Small Mountain Town in California Files for Bankruptcy Protection
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Small Mountain Town in California Files for Bankruptcy Protection

July 18, 2012


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The California town of Mammoth Lakes, a picturesque village in the heart of the Sierra Nevada Mountains, is reportedly filing for bankruptcy because it cannot afford to pay $43 million to a developer, according to the Los Angeles Times.

The town apparently lost a breach-of-contract lawsuit to the developer, and is unable to pay the court’s multi-million dollar judgment, so it is seeking bankruptcy protection while it determines how it will repay its debt.

The town’s primary creditor, Mammoth Lakes Land Acquisition, sued the village in state court to ask for full payment for the developer’s efforts to construct a lakeside hotel and resort in Mammoth Lakes.

On June 30, the court ruled that Mammoth Lakes must pay the developer in full, which prompted the town to file for bankruptcy because it was "the only option left," according to city officials.

Sources indicate that the $43 million judgment represents a sum of money that is nearly three times the size of the city’s annual budget.

To make matters worse, the town had a budget shortfall of nearly $3 million last year and had to cut key municipal services and reduce pay for employees in order to make ends meet.

And the town’s financial malaise comes on the heels of a historically low snowfall at its premier resort, Mammoth Mountain, which forced the resort to fire 70 full-time employees.

But sources are quick to note that the town plans to pay off its debts, it just wants to create a payment plan through the bankruptcy court to allow it to meet its obligations at a more sustainable pace.

In its Chapter 9 bankruptcy petition, Mammoth Lakes officials have asked the court to allow it to pay $500,000 a year over the next 10 years. This payment plan would allow the city to continue to provide basic services and allow its police and fire departments to continue functioning.

If the court allows the town of 7,700 to create this payment plan, it may help Mammoth Lakes prevent a financial disaster that could have shut off basic services for its residents.

In the meantime, local residents will cross their fingers and hope that the town will be able to reach a workable deal in bankruptcy court.

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