Mammoth Lakes fears financial ruin after legal judgment

[mmmthmtskier]

All snow and no dough

The Sheet: 07 January 2011

Note to Mammoth Lakes Town Council: It’s always important to have a good attitude in the face of adversity.
We’re snow farmers, not legal eagles. Town now oh for two in Hot Creek litigation
Ever since California’s Third Court of Appeals upheld Mammoth Lakes Land Acquisition’s $30 million judgment against the Town of Mammoth Lakes on Dec. 30, the powers-that-be have reiterated that it’s time to stop pointing fingers and start looking for solutions.
However, while Town officials decry the decision and vow an appeal to the Supreme Court, a certain sense of reality has finally sunk in. As Councilman John Eastman said this week, “I think we suck it up and do what we have to do to pay it off.”
We being Mammoth taxpayers and the guests we’ll inevitably pass the cost down to. 14% T.O.T., anyone?
Of course, the $30 million judgment is actually worth $40 million now, when you take into account 10% annual interest over 2.5 years and nearly $2.5 million owed in attorney fees. Hardly the result forecast by former Mayor Neil McCarroll, who thought (and still thinks) there’s been a miscarriage of justice.
“Attorneys have just ruined California,” said McCarroll, himself an attorney.
For the uninitiated, here’s a brief synopsis of the case.
In 1997, the Town of Mammoth Lakes signed a Development Agreement with Mammoth Lakes Land Acquisition (aka the Hot Creek developers) to essentially take over Mammoth airport operations, becoming Mammoth’s fixed-base operator.
The deal also gave Hot Creek property development rights.
A few years later, the Federal Aviation Administration (FAA) came along and dangled $30 million in airport improvements before the Town’s starry, we-want-to-be-a-world-class-destination-resort eyes.
But there was a catch. The development rights held by Hot Creek clashed with the FAA’s policy which mandates preserving airport property for aeronautical uses.
In short, to date the FAA, the Town had to dump Hot Creek, but instead of doing the right thing and condemning the property via eminent domain and paying Hot Creek fair market value, the Town chose to try to wriggle out of its promises via some clever lawyering.
The trial court and now the appeals court has chastised the Town (and its legal counsel) for its behavior.
This was attorney cum mall magnate Paul Rudder’s view after reading the appellate opinion:
“Without commenting on the behavior of Town officials and the Town Council, I can’t remember reading an appellate opinion where every other page pointed out something counsel for a party failed to do, or did wrongly, either at trial or on appeal, page after page after page. To say that the Town suffered from poor representation would be putting it mildly. Sometimes the practice of law devolves into nothing more than what Kenny Rogers said, ‘you gotta know when to hold ‘em, you gotta know when to fold ‘em.’ Clearly, given the facts enunciated by the Court of Appeal, this matter should have been resolved before it ever got near a court of law.”
What would it have cost to settle with Hot Creek back when the problem first arose? Town Manager Rob Clark addressed that a in letter back in 2004: “Hot Creek estimates the market value of their project at $400 million, which is $1.6 million per unit based on fractional ownership, and the value of the option at 5% of sales price [$20 million]. Even if the value is half that amount, it would cost $10 million to acquire the option through negotiation. They offered to have a mutually agreeable expert determine the value. Since we don’t have $10 to $20 million in spare change, I am trying to come up with some other way to compensate Hot Creek.”
That was before the Town decided that it would rather rely on some legal arguments and pay nothing at all.
According to the appellate decision, “Section XVII(e) of the Development Agreement (clause E) stated that neither party would be in default for a cause beyond the reasonable control of the parties. It stated: ‘Neither party shall be in default of this Agreement for delays in or failures of performance due to war, insurrection, strikes, floods, earthquakes, fires, casualties, acts of God, governmental restrictions imposed or mandated by governmental entities other than Town, enactment of conflicting State or Federal laws or regulations, judicial decisions, or similar bases beyond the reasonable control of the party excused.’
The Town asserts that, as a matter of law, the emphasized portion of clause E excused it from performing on the Development Agreement because both the Town and the Developer were required to comply with the FAA restrictions (regarding property develiopment at the airport. This assertion is without merit because the FAA’s restrictions were within the control of the Town.”
In other words, if the Town chose to never expand its airport, it would never have to comply with the FAA. Compliance was a choice, just as entering into a Development Agreement is a choice.
And as McCarroll told The Sheet this week, “If getting an airport ends up costing us $20 million, that’s still a better deal than having a bunch of condominiums down at the airport.”
As Town Manager Rob Clark said, we now have three options: Supreme Court, bankruptcy or settlement.
The threat of a municipal bankruptcy may induce Mammoth Lakes Land Acquisition to settle for a lesser sum, as a municipality, though it can’t duck a judgment, could certainly drag out the payment timeline for a long, long time. According to USCourts.gov, the following are some of the parameters of Chapter 9 bankruptcy:
“Chapter 9 is significantly different in that there is no provision in the law for liquidation of the assets of the municipality and distribution of the proceeds to creditors.
… the municipal debtor has broad powers to use its property, raise taxes, and make expenditures as it sees fit. It is also permitted to adjust burdensome non-debt contractual relationships under the power to reject executory contracts and unexpired leases, subject to court approval, and it has the same avoiding powers as other debtors. Municipalities may also reject collective bargaining agreements and retiree benefit plans without going through the usual procedures required in chapter 11 cases.”
Which doesn’t sound so enticing if you’re a local taxeater.
The Sheet asked Clark how a bankruptcy might affect Town services. “That’s hard to foresee,” he said. “The purpose of municipal bankruptcy is to protect the citizenry. You can’t endanger the public by having to eliminate essential services.”
Will there be renewed thought given to disbanding the MLPD and contracting out law enforcement services with Mono County?
“A consultant has already looked at this. I don’t think there are savings to be generated,” Clark said. Mono Sheriff Rick Scholl, however, said whether there would be savings or not is uncertain, since the County has never run any figures or cost analysis on consolidating the two agencies.

