HomeMy WebLinkAbout2007-0208 Mt. Ashland Expansion LetterSarah J. Croaks
rNONe (503)727-2252
rAx: (503) 346-2252
Emml,: SCrooks@pwkinscoie.com
February 8, 2007
VIA HAND DELIVERY, FACSIMILE, AND
US CERTIFIED MAIL, RETURN RECEIPT REQUESTED
Mayor John Morrison
City of Ashland
20 East Main Street
Ashland, OR 97520
Re: Mt. Ashland Association Ski Area Lease
Dear Mayor Morrison:
Perkins
Coie
1120 N.W. Couch Street,Tenth Floor
Portland, OR 97209-4128
PHONE: 503-727.2000
FAX: 503.727.2222
www.perkinscoie.com
FEB,0 8 2007
We represent Mt. Ashland Association ("MAA"). As you know, MAA plans to begin
construction this spring to expand the Mt. Ashland Ski Area and upgrade its facilities to provide
more balanced terrain for recreational slaers. Since 1998, MAA has spent significant time and
resources in developing the Mt. Ashland Ski Area expansion plan. In its letter dated January 30,
2007, MAA articulated its position regarding the planned expansion and again sought the City of
Ashland's ("City") cooperation. To date, MAA has not received a satisfactory response.
The City and MAA executed the Mt. Ashland Ski Area Lease in 1992 ("Lease"). Under the
Lease, the City granted MAA "sole and exclusive possession and use" of the Mt. Ashland Ski
Area "for the purpose of constructing, improving, maintaining and operating year-round
educational and/or recreational facilities for the benefit of the general public (including but not
limited to a ski area and/or winter sports resort)." Lease § 3. In connection with the Lease, the
City transferred the right to operate the Mt. Ashland Ski Area under the U.S. Forest Service
Special Use Permit ("SUP"). Lease § 2.2. In return, MAA agreed to perform all of the
obligations of the SUP, and to defend and indemnify the City for any failure to perform those
obligations. Id.
The parties always expected that MAA would work to improve the Mt. Ashland Ski Area.
Section 6.11 of the Lease expressly states that MAA may, at its own expense, "make such
alterations, improvements, additions and changes to the Leased Property as it may deem
L.EGAL1301 1405.1
ANCHORAGE • BEIJING • BELLEVUE - BOISE • CHICAGO - DENVER - LOS ANGELES
MENLO PARK • OLYMPIA • PHOENIX PORTLAND SAN FRANCISCO SEATTLE - WASHINGTON, O.C.
Perkins Coie LLP and Affiliates
Mayor John Morrison
February 8, 2007
Page 2
necessary or expedient in the operation of the Leased Property" provided that changes do not
substantially diminish the value of the property. See also Lease §§ 5.1, 7. Indeed, such
improvements are necessary to meet MAA's duty to "provide educational and recreational
programs to residents of the City of Ashland" and to operate the Mt. Ashland Ski Area in a
manner "which will stimulate the economy of the City." Lease § 7.1.2.
Despite the express terms of the Lease, in a letter dated October 3, 2006, the City demanded that
the Forest Service cease all direct communications with MAA regarding its expansion plans and
amendments to the SUP. The City's October 3, 2006, letter to Linda Duffy of the Forest Service,
commanded the Forest Service to
direct all future contracts and permits to the City, not to our
sublease [sic], MAA, DBA Ski Ashland, Inc. This request
specifically includes activities in preparation for the Ski Run
Settlement Sale, as well as future expansion permitting. Per the
Forest Service's Record of Decision (ROD) released on September
13, 2004, the City will provide the Operating Plan to initiate the
construction activities related to the expansion process. The City
is working with MAA to ensure adequate financial arrangements
for the expansion process.
By a letter dated October 4, 2006, the City notified MAA that it had directed the Forest Service
to cease working with MAA on the expansion activites. As a result of the City's actions, MAA
has been prevented from performing obligations under the SUP, and MAA has been unable to
arrange for the Ski Run Settlement Sale, or begin preparations for the Mt. Ashland Ski Area's
expansion authorized under the SUP and the Forest Service Record of Decision. Additionally,
the City has not undertaken any of the preliminary contracting, permitting, and planning that
must be completed before construction may begin. Because construction work is set to begin on
May 1, 2007, and some work potentially as soon as April 1, 2007 if snow conditions warrant,
this delay is significant. Further delay will likely derail MAA's expansion plans for the duration
of the 2007-08 season.
By barring the Forest Service from dealing directly with MAA, the City has breached its Lease
with MAA. Specifically, the City has breached the Lease by failing to allow MAA to exercise
its right to improve the Mt. Ashland Ski Area, by failing to allow MAA to perform its
obligations under the SUP, and by fiustrating MAA's general purpose of providing recreational
facilities that benefit the general public. Additionally, by preventing MAA from pursuing its
expansion plans, the City breached its implied covenant to act in good faith to perform the terms
of the Lease: At the time the Lease was executed, the parties reasonably expected that MAA
would work to improve and expand Mt. Ashland Ski Area's operations. Moreover, the parties
LEGAL13011405.1
Mayor John Morrison
February 8, 2007
Page 3
reasonably expected that MAA would be able to communicate directly with the Forest Service to
fulfill rights and obligations under the SUP.
If, by February 22, 2007, we have not received notice that the City has acted affirmatively to Iif1
the bar on MAA's direct communication with the Forest Service, MAA will exercise its rights
and remedies under the Lease, up to and including the commencement of legal proceedings. If
legal proceedings ensue, MAA will seek specific performance of its rights under the Lease, and,
in the alternative, at least reliance damages based on the monies MAA has expended in planning
and studies for the expansion, and/or monetary damages flowing from construction cost
increases and lost revenue due to construction delays. We expect such damages to amount to at
least hundreds of thousands of dollars. In addition, MAA will seek to recover all reasonable
attorney fees and costs incurred in its efforts to modify the SUP and expand the Mt. Ashland Ski
Area under Section 15 of the Lease, which provides:
If suit or action is instituted in connection with any controversy
arising out of this Agreement, the prevailing party in that suit or
action or any appeal therefrom shall be entitled to recover, in
addition to any other relief, the sum which the court may judge to
be reasonable attorney fees.
I have enclosed copies of the above -referenced Lease and SUP for your reference. I look
forward to your prompt attention and response to this demand. Please direct all future
communication regarding this matter to this office.
Very truly yours,
jasa" 441---
Sarah J. Crooks
LEGALI3011405.1
Mayor John Morrison
February 8, 2007
Page 4
Enclosures
cc: Bill Little
Kim Clark
Martha Bennett
David Chapman
Alice Hardesty
Cate Hartzell
Kate Jackson
Eric Navickas
Russ Silhiger
LEGAL 13011405.1