Mammoth Lakes filed for bankruptcy 2 July 2012

[donbrown]

The High Sierra town of Mammoth Lakes said 2 July that it filed for bankruptcy because it cannot afford to pay a $43-million breach-of-contract judgment against it brought by a developer.

In a prepared statement, Mammoth Lakes officials said "bankruptcy, unfortunately, is the only option left" for the town, whose largest creditor, Mammoth Lakes Land Acquisition, had won a state court order requiring full payment by June 30, 2012.

Facing a judgment nearly three times the size of its annual operating budget and a $2.8-million shortfall in its 2011-12 fiscal year, the town had already cut many services and asked employees to take reductions in pay. Compounding problems, the adjacent Mammoth Mountain ski resort was forced to lay off 70 full-time employees last year due to a dearth of snow.

PHOTOS: California cities in bankrupcy

A breakdown in negotiations with the developer was the last straw.

The town plans to ask the bankruptcy court to approve a payment plan it claims is the most it can afford without jeopardizing the safety of residents and tourists: $500,000 a year over the next 10 years.

In the meantime, officials said the town of 7,700 permanent residents, about 300 miles north of Los Angeles, will remain open for business, and local police and fire departments will continue to provide “high levels of response and care.”

Mammoth Hospital, the Mammoth Community Water District and Mono County are separate from the town and are not affected, officials said.


Mark Rosenthal, a spokesman for the developer, was not immediately available for comment.

A state appellate court decision in December 2010 upheld the judgment and chastised the town for trying to back out of the agreement it signed in 1997 with Mammoth Lakes Land Acquisition.

The agreement required the developer to make improvements to nearby Mammoth Yosemite Airport’s fixed-based operations. In return, it would receive rights to develop a $400-million Hot Creek hotel project on 25 acres at the airport and an option to buy the land.

The court found that Mammoth Lakes changed its priorities in 2007 after it determined the project would interfere with Federal Aviation Administration policy governing the use of the airport property for aeronautical purposes and, as a result, derail the town’s plans to extend the runway to accommodate Boeing 757 passenger jets.

The developer, which had invested in some improvements at the airport, filed a breach of contract lawsuit against the town after it refused to move forward with the hotel project until the FAA policy issues were resolved.

 

[Visi]

This is crazy! I would of never thought they would be in such trouble. My grandpa lives in Bishop and went down there in Feb. it was a sad site for sure.

 

[bholmlate]

Interesting development. Sounds to me like its just big business's way to get all the players back to the table to discuss the issue and come up with some sort of resolution that everyone can can live with. I just feel sorry for the coladeral damage (ie residences and service provides in the area) that these types of things always leave in their wake. interesting time we live in for sure.

 

[judger101]

it seems like alot of smaller towns are in trouble these days

 

[donbrown]

At a special meeting on Monday, July 2, 2012, the Mammoth Lakes Town Council voted unanimously to authorize the filing of a petition for relief under Chapter 9 of the Bankruptcy Code in U.S. federal court. Bankruptcy, unfortunately, is the only option that the Town is left with, after its largest creditor, Mammoth Lakes Land Acquisition (MLLA) repeatedly refused to mediate its $43 million judgment against the Town, and obtained a State court order requiring payment of the full judgment by June 30, 2012.

In the past few months, Mammoth Lakes has struggled with two problems:

One - a lack of sufficient revenue to pay its current and anticipated obligations, as evidenced by a $2.7 million initial shortfall in its 2011-2012 fiscal year budget, balanced through painful measures in June 2011, an additional unanticipated shortfall of $0.9 million in the same 2011-2012 fiscal year that forced the Town to reduce its already low available cash, and a projected $2.8 million budget shortfall in its 2012-2013 fiscal year.

Two - a Writ of Mandate issued by a State Court ordering the Town pay a $43 million judgment owed to MLLA by June 30, 2012.

The Town has attempted to deal with both of these problems in a responsible fashion, cutting many services and asking its employees and the majority of its creditors and other parties in interest to take substantial cuts in payment. These negotiations took place in the context of the neutral evaluation process established by the California Government Code (the AB 506 mediation), and concluded on June 29, 2012. The neutral evaluation was conducted by the Hon. David Coar (Ret.), a very experienced and respected former Bankruptcy and U.S. District Court Judge selected by the participants.

