Town of Mammoth officials have released their own list of frequently asked questions, and answers, about the $42 million court judgment debt against town government. More was expected at Wednesday night’s Town Council meeting with discussion of these issues slated for 6pm.
Frequently asked questions regarding the judgment awarded to Mammoth Lakes Land Acquisition (MLLA) and status of settlement negotiations
• Why is there a judgment, and what is the amount? In 1997, the Town entered into a Development Agreement (“DA”) with Terrance Ballas (“Developer”) to construct residential units, retail, hangars and other structural improvements near the Mammoth Yosemite Airport. The Developer subsequently transferred development rights for the residential (hotel/condominium) portion of the DA to Mammoth Lakes Land Acquisition (“MLLA”).
In 2006, MLLA sued the Town for breach of contract over their portion of the DA. As a result of a jury trial, in 2008 MLLA was awarded a $30 million judgment against the Town. While the Town appealed the judgment several times, those appeals were ultimately unsuccessful. After the latest appeal in November 2010, the Town requested review by the California Supreme Court. That request was denied in March 2011. The Town, therefore, has exhausted its options to appeal the judgment.
The amount of the judgment, in the meantime, has grown to over $42 million. This amount includes nearly $2.4 million in MLLA attorney’s fees that were previously awarded by the trial court, MLLA attorney’s fees incurred as a result of the various appeals, other related MLLA costs, as well as post-judgment interest at 7% as established by law.
• Why is it taking so long to settle? After the State Supreme Court declined to hear the Town’s appeal in late March 2011, the Town and MLLA promptly met and established a process to exchange information and begin settlement discussions.
On April 18, 2011, representatives of the Town and MLLA, along with their respective legal counsel, held their first meeting, and initiated a collaborative process in pursuit of a settlement that protects the public service interests and functions of the Town and compensates MLLA. What followed that meeting, through the months of May, June, July, August and September 2011, was a review of the Town’s financials and related details by MLLA. Volumes of information were provided to MLLA in response to their questions and requests, and several meetings were held between the Town’s and MLLA’s representatives to collectively review the provided information, and answer any follow up questions. During these meetings, possible components of a settlement, and the Town’s ability to pay, were also reviewed and discussed.
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After completing their review of the Town’s finances, in early October 2011, MLLA presented to the Town their first proposal on paying the judgment. The Town responded to MLLA on October 5, 2011, and received a counter-proposal from MLLA on November 16, 2011. The Town Council discussed MLLA’s counter-proposal in a closed session on November 30, 2011, and responded with its own counter-proposal #2 on December 1, 2011. MLLA rejected the Town’s December 1, 2011 settlement proposal, and MLLA responded with another counter-proposal that was received on December 14, 2011.
In early January 2012, additional information about the Town’s fiscal condition for the current and next fiscal years became known, and the Town has been developing a restructuring plan to address all of its obligations, including the MLLA judgment.
• It has been reported in the local media that the Town’s settlement discussions with MLLA have been discontinued. Is this true? Not from the Town’s standpoint. On the contrary, the Town continues to make every attempt to reach a settlement with MLLA. In this respect, on January 19, 2012, the Town wrote to MLLA the following: “In light of current fiscal realities, the Town has determined that it needs to more closely analyze and assess pertinent issues with financial implications, including the ongoing efforts to reach a resolution with MLLA. The Town has begun developing a global restructuring plan, which will address the various fiscal issues impacting the Town.” The Town’s January 19th letter further stated that another settlement offer would be presented to MLLA after February 1, 2012.
In the meantime, on February 2, 2012, MLLA filed a petition with the State Court seeking a writ demanding the Town to pay the full $42 million judgment.
Despite this recent State Court proceeding, the Town still intends to continue settlement talks with MLLA. In this respect, on February 15, 2012, the Town sent MLLA a letter requesting that the parties continue their settlement discussions through a neutral evaluation process (i.e., mediation) in accordance with section 53760.3 of the California Government Code. In that neutral evaluation process, the Town will submit to MLLA a restructuring plan that addresses all of its obligations, including the MLLA judgment.
Various creditors of the Town and other interested parties will also be receiving similar letters from the Town providing notice of this neutral evaluation process.
