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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