Town of Mammoth will file for bankruptcy relief

As expected, and as clearly planned, the Mammoth Town Council voted unanimously this morning at 10:20 to enter Chapter 9 bankruptcy. A filing will now go to a bankruptcy court. Mayor Matthew Lehman read a press statement in which the Council assures that public services will continue as usual, with support from other local agencies.

It was a tense hour in the Mammoth Town Council chambers. Officials and all those watching knew the somber decision that would inevitably leave the Town of Mammoth Lakes on the list of bankrupt California cities.

The enormous but obviously calculated decision started with Town Manager Dave Wilbrecht who thanked all staff who had worked to bring the Town to this point. He introduced Assistant Town Manager Marianna Marysheva-Martinez, who had largely handled this issue for Mammoth. She said, “Today is not an easy day for us. We have to make a significant decision.” Martinez went through the chain of events – the mediations that had taken place as prescribed by AB506, State Bankruptcy Law.

Martinez repeated what, by now, everyone who has watched the issue knows – the Town remained severely wounded by a structural budget deficit of nearly $3 million and the crushing $43 million MLLA lawsuit debt. She explained how through mediation and other budget cuts the Town was able to balance the new fiscal year budget. She said that the Town had asked MLLA at least six times to participate in mediations, but the company refused. Much earlier, after many months of talks and then negotiations, MLLA had accused the Town of dealing in bad faith and declined further negotiations.

Attorneys Zack Clement (at the podium) and Bill Greendyke of Fulbright and Jaworski gave the Council the bankruptcy recommendation.

MLLA went to court and won a Writ of Mandate to force payment of the debt by June 30th. Then, MLLA had made a settlement offer of roughly $2 million per year for 30 years. The Town did not accept.

With the Court Writ and $43 million due now, Martinez said Mammoth could not pay today nor over 10 years, as allowed by State law. She said a 10-year plan would cost Mammoth around $6 million per year which, she said would decimate the municipality and force it to stop operating.

Martinez went through the consultants’ study that said Mammoth could come up with just over $6 million in the next ten years or could use that money to pay for a bond to cover the MLLA debt. She pointed to the study that shows Mammoth citizens can not afford more taxes to pay for the debt. Then she introduced Zack Clement of Fulbright and Jaworski law firm. He said to the Council, “You do not have the financial capacity to pay the $43 million now or in ten years.” Bill Greendyke of the same firm went through the mediation process which qualifies Mammoth to file for Chapter 9. He said that process was “authorized earlier this year.” He called the mediations “very successful.”

Clements told the Council that the “Town should be proud that it solved the deficit and freed up money for MLLA.” He said MLLA was asked repeatedly to participate. “They simply did not come,” he said. Clement said all of the facts brought him and his firm to ask the Council if they want their recommendation. After some silence, the Council said, yes.

“It is our recommendation,” said Clement, “that you have no choice but to file a Chapter 9 case and bring it up in court how much you will pay MLLA.” Clement produced a pre-prepared resolution and press release – evidence that the Council was prepared for the vote to go bankrupt.

Bill Greendyke said, “We believe the Town of Mammoth Lakes qualifies for Chapter 9 and that this is the only alternative for the Town regarding financial problems.”

Councilman John Eastman made the motion to approve the bankruptcy resolution. Rick Wood seconded it, and the vote was unanimous. Mayor Matthew Lehman asked for public comment. There was none. He then read the prepared press release which already included the unanimous vote for bankruptcy. The press release repeated what had already been said by Martinez and the two lawyers, describing the painful process of budget cuts, employee pay cuts, and efforts to settle with MLLA.

The press release said that the Town can overcome its fiscal issues with a surplus of $500,000 per year or could use that money to pay for a bond to pay creditors. Mayor Lehman read from the release when he said, “MLLA failed to be part of this or to prove that we can pay the debt.” He said the Town asks that the bankruptcy court process move quickly. “If it lasts too long,” he said, “we can’t recover.”

