1992-37601-Minutes for Meeting November 02,1992 Recorded 11/4/19920 92-3'7601 0119-13C3 WORK SESSION MINUTES DESCHUTES COUNTY BOARD OF COMMISSIONERS November 2, 1992 Chairman Maudlin called the meeting to order at 10 a.m. Board members in attendance were: Dick Maudlin and Tom Throop. Also present were: Larry Rice, Public Works Director; Bruce White, Assistant County Counsel; Rick Isham, County Counsel; Mike Maier, County Administrator; George Read, Planning Director; and Kevin Harrison, Senior Planner. INN MANAGEMENT COMPANY, INC. BANKRUPTCY PLAN Before the Board was consideration of approval of a Proposed Plan for the Inn Management Company, Inc. Bankruptcy dated November 2, 1992, and attached to these minutes. Bruce White reviewed his attached memorandum with the Board. Rick Isham pointed out that the newspaper showed Golf Village as being worth approximately $7-$8 million while Inn Management had said their interest was $300,000. Mr. White said they may had been understating their interest in Golf Village, because they were "captured investors" at this point since they didn't control the partnership. He didn't feel that would have a bearing on the acceptability of this plan, because they were not proposing to liquidate. If it were sold, they would use the proceeds to pay off the priority tax claims. Even if there was a cash call, it would not reduce their cash flow, however it would reduce the amount of their interest in the Golf Village Partnership. Chairman Maudlin pointed out that if it reduced their interest, it would also reduce the County's collateral. However, since the room taxes had always been paid by the Inn of the Seventh Mountain and not the Golf Village, if Inn Management Company lost their partnership interest in the Golf Village, it wouldn't affect the amount of room tax received. Mr. White asked that the Board move to accept this plan with the addition that the post-petition real property tax administrative claims would be paid on March 15, 1993, with interest accruing at 16%. THROOP: I'll move the staff recommendation which is to adopt the November 2 proposed plan with the addition of the March 15, 1993, payment date for administrative expenses for real property taxes and also authorize the chair to sign ballots approving the plan. MAUDLIN: I second the motion. ,.. VOTE: THROOP : YES SCHLANGEN: Excused MAUDLIN: YES DATED this '�" day of 7L Commissioners of Deschutes County, ATT z� Recording Secretary 0119-1304 , 1992, by the Board of ssioner Nancy Pope Schlangen, Commissioner Dick Maudlin, Chairman OIES IE �0 0119-1305 LegalDepartment OFFICE OF LEGAL COUNSEL ADMINISTRATION BUILDING n 1130 N. W. HARRIMAN m BEND, OREGON 97701 FAX (503) 388-4752 Richard L. Isham ■ 388-6625 Bruce W. White ■ 388-6593 Susan Brewster■ 385-1714 November 2, 1992 CONFIDENTIAL - SUBJECT TO ATTORNEY CLIENT PRIVILEGE MEMORANDUM TO: BOARD OF COUNTY COMMISSIONERS FROM: BRUCE WHITE V"rt.) SUBJECT: INN BANKRUPTCY COPIES: RICK ISHAM MIKE MAIER HELEN RASTOVICH FILE NO.: 2-593 Summary of Proposed Plan (a) Priority room tax claim Semi-annual payments on $142,337.99 claim on March 31 and September 30 over six years, with interest accruing at 8%; first payment to be made by September 30, 199.1. Payment of dividends to Unit Owners semi-annually only after payments made to County and after $50,000 reserve maintained. (b) Secured real property claim Payment of $58,203.83 plus interest at 12% in two installments, approximately $30,703.10 by May 15, 1993 and the remainder by September 15, 1993. (c) Secured personal property claim $8,169.27 claim plus interest at 12%, payable on the effective date of the Plan. Board of County Commissioners November 2, 1992 Page Two (d) Administrative claims (post-petition property) 0119-1306 real and personal 1992-1993 real and personal property taxes will be paid as they fall due. 1991-1992 real property taxes to be paid by March 15, 1993, with interest accruing at 16%. (e) Unsecured claim for room tax penalties Payable at $.035 on the dollar. The Plan is explained below in further detail. Board Settlement Authorization At a department head meeting with Mike Maier and Helen Rastovich on September 14, 1992, the Board authorized a settlement with the Inn along the following lines: (a) Priority room tax claim. Payment of the $170,823.62 claim (excluding interest) with interest accruing at 8%, in semi- annual payments starting in March 1993, provided that payment of dividends to the unit owners was made only after such semi-annual payments and provided that an adequate reserve was on hand prior to the such dividend payments. (b) Pre-petition secured claim for real property taxes. Payment of the sum of $66,343.89 in two installments, as follows: $34,984.89 on or by May 15, 1993; $31,359.00 on or by September 30, 1993, with interest in the 10 to 12% range. The amount of the claim assumed that the Inn was responsible for payment of taxes on the 4 condominium units owned by Moana. (c) Pre-petition secured claim for personal property taxes. Payment of the sum of $8,456.69 at the time of the effective date of the plan, with interest to be paid in the 10 to 12% range. (d) Post-petition administrative claim for real property taxes. Payment of amounts accruing since July 1, 1992, with interest at a rate of 16%, payable in February or March 1993. The payment schedule on such expenses likewise would constitute a 0119-1307 Board of County Commissioners November 2, 1992 Page Three concession to the Inn, since by law administrative expenses are due on the effective date of the Plan. After the meeting, there were a handful of issues on which the Board had given direction but the details of which were left unresolved. Those details were as follows: the exact interest rate on the pre-petition property taxes amounts and the amount of the cash reserve required before dividends could be paid to the unit owners. Concern was also expressed that the disclosure statement disclose the status of the golf partnership and the possibility of the Inn being called to make capital contributions thereto. The Board did not seem to be interested in pressing for liquidation as opposed to working with the Inn to acheive a Plan of Reorganization. Changes in Plan After our meeting, the Inn made the following proposal, as part of its revised Plan of Reorganization, which differs from the Board's proposed agreement in certain respects, as noted: (a) Room taxes. Room tax amounts to be paid will not include assessed penalties, which total $28,445.56. The priority claim amount would therefore be reduced to $142,337.99 instead of $170,823.62. The penalty amounts will now be treated as an unsecured claim, which means that the County will get $.035 for each dollar of penalties. This is not an unexpected development; the bankruptcy code does not recognize tax penalties as priority claims. The Inn didn't realize at first that the County's priority claim amount included the penalty amounts. A $50,000 reserve would be required before payment of dividends could be made to the unit owners. The Inn now states that it will not be able to make its first payment before September 1993. The rational for the reserve amount is that it would be sufficient to cover one semi-annual payment to the taxing entities. However, according to Cathy Travis this amount should be at least $79,200 if it were to cover the full amount of one semi-annual payment to taxing authorities. Cathy does not recommend fighting for a higher reserve. 0119-1308 Board of County Commissioners November 3, 1992 Page Four (b) Pre-petition real property taxes. The Inn has stated that Moana and not the Inn should be responsible for the property taxes on the four individual condominium units owned by Moana. These units are not part of the proposed sale of Moana property to the unit owners. Therefore, the amount of this claim would be reduced by an amount commensurate with the outstanding taxes on those units. The Inn's calculation shows this to be $58,203.83. The Inn has agreed to an interest rate of 12%. The payment schedule is as was proposed earlier. The Inn has agreed to put language in the order to the effect that the liens on the Moana tax account remain unaffected by the bankruptcy. (c) Pre-petition personal property taