The City of Cle Elum and a housing developer have agreed to enter mediation to settle on an installment plan for the city to pay a $22.3 million judgment, avoiding municipal bankruptcy.
The city, population of about 2,200, is on the hook for $22.3 million — five times its annual general-fund budget — after an arbitrator ruled in November in favor of housing developer Sean Northrop and his LLC, City Heights Holdings, over the provisions of a 2011 development agreement regarding Ederra, a new community of 1,000 houses. The arbitrator came to the $22.3 million figure based on the delays caused by the city not executing the agreement as written.
In January the Cle Elum City Council voted to look into municipal bankruptcy, stating there was no other option. Municipal bankruptcy in Washington is rare — North Bonneville is the first and only city to pursue this option when it filed in 1991.
Cle Elum Mayor Matthew Lundh said in a news release he was glad City Heights Holdings was willing to enter mediation to work toward a “realistic and sustainable resolution.”
“A settlement that balances the City’s financial realities with its obligations is the only viable path forward — without it, Chapter 9 bankruptcy remains our only alternative,” Lundh said in the news release.
The city agreed to make a $50,000 payment to City Heights Holdings to enter mediation, which will be applied toward the cash judgment. Mediation starts March 24.
