Mammoth Lakes to File for Bankruptcy

Popular ski town is struggling financially.

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    NEWSLETTERS

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    Lonnie Kauk of Mammoth Lakes races down a mountain on his skis.

    Councilmembers in the popular ski town of Mammoth Lakes voted unanimously Monday to file for bankruptcy, the second local government in the state to recently make that decision.

    Mammoth Lakes is facing a $43 million judgment that's more than twice the town's budget. Papers seeking Chapter 9 bankruptcy protection could be filed in court as soon as Tuesday, according to Marianna Marysheva-Martinez, the assistant town manager.

    The city of more than 8,000 people about 300 miles north of Los Angeles has lacked sufficient revenue to pay $2.7 million in obligations, and a state court has ordered it to repay its largest creditor, Mammoth Lakes Land Acquisition.

    The town lost a property development fight that left it with a $30 million legal judgment in 2008. Mammoth Lakes had tried to back out of a 1997 agreement that gave a developer the right to develop a hotel and buy land in return for improving the local airport.

    The town fought that judgment but lost its final appeal to the California Supreme Court. The tab has grown to $43 million interest and legal fees — a figure more than twice the town's annual budget of $18 million.

    A poor snow season also hurt the town's finances because it caused a dip in tourism. The town now faces a deficit of $2.2 million to $2.5 million in its general fund budget.

    While the city is under Chapter 9 protection, agencies including police and fire services will remain intact, town officials said.

    The filing will make Mammoth Lakes the second local government after Stockton to use a new state mediation process before filing for bankruptcy.

    The new union-backed law aims to protect public employee contracts by making it harder for municipalities to file bankruptcy and requires local governments to enter an evaluation process with its bond holders, creditors, employee unions and retirees for up to 90 days in an effort to avoid Chapter 9 protection.

    Stockton City Manager Bob Deis has said the Central Valley city's financial problem stems from years of overly generous public employee contracts and too much borrowing for revitalization projects, such as a sports arena.