Ordinance No. 19-01

Introduced: August 26, 2019
Public Hearing: September 9, 2019
Status: Adopted

An Ordinance of the Township of Vernon, County of Sussex, State of New Jersey Creating a Resort Service Fee

WHEREAS, Mountain Creek Resort, Inc. (“Mountain Creek”) owns and operates a four-season resort located in the Township of Vernon (“Township”) that is commonly known as the Mountain Creek Resort (“Resort”); and

WHEREAS, Mountain Creek owns and/or leases multiple parcels of real property to operate the Resort, all of which are listed on the attached Appendix A  and are incorporated herein (“Property”); and

WHEREAS, Mountain Creek intends to further develop the Resort, and its contemplated development requires additional wastewater capacity; and

WHEREAS, Mountain Creek requested the Township to acquire the additional wastewater capacity from the Sussex County Municipal Utilities Authority (“SCUMA”) and build the infrastructure necessary for the additional wastewater capacity (“Project”), which would facilitate development of the Property; and

WHEREAS, the Project was funded by the Township and SCUMA issuing bonds (“Sewer Bonds”); and

WHEREAS, the Township and Mountain Creek entered into an agreement dated October 24, 2005 (“2005 Sewer Agreement”), pursuant to which Mountain Creek agreed, subject to the terms of the 2005 Sewer Agreement, to pay the debt service on the Sewer Bonds, plus the costs associated with the development, construction, operation, and maintenance of the Project less the revenue obtained by the Township for sewer charges on an annual basis; and

WHEREAS, the Township and Mountain Creek entered into a sewer funding agreement dated July 18, 2012 (“Sewer Funding Agreement”), which modified and superseded the 2005 Sewer Agreement; and

WHEREAS, the Sewer Funding Agreement, among other things, modified Mountain Creek’s obligation to pay the debt service for the Sewer Bonds and thereafter required Mountain Creek to pay 63% of any yearly budget deficit incurred by the Vernon Township Municipal Utilities Authority (“VTMUA”) in relation to the Project; and

WHEREAS, subject to the terms of the Sewer Funding Agreement, Mountain Creek’s obligations under the Sewer Funding Agreement continue annually until the Sewer Bonds are paid in full; and

WHEREAS, Mountain Creek filed a Chapter 11 petition in the United States Bankruptcy Court for the District of New Jersey (“Bankruptcy Court”) on May 15, 2017, and the Chapter 11 case is pending under Case No. 17-19899 (SLM) and thereafter Mountain Creek did not pay certain obligations (the “Past Due Obligations”) provided for under the Sewer Funding Agreement;

WHEREAS, Mountain Creek has not paid the Past Due Obligations; and

WHEREAS, the Vernon Parties (as defined below) and Mountain Creek are engaged in certain litigation (the “Litigation”) in the Bankruptcy Court concerning the Sewer Funding Agreement and claims asserted by the Vernon Parties arising under and related to the Sewer Funding Agreement;

WHEREAS, the Township and the VTMUA (together “Vernon Parties”) and Mountain Creek have entered into a settlement agreement (the “Approved Settlement Agreement”) to resolve the Litigation and all claims related to the Sewer Funding Agreement, which settlement agreement has been approved by the United States Bankruptcy Court for the District of New Jersey; and

WHEREAS, the Approved Settlement Agreement has been approved by the authorized representatives of the Vernon Parties; and

