The Bond Buyer is a daily newspaper of public finances. Earlier this month, an article in that paper delved into the financial and legal problems of the Town of Mammoth Lakes. The article said Standard & Poors lowered Mammoth’s bond rating because of the pending Hot Creek lawsuit judgment of $30 million against the Town.
The article said Mammoth’s rating dropped from SP-1-plus down to SP-3. Standard and Poors also downgraded about $5 million in outstanding certificates of participation from A-minus to BB.
The writer asked Town Finance Officer Brad Koehn if this plunge in ratings would hurt Mammoth’s plan to refinance $2 million in notes at the end of June. The $2 million paid for the new terminal at Mammoth Airport. Koehn said it wouldn’t. Standard and Poors was quoted as saying that they doubted the roll over could take place in light of the Hot Creek $30 million judgment against Mammoth.
Town Manager Rob Clark said that Mammoth financed the new terminal with a one year $2 milllion note amortized out over 10 years. Clark said because of the Hot Creek lawsuit uncertainty the bond rating was affected. Clark said this could mean a higher interest rate on this note, a restructured loan or a different lender.
Clark went further and said the Town could look for a bond with a reasonable rate, use the line of credit from Mammoth Mountain Ski Area, or borrow from town funds internally.
The big issue, Clark said, is whether Mammoth wins or loses the Hot Creek appeal. Other things, he said, are inconveniences. Hot Creek developers claimed the Town prevented their ability to develop at Mammoth Airport. The Town claims the federal government delayed the development. Hot Creek won the case, and Mammoth has appealed. Clark said briefs are due in the next couple of weeks with oral arguments in the fall. A decision is expected in the spring or summer of 2010.
Wednesday’s Town Council agenda lists a resolution approving the rollover of financing for the Airport terminal.