Tuesday, April 8, 2008 • DMA bankruptcy filing raises concerns for county

Publisher’s note: These related stories originally appeared in the Tuesday, April 8, 2008 edition of the Lassen County Times.

When Dyer Mountain Associates, the lead developer of a proposed 6,700-acre, four-season resort near Westwood dropped a Chapter 11 bankruptcy filing in federal court in San Francisco on Thursday, March 27, it raised a number of issues for Lassen County.

John Ketelsen, Lassen County’s chief administrative officer, said, “We’ll have to ferret out what it means on a number of different fronts. We don’t know what the impact will be yet. It’s too early to come to any conclusions. We’ll have to wait for action by the bankruptcy court and respond appropriately.”

He said the county certainly has concerns about collecting nearly $200,000 in back taxes DMA owes Lassen County.

But an even bigger issue is the ongoing litigation surrounding the proposed project, especially the challenge to the developer agreement filed last October by the Mountain Meadows Conservancy, Sierra Watch and the Chico-based Yahi Group of the Sierra Club.

The suit, filed in Lassen County Superior Court, claims the county did not follow California environmental law in certifying the project’s Environmental Impact Report, development agreement and tentative parcel map for the resort.

An amendment, filed on Tuesday, Jan. 8, alleges the development agreement violates the voter-approved 2000 initiative, which zoned as mountain resort the area around Dyer Mountain and Walker Lake.

The three groups allege the initiative gave the county the option of changing the land-use designation on the project site if construction of ski facilities had not commenced within seven years.

The suit initially asked the court to set aside the Board of Supervisors’ certification of the EIR, development agreement and parcel map.

The three groups also seek an order directing the county to comply with the California Environmental Quality Act, a temporary stay and restraining order, and preliminary and permanent injunctions stopping the county and its agents from taking any action to implement the project until full compliance with CEQA.

The suit said the 6,741-acre ski area and golf resort on undeveloped land on the flanks of Dyer Mountain “would house at least 17,382 people, making it in essence a brand-new city, just miles from Westwood, a small community of about 2,000 people.”

The large new population and unprecedented degree of construction in an undeveloped and sparsely populated area will lead to “a wide array of significant environmental impacts,” it said.

Two-thirds of Westwood voters and almost 63 percent of voters countywide supported a November 2000 ballot initiative that amended the General Plan, Zoning Ordinance and Westwood Area Plan to allow the development of the four-season resort.

Regarding the court battle over CEQA and the developer agreement, Ketelsen said, “They (DMA) are the real party, and we don’t want to get in too deeply. The county doesn’t want to defend an insolvent real party.”

Ketelsen said attorneys from both sides were providing the court with documents for the proceeding.

He characterizes the lawsuit as a complex case with “a lot of nuisances and subplots.”

DMA manager puts positive spin on bankruptcy
At least one Dyer Mountain Associates manager put a positive spin on the company’s filing for Chapter 11 protection in a federal bankruptcy court on Thursday, March 27.

The Chapter 11 process allows DMA to propose to the court a reorganization plan to satisfy its debts. The court must approve this plan before it can be implemented.

Sara Duryea, one of three DMA managers, said the bankruptcy filing gives the company “time to get a deal done. Within 30 days we should have a pretty good idea of whom we’re going to be working with. We’ve got 90 to 120 days to present a plan to the court.”

According to Duryea, DMA has “two investors working with us right now, and we’re talking with other interested investors. Dyer Mountain is an incredible asset, and there’s lots of interest.”

Duryea said she is very optimistic despite all the current debt in the housing market. She acknowledged the project “needs equity” but she said she was “very confident” DMA would partner with other investors during the Chapter 11 process who would eventually build the project.

She also said the bankruptcy filing would give the company some time to resolve its conflicts with lenders who have been seeking to foreclose on the property.

Earlier this month, California Mortgage Reality, DMA’s mortgage lender, planned several public auctions so the remaining unpaid balance on a deed of trust executed on Nov. 18, 2005, can be paid. DMA reportedly owes almost $16 million. CMR extended the deadline at each of those public auctions, held on the steps of the Lassen County Courthouse.

Calls to CMR requesting comment for this story on the DMA bankruptcy filing were not returned.

The Dyer Mountain Project has been in the works at least since voters approved a ballot initiative in 2000, which zoned the area around Dyer Mountain and Walker Lake, also known as Mountain Meadows Reservoir, as a mountain resort.

The Lassen County Board of Supervisors approved the environmental impact report, development agreement and tentative parcel map for the resort in September 2007.

A month later, three groups filed suit to stop the resort development, claiming Lassen County did not comply with California environmental law in approving DMA’s plans to build, or have other developers build, three golf courses, ski runs, more than 4,000 houses and condos, and commercial and retail projects.

Mountain Meadows Conservancy, Sierra Watch and the Chico-based Yahi Group of the Sierra Club filed the lawsuit in Lassen County Superior Court asking the court to set aside certification of the EIR, development agreement and parcel map.

Attorneys on both sides are collecting material for the “administrative record” in the lawsuit, and trial dates have not been set yet.

Environmental groups look beyond DMA bankruptcy
Mountain Meadows Conservancy and Sierra Watch, two of the environmental groups opposing the proposed four-season resort at Dyer Mountain, will continue to pursue protection for Dyer Mountain despite a bankruptcy filing by the lead developer of a proposed four-season resort.

Dyer Mountain Associates filed for Chapter 11 bankruptcy protection in federal court in San Francisco on Thursday, March 27.

According to an April 2 press release from the two environmental groups, the conservationists will seek an opportunity to bring all parties to the table to seek a conservation resolution for Dyer Mountain.

“Bankruptcy might put a halt to the DMA development proposal, but it doesn’t achieve our goal,” said Steve Robinson of Mountain Meadows Conservancy. “We look forward to sitting down with county officials, creditors, conservation allies and others to seek permanent protection of the property itself.”

“Folks in Lassen County and throughout California recognized that this is not the best way to plan the future of the Sierra Nevada,” said Tom Mooers of Sierra Watch. “Now Dyer Mountain is becoming another example of how we can work together to defend our favorite Sierra places.”

According to the release, “Developers had promised ski operations by November 2007, but the project mired in deepening legal and financial turmoil and DMA was subject to at least five lawsuits and two scathing court orders. In May 2007, for example, San Francisco Superior Court assigned a majority stake in DMA to a court-appointed receiver, stating that DMA, ‘ … is in default of outstanding loans to creditors, payroll, rent and other financial obligations.’”

Creditors foreclosed on the property in January and the group owes nearly $200,000 in taxes to Lassen County.

The conservation groups said the project changed in scope after a zoning and general plan change was approved by a voter initiative in 2000. They characterized the proposed development as “irresponsible and illegal.”

“Dyer Mountain Associates began pursuing development on remote Dyer Mountain in Lassen County nearly 10 years ago,” the groups wrote … “But the scope of the project ballooned into a vague plan for 4,000 new homes, three golf courses and the ski resort on 7,000 acres of forest lands.”

“Now that the threat of development is lifted, we look forward to working to secure permanent protection for Dyer Mountain and its incredible natural resources,” Robinson said.

The Mountain Meadows Conservancy’s mission is to conserve and enhance the natural beauty and environmental health of the Mountain Meadows watershed, protect its significant Mountain Maidu burial and cultural sites and provide recreation and public access for generations to come.

Sierra Watch defends the incomparable natural resources and unparalleled quality of life in the Sierra Nevada.