WHEREAS, subject to the terms and conditions of the Approved Settlement Agreement, Mountain Creek has agreed to pay the following obligations owed to the Vernon Parties pursuant to the Sewer Funding Agreement: (i) Mountain Creek’s sixty-three percent (63%) share of the yearly budget deficit (the “VTMUA Budget Deficit Obligations”), if any, incurred by the VTMUA; (ii) payments on Mountain Creek’s accumulated past due debt under section 6.02 of the Sewer Funding Agreement for the period January 1, 2012, through December 31, 2016 (“Past Due Sewer Obligations”); (iii) payments on the debt service attributable to the Vernon Bonds as defined in article 5.02 of the Sewer Funding Agreement (“Vernon Bond Obligations”); and (iv) Mountain Creek’s obligation (“Pump House Obligations”) to reimburse the Township for the costs associated with the design, permitting and construction of the Sand Hill Road Sewage Pump Station (“Pump Station”). The Past Due Sewer Obligations and the Vernon Bond Obligations are hereinafter referred to as the “Fixed Sewer Agreement Obligations.” Together, the Fixed Sewer Agreement Obligations, the VTMUA Budget Deficit Obligations and the Pump House Obligations are hereinafter collectively referred to as the “Sewer Agreement Obligations.” Appendix B attached hereto lists the Fixed Sewer Obligations and the estimated VTMUA Budget Deficit Obligations. The actual amount of the VTMUA Budget Deficit Obligations will be calculated annually in accordance with Approved Settlement Agreement. The Pump House Obligations are not yet determined but shall be determined as set forth in the Approved Settlement Agreement. Once the Pump House Obligations are determined, Appendix B shall be updated to include those amounts.

WHEREAS, pursuant to the terms of the Approved Settlement Agreement, a Recreational Service Fee (referred to in the Approved Settlement Agreement as the Vernon Municipal Fee) will be collected from Mountain Creek or any other operator offering Recreational Activities (as such term is defined in the “Approved Settlement Agreement”) on the Property to pay the Sewer Agreement Obligations.

NOW, THEREFORE, BE IT ORDAINED by the by the Township Council of the Township of Vernon as follows:

