Mammoth Lakes, California, is known for its world-class skiing and snowboarding, as well as the majestic Sierra Nevada wilderness that surrounds the remote California town. Yesterday, however, it also became known for having filed for bankruptcy in the face of a $43-million breach-of-contract judgment brought against the town by a developer.

“I wish this hadn’t happened,” Mammoth Lakes Mayor Matthew Lehman told the Mammoth Times. “But it’s not the way the cards fell for us.”

Town officials said that bankruptcy “is the only option that the town is left with” because negotiations to mediate payment terms with Mammoth Lakes Land Acquisition failed before a court-mandated June 30 deadline.

The Los Angeles Times reports that the town plans to ask the bankruptcy court to approve a 10-year payment plan of about $500,000 a year. That way it can assure operating with enough services to assure the safety of residents and tourists. (Mammoth Hospital and the Mammoth Community Water District are separate from the town and not affected.)

Mammoth Lakes already was struggling economically. It had cut services and asked employees to endure pay reductions. Mammoth Mountain Ski Area in the spring laid off 75 full-time employees. Two weeks ago, the ski area also announced it was closing June Mountain, a sister resort about 30 miles to the north, for economic reasons.

The bankruptcy, however, stems from the breach-of-contract judgment.

Mammoth Lakes in 1997 signed an agreement with Mammoth Lakes Land Acquisition that required the developer to make substantial improvements to Mammoth-Yosemite Airport’s fixed-base operations.

The developer, in turn, earned rights to develop a $400-million hotel project on 25 acres of airport land, with an option to purchase the property.

The court agreed, however, that Mammoth Lakes did not keep its end of the agreement after discovering that the hotel project would interfere with Federal Aviation Administration policy and essentially disallow the expansion of the airport runway to accommodate large passenger jets. Because its remote Eastern Sierra location limits access, the town has expanded airline service considerably over the last decade.

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