And from Kirkner’s desk …
At Wednesday’s Council meeting, member Rick Wood brought up the “elephant in the Town,” the airport litigation only to say that he did not believe the denial was the end of the road for the Town. “I for one take this seriously,” Wood said. “I will do what I can as a Council member and a citizen to protect our assets. We are not in a great place but we are not in a bad place, we are just in a process.” Council was expected to further discuss the outcome of the litigation’s appeal during closed session. According to a press release on Jan. 6, Council opted to petition the California Supreme Court to review the Hot Creek decision.

[splat]

This is nothing short of a fantastic opportunity for Mammoth to get a complete makeover and come out better for it with a locally manufactured product that will generate massive tax dollars. They need to get off that redneck agenda and legalize the large scale grow ops that failed to get going in Oakland to generate revenue to get out of this pickle.

Mamsterdam!

[huckster989]

Mammoth is an interesting place. It should be a mecca for skiing. The town's economy is all based on tourism, yet the local population conveys a very unfriendly vibe. Refrains of "Go Back to LA" are on the lips and bumper stickers of "locals" as they drive to their job at the mountain. It has always confused me.

I feel most of the comments are jokes, everyone I worked with knew exactly where our paychecks came from...LA but of course the ski bum / resort employee is going to make tourist jokes every place does that but I never once saw a resort / hospitality employee be rude or abusive to a tourist.

mammoth is a great little town that I think is probably one of the best places in this country I hope they can work this out but I bet the mountain pays for most of this seeing how much they could stand to loose....maybe rusty will buy the town....

[BirdRock]

Couple of thoughts....

As a 20 year veteran of mammoth weekend trips from SD, I've never felt a bad local vibe towards me. Probably because I don't act like an idiot when I'm there.

The town council really screwed the pooch on this issue. Whether the locals agree or not can be figured out later but they all need to get on the same page now to figure out a way to stop the bleeding.

Municipal bankruptcy sounds like an easy solution but in reality it's almost unheard of and there is no guarantee that existing contracts or judgements would be voided. San Diego has been talking about this for a few years due to their pension mess but it seems most "experts" agree this isn't an easy way out.

May Dave McCoy will bail out the town. He's probably got the cash.

