The Mammoth Lakes Town Council voted unanimously to begin Chapter 9 bankruptcy proceedings in U.S. federal court, after several months of being short on revenue and facing a multi-million dollar judgment ordered against them, as reported by the Mammoth Lakes official website and mainstream news sites.
The bankruptcy, according to the council, is due to the lack of revenue required to pay its current and future obligations. In the 2011-2012 fiscal year budget the city was short $2.7 million, and later that same year, the city was short an additional $0.9 million.
For the 2012-2013 fiscal year the council projected a $2.8 million shortfall in the budget.
The largest creditor that Mammoth owes is the Mammoth Lakes Land Acquisition (MLLA) in the amount of $43 million. A State Court issued a Writ of Mandate ordering the city to pay MLLA the entire sum by June 30, 2012.
In attempting to resolve the revenue shortage the city asked creditors, employees, and others to accept reduced payments during a neutral evaluation process. Mammoth also reduced some of its services. The cuts have since been implemented, causing some contract breaches, which will now be handled either in the bankruptcy or by MLLA agreeing to a settlement.
The California Government Code, known as the AB 506 mediation, established the neutral evaluation process. Mammoth's AB mediation ended on June 29, 2012 and was conducted by Hon. David Coar (Ret.).
In the bankruptcy the council believes that they will be able to free up as much as $500,000 per year to pay creditors over a 10-year span. MLLA is included in this figure.
Another option may be to gain a bond to support the payment stream where the proceeds will be used to pay creditors, again including MLLA.
The council stated that since MLLA refused to attend the mediation discussions – and they were allegedly invited to several – Mammoth was forced to file for bankruptcy.
The council hopes that the bankruptcy case is processed quickly to avoid spending any more funds on the case instead of paying back unsecured creditors.
The council expects the city to remain open as usual with assistance from other governmental agencies.
Police, Fire, paramedics and the Sheriff's office will still respond when called; maintenance to roads, parks and the airport will not stop; and there will be no interruption of services from the Mammoth Town Office.
Mammoth Hospital, Mammoth Community Water District and Mono County will not be impacted by the bankruptcy, as they are all separate entities from Mammoth.
Mayor Matthew Lehman said, "I wish this hadn't happened, but it's not the way the cards fell for us."
Mayor Pro Tem Rick Wood added, "In some ways, and I don't want to say it's anticlimactic, but this has been brewing over some time. We sure tried to avoid it, but here we are."
The Mammoth bankruptcy announcement follows less than a week after the city of Stockton, CA., filed for bankruptcy.
Do you feel burdened by debt? Contact a bankruptcy attorney to help you lift that burden and get your life, or the life of your business, back on track.