Contrary to public statements made by Sean Northrop and other representatives of City Heights regarding the City’s unwillingness to meet to discuss a potential settlement in lieu of bankruptcy, it was the City that initially reached out to City Heights to schedule a mediated discussion before taking other actions, such as considering filing for bankruptcy.
The City also made, in its view, a reasonable settlement offer to City Heights prior to the arbitration. Unfortunately, some of the funds that would have been available to pay City Heights then are no longer available because of the costs of protracted litigation with City Heights. Both prior to and subsequent to the arbitration award, City Heights refused to take a realistic view of the City’s finances, which are a matter of public record, to determine how much the City has available to pay a judgment while still providing basic public services to its citizens.
On November 18, 2024, the City’s attorney contacted City Heights’ attorney and asked for mediation with an experienced Chapter 9 bankruptcy mediator. The scheduling of this mediation would be contingent upon City Heights’ agreement to take no action to collect on its judgment pending the mediation.
On November 22, 2024, City Heights’ counsel responded that City Heights would consider staying collection efforts if the City made a lump sum payment of $5 million.
On November 25, 2024, the City’s counsel responded to City Heights’ counsel and explained that the City lacked $5 million in available funds, could not borrow such funds with City Heights’ judgment hanging over it, and therefore the City was unable to meet the $5 million demand.
On December 16, 2024, the City provided the following settlement offer to City Heights contingent upon City Council approval and to avoid bankruptcy. The City would pay City Heights $250,000 upon the effective date of a settlement agreement that resolves the judgment, and $250,000 on or before the anniversary date of the settlement agreement for the next 15 years. This meant that over the course of 15 years, City Heights would receive 16 total payments of $250,000 each, totaling $4 million.
Inexplicably, Mr. Northrop has made several public comments where he has stated that the City’s offer was $250,000 over the next 10 years. The City has never made that offer and it’s unclear why this inaccurate statement has been repeated. Additionally, Mr. Northrop has falsely stated that the City has a $7 million line of credit available from which the City could make a lump sum payment. To be clear, the City does not have a $7 million dollar line of credit.
On December 19, 2024, the City Council held a Special Meeting to consider filing a Chapter 9 Petition for Bankruptcy. The City Council voted to table discussion and decision on the filing until a later date to allow staff to continue settlement discussions with City Heights.
Throughout the end of December and through today, City Heights’ counsel corresponded by phone and email with the City’s bankruptcy attorney.
On December 24, 2024, at City Heights’ request, the City provided City Heights’ counsel with financial documentation demonstrating the City’s financial situation and showing that the City conducted a thoughtful and meaningful review to create the December 16 offer.
City Heights has requested some immediate payment from the City. On January 3, 2025, City Heights’ counsel advised the City’s counsel that City Heights would not mediate without an up-front payment to show “good faith” by the City.
The January 14, 2025, the Cle Elum City Council meeting will include an executive session and potential action by the City Council on City Heights’ positions on mediation and settlement. The City hopes this will finally bring City Heights to the table to have a mediated, constructive discussion toward a viable path forward for both parties.
The City continues to believe that an experienced Chapter 9 bankruptcy mediator is necessary to try to bridge the gap between the parties by helping to frame realistic expectations of the likely range of outcomes if City Heights forces the City into bankruptcy.