Thursday, April 05, 2012
RE: Letter to the Editor from the Mammoth Lakes Town Council addressing a Letter from Mammoth Lakes Land Acquisition (MLLA) to the Town dated March 23, 2012
On March 23, 2012, MLLA sent the Town a letter with their demand for a full payment of their $42 million judgment. They chose to make their request publicly, breaching the confidentiality agreement between MLLA and the Town and obliging us to make this public response.
As a point of fact, since the start of the negotiations, the Town Council has been receiving many requests for information and desires to communicate important information to the community about the status of the negotiations and settlement. Last fall, we formulated information in a Frequently Asked Questions (FAQ) document and were prepared to send to the media. In respect for the confidentiality process, the FAQ was sent to MLLA. MLLA immediately demanded the Town not send it as proposed, claiming a breach in our agreement with them. In respect to the process, and MLLA’s specific request of the Town to not distribute the FAQ, we held back sending it.
The Town Council has reported publicly and to MLLA that it is facing structural financial challenges above and beyond MLLA’s $42 million judgment. After balancing a $2.8 million Fiscal Year 2010-11 shortfall in June 2011, the Town now estimates a $0.9 million budget gap in FY 2011-12, and a $2.5 million baseline shortfall in the following year, FY 2012-13.
While MLLA’s judgment is the Town’s largest liability, we must make difficult cuts in expenditures and restructures of existing indebtedness simply to balance the above baseline budget issues, and must make even more cuts and restructures in order to finance any sort of payment on the judgment. For context, the $2.5 million baseline budget shortfall represents some 13% of the Town’s General Fund budget for FY 2012-13. If the Town were simply to make across-the-board cuts to balance that baseline issue without any other restructuring, all of its expenses would need to be reduced by 13%. This hypothetical, across-the-board reduction would include employee compensation, cuts to marketing, housing and transit dollars, reductions in public safety and snow removal services, cuts to recreation programs, and so on. This is why a fundamental financial plan involving both cuts and debts restructuring is important.
During discussions last fall, the Town Council and staff were intent on a settlement with MLLA that would withstand the test of time – a settlement that would not fail in the future due to financial conditions beyond our control, which could force the Town into a crisis. This was sound reasoning then and still is. As we have experienced this winter, financial crises do happen. This crisis has and will affect the Town’s ability to deliver services now and into the future. The Town Council and staff have a fiduciary responsibly to preserve essential services. The Town’s restructuring plan, once finalized, will balance the need to continue providing these services with the need to satisfy the MLLA judgment and other obligations of the Town.
Resolving the Town’s baseline fiscal issues and the additional issues posed by the MLLA judgment will require a broad and carefully crafted restructuring of the Town’s finances that is sustainable and can be supported by the community. The Town continues to formulate a plan to accomplish this goal that will involve concessions from multiple interested parties, including MLLA, who have been invited to participate in the mediation process provided by section 53760.3(a) of the California Government Code. So far, MLLA has refused to participate in that mediation.
As we continue to develop the Town’s restructuring plan and negotiate a fair and sustainable solution to the Town’s many financial challenges in the mediation, we will be able to make more detailed proposals in response to MLLA’s most recent demand.