The city of Mammoth Lakes. The ski town will declare bankruptcy after efforts to negotiate payment terms for a $43-million legal judgment broke down.
Hot on the heels of Stockton, Calif. becoming the largest U.S. city to declare bankruptcy, the far smaller hamlet of Mammoth Lakes has headed for Chapter 9, the municipal equivalent of Chapter 11. Mammoth Lakes is much smaller than Stockton — just south of 8,000 residents, versus 300,000 — but it used the same state-mandated mediation process to work things out with its creditors prior to declaring bankruptcy.
Mammoth Lakes was dealing with $2.8-million budget deficit, also much smaller than Stockton's $26-million gap, but still a gap. However, the real problem for Mammoth Lakes was a $43-million court settlement on a breach-of-contract with a developer, on a deal that dated to 1997. True, Mammoth Lakes was hit by the same housing downturn that crushed Stockton's finances, with the main difference being that Mammoth Lakes is a ski destination where second homes and condos can be appealing, while Stockton was trying to become a bedroom community for the San Francisco Bay area — a primary-home market.