• What procedural options are available to the Town? The Town cannot pay the full judgment amount, which currently stands at over $42 million, with interest and legal fees. In light of this inability to pay, the Town has pursued settlement discussions with MLLA. These settlement discussions began after a five-month information- exchange period on the Town’s finances, structure and services, at MLLA’s request. In furtherance of those settlement discussions, on February 15, 2012, the Town sent MLLA a letter requesting that the parties participate in a neutral evaluation process (i.e., mediation) in accordance with section 53760.3 of the California Government Code. Various creditors of the Town and other interested parties will also be receiving similar letters from the Town providing notice of this neutral evaluation process. In the event that the neutral evaluation process is unsuccessful, the Town may be forced into Chapter 9 bankruptcy.
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• Why not just file for bankruptcy? Many other cities seem to be doing this. The goal of the Town is to achieve a feasible, consensual out-of-court resolution. The Town views Chapter 9 bankruptcy as a last resort to be used only after other potentially feasible means of resolving the judgment have been fully explored.
• What exactly is Chapter 9 bankruptcy? Chapter 9 of the Bankruptcy Code is designed to enable a local governmental entity that is unable to pay its debts as they come due to continue to provide essential programs and services to its residents while working out and presenting a plan to adjust its debts. A Federal Bankruptcy Judge presides over a municipal debt adjustment case.
• How could the Town afford to pay anything at all, given that the Town only recently balanced a $2.8 million budget gap? The Town cannot pay the entire $42 million judgment. However, the Town will work with MLLA to reach a settlement that the Town can reasonably afford to pay, without significantly impacting the Town’s essential programs and services. In this respect, on February 15, 2012, the Town sent MLLA a letter requesting that the parties continue their settlement discussions through a neutral evaluation process (i.e., mediation) in accordance with section 53760.3 of the California Government Code. The Town will submit to MLLA a restructuring plan that addresses all of its obligations, including the MLLA judgment, in that neutral evaluation process. Various creditors of the Town and other interested parties will also be receiving similar letters from the Town providing notice of this neutral evaluation process.
• What about long-term economic viability of the Town, and the need to keep our resort status in order to continue attracting visitors and generating revenues? The Town must continue to provide resources to sustain current levels of Town municipal services, without further erosion of already severely depleted service levels. The Town’s own experience, and the experience of similar resort communities, emphasize the importance of investing in and supporting: commercial air travel service, local free transit, affordable workforce housing, tourism promotion, public safety and recreation. The Town’s spending in these areas is comparable to – and, in some cases, lower than – other resort communities with which it must stay competitive.
Furthermore, the Town must provide annual funding for road rehabilitation and maintenance, and snow removal; fully address its existing debt obligations, unfunded or under-funded liabilities such as pensions and post-employment benefits; and maintain adequate cash reserves necessary to both pay bills during the year and provide funding in the case of uncertainties (such as the lack of snow) or emergencies.
Meeting the above objectives will be challenging, given the current fiscal realities and the bleak fiscal future of the Town. Nevertheless, the Town is committed to continuing to work with MLLA to reach a settlement for an amount that the Town can afford to pay.
• What payment options is the Town considering? The Town has offered to MLLA various alternatives to settle the judgment.
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• Will there be an opportunity for public input? The Town is contemplating a public meeting to respond to questions regarding the settlement process. In the meantime, the Town’s leaders encourage input from the community. You can contribute in one of several ways:
1. Attend a public meeting on Wednesday, February 15, at 6:00pm, in Suite Z. Additional public meetings may be held at future dates. Please contact the Town Manager’s Office for information, at (760) 934-8989, extension 223.
2. Provide input via e-mail ([email protected]). Your input is sought on payment options that should be considered in a settlement, possible adjustments to the Town’s General Fund budget to accommodate a long-term payment once a settlement is reached, and anything else you find important related to the judgment.
3. Contact a Town Council member or the Town Manager’s office to offer your suggestions or solutions.
• Where can I get additional information? You can contact the Town Manager’s office at 760-934-8989, extension 223, or send an e- mail to [email protected] If you call with, or otherwise submit a question that has not yet been included in this document, we will add a question and a response for everyone’s benefit.