1, 2, 3, 4 Paid YES Cost Sport Bubble 1, 2, 3, 4 Paid YES Fitness *Fee if Chairlift Used

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8.0 Appendix B – Nordic Ski

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9.0 Appendix C – National Ski Areas Association Annual Report summaries conducted by the NSAA. Full reports are available for a fee on the NSAA website25.

End of Season Survey tracking skier visit totals, distribution of skier visits by several key segments (day/overnight, skier/snowboarder, adults/kids, etc.) days of operation, snowfall, number of lifts, capital spending, lessons taught, lift tickets sold, and other key operational metrics (information collected by region,

 National visits down, impacted by weather. The 2006/07 saw a 6.5 % decline in total visits compared to the five previous years. Abnormally warm temperatures and below average snowfall impacted most areas.

 Results varied in regions (regions are: pacific west, Rocky Mountains, midwest, southeast, northeast). All regions except Rocky Mountains performed below its ten-year average, including slightly in the Midwest (down 0.2 percent)

 Operating days decline; delayed openings and midseason closures common. Average days open this season declined from 126 to 119 days, and every region of the country reported shortened seasons

 Peak day visitation soars. The ratio of peak day visits to average day visits, a measure of the magnitude of peak-day visitation, increased nationally this season, from 20 to 28 percent higher than the prior three-seasons.

 Season pass usage and season pass sales grow (Midwest up 6 %).

 Ticket yields and ticket yield ratios strengthen. The national average ticket yield ratio(the ratio of average ticket revenue per skier visit to lead ticket price) rose to 54.1 percent this season from 52.6 percent in 2005/06 (Midwest, up 1.1 %).

 Ski industry shows resilience, Despite down season. The 55.1 million visits represent what would have been record years in 1990s.

25 NSAA, RCA, Incorporated (2006). 2006/07 Ski Resort Industry Research Compendium: A summary of major research projects conducted for National Ski Areas Association. Retrieved April 28, 2010 from https://www.nsaa.org/nsaa/members/0607-research-compendium.pdf

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National Demographic Study to track demographic characteristics of skiers and snowboarders of the snow riding population for marketing and other purposes.

Key Highlights

 Age of visitor base. Notes strong growth in the 45-65 and 65+ segments, Declines in younger populations which remains important to long term health of industry.

 Snowboarding participation, slight decline.

 Related to the aging of the skier base, the proportion of visitors living in family or empty nester households continues to trend up, while the proportion of singles trends down.

 Ability levels and years of experience in snowsports continue to trend up.

 Season pass usage continues to rise, likely contributing to increased days of participation and increased ability levels. Average annual days of participation in total continued to trend up.

 Loyalty to individual resorts (as measured by the share of total season visits taken at a single resort) has continued to increase.

 Helmet usage continues to grow.

 Use of rental equipment continues to decline, partly as a result of increased ability levels.

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