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The Stonewall Resort in West Virginia, Developed as a Public-private Partnership,
Working on a Firmer Financial Footing; Has Not Made Payment on its
 $42 million in Bonds Since 2006

By George Hohmann, Charleston Daily Mail, W.Va.McClatchy-Tribune Regional News

October 26, 2009 --CHARLESTON, W.Va. -- The developer of Stonewall Resort said a lot of progress has been made recently toward putting the project on a firmer financial footing.

"Over the last two years we've focused on how can we get all of the stakeholders to cooperate and grow the revenues of the project," said Rudy Henley. "We've come up with two sets of tools that can do that."

One tool is legislation, approved by the state Legislature last year, which allows the construction of up to 100 additional cottages. The cottages would be privately financed and available to the public for rent, with some of the revenue going to the investors and some to the resort.

"One way to have more revenue (for the resort) is to have more people on site, taking advantage of the amenities, facilities and activities," Henley said. "This (the legislation) creates a means to finance additional lodging without the state having to write checks, and it produces benefits to the project in terms of stabilizing employment and providing additional revenues and increased capacity."

The other tool is the creation of a nonprofit foundation that can accept grants and private donations.

"This provides another source of funding to build amenities, enhance education and be diligent about preservation of the environment," Henley said.

The foundation has received three grants totaling about $650,000, has raised about $150,000 in matching funds, and is trying to raise another $600,000, he said.

One of the foundation's goals is to build a walking bridge on the lake that connects the lodge to the day-use area and marina.

"The walking bridge is designed to be an iconic part of the project," Henley said. "Our thought was to design it after the Chapel Bridge in Lucerne, Switzerland."

The walking bridge will be compliant with the federal Americans with Disability Act and will get people down by the water to fish and relax, he said.

The state legislation and the creation of the foundation are in accord with a 1999 presidential commission that studied the nation's recreation lakes, Henley said.

Stonewall Resort, which cost $64.7 million, opened in late 2002 -- almost two years behind schedule. Costs roughly doubled from the original plan as the scope of the project was expanded from construction of a 150-room lodge to 198 rooms.

Because of the delay the resort went through its $2 million in start-up money.

McCabe-Henley Properties, a Charleston-based firm operated by Henley and State Sen. Brooks McCabe, D-Kanawha, developed the resort. Earlier this year McCabe and Henley re-arranged their business relationship. McCabe has said he no longer has any connection to the resort. He now heads the commercial real estate firm, which has been renamed WV Commercial Real Estate. Henley's focus is on venture capital projects and Stonewall Resort.

The development of the resort was a public-private partnership that involved the U.S. Army Corps of Engineers, the state Division of Natural Resources, the state Economic Development Authority and bondholders.

The federal government, which developed the lake, owns the land. The state, which put $23 million into the project, owns the lodge and other improvements. The bondholders, who bought bonds with a face value of $42 million, have the right to the revenues, although the lodge and other improvements will eventually revert to the state.

Henley said the resort "is 100 percent self-sufficient," in that it generates enough money to finance ongoing operations. However, it hasn't made a payment on its bonds since April 1, 2006.

In 2005 the resort received a $1 million loan from the Legislature to make a bond payment but in early 2006 Gov. Joe Manchin's administration announced it would not ask for any more state money to help the resort.

"Over the last two years, my focus has been on how can we get all of the stakeholders to cooperate to grow the revenues of the project," Henley said last week.

Almost any major change at the resort requires the approval of all the parties involved, including the bondholders. That was a problem because, until recently, the bondholders were not organized.

Henley said the bondholders recently organized. Earlier this month they gave preliminary approval to an amendment to the trust indenture and development agreement that allows planning to proceed for additional cottages and more amenities. The final plan will go to the bondholders, the Division of Natural Resources and the Army Corps for approval.

"My goal is to have the approvals in the spring," he said. "That's probably a little unrealistic but, to keep everybody moving, cooperating and working together, my goal is spring. If it moves efficiently, spring is not unrealistic, at least to be able to present the product to the marketplace.

"The public looks at this and says, 'You've got a nice project -- a good meeting place, good service, a quality product,'" Henley said. The resort employs 275 people who have benefits and career paths and the resort is generating $1 million a year in taxes.

Henley has repeatedly said that if West Virginia had not had the resort developed, the state would have had to write a check to the Army Corps for $35 million. That figure represents half the amount, plus interest, spent by the Army Corps to create a 2,000-acre state park and an 18,000-acre wildlife management area in Lewis County. The resort is 91 miles north of Charleston, off the Roanoke exit of Interstate 79.

"The state put in $23 million, the bondholders put in $42 million and the state was relieved of a $35 million debt," Henley said again last week.

However Dave Callahan and Cordie Hudkins, who were state government executives in 1977 when the state and the corps signed the Stonewall contract, said in 2006 that they don't think the state would have ever been forced to write a check. Hudkins said, "There was always the thought the state had the moral obligation to pay and would do whatever it could to pay."

A spokeswoman with the Pittsburgh, Pa., district of the Army Corps said in 2006 that the state had an obligation to the corps for the development of the recreation facilities.

Henley said that now, "I feel there's an understanding among all of the parties," and that "cooperation is better, communication is better, although it is an ongoing process with a wide-range of interested parties with a wide range of views.

"I think we're making progress," he said. "What I'm asking for is cooperation. This can be a great project of national significance as well as to the state and local economy. We can have that. But if the parties don't cooperate, we can tear it down.

"I'm saying (to the parties involved), 'Do what you can do within the bounds that you're comfortable with and that have precedent.' I don't think anything we're asking puts anyone at risk or outside of their comfort zone.

"Why wouldn't you want to make this as successful as you possibly can? You've got to cooperate at the speed of business to get some of these things done."

Contact writer George Hohmann at business@dailymail.com or 304-348-4836.

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To see more of the Charleston Daily Mail, or to subscribe to the newspaper, go to http://www.dailymail.com.

Copyright (c) 2009, Charleston Daily Mail, W.Va.

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