Wednesday, December 5, 2012

Old Cutters bankruptcy ruling near

$2.45 million payment plan under review in federal court


By TONY EVANS
Express Staff Writer

Some of the lots at Old Cutters subdivision in Hailey have been developed with houses, but most remain undeveloped. Photo by David N. Seelig

The city of Hailey could soon get regular payments from Old Cutters subdivision developer John Campbell to cover $2.45 million in past-due annexation fees, unless a federal judge in Boise decides the fees are illegal.

Campbell filed for Chapter 11 bankruptcy protection last August against $9.5 million in claims from Mountain West Bank and $2.45 million from the city of Hailey. Citing “extortionate” annexation fees and an allegedly unlawful affordable-housing requirement, Campbell also filed a lawsuit in bankruptcy court against the city in December 2011. 

The suit seeks a declaration that Old Cutters does not owe any more in annexation fees and cannot be required to provide deed-restricted affordable housing. Campbell agreed in 2006 to build 20 community-housing units on the site, worth about $2 million.

Mountain West Bank, a lender to the subdivision northeast of downtown, also filed a suit against the city claiming that the annexation and development agreement signed between Campbell and the city in 2006 is invalid. The agreement includes the annexation fees and housing requirement.

Hailey City Attorney Ned Williamson filed a motion to dismiss both lawsuits and the bankruptcy filing, but the motion was denied in April.

Williamson said in an interview last week that a four-year payment plan currently under review by U.S. Bankruptcy Judge Jim D. Pappas is “generally acceptable” to the city. He said the plan would require Old Cutters to sell lots from Old Cutters subdivision over a four year period and use proceeds to pay debts, to the city and to Mountain West Bank. 

Campbell said the payment plan could be moot if Pappas rules in separate adversary proceedings that the annexation fees and community-housing requirements were illegal to begin with.

“Old Cutters Inc. has argued that it paid more than the amount of annexation fees mandated by Idaho law and that any additional claim for annexation fees is not supported by Idaho law,” wrote Campbell in an email to the Idaho Mountain Express. 

“It (Old Cutters) is not asking the city to return those annexation fees that have been paid to date,” he wrote.  

In 2006, Campbell agreed to pay the city $3,787,500 in annexation fees. To date, he has paid the city $1,317,000, the lawsuit states.

A confirmation hearing of the proposed plan is scheduled for Dec. 19 in Boise.

 




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