Mayor Lehman assured that the Town is “open for business. The police, fire department and paramedics and Sheriff’s Office will still deliver high levels of service.” He said roads, parks and maintenance will move forward with all other county departments, including the airport.

Lehman made it clear that Mammoth Hospital, Mammoth Community Water District and Mono County are not part of this bankruptcy. The meeting was then adjourned to the next regular Council meeting on July 18th.  (Town press release below)

TOWN OF MAMMOTH LAKES FILES FOR CHAPTER 9 BANKRUPTCY PROTECTION

Town of Mammoth Lakes, California, July 2, 2012 – 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.

RESOLUTION ADOPTED BY TOWN COUNCIL -

RESOLUTION NO. ________

A RESOLUTION OF THE TOWN COUNCIL OF THE TOWN OF MAMMOTH LAKES, CALIFORNIA AUTHORIZING THE FILING OF A PETITION UNDER CHAPTER 9 OF THE UNITED STATES BANKRUPTCY CODE

BE IT RESOLVED by the Town Council of the Town of Mammoth Lakes, California as follows:

WHEREAS, the Town Council has determined, after, among other things, taking into consideration: (i) the material it considered as described in the July 2, 2012 special Council meeting agenda bill and as apparent during the public forum today, and (ii) the advice of the Town’s staff and attorneys, that a petition for protection under the provisions of chapter 9 of the United States Bankruptcy Code be filed by the Town of Mammoth Lakes.

NOW THEREFORE, BE IT RESOLVED by the Town Council of the Town of Mammoth Lakes that a petition for protection under chapter 9 of the United States Bankruptcy Code shall be filed and the same hereby is approved and adopted in all respects, and the Town Manager, or his designee, is hereby authorized and directed, on behalf of and in the name of the Town of Mammoth Lakes, to execute and verify such petition and to cause the same to be filed with the United States Bankruptcy Court for the Eastern District of California, Sacramento Division.

BE IT FURTHER RESOLVED that the Town Manager and all other appropriate officials and employees of the Town are hereby authorized to execute and file all petitions, schedules, lists, and other papers, and to take any and all actions which they shall deem necessary and proper in connection with said chapter 9 case, and with a view to the successful completion of such case.

APPROVED AND ADOPTED THIS 2nd day of July 2012.

________________________________ Matthew Lehman, Mayor

_________________________________ ATTEST: Jamie Gray, Town Clerk

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42 Responses to Town of Mammoth will file for bankruptcy relief

  1. great news -NOT July 2, 2012 at 11:27 am #

    Did not see this one coming. We all knew this unless we live under a rock,
    Ok so know what.

    Well-loved. Like or Dislike: Thumb up 11 Thumb down 0

    • P&B July 2, 2012 at 6:27 pm #

      “The enormous but obviously calculated decision started with Town Manager Dave Wilbrecht” – that statement says it all….

      Like or Dislike: Thumb up 3 Thumb down 4

  2. Bill July 2, 2012 at 11:28 am #

    No real surprise to anybody. But glad it is finally out in the open. Hopefully, the presiding Bankruptcy Judge can reduce the settlement from insane and ludicrous to manageable and fair.

    Over the last few years scores of people within and beyond our community have searched for blame for this whole mess.

    GREED – is to blame. The society we live in today is plagued with GREED.

    Well-loved. Like or Dislike: Thumb up 35 Thumb down 2

    • Big AL July 2, 2012 at 2:17 pm #

      Amen Bill … greed

      Well-loved. Like or Dislike: Thumb up 11 Thumb down 0

    • upthecreek July 2, 2012 at 3:40 pm #

      The government entities are busy fighting for the last morsels of food left in the Public troft.
      Say goodbye to the tax payers of Taxifornia.
      You can thank all the 50 year old retired police , fireman ans public workers (Public Servants) with their HUGE public pensions that have moved out of state to avoid paying California’s high taxes.

      Pensions for Everyone

      GGW

      Hot debate. What do you think? Thumb up 14 Thumb down 28

  3. Just the facts July 2, 2012 at 12:01 pm #

    Mammoth Lakes is too fine a town with some some very talented people at the helm to allow it to go down the drain as some naysayers insist this to be. Our remote and resourceful town just has too much going for it.
    Onward and upward.

