Time’s up
MLLA files petition for writ of mandate demanding payment in full from Town
With more than a $15 million gap still between them, the Town of Mammoth Lakes and Mammoth Lakes Land Acquisition might have reached the end of the negotiation line.
This week, Jay Becker of MLLA distributed a letter to local media that had been sent from MLLA’s legal counsel to the Town’s legal counsel on Jan. 27. The letter accused the Town of acting in bad faith, and explained that MLLA would no longer extend the standstill agreement that has been in place while the two entities have been negotiating. The agreement expired on Feb. 1, and according to the letter had already been extended seven times. The Town and MLLA have been negotiating since April 2011, according to a press release issued by the Town on Feb. 7, although offers did not start shuttling back and forth until fall 2011.
On Feb. 2, MLLA filed a petition for a writ of mandate, which requests that Mono County Superior Court enforce judgment and require the Town to pay the settlement in its entirety. Currently this number stands in excess of $42 million. The Town was served with this paperwork on Feb. 6.
In the letter distributed by Becker, MLLA lawyer, Eric Winston wrote, “MLLA’s prior proposals provided for a substantial discount on the amount the Town owes, outlined concrete steps for the Town to take advantage of that substantial discount and requested that the Town take the matter seriously by moving on a timely basis.”
Councilmember John Eastman, however, confirmed to The Sheet on Feb. 8 that there is still an ocean between what the Town was offering and what MLLA was requesting. The gap, he said, was still “very wide” and “really big.”
When asked if it was more than a $15 million difference Eastman responded, “Yes … more.”
According to the letter, MLLA’s change of heart stems from action the Town took on Jan. 19. On that day, rather than send another counter offer back to MLLA as the Town had indicated it would, it sent a letter withdrawing the offer it had put on the table on Dec. 1, 2011.
“The Town has completely failed to follow through on the representations,” the Jan. 27 MLLA letter said. “Its conduct smacks of bad faith.”
The Town, however, thinks it is MLLA that has acted in bad faith by filing the writ of mandate petition, which according to the press release ceases the settlement process even though, according to the press release, the Town had indicated it would send another counter offer to MLLA after Feb. 1.
“In light of current fiscal realities, the Town has determined that it needs to more closely analyze and assess pertinent issues with financial implications, including the ongoing efforts to reach a resolution with MLLA,” the Jan. 19 letter from the Town to MLLA had stated. “The Town has begun the development of a global restructuring plan, which will address the various fiscal issues impacting the Town.”
In an interview with Town Manager Dave Wilbrecht last month, he pointed out that it was a good thing the Town had not begun its negotiations with MLLA prior to realizing a $2.7 million shortfall going into the 2011/12-budget.
“Can you imagine if we had been working on the settlement based on bad budget numbers?” he had asked rhetorically.
The Town, however, did not fully escape that scenario, as it now realizes its Dec. 1, 2011, offer was based on numbers it cannot afford.
As a consequence of property taxes being down in addition to a winter season with a scant amount of snow and therefore less Transient Occupancy Tax to be collected, the Town is again expecting at least a $1 million shortfall in its 2011-2012 budget.
“We needed time to study the Town Budget,” Wilbrecht said this week of the decision to withdraw the Dec. 1, 2011 offer. “We are recalculating what can be offered.”
According to the press release, “On December 1, 2011, the Town made a multi-million settlement offer to MLLA — an amount that the Town currently feels it cannot afford to pay in light of the worsened fiscal conditions since early December.”
At this time, Wilbrecht stated that the Town is still working on a counter offer to MLLA’s Dec. 14 offer, which was in response to the original Dec. 1 offer from the Town. In the meantime, interest will continue to pile up as the process continues.
As of the filing of the writ of mandate petition on Feb. 2, more than $8.5 million had accrued in interest alone since the 2008 judgment. According to the petition, the post-judgment interest rate for judgments against municipalities is 7%, whic breaks down to $7,000 per day according to Wilbrecht. The Town has yet to pay a single penny on the judgment, according to the MLLA letter and the petition.
The Town and its legal counsel have a certain amount of time to respond to the writ of mandate, according to Wilbrecht.
Wilbrecht reiterated that while MLLA believes the Town is no longer negotiating, “we still want to negotiate.”
The Town Council met on Feb. 6 and 8 in closed session, and plans to meet again on Monday, Feb. 13, at 8 a.m. An all-employee meeting was held on Feb. 8, closing the Town offices from noon-2 p.m.
A public discussion of the situation has been scheduled for the regular Town Council meeting on Wednesday, Feb. 15, at 6 p.m. in Suite Z. Directly following the pledge of allegiance there will be a presentation and the public will be allowed to make comments and ask questions, said Mayor Jo Bacon.
Wilbrecht pointed out that while the Town is still putting together a counter offer to MLLA it also continues to study Chapter 9 (bankruptcy).
“But municipalities going to Chapter 9 [bankruptcy] must still by the law go through mediation first,” Wilbrecht continued.
A new process would kick off if the Town ends up filing for bankruptcy. The Town would have to first prove it is insolvent to even be eligible, according to Wilbrecht.
According to documentation included with the writ of mandate petition, by law the Town should have started paying off the judgment in the fiscal year that the judgment became final, which would have been 2011 after the appeals process. The standstill agreement held that off until now. Only Town funds restricted by law or contracted to other purposes are exempt from being used for payment.
“The unavailability of funds … is not an excuse for non-payment,” explained MLLA in the petition. “The sole exception is setting up a payment plan up to 10 years upon passing an ordinance or resolution, and making show of unreasonable hardship.”
In the petition, MLLA states that it wants the Town to 1.) Take immediate steps to pay and 2.) Include provisions to pay in current and future budgets.
If the Town has unreasonable hardship, “it can move the court to make annual payments with interest continuing to accrue, in installments over 10 years.”
In 2008, a final judgment was issued against the Town of Mammoth Lakes. A jury found the Town guilty of a breach of contract with MLLA. The damages the Town was ordered to pay were $30 million plus attorneys’ fees and court costs. By the end of the appeals process that the Town pursued in 2009 and 2010, additional attorneys’ fees and costs inflated the debt to more than $33 million. As of Feb. 2, with accrued interest, the Town owes $42,186,032.