The Town has already implemented the cuts it proposed during mediation, in effect breaching many existing contracts. However, based on agreements reached with many of its creditors, these contract breaches will be cured in new agreements, contingent upon either (a) a settlement with MLLA or (b) a Chapter 9 plan confirmation. The Town’s creditors and employees were willing to make their concessions as part of a global resolution of the Town’s financial challenges; their agreements were not made without reservations, their concessions are part of a global resolution that would allow the Town to move forward in a fiscally responsible manner.

As the Town acts in keeping with these agreements and as they are ultimately consummated, the Town will be able not only to overcome its structural fiscal issues, reflected in the annual budget shortfall, but also free up approximately $500,000 a year that can be used to pay its creditors, including MLLA, over the next 10 years, or to obtain a bond supported by that same payment stream, the proceeds of which will be paid to creditors, including MLLA.

Although invited on multiple occasions, MLLA refused to participate in the AB 506 mediation to discuss settlement or demonstrate to the mediator and the participating creditors that the Town can afford to pay more. As a result, a mediation that might have succeeded in avoiding a Chapter 9 case failed because a crucial party simply refused even to attend and discuss any issues it might have.

The Town will ask the bankruptcy court to process its Chapter 9 case efficiently and quickly. The Town has limited financial resources and cannot afford a long drawn-out case. If the case lasts too long, it will significantly reduce the Town’s available funds, necessarily reducing recoveries to the Town’s unsecured creditors.

While the Town proceeds with its Chapter 9 bankruptcy case, it will remain open for business as expected, with the support from other governmental agencies:

• The Police and Fire Departments, along with other safety partners such as paramedics and Sheriff's office, will provide high levels of response and care;

• Road, parks, and airport maintenance services will continue as scheduled;

• Town Office business hours and service deliver will continue as usual without interruption of services;

• Community services and providers such as Mammoth Hospital, Mammoth Community Water District, and Mono County are separate from the Town and are not impacted.

MAMMOTH LAKES FAQS ABOUT BANKRUPTCY

http://www.ci.mammoth-lakes.ca.us/documents/18/321/TOML_FAQ_Chapter%209_7-5-12_201207051346559844.pdf

SIMILAR MAMMOTH LAKES FAQS ABOVE BANKRUPTCY A PAGE LONGER

http://www.ci.mammoth-lakes.ca.us/documents/18/321/Frequently%20asked%20questions%20-%20MLLA%20Mediation%20and%20Chapter%209_7-10-12l_201207111107052383.pdf

 

[byeatts]

The High Sierra town of Mammoth Lakes said 2 July that it filed for bankruptcy because it cannot afford to pay a $43-million breach-of-contract judgment against it brought by a developer.

In a prepared statement, Mammoth Lakes officials said "bankruptcy, unfortunately, is the only option left" for the town, whose largest creditor, Mammoth Lakes Land Acquisition, had won a state court order requiring full payment by June 30, 2012.

Facing a judgment nearly three times the size of its annual operating budget and a $2.8-million shortfall in its 2011-12 fiscal year, the town had already cut many services and asked employees to take reductions in pay. Compounding problems, the adjacent Mammoth Mountain ski resort was forced to lay off 70 full-time employees last year due to a dearth of snow.

PHOTOS: California cities in bankrupcy

A breakdown in negotiations with the developer was the last straw.

The town plans to ask the bankruptcy court to approve a payment plan it claims is the most it can afford without jeopardizing the safety of residents and tourists: $500,000 a year over the next 10 years.

In the meantime, officials said the town of 7,700 permanent residents, about 300 miles north of Los Angeles, will remain open for business, and local police and fire departments will continue to provide “high levels of response and care.”

Mammoth Hospital, the Mammoth Community Water District and Mono County are separate from the town and are not affected, officials said.


Mark Rosenthal, a spokesman for the developer, was not immediately available for comment.

A state appellate court decision in December 2010 upheld the judgment and chastised the town for trying to back out of the agreement it signed in 1997 with Mammoth Lakes Land Acquisition.

The agreement required the developer to make improvements to nearby Mammoth Yosemite Airport’s fixed-based operations. In return, it would receive rights to develop a $400-million Hot Creek hotel project on 25 acres at the airport and an option to buy the land.

The court found that Mammoth Lakes changed its priorities in 2007 after it determined the project would interfere with Federal Aviation Administration policy governing the use of the airport property for aeronautical purposes and, as a result, derail the town’s plans to extend the runway to accommodate Boeing 757 passenger jets.

The developer, which had invested in some improvements at the airport, filed a breach of contract lawsuit against the town after it refused to move forward with the hotel project until the FAA policy issues were resolved.

Sounds like poor city management and promises they couldn't make. Irresponsible decisions without doing the homework. Sad for the city but serves them right.