    Well-loved. Like or Dislike: Thumb up 22 Thumb down 15

    • SierraFan July 2, 2012 at 12:56 pm #

      Well said “Just the Facts”!!!

      Hot debate. What do you think? Thumb up 14 Thumb down 9

    • Tourbillon July 2, 2012 at 1:35 pm #

      For once we’re in agreement Facts. The Town will emerge but if it emerges fast, I’m afraid we should all be prepared to have a few of our pet oxen gored. It’s in the hands of a neutral bankruptcy trustee now who is supposed to be fair to both sides, which usually means that neither side will be happy with the outcome.

      Well-loved. Like or Dislike: Thumb up 13 Thumb down 1

      • Big AL July 2, 2012 at 2:23 pm #

        You’re right there too Tourbillon, but now that the town is in the mind set, that it has to tread carefully, hopefully it can get through this not too beat up .. gonna take a beating, that’s for sure. But it all will pas and lessons learned, hopefully.

        Like or Dislike: Thumb up 4 Thumb down 2

    • Bemused July 2, 2012 at 1:48 pm #

      Like your sentiment. But one could make a real argument at this point against there being “talented people at the helm”…

      Well-loved. Like or Dislike: Thumb up 15 Thumb down 3

      • P&B July 3, 2012 at 5:42 am #

        As stated it’s not as if this was not a result of the decisions and actions of those at the “helm” via closed door meetings.

        Well-loved. Like or Dislike: Thumb up 7 Thumb down 0

    • Big AL July 2, 2012 at 2:20 pm #

      Right on facts … yes moving past it and … hopefully learning from all of this, as Rob say’s the town is looking at the issue with DWP as well .. but I feel that issue can be a better outcome. hopefully ..

      Like or Dislike: Thumb up 4 Thumb down 0

    • Ken Warner July 2, 2012 at 4:37 pm #

      …er… wasn’t it those very same “…talented people…” who brought the town to bankruptcy?

      Resourceful? After denying that they lost the MLLA suit for 5 years, running the debt even higher, then doing what should have been done 5 years ago? Resourceful?

      You see things differently than I do.

      Well-loved. Like or Dislike: Thumb up 20 Thumb down 3

      • Where it started July 3, 2012 at 5:28 am #

        I wouldn’t necessarily put Eastman and Wood (the two that had most to gain in the mess) into the category of “talented people” Ken.
        It is not against the law to profit from development projects (kickbacks, monies, etc.) and our illustrious “officials” know it.
        And now guess what? The new mayor is … (you guessed it) ANOTHER DEVELOPER!

        Well-loved. Like or Dislike: Thumb up 13 Thumb down 1

    • enoughalready July 2, 2012 at 5:40 pm #

      Bodie had a lot going for it at one time too. It gets more visitors these days than it ever did when it had a active population.

      Put your statement in the past tense and you would be more correct. There is no quick bounce back. All the empty business locations will not spring back to life over night.
      Your population base is too apathetic and too transient or undocumented.
      Good luck with all that resourceful talent.

      Well-loved. Like or Dislike: Thumb up 11 Thumb down 4

    • Waterboy July 3, 2012 at 8:06 am #

      Talented people? 43 million judgement? You’re joking right?

      The town is still in trouble and the dumbass politicians that got them into the mess will skate.

      Well-loved. Like or Dislike: Thumb up 10 Thumb down 0

      • setting the record straight July 3, 2012 at 9:53 am #

        I’m talking about staff – not upper management and elected officials sucked up to developers.

        Like or Dislike: Thumb up 2 Thumb down 0

  4. johndoeml July 2, 2012 at 1:08 pm #

    A necessary maneuver.

    Well-loved. Like or Dislike: Thumb up 10 Thumb down 1

  5. Rob July 2, 2012 at 1:49 pm #

    “Onward and upward.”

    right now it’s just onward to the next lawsuit. The DWP water issue will be much longer lasting than the town going bankrupt.

