daho Ski Resort Seeks $42.5M State Loan

BOISE, Idaho -

Tamarack Resort, a ski resort and real-estate development near McCall, is trying to persuade the state to guarantee a $42.5 million low-interest loan to a local sewer district for a major expansion of sewer and drinking water systems that serve the ski and golf community and others in the area.

As security, the resort has pledged property it says is worth $728 million, according to documents obtained Tuesday by The Associated Press at a meeting of the Idaho Municipal Bond Bank, the 7-year-old state organization that lends money to local governments at favorable interest rates.

The bond bank generally lends on the condition that Idaho can intercept state sales tax revenue destined for the local government, in the rare instance that government no longer can make its payments.

In this case, the loan applicant, the North Lake Recreational Sewer and Water District, doesn't get state tax money. So the resort has offered the property as security instead.

The five-member bond bank authority, made up of state officials and lawmakers, has delayed approving the proposal so it can first gauge support among legislative leaders and Gov. C.L. "Butch" Otter.

"Legislative leadership is critical in this, simply from the question, 'Is this the direction you want the bond bank to go?'" said state Treasurer Ron Crane, the authority's chairman. "The same with the governor's office: 'Is this what you envisioned the bond bank doing, or are we getting a little too far out of line?' "

The bond bank came about in 2000 after voters that year approved a constitutional amendment. It offers small local governments the chance to minimize bond costs and interest rates by bundling several bond issues together and then taking advantage of the state's guarantee of repayment.

For instance, the bank on Tuesday approved selling about $15 million in bonds to cover loans to the cities of Heyburn, Jerome and Eagle for utility improvements.

But the Tamarack plan, which would clear the way for the resort to complete development of more than 1,000 lots, would be the largest single project the bank has undertaken, doubling existing loans to some $80 million, Crane said.

According to the proposal, the North Lake Recreational Sewer and Water District would use the money to expand sewage collection and treatment systems, build lift stations, upgrade Tamarack's drinking water system and help pay off $11 million in existing loans the district has gotten from the state Department of Environmental Quality and State Water Resources Board.

Bill Eddy, the sewer district manager, said the resort isn't the only one who would benefit.

The expansion would allow about 2,000 other lots on the northwest shore of Lake Cascade (nyse: CAE - news - people ) to hook into the system, as well as give existing cabin owners who now have septic tanks a chance to voluntarily join the district.

"The environmental impact on the lake has to be taken into account," Eddy said, noting septic systems can hurt water quality.

In addition to offering land as security, Tamarack has pledged to pay any cost overruns in the water system expansion, as well as provide financial guarantees to complete roads, communications infrastructure and power lines, before any bond-bank money is spent on the sewer system expansion.

"Even if we had a catastrophic reduction in the value of the real estate market, that property that is there does secure the amount of the issuance and can be the ultimate recourse for the district," said Steve Millemann, the resort's attorney.

Sen. Bart Davis, R-Idaho Falls and another bond bank authority member, said he doesn't doubt the merits of the project - or that Tamarack could provide adequate security to reduce financial risks of such a bond issuance.

Still, policy makers first need to consider that thousands of other sewer and water districts in Idaho could request similar assistance if this proposal goes ahead. That could sap bonding capacity from other worthy causes, he said.

"I continue to worry about how broad and popular the bond bank is becoming," Davis said, adding that if every sewer or local improvement district were to request a loan, "it makes this application seem pretty small."