  1. The aforesaid recitals are hereby adopted and incorporated herein as if repeated in full; and
  2. To satisfy the Sewer Agreement Obligations, Mountain Creek, and/or any operator licensed by or in contract with Mountain Creek (including any successor to Mountain Creek) to operate/manage any Recreational Activity, or any person or entity that offers Recreational Activities (“Resort Operator(s)”) on the Property shall cause to be charged and collected from every customer purchasing a ticket for admission (whether such ticket is an individual ticket or included as part of a group sale or ticket/admission package, in which case the Recreational Service Fee will be charged to the Recreational Activity portion of such ticket/admission package) for any Recreational Activity a fee equal to 7% of the gross ticket price related to such Recreational Activities (the “Recreational Service Fee(s)”). In the event there is a shortfall in collections of the Recreational Service Fees (the “Shortfall”) necessary to repay the annual Sewer Agreement Obligations due in any calendar year, Mountain Creek and/or any Resort Operator shall, from the first day of the calendar year immediately following the Shortfall, cause to be charged and collected from every customer purchasing a ticket for admission for any Recreational Activity a fee equal to 8% of the gross ticket price related to such Recreational Activities until such time as the Shortfall for the prior year(s) is fully paid. If the Shortfall, if any, is paid, Mountain Creek and/or any Resort Operator shall reduce the fee to 7% of the gross ticket price. Recreational Activities subject to the Recreational Service Fee include skiing/snowboarding, snow tubing, water park admission, admission to the bike park and the Oktober Fest offered by Mountain Creek, any of its affiliated companies or successors or assigns or any Resort Operator at the Property. The Recreational Service Fee shall not include any activities or sales with respect to which a sales tax is applied as of the effective date of this Ordinance. In the event that a sales or similar type of tax is applied to any Recreational Activity after the effective date of this Ordinance, the obligation to charge, collect, and remit the Recreational Service Fee shall continue. Recreational Activities shall not include, and the Recreational Service Fee shall not apply to, sales for lodging, food, beverages, parking, apparel and other retail items, equipment, land, banquet-related services, and other similar good or services; and
  3. The Recreational Service Fee shall be collected until the Sewer Agreement Obligations are paid in full; and
  4. Except to the extent set forth in section 2(vi) of the Approved Settlement Agreement, until such time as all of the Sewer Agreement Obligations are paid in full, the Recreational Service Fees that are collected shall constitute the property of the Vernon Parties and shall be held by Mountain Creek, and/or any Resort Operator that manages or operates the Resort or offers recreational activities on the Property, in a separate interest bearing account (“Recreational Service Fee Account”) in express trust for the Vernon Parties for the specific purpose of paying the Sewer Agreement Obligations in accordance with the terms of the Approved Settlement Agreement Nothing herein shall be deemed to apply to Mountain Creek’s regular quarterly sewer usage fees or property taxes; and
  5. Subject to the terms of the Approved Settlement Agreement, on or before January 1st, April 1st, July 1st, and October 1st of each year, commencing October 1, 2019, Mountain Creek, and/or any Resort Operator that manages or operates the Resort or offers Recreational Activities on the Property, shall disburse the Recreational Service Fees held in Recreational Service Fee Account as of December 1st, March 1st, June 1st, and September 1st towards payment of the Sewer Agreement Obligations owed for that calendar year; and
  6. Subject to the terms of section 2(vi) of the Approved Settlement Agreement, if the Recreational Service Fees in the Recreational Service Fee Account exceed the Sewer Agreement Obligations owed for a calendar year, Mountain Creek, and/or any Resort Operator that manages or operates the Resort or offers recreational activities on the Property, shall hold the excess Recreational Service Fees in the Recreational Service Fee Account and paid and applied to the Sewer Agreement Obligations due in the following year(s) in accordance with the timeline in section 2(v) of the Approved Settlement Agreement; and
  7. If the amount held in the Recreational Service Fee Account exceeds the amount equal to twice the Sewer Agreement Obligation owed for the preceding year, Mountain Creek, and/or any Resort Operator that manages or operates the Resort or offers recreational activities on the Property, shall be entitled to use the amount in excess of twice the Sewer Agreement Obligation owed for the preceding year (“Excess Recreational Fee”) in its sole discretion. The Excess Recreational Fee shall not constitute trust funds held for the benefit of the Vernon Parties; and
  8. If the funds in the Recreational Service Fee Account are not sufficient to pay in full the annual Sewer Agreement Obligations in any particular calendar year, the Recreational Service Fees collected in any subsequent year shall be applied first to satisfy the shortfall and Mountain Creek, and/or any Resort Operator that manages or operates the Resort or offers Recreational Activities on the Property, shall increase the amount of the Recreational Service Fee to eight percent (8%) in accordance with paragraph 2 above. When the Shortfall for the prior year(s) is fully paid, Mountain Creek, and/or any Resort Operator that manages or operates the Resort or offers recreational activities on the Property, shall reduce the fee to seven percent (7%) of the gross ticket price or gross admission price.
  9. Subject to the terms of section 2 (v) of the Approved Settlement Agreement, the Vernon Parties shall have the right to audit the Recreational Service Fee Account at any time by an auditor solely of the Vernon Parties choosing during reasonable business hours, on at least seven (7) business days’ advance written notice and at the sole expense of the Vernon Parties; and
  10. The obligation to charge, collect, and remit the Recreational Service Fee consistent with this Ordinance shall be a continuing obligation imposed by the Vernon Parties on Mountain Creek and/or any Resort Operator that manages or operates the Resort or offers Recreational Activities on the Property; and
  11. The obligation to collect and disburse the Recreational Service Fees pursuant to this Ordinance and in accordance with the terms of the Approved Settlement Agreement, shall be a condition of operating or conducting any Recreational Activities on the Property until such time as the Sewer Agreement Obligations are paid in full; and
  12. Upon payment in full of all Sewer Agreement Obligations neither Mountain Creek nor any Resort Operator shall have any obligation to charge, collect, or remit to the Vernon Parties the Recreational Service Fee. To the extent any Recreational Service Fees remain in the Recreational Service Fee Account at the time all Sewer Agreement Obligations are paid in full, Mountain Creek or any Resort Operator shall be entitled to retain the funds in the Recreational Service Fee Account for its exclusive use and the Vernon Parties shall not have any entitlement to any portion of the Excess Funds; and
  13. This Ordinance shall not prohibit the Township of Vernon from obtaining or enforcing any lien pursuant to the Approved Settlement Agreement.
  14. This ordinance may only be amended by an affirmative vote of three fourths of the Township Council.
  15. Each section of this ordinance is an independent section, and the holding of any section or part thereof to be unconstitutional, void or ineffective for any cause shall not be deemed to affect the validity of constitutionality of any other sections or parts thereof.
  16. Any ordinances or parts thereof in conflict with the provisions of this Ordinance are hereby repealed as to their inconsistencies only.
  17. This Ordinance shall take effect immediately upon final passage, approval, and publication by law.