Two More Cities Topple, Look to Bankruptcy

The domino effect has begun – two more California cities have voted to file for bankruptcy.

Mammoth Lakes city council voted to seek bankruptcy after its largest creditor, Mammoth Lakes Land Acquisition (MLLA) won a court order requiring the city to pay the $43 million judgment by June 30th.

City officials stated “Bankruptcy, unfortunately, is the only option that the town is left with.” The decision to file bankruptcy came five days after Stockton, California filed for bankruptcy.

California, suffering from a housing crisis with high foreclosure rates, high unemployment, unsustainable pensions and benefits has had several cities file bankruptcy.

Experts also point the finger at Proposition 13, the property tax reform adopted in the 1970’s. California cities are at greater risk because of their debt structure.

Mammoth Lakes, a beautiful ski resort community near Yosemite National park has 8,200 residents and an annual budget of $19 million.

MLLA sued the town in 2006 for allegedly breaching a development agreement in which MLLA would build homes, retail space and other structural improvements near the city’s airport.

Two years later, the state court awarded the company $30 million for breach of contract, and the town appealed. The appeals court sided with MLLA, and the $30 million grew to $43 million with interest and legal fees.

Right on the heels of Mammoth Lakes is San Bernardino. They filed for bankruptcy Tuesday night when the city council voted to avoid a $45 million budget shortfall. San Bernardino is also seeking protection due to its inability to make payroll over the next three months. If payroll isn’t met, there will be a mass exodus of employees. Their workforce has already been slashed by 20% over the last four years. San Bernardino has a 15.7% unemployment rate and over 5,000 homes in foreclosure.

Washoe County, Nevada is having similar problems with different circumstances. Local residents have won property tax judgments against Washoe County where Incline Village, Crystal Bay and Reno are located. Home prices in Washoe County tripled during the real estate boom, increasing property taxes while wages went down or didn’t increase very much. Local governments increased their spending. Public employee staffing increased, and much like Stockton, the employee’s benefits and pensions were


Washoe County is showing a projected loss of approximately $85 million for fiscal year June 30, 2013. The treasurer’s office has been very slow to pay the tax refunds. Incline Village and Crystal Bay property owners had to go to court to get the treasurer’s office to face an August 2013 deadline for payment of property tax refunds.

Cities and counties aren’t the only ones filing for bankruptcy.

In the past 12 months, 1.37 million people filed for bankruptcy. In Colorado, nearly 30,000 people filed bankruptcy with the majority filing a Chapter 7. Debt collectors are presently pursuing over 30 million people in the US.

The majority of the personal bankruptcies can be directly contributed to home and property issues. Homeowners have found themselves underwater (owing more on their home than it’s worth) have lost their jobs and are facing foreclosure.

When facing foreclosure or short sale and considering bankruptcy, the homeowner should contact a foreclosure defense attorney who also handles bankruptcies to ensure there are ‘no surprises’ for the homeowner later on.

Keith A. Gantenbein, Jr. is a Colorado foreclosure defense attorney located in Denver and servicing all of Colorado. He also handles bankruptcies, mortgage negotiations, lender liability, real estate, civil litigation, contracts and landlord/tenant. If you think you will be facing foreclosure, or are in the foreclosure process, or have had a wrongful foreclosure, contact Keith Gantenbein at (303) 618-2122 for a one-hour consultation where he will discuss your situation and go over all your options with you.

This article is not intended as legal advice. The opinions of this article are solely the opinion of the author.

About theglawfirm1

Gantenbein Law Firm is a Denver, Colorado Tax Law Firm, servicing all of Colorado. Gantenbein Law Firm also specializes in Colorado Real Estate Law, Colorado Foreclosure Defense, Wills & Trusts, and Business Law.
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