Tuesday, June 29, 2010 • Dyer offers no plan to pay back taxes

Publisher’s note: This story originally appeared in the Tuesday, June 29, 2010, edition of the Lassen County Times.

Lassen County will have to wait until the economy improves enough for the new owners of Dyer Mountain, a proposed 6,700-acre, four-season resort near Westwood, to refinance the project before it receives any payments on past-due property taxes.

As part of an assumption agreement approved last December, the board of supervisors required the new owners to file a written repayment plan with the county within six months describing how it plans to settle its back tax debt.

According to a June 15 letter from Michael Choo, one of Dyer Mountain’s principals, the developer has “has timely funded and continues to make the required quarterly litigation deposits and supplemental reimbursements for expenses incurred as a result of the county’s retention of Richard Crabtree as counsel for the county.”

Craig Settlemire, Lassen County counsel, acknowledged those payments had been made.

But Choo’s letter offered no repayment plan for the outstanding taxes owed since 2008.

“Dyer Management intends to bring the county current with respect to outstanding property taxes as such point in time in which new financing becomes available at reasonable commercial terms,” Choo wrote. “We recognize the county prefers that tax payments not be delayed, however, the market for real estate investment continues to be in flux, adversity impacting capital investment. At the end of the day, the county remains a secured creditor with priority, and so the county will recoup all deferred taxes along with interest, as permitted by law.”

Bob Pyle, board chairman and District 1 supervisor, asked for the matter to be placed on the agenda so the board could get an update from the Dyer Mountain developers.

“That’s why I put it on (the agenda),” Pyle said. “I wanted an update on where they are on the taxes. I didn’t read anything real positive in the letter.”

William W. Abbott, an attorney representing Dyer Management, LLC, appeared before the Lassen County Board of Supervisors to answer questions about the developer’s plan to pay a $1.3 million back tax bill.

Abbott acknowledged as part of the assumption agreement, Dyer Management was obligated to provide a repayment plan for the back taxes to the county within six months.

Abbott said the real estate industry finds itself in a similar position to many local governments in California — “slack consumer demand and a decrease in revenues. As the economy recovers and consumer confidence recovers, then capital will start to become available to the real estate industry that isn’t available now. So, there’s a series of events that lie before us that really hold the key to recapitalizing this project and bringing the property taxes current.”

According to Abbott, the developer’s number one priority is to continue to collaborate with the county and support the costs of litigation against the project. He said resolving the litigation was very important in moving the project forward.

“The capital market is what it is, and unfortunately, we’re not in a position to reverse that,” Abbott said. “We plan to move the project forward at our first opportunity. We take the issue very seriously.”

“So basically, there’s no plan to start paying us back for the back taxes,” Pyle said. “So, hope things get better and (if they don’t) in five years, we can take the property and sell it.”

“We do not have a timetable that says we can pay this amount of money by a certain date,” Abbott said.

“I think that’s what we asked for when we approved turning the developer agreement over to you — that you would come back in six months with a plan,” Pyle said. “I guess the plan is, do nothing.”

“There is no discrete timeline because of the access to capital or the lack of access to capital,” Abbott said.

Richard Egan, Lassen County’s tax collector, said the taxes became delinquent on June 30, 2008, and he could file a power to sell document in 2013. He said he then would have to offer the property for sale within four years, but he probably would offer it immediately, perhaps even at a special sale.

District 5 Supervisor Jack Hanson asked Egan if he knew what the property’s value would be if it were assessed as timberland compared its current assessment.

Eagan said he didn’t have those figures. He did say if the economy continues to worsen, he expects the developers to come in and ask for the property to be reassessed at a lower rate.

Jim Chapman, district 2 supervisor, expressed his concerns about the project and its viability. He noted the developer was paying a 10 percent penalty and 18 percent per annum interest, which he called pretty expensive money.

“From a business perspective, I really question the logic of a big company wanting to finance their needs through the 18 percent because of the lack of capital. All that’s going to do, at least it screams to me in very loud terms, that before this 2013 date it’s probably going to lead to another bankruptcy. The county once again is going to be looking at transfers forward to another group and maybe another group and everybody having the reality that this thing is not going to happen … Even though there’s the optimism this thing could pull itself out of the nosedive it’s been in, I think it’s important that the record reflect there are concerns about the long-term ramifications … I really question the direction in which we’re going, and I’m disappointed the new owners who have assumed this responsibility have yet to come forward with a concrete plan and use the economy as an excuse for not taking care of business.”

Hanson asked if the county could recover its money if the property eventually had to be sold.

Egan said the county’s tax lien would be in first position except for any monies owed to the Internal Revenue Service. But he said the IRS essentially retains the right to buy the county out. He said he believes the property has enough value for the county to recover all the back taxes, penalties and interest it is owed.

“I’m not impressed,” Chapman said, “and I’d venture to say most people in Lassen County aren’t impressed either.”

“Nobody’s impressed, but that’s where we are,” Pyle said.

Project history
Almost 63 percent of Lassen County voters approved a November 2000 ballot initiative that amended the county’s General Plan, Zoning Ordinance and Westwood Area Plan to provide for development of Dyer Mountain and the surrounding area. The ballot measure changed the zoning of the area around Dyer Mountain and Walker Lake, also known as Mountain Meadows Reservoir.

In September 2007, the board approved an Environmental Impact Report and a large-lot parcel map dividing the resort property into 13 parcels ranging in size from 40 to 1,118 acres. The next month a number of environmental groups filed a lawsuit over the project in Lassen Superior Court.

In 2008, Dyer Mountain Associates filed a petition for bankruptcy protection in federal bankruptcy court. As a result, the local litigation and the foreclosure proceedings by creditors were stayed. One of the creditors, Dyer Holdings, Inc., obtained relief from the bankruptcy stay, foreclosed on a deed of trust and became the owner of the project’s real property on Sept. 12, 2008.

On March 30, 2009, Dyer Holdings transferred its ownership and interest in the property to Dyer Management, LLC, a Delaware limited liability company.

Dyer Mountain Associates, the project’s original developer, planned to build, or have other developers build, three golf courses, ski runs, more than 4,000 houses and condos and other commercial and retail projects as part of the proposed four-season resort.