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Mammoth agrees to $2 million a year for 23 years in MLLA case

September 28, 2012

 

Town leaders of Mammoth Lakes last night issued a clarion call for action by the town’s citizens in the wake of its $29.5 million, 23-year settlement with Mammoth Lakes Land Acquisition (MLLA).

The call came from town councilmembers and Town Manager Dave Wilbrecht, who together face the prospect of paying off a $2 million annual payment over the next 23 years to end the breach of trust judgment against the town.

 “There is no margin for error,” Wilbrecht said before the start of a highly unusual town council meeting in the town offices.

“All we can do is lay out a plan,” he said, “but the community really needs to be involved. This is going to affect services in some fashion or form.”

According to a press release last week, among the ideas on the table are community volunteer efforts “in areas such as customer service, visitor services and neighborhood patrols.”

Also on the table are more cuts to the town’s workforce through the elimination of some positions.

The plan, such as it was presented at the meeting, calls for no new taxes, but the town said it wanted to float that possibility.

“The town will pursue efforts to raise funds to prepay the MLLA obligation through borrowing, and will work with both institutional and individual investors,” the town said in a press release.

The settlement does not call for any new taxes.

“However, the town expects to engage the community in a discussion of whether a new tax should be raised with voter approval, to help pay off the settlement early.”

One of the variations on the tax idea is in the creation of a “business improvement district,” or a BID. Tourism director John Urdi has pushed for a consideration of the idea, specifically to prop up guaranteed airline subsidies at Mammoth-Yosemite Airport.

However, Urdi said he has not found any solid footing for the idea as yet.

“The BID is still TBD,” he quipped at an Airport Commission meeting Tuesday afternoon.

Urdi’s idea is to add 0.5 percent surcharge, or fifty cents for every $100 spent, on most transactions, such as lodging, food and retail products.

He said such a surcharge would be mostly paid for by visitors—added to the bill they got for their meal or their room—but local residents would also contribute toward the fund, whenever they spent money within the borders of the BID.

It’s similar to the more familiar “resort fee,” he said, except this surcharge would be targeted only toward maintaining year-round air service.

Otherwise, the money to pay for the settlement will have to be in the form of cuts, town officials say.

If there is a silver lining in any of this, it is that in bad snow years, such as last year, partial prepayments are allowed, as low as $250,000 in any given year.

Where the cuts will come from ultimately was anyone’s guess on Thursday evening. Although the town agreed on a settlement on Friday, Sept. 21, the town did not put forth a payment plan at the time. Wilbrecht said he and the Town Council wanted to listen to the citizens first.

As residents last night filed into the council chambers in Suite Z of the town offices, nothing was set in stone, Wilbrecht said.

Everything was on the table, including a plea for steely direction from the citizens themselves.

“We’re trying instill a sense of discipline,” Wilbrecht said before the meeting began.

Wilbrecht said he could not predict what would happen as a result of the forum, but he said he anticipated the council would wrestle with a payment plan over the next weeks and months, with a restructuring plan to go into effect this coming Jan. 1.

As to the immediate effects of the cuts, Wilbrecht said he could not say, either in short-term effects or long-term effects.

The process, he said, might very well include the creation of a blue-ribbon panel of “interested parties” to help the council make the tough decisions.

In a the lengthy,  Jan. 21 press release, the town said that during the next few weeks, the town plans to meet with its employee groups to discuss ways to dramatically restructure its operations and provision of services.

“This will be a part of an effort to move to an innovative and collaborative model that reduces costs, engages other governmental agencies, volunteers, local nonprofits, and the private sector,” the press release stated.

“The town’s plan includes talking to employee groups and evaluating the following options:

  •  Contracting out some of its services, to other governmental entities, nonprofits 
and/or the private sector.
  •  In collaboration with neighboring entities, such as the school district, the hospital, the fire district, ESTA, Mono and Inyo counties, exploring opportunities to create economies of scale in the provision of common services, through formation of a Joint Powers Authority (a JPA, similar to ESTA).
  •  Creating opportunities for the public to be more involved in government by establishing a far-reaching volunteer program, with opportunities in areas such as customer service, visitor services and neighborhood patrols.

“The town’s restructuring plan may necessitate elimination of some town positions.

“The town will meet and confer with its employee groups, and those groups will be invited and encouraged to participate in a competitive process to bid on providing the various services and functions that the town will be considering for outsourcing, including those that may be provided through a JPA.

“The town’s desire is to begin implementing suitable portions of the plan by Jan. 1.

Among the areas that are wide open are how many employees the town really needs, particularly in the public safety (police) sector.

Whichever way the town goes, it insists it is better than facing bankruptcy, for which it filed for eligibility last July.

“The more the town has learned about Chapter 9 bankruptcy and strengths and weaknesses of our particular case,” town officials wrote in their press release, “the more evident the risks and costs became.

“There was a possibility that the bankruptcy judge would find the town ineligible for Chapter 9 relief, or would not approve our proposed debt-restructuring plan. It became clear that the town would be required to increase financial support for its litigation efforts in order to try to win eligibility and plan confirmation.”

“These increases were estimated between $2.5 million and $5 million. Without a massive cash infusion (and, quite possibly, even after spending additional millions), there was a strong potential for a dismissal of the town’s bankruptcy case by the bankruptcy judge.

“This would immediately make the town subject to the $43 million state court writ, ordering the town to pay the $43 million immediately, or request a 10-year payment term (resulting in approximately $6 million annual payments for 10 years, after applying the seven percent interest set by California State law). The town simply cannot afford to pay $43 million immediately or $6 million annually.

“A prolonged legal battle with MLLA and other major creditors was anticipated in the bankruptcy court.

“Such a battle would require spending millions of dollars in legal fees, with a very uncertain outcome as to the eventual payment to MLLA.

“Even if the town eventually received the U.S. Bankruptcy Judge’s approval of its debt adjustment plan, a payment to MLLA under that plan would likely be similar to the $29.5 million negotiated under this settlement. And even then, the Judge’s decisions could have been appealed by MLLA and others, resulting in yet more litigation and additional cost.”

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