City of Cle Elum

Heart of the Cascades

City Heights Arbitration Award Information

Statement from City of Cle Elum Mayor Matthew Lundh on Award in Developer Dispute

CLE ELUM, Wash., – In response to the award in the legal dispute with land developer City Heights that resulted in arbitration and a $22.2 million award against the City of Cle Elum, Mayor Matthew Lundh issued the following statement:

“The City Heights Development Agreement was entered into in 2011.  City Heights initiated discussions with the City about moving forward with development in 2019.  Between the time that the agreement was established and development efforts initiated, the City’s administration as well as personnel for both the City and City Heights changed.  Given the time that had passed and changes in personnel for both parties, there were differing views on the interpretation and meaning of various provisions in the 2011 Development Agreement, including the applicable process for reviewing permit applications as well as environmental concerns. The City did its best to work with City Heights’ requests and comply with its obligations.

“Throughout the process, rather than issue permit denials based on City Heights’ deficient or inconsistent permit applications, the City chose to work with City Heights to try and resolve the issues.  Additionally, over the course of several years, the City spent a significant amount of time and effort attempting to resolve the litigation. It’s worth noting that Washington State law restricts the City’s ability to raise revenue, including by borrowing, which limited the City’s ability to agree to settlement amounts and timing proposed by City Heights.

“Ultimately, the third and final round of arbitration has substantially concluded, with a remaining issue as to attorney’s fees, and with the Arbitrator issuing a financial award to City Heights on November 5.  While the amount of the award is less than what City Heights had claimed, it is still a large sum for a City of our size.  The City is in the process of analyzing the award and will provide additional updates as appropriate.”

Resources

Frequently Asked Questions

What is City Heights?
City Heights is a planned mixed-use development that includes the development of up to 962 dwelling units on 358 acres in the City of Cle Elum generally located north of 6th Street along the ridge overlooking the City pursuant to a Development Agreement.
When was the Development Agreement signed?
In 2011, the Cle Elum City Council approved a Master Site Plan, an Annexation and Development Agreement, and a Planned Action Ordinance for City Heights under different City leadership and staff.  After the agreement was finalized, the City Heights project laid dormant for several years.  City Heights Holdings LLC was formed in 2019 and acquired the property.  City Heights first indicated it was moving forward with development in 2019.
What caused the legal dispute?
Given the time that had passed and changes in personnel for both parties, there were differing views on the interpretation and meaning of various provisions in the Development Agreement, including the applicable process for reviewing permit applications.  These disputes led to three arbitrations, with the first two relating to seeking decisions from the Arbitrator regarding how permit applications should be processed under the development agreement and the third arbitration relating to City Heights’ claims that the City should be held liable for a substantial amount of damages City Heights alleged it incurred as a result of alleged delays.
What is the status of the arbitration?
As part of the third arbitration, on November 5, 2024, the Arbitrator issued an award of $22,230,175 against the City.  Copies of the parties’ arbitration briefs, along with the Arbitrator’s Award and letter of explanation can be found above under “Resources”.
Why is the award so high?
With respect to damages, City Heights claimed it was entitled to over $28 million in damages.  CHH asserted that, “but for” delays caused by the City, it could have reaped a windfall from a “hot” seller’s market resulting from impact of COVID-19. In response, the City submitted evidence demonstrating that the City was not the “but for” cause of the alleged delays and that City Heights’ alleged damages were speculative and unsupported. The Arbitrator ruled that City Heights met its burden of proof and awarded damages in the amount of $20,340,000, plus interest.
Why didn’t the City settle the litigation?
Over the course of several years, the City spent a significant amount of time and effort attempting to resolve the litigation. Washington State law restricts the City’s ability to raise revenue, including by borrowing, which limited the City’s ability to agree to settlement amounts proposed by City Heights. Ultimately, what City Heights demanded via a settlement was in excess of the City’s available resources, and the parties were unable to reach an agreement.
Where is City Heights’ development project now?
Information relating to the project can be found here.
What happens now with the award?
The City is in the process of evaluating the award and will provide additional updates as appropriate.