The city of Hailey will appeal last month’s decision in federal bankruptcy court that bars the city from seeking $2.5 million in unpaid annexation fees from Old Cutters Inc.
The court also invalidated the city’s requirement that Old Cutters include 20 affordable housing units in the partly built 108-unit subdivision in east Hailey.
“We reviewed the decision and evaluated it and believe there are sufficient reasons to appeal it,” Hailey City Attorney Ned Williamson said.
A decision issued by the federal bankruptcy court in Boise on Dec. 31 addresses several claims and counterclaims by the city, Old Cutters and Mountain West Bank over payments of fees, loans and the legality of liens on the property.
In granting Old Cutter’s motions for summary judgment, federal Judge Jim Pappas called Hailey’s annexation fee of $3.8 million, contained in a 2006 annexation agreement, “unquestionably in excess of” the amount required to compensate the city for actual costs resulting from the annexation.
Bankruptcies are all handled in federal court, though this case raised questions of state law regarding the annexation fee and community housing requirement.
“Typically, this is something that would have been decided by a state court,” Williamson said "These are state issues, not federal issues."
In his decision, Pappas stated that “some of the issues raised by the parties pose questions of first impression under the Idaho statutes,” meaning that the identical questions had not been presented to an Idaho court.
Williamson said that even though the appeal would be filed in federal court, federal rules allow the city to seek resolution on issues of state law from the Idaho Supreme Court during the appeals process.
“This is an option that we will be looking at,” he said.
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