[nogophers]

Blame the F-ing developers. I have met dozens of them and have yet to meet one who is honest. They have crap loads of debt, use other people's money and shirk any sort of personal responsibility.

[AKbruin]

Mammoth Lakes should try tapping into the cash cow that is Mono County's speed limit enforcement on barren stretchs of 395.

[Long duc dong]

Mammoth is an interesting place. It should be a mecca for skiing. The town's economy is all based on tourism, yet the local population conveys a very unfriendly vibe. Refrains of "Go Back to LA" are on the lips and bumper stickers of "locals" as they drive to their job at the mountain. It has always confused me.

I think every ski town I have been around was this way. I lived in Tahoe as a ski bum, and now I am a Mammoth weekender, so I have been on both sides.

There is certainly obnoxious behavior among tourists, you get that in any situation like this. The sense of entitlement many visitors ooze can be annoying for sure. When I was first living in Tahoe, a few weeks into my employment at a ski shop, I saw a customer I will never forget. Bay area guy in his 50's, bitching about having to wait to get his boots fitted. Spewing out "I make a lot of money, I don't expect to wait." In addition to being rude, his logic was flawed, as he was not paying any more money than the people who were being helped, so he should not have expected special treatment. He was far from the last obtuse tourist I dealt with, but that is part of the job. People are able to live in mountain towns because of the tourists.

The "go home" refrain is somewhat hypocritical, to be sure. The tourist economy provides jobs, which employ the majority of the bitter locals. The tourist situation also makes housing so expensive that locals have little or no hope of ever owning a place. Said tourist/second home situation also provides a ton of local employment in the summer, through the building and landscaping of second homes.

I have heard it said that Tahoe his the highest per capita rate of contractors anywhere. I don't know if that is true or not, but it would not surprise me. It takes a large second home market to support the summer work those folks do.

[LightRanger]

Mammoth Lakes should try tapping into the cash cow that is Mono County's speed limit enforcement on barren stretchs of 395.

Refurbed Passport 8500 x50 for $200 shipped on eBay.

Got nailed a month ago, and bought one as soon as I got into the office on Monday morning. Been a long time coming.

12:40 am. Same time as my last ticket on 80. Fucking dicks.



Edit: In other news, Mammoth Lakes is fucked. I saw a few weeks back that a BB&K guy from Sacto is their new city attorney. I immediately thought, "Man, that's a cool gig." But there's no way you could pay me enough to deal with the shitstorm they have now.

[Piggity]

I've always had a good experience at mammoth, except at footloose. But that's my fault for going there.

Sorry in advance if anyone works or is affiliated with the shop, just my personal experience on 2 separate occasions with 2 different sales reps.

[mmmthmtskier]

January 8, 2011

BY GEORGE SHIRK - MAMMOTH TIMES SENIOR WRITER


The Town Council on Wednesday, Jan. 5, considering its options. Or lack of them.
A travesty of justice?

The California Third Appellate District Court sure didn’t think so.

The three-member panel last week unanimously upheld a $30 million judgment against the Town of Mammoth Lakes in the Hot Creek Aviation litigation.

It wasn’t even close.

Thus ends the litigation in a dispute that began in 1997. Now begin the myriad questions facing the Town and what it’s going to do about them.

First among these is filing an appeal with the California Supreme Court, said Mammoth Town Councilman Rick Wood Thursday. Wood said that decision was made in council’s closed session Wednesday night.

Town Manager Rob Clark now will be asked to help sort this thing out, and on Tuesday he was still a little taken aback.

“We think they made the wrong decision. However, given the comments that they made at oral argument we weren’t totally taken by surprise.”

Two weeks ago, as former Town Attorney Peter Tracy was leaving the council chambers, having accepted a plaque of appreciation from the council, he said that if the state appeals court upheld the judgment against Mammoth Lakes, it would be “the worst travesty of justice I’ve seen in 32 years of practicing law.”

Asked if he agreed with that, Clark said, “Um, yeah.”

Yet the court’s 66-page decision tells a much different story, one of:

• Bollixed communications by the Town with the Federal Aviation Administration (FAA) and the project developers over a 13-year span.
• Unclear motives by the Town as it shifted its focus from private side development to creating an airport for commercial aircraft service.
• A change in direction by the FAA, which along the way laid down tougher requirements for the airport in mid-stream.
• An unwillingness of the Town to seriously negotiate a settlement, believing it had the right to simply walk away from a signed agreement.