    Well-loved. Like or Dislike: Thumb up 10 Thumb down 1

  6. Wayne Deja July 2, 2012 at 2:07 pm #

    ….and then,onward and upward to the NEXT bankruptcy….

    Hot debate. What do you think? Thumb up 5 Thumb down 12

    • Big AL July 2, 2012 at 5:33 pm #

      Nice positive post there Wayne. Glad you’re on board with getting past this.

      Like or Dislike: Thumb up 7 Thumb down 2

  7. Vince Townsend July 2, 2012 at 2:30 pm #

    Hahaha looks like the City of Stockton, CA also files Bankruptcy too, all those cushy Pension Funds Days are Numbered, it’s coming and it’s gonna be ugly :-(

    Hot debate. What do you think? Thumb up 5 Thumb down 29

  8. Beware means be aware July 2, 2012 at 2:56 pm #

    Just beware of developers who manipulate themselves into power positions who refuse to recuse.
    Otherwise its the same ol same ol.

    Well-loved. Like or Dislike: Thumb up 21 Thumb down 3

  9. upthecreek July 2, 2012 at 3:32 pm #

    LET THE FIREWORK BEGIN.

    this is what happens when you have an “OUT OF CONTROL” Government

    Hot debate. What do you think? Thumb up 10 Thumb down 10

  10. Wildwindranch July 2, 2012 at 5:21 pm #

    Mmm glad I didn’t buy any realestate up there!

    Hot debate. What do you think? Thumb up 7 Thumb down 5

  11. Dingo July 2, 2012 at 6:02 pm #

    Well, nothing left to do now but drown our sorrows…with a couple of margaritas at the 4th of July parade.
    Give it some time, we’ll be back and even better than before, I hope. Not Obama hope but REAL hope.
    Maybe we should find a couple of GED’s graduates to run our town as a trial run.

    Well-loved. Like or Dislike: Thumb up 13 Thumb down 4

  12. Wilderbeast July 2, 2012 at 6:09 pm #

    up the creek…firemen and cops have absolutely nothing to do with the bankruptcy in Mammoth Lakes. Nothing….not connected….no how no way. It is about out greedy friends in private industry who went for the big kill. I am really starting to believe that you seriously believe what you are sprouting….no matter what the topic.

    Well-loved. Like or Dislike: Thumb up 22 Thumb down 4

    • upthecreek July 2, 2012 at 10:40 pm #

      @ Wilderbeast

      Check back with me in a few years and we will see the overall health of this state due to the public pension ponzi scheme ..500 BILLION IN UNFUNDED LIABLITIES AND RISING FAST

      good luck Taxifornia

      BTW
      if I didnt believe it I wouldnt post it.
      Don’t worry the people of this state are starting to figure it out…i am just early

      Hot debate. What do you think? Thumb up 6 Thumb down 14

      • Devout Liberal July 3, 2012 at 10:28 am #

        Upthecreek,

        Your statement is actually untrue.

        It’s 619 BILLION PLUS !!!!! of unfunded pension liabilities in California as of today.

        It’s going to be a tough road ahead.

        Like or Dislike: Thumb up 1 Thumb down 5

      • Not in your lifetime July 3, 2012 at 12:38 pm #

        Upthecreek is just sour that he made poor life choices and has to work in fast food until he can get his social security, which is exactly like a pension and just as underfunded.

        Like or Dislike: Thumb up 5 Thumb down 3

        • upthecreek July 3, 2012 at 3:27 pm #

          you better not show up in my line at Mc Donalds.

          LOL

          “Pensions for everyone”

          Like or Dislike: Thumb up 2 Thumb down 0

        • upthecreek July 3, 2012 at 3:31 pm #

          from today

          “(Reuters) – U.S. states and localities have run up more than $2 trillion of unfunded pension liabilities, Moody’s Investors Service said on Monday, citing data on plans offered by 8,500 local governments and over 14,000 individual entities.

