A state judge said Wednesday the "money clock is ticking" and he is inclined to rule in favor of the city of McCall's request to issue revenue bonds to pay the remaining $6 million from the J-Ditch lawsuit.
The city of McCall was poised to go into bankruptcy if it could not make a deal with two companies to which it owes $6 million from the J-Ditch lawsuit.
The city went forward with a hearing before Fourth District Court Judge Thomas Neville in Cascade Wednesday afternoon to ask permission to issue sewer bonds to cover the remaining $6 million owed to Wausau and St. Clair.
Two McCall citizens testified against the city's request. Mike Anderson and Jean Odmark each asked the court to deny or delay the decision until the Ninth U.S. Circuit Court of Appeals rules on the city's appeal of a federal judge's order to pay the judgment immediately.
"The appeal will not make the judgment go away," Neville said referring to an original order to pay that was not appealed. "I can't think of a clearer case of ordinary and necessary: I am tentatively inclined to grant this petition."
Neville could rule on the case soon, which may make unnecessary hearing next week in, federal court in Boise on a contempt of court motion against the city.
The McCall City Council voted unanimously Monday night to file for bankruptcy if no settlement is reached before a scheduled contempt of court hearing next Thursday in U.S. District Court in Boise.
Citizens at a town hall meeting on the issue were told last Thursday the council would make a decision Monday night whether to declare bankruptcy.
Instead, the council decided to keep negotiating with Employers Insurance of Wausau and St. Clair Contractors.
"We don't want to hit the March 6 wall," Mayor Bert Kulesza told the town hall meeting last Thursday.
"Wausau and St. Clair have put us in a tight corner. We are in an untenable position. Losing control of the city is unacceptable."
The city may seek bankruptcy in order to keep control over city services that could be shutdown by the contempt of court motion before U.S. District Court Judge B. Lynn Winmill.
Cost and control seemed the major concerns of citizens who wanted to know more about the reality of municipal bankruptcy.
Local developer Scott Findlay challenged the city's assertion that filing for municipal bankruptcy would be "business as usual."
Filing for bankruptcy would temporarily stop Employers Insurance of Wausau and St. Clair from collecting the debt the city owes them, said Boise attorney Kim Trout, who the city has hired to advise them on the case.
A Financial 'Hiccup'
The city would have 120 days to propose a plan to pay the judgment. A bankruptcy judge would decide if the plan is acceptable, he said.
Trout told the audience that if not for the judgment against the city, the city would be in great financial shape. He called the judgment a financial "hiccup."
Filing for bankruptcy could cost the city $200,000 to $750,000 in legal fees.
A bankruptcy filing would also give the city's pending appeal with the Ninth US. Circuit Court of Appeals more time to be heard.
The city wants the appeals court to invalidate Winmill's order last April ordering the city to pay the judgment, saying a federal judge cannot overrule state limits on property-tax collections.
The council considered filing for bankruptcy after Winmill's original order, but held off.
The new consideration comes on the heels of a demand by Wausau and St. Clair to hold the city in contempt of court.
The motion to be !heard next Thursday offers Winmill several options if he decides the city is in contempt of his previous orders for the city to pay the judgment.
City Manager Lindley Kirkpatrick was worried that a contempt ruling could cause the city to lose control of its services.
"It's reasonable to assume, based on the history of this case, the worst case those orders could be granted on March 6," Kirkpatrick said. "It would be devastating. It would mean the elimination of city services. Police, water, sever, parks, recreation, library, streets maintenance, snow plowing virtually every service provided by the city would halt."
He also spoke to concerns about a suggested fine if the city did not pay the judgment.
The fine would begin at $1,000 a day. At the first of each successive month, the fine would be doubled. The fine could grow to $1 million a day within a year if the city failed to pay the judgment, Kirkpatrick said.
Wausau Attorney on Blewett of Lewiston attended Monday's meeting and told the audience why he filed the contempt of court motion. He also told the crowd that he has been willing to work with the city.
"We're ready to sit down and talk," Blewett said. "There has to be something out there that convinces us there is a genuine effort out there to pay and satisfy the judgment."
"We remain open to discussion," Trout said. "We are trying very, very hard."