“Many years were spent seeking an alternative to litigation, but we were unwilling to accept a solution that simply absolved the Town of its contractual obligations,” said Mark Rosenthal of Mammoth Lakes Land Acquisition, LLC., which pressed the case against the Town.

In an e-mail, Rosenthal wrote, “While we are still not prepared to make any of our own editorial comments, I think it will be clear from this opinion why the Hot Creek developers were left with no alternative to filing suit.

“Now that both trial and appellate courts affirmed the legal position that the Hot Creek developers expressed to the Town’s representatives for years, perhaps (Mammoth Lakes) officials will choose to take responsibility for their actions and work with us to seek a realistic resolution to a problem of their own making, rather than simply spending more money on legal fees.”

Given the history of rancor between the two sides, that’s hard to imagine.

For example, in 2004, then-Deputy Town Manager Charles Long met with officials from the FAA and told them that the Hot Creek project was “inconsistent with the Town’s goals.”

He said the project might never be built.

According to the court ruling, “He (Long) asked the FAA to help the Town ‘get rid of Hot Creek’ because it interfered with expanded air service.”

On June 29, 2004, the day after the meeting with the FAA, Long sent an e-mail to the Hot Creek developers, saying,

“The FAA is primarily concerned … that the airport will run out of land for aeronautical purposes as a result of the land used by the non-aeronautical purposes your project represents.

“The FAA intends to send us a specific itemization of these compliance concerns in the next few weeks. Until these issues are resolved, we will be unable to move forward with your project.”

But all along, the fact remained that the Town had signed a development agreement with Terry Ballas in 1997.

Even at the start, the Town Council bungled the timing.

Nine days before the council signed the agreement, according to the ruling, airport manager Bill Manning, having submitted the proposal to the FAA, received a return fax indicating the FAA had some serious objections to the document as it then stood.

It had a problem with the projects proposed 55-year lease, for example.

Nevertheless, on Aug. 21, 1997, the council plowed ahead, signing a Development Agreement in spite of the red flags raised by the FAA.

“While the Town claimed that the Town’s airport director (Manning) discussed the FAA’s concerns with Ballas,” the court ruling said, “Ballas testified that the Town did not disclose to him the FAA’s concerns about the Development Agreement until seven years later.”

Unknown to Ballas and the Town at the time, a 13-year battle was thus joined, ending on Thursday, Dec. 30, when the Town, having already lost a jury trial in Bridgeport, lost its appeal by a unanimous vote of the appeals court.

By the time the wrangling was over, the town had gone through seven Town Councils, a steady turnover of town staff and four Town Managers – Tracy Fuller, Steve Julian, Charley Long and Robert Clark.

Only a few players remained start-to-finish. Among them were Town Attorney Tracy, Airport Manager Manning, and councilman John Eastman. Some were in-and-out players, such as councilman Rick Wood, who served eight years on the council, four as Mayor, before leaving. Wood was re-elected to the council last June.

On the other side, Ballas long ago sold his interest to Mammoth Lakes Land Acquisition, LLC.
Some people were caught in the crossfire, among them current Town Manager Clark, who succeeded Long and landed smack in the middle of the imbroglio.

Clark, in an interview, said he spent an entire year trying make things right, “to get our ducks in a row.” However, once he thought he had succeeded, the FAA once again zig-zagged, sabotaging his efforts.

But at least some officials think the Town Council and Town government were woefully unprepared for the high-level negotiations an ambitious project like Ballas’ required, let alone one involving the FAA.

Kathy Cage is a former Town Council member (1994-2002), the only one of the five council members to vote “no” on the 1997 development agreement at the heart of the appellate court’s decision.

“I wish I could say I was a genius, that I saw all this coming, but the real reason I voted “no” was because the agreement was prepared to allow the land under the airport to be valued at the date of the agreement,” she said.

“I thought that was ridiculous.”

