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Eugene

(61,593 posts)
Mon Jul 2, 2012, 09:50 PM Jul 2012

California ski resort town to file for bankruptcy

Source: Reuters

SAN FRANCISCO | Mon Jul 2, 2012 8:57pm EDT

(Reuters) - The leaders of Mammoth Lakes, California, voted on Monday to approve a bankruptcy filing for the ski resort town, just days after Stockton, California, became the most populous U.S. city to turn to bankruptcy court for protection from its creditors.

The vote by the Mammoth Lakes town council to seek Chapter 9 bankruptcy protection was unanimous, according to a statement on the town's website.

The town of about 8,000 residents in the Sierra Nevada mountains about 300 miles north of Los Angeles saw no other options after its largest creditor, Mammoth Lakes Land Acquisition, refused to negotiate concessions, the statement said. Mammoth Lakes Land Acquisition won a $43 million legal judgment against the town stemming from a property development dispute that began in 2006.

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Read more: http://www.reuters.com/article/2012/07/03/us-mammoth-lakes-bankruptcy-idUSBRE8611GW20120703

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SunSeeker

(51,367 posts)
1. Sounds like a greedy land developer was trying to squeeze blood from a stone.
Mon Jul 2, 2012, 10:36 PM
Jul 2012

Per the city of Mammoth Lakes press release:

"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."

http://www.ci.mammoth-lakes.ca.us/CivicAlerts.aspx?AID=175

Mammoth Lakes was devastated by the real estate bubble popping. It was so sad to drive through this beautiful ski town this Christmas and see all the vacant houses. No one wants vacation homes in the mountains now, when they can barely afford to pay for one house.

I bet MLLA's hands weren't exactly clean in the real estate bubble, and if Mammoth Lakes denied them a right to develop back in 2006, then it probably saved MLLA's bottom line. Otherwise, they'd be upside down like everyone else is in Mammoth Lakes. I hope MLLA gets nothing in the bankruptcy.

Thanks for the post, Eugene.

hack89

(39,171 posts)
3. "the town snubbed a plan by his client that would allow it to pay off the judgment over 30 years."
Tue Jul 3, 2012, 09:54 AM
Jul 2012
"We structured a very reasonable proposal to resolve this," Brockett said. "They're not even insolvent."


It looks like the developer did try to work with them.

SunSeeker

(51,367 posts)
5. The town is insolvent.
Tue Jul 3, 2012, 11:46 AM
Jul 2012

Per the town's Press Release:

"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."

http://www.ci.mammoth-lakes.ca.us/CivicAlerts.aspx?AID=175

MLLA wanting 100 cents on the dollar from an insolvent debtor when other creditors are taking cuts is greedy (and would amount to a prohibited "fraudulent transfer" under bankruptcy law), particularly in light of how the town is cutting services and suffering. This is exactly the type of situation bankruptcy is designed for.

kwassa

(23,340 posts)
2. I've skied and backpacked from there....
Mon Jul 2, 2012, 11:44 PM
Jul 2012

Great area, something like 130 ski runs on Mammoth Mountain.

kemah

(276 posts)
4. Donald Trump's tactics
Tue Jul 3, 2012, 10:30 AM
Jul 2012

Donald uses bankruptcies to screw his vendors. He calls it a business decision.

SunSeeker

(51,367 posts)
6. But here it's MLLA that is trying to screw the town's vendors, not the town.
Tue Jul 3, 2012, 11:50 AM
Jul 2012

MLLA wants 100 cents on the dollar from an insolvent town--while other creditors are taking cuts. In the bankruptcy, all of the creditors all get a chance to be paid off fairly.

http://www.ci.mammoth-lakes.ca.us/CivicAlerts.aspx?AID=175

lolly

(3,248 posts)
8. One thing I can't follow here
Tue Jul 3, 2012, 12:55 PM
Jul 2012

Why does the town owe so much money to a land acquisition firm?

Wouldn't the firm be buying from the city to acquire land? Or did the acquisition firm get land somewhere else, and sell it to the city at boom-inflated prices?

SunSeeker

(51,367 posts)
9. Because the developer had way craftier attorneys than the town.
Tue Jul 3, 2012, 10:10 PM
Jul 2012

Here's how the LA Times described it:

"The agreement required the developer to make improvements to nearby Mammoth Yosemite Airport's fixed-base 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.

The court found the city had not lived up to its end of the bargain."

http://www.latimes.com/news/local/la-me-mammoth-lakes-20120703,0,4573711.story

I don't get how the MLLA's damages in not being able to build the hotel amount to $43M, especially since if they had built the hotel in 2007, they'd be underwater on it now, and NO ONE would be in it. It would be MLLA who would be filing for bankruptcy. Mammoth Lakes is a ghost town right now. As far as I'm concerned, Mammoth Lakes did MLLA a favor by blocking the development.

All I can figure is the developers had the craftier attorneys. Small towns can't afford to hire the best legal counsel.

lolly

(3,248 posts)
10. Damn.
Wed Jul 4, 2012, 10:16 PM
Jul 2012

So, the town has to pay up because the FAA didn't like the MLLA's plan.

Hope the bankruptcy court awards them 1$ and tells them to take a hike.

Anyway, as luck would have it, I'm leaving for Mammoth tomorrow for the weekend. I guess it will be nice and quiet...

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