          The Wall Street credit agency said that according to its estimate, the total liabilities for fiscal 2010 were more than three times the amount reported by local government”

          Like or Dislike: Thumb up 0 Thumb down 0

    • Tourbillon July 3, 2012 at 11:33 am #

      Wilderbeast, firemen and cops should not be “blamed” for the bankruptcy but they have far more to do with the Town’s insolvency than do your cartoon villains. About half of TOML’s stressed budget is for police, for instance, and that is a structural problem having nothing to do with the lawsuit or private industry. Private developers, on the other hand, pay impact fees that go right to the Town’s coffers building properties that generate further revenue through property taxes (and no, I am not a developer).

      MLLA are indeed private developers, but a Mono County jury found that they had been abused by a Mono County government – not by any of your “greedy friends in private industry.” Personally, I don’t think MLLA are doing themselves any favors right now, but the point is that batty propaganda about the “greedy private sector” cannot trump the empirical evidence at hand.

      Like or Dislike: Thumb up 3 Thumb down 3

  13. Dave Hammond July 3, 2012 at 3:10 am #

    How about lowering the building permit fees to an affordable price so us home owners can afford to build on our vacant lots and remodel our homes. This will bring in plenty of dollars back into the town economy… or they can waste their time and money on another “smart growth” high density redevelopment project that will fail while our community falls to pieces.

    Well-loved. Like or Dislike: Thumb up 14 Thumb down 1

    • Big AL July 3, 2012 at 9:45 am #

      Good point Dave, one might think .. well if they do that how will they feed the budget? .. it’s simply as you say, with lower permit rates, it frees more people up to take out permits, thus bringing in more than just permit dollars, but more dollars into the community through buying building supplies and wages for people doing the work … etc …

      Like or Dislike: Thumb up 3 Thumb down 0

  14. John P. Gross July 3, 2012 at 8:05 am #

    Can anyone out there tell me what the Bankruptcy means in lay terms? Who suffers outside of those the town owes money to? What are the negative ramifications to the town?

    Like or Dislike: Thumb up 3 Thumb down 0

    • Benett Kessler July 3, 2012 at 8:31 am #

      I’ll have more on that later today or Thursday. I will tell you Marysheva-Martinez said she sees no negative impacts
      to the Town since its credit rating is already very low.
      Benett

      Well-loved. Like or Dislike: Thumb up 6 Thumb down 0

  15. John July 3, 2012 at 11:03 am #

    no negitive impact, I say time will tell.

    Like or Dislike: Thumb up 2 Thumb down 0

  16. Bye-bye developers July 3, 2012 at 11:22 am #

    Why not let the developers go back south and develop their little hearts out?
    Every available square inch. The locals down there don’t seem to mind.
    Meanwhile, there is more than enough lodging, food, recreation and culture to attract the usual subjects in Mammoth year round and afford a subtantial living.

    Like or Dislike: Thumb up 1 Thumb down 3

    • Wayne Deja July 3, 2012 at 1:40 pm #

      Bye-bye developers……If the people of MAMMOTH LAKES felt that same way about their cute,quiet little town back in the 80′s they all wouldn’t be in the mess they are in today.

      Like or Dislike: Thumb up 3 Thumb down 2

  17. good for the economy? July 3, 2012 at 11:28 am #

    “Mayor Matthew Lehman asked for public comment. There was none.”

    And there you have it.

    Our new mayor (who just happens to be a developer) has carte blanche now. And watch for the “this town needs more development to put people back to work” with 5 thumbs up from the council every time.
    Until very available square inch of Mammoth Lakes is fully developed like it is in Los Angeles.

    See how it works?

    Hot debate. What do you think? Thumb up 8 Thumb down 3

  18. outside the box July 4, 2012 at 3:28 pm #

    How about connecting mammoth and June ski resorts? Then Mammoth will be a world class Euro style resort. Or shut the town and mountain down and turn it into a wildlife sanctuary for the environmental groups to manage it.

    Like or Dislike: Thumb up 1 Thumb down 1

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