But this kind of action spoke to a pervasive problem, she said: a staff and council “out of their league.” Yet they were unwilling to invest in the kind of high-level legal and negotiating expertise that Cage said wasn’t always in place and that she often advocated for in regard to the airport development issues.

“It all comes down to the fact that we went into this without the defensive attitude we should have had,” she said. “We were pressured to see the agreement with Ballas as a partnership, and that was not enough to protect our interests.”

Left on clean-up duty is a new Town Attorney from Best, Best & Krieger, a sprawling law firm that represents many towns and cities in California, addressing just these kinds of issues.

[freshie247]

During my 3 years working at a resort, there was eventually always someone that complained about something I had no control over & asked how I could sleep at night.I didn't want to tell them,

" I sleep just fine at night.You're a tourist 1 week a year here, I'm a tourist 52 weeks a year here.Deal with it,or you could always be a stay at home asshole & save a lot of your good money.",

but I felt I owed it to them.

[irul&ublo]

Only executory contracts, those that are not completed, can be voided. The developer has a judgment, whole different deal

[SchralphMacchio]

Mammoth Lakes should try tapping into the cash cow that is Mono County's speed limit enforcement on barren stretches of 395.

Inyo County is much much worse.

[Eastside]

Regarding the lawsuit-skimmed the article and frankly don't care much. It would be nice to see the liars, crooks and dirt pimps get their comeuppance just because. The mountain will still be there and people will still go there. As soon as someone thought it was a good idea to have a planeload of Texans or Chicago-ites show up, was the beginning of the end.

[spanghew]

Regarding the lawsuit-skimmed the article and frankly don't care much. It would be nice to see the liars, crooks and dirt pimps get their comeuppance just because. The mountain will still be there and people will still go there. As soon as someone thought it was a good idea to have a planeload of Texans or Chicago-ites show up, was the beginning of the end.

Agreed. The Downhill Slide book pretty well summed this up and predicted the results. That the town wanted to put a shopping center by the airport shows the people running the town should be tarred, feathered and sent to Los Angeles.

[Hutch]

Regarding the lawsuit-skimmed the article and frankly don't care much. It would be nice to see the liars, crooks and dirt pimps get their comeuppance just because. The mountain will still be there and people will still go there. As soon as someone thought it was a good idea to have a planeload of Texans or Chicago-ites show up, was the beginning of the end.

Agreed. The Downhill Slide book pretty well summed this up and predicted the results. That the town wanted to put a shopping center by the airport shows the people running the town should be tarred, feathered and sent to Los Angeles.

But its the residents of Mammoth Lakes that are going to have to pay for this, not the "liars, crooks and dirt pimps" or "the people running the town."

That's what sucks.

[hutash]

Mammoth desperately wants to be Vail, and sell Vail priced real estate. It is not going to happen. It was unlikely during good times when all this went down, but certainly will not happen with the present economic climate.

LA is their base market, and they just keep doing things to piss off that base.

[Eastside]

But its the residents of Mammoth Lakes that are going to have to pay for this, not the "liars, crooks and dirt pimps" or "the people running the town."

That's what sucks.

Yeah, I suppose so but I am not sure the price of weed will be affected.

Mammoth desperately wants to be Vail, and sell Vail priced real estate. It is not going to happen.
LA is their base market, and they just keep doing things to piss off that base.

Precisely. It is unfortunate that most knew that except for the people who put their signatures on shit.

[mmmthmtskier]

Precisely. It is unfortunate that most knew that except for the people who GOT PAID OFF BY ALL THE DEVELOPERS.

Fixed it.

[mmsnowman]

Wow bullet just paints a picture that is so wrong... 99% of the people who live here are not that way at all.

Those that hate the la crowd for the most part are from LA and now since they have lived here one month they think they are locals. These are the same people that come mid February are ready to go home to mom and dad for a break and bank account re up. Morons

As for nightly rentals in our single family neighborhoods FUCK THAT SHIT> We lived next to several houses that did that illegally and what a nightmare. Sorry I am not your condo manager and yes throwing your trash on the ground gets me mad as hell. And no you cannot use my shovels and snow blower with out asking...WTF more morons

[Piggity]

You could always use the shovel for the beat down if they're using your snowblower.