Town council for Mammoth Lakes, Calif. voted unanimously on Monday, July 2, 2012 to authorize the filing of Chapter 9 Bankruptcy according to a statement on the town's website

The small mountain town was forced into the decision after it's largest creditor, Mammoth Lakes Land Acquisition (MLLA) obtained a State court order requiring payment of $43 million by June 30, 2012. That's more than twice the town's annual budget of $18 million.

Mammoth scenic view

Questions remain about skiing at Mammoth Mountain following Mammoth Lakes' Chapter 9 filing. Photo Courtesy of Mammoth Mountain Ski Area.

The town tried to back out of a 1997 deal that allowed the development of a hotel and purchase of land in exchange for cleaning up the local airport. The MLLA sued the town for ending the contract and won. They refused to negotiate concessions from the property development dispute. A $30 million judgment jumped to $43 million with interest and legal fees, before Mammoth Lakes lost its final appeal.

The huge drop in tourist visits due to the poor snow season also hurt the town's financial situation. The general fund budget is now down $2.2 to 2.5 million.

Mammoth will go through the new mediation process before filing under the new union-backed law that aims to protect public employee contracts. Local governments enter an evaluation process with its bondholders, creditors, employee unions and retirees. The process may take up to 90 days.

With the support of other government agencies, the town will continue to run as usual. The police and fire departments, roads, parks and airport maintenance services, and town office business hours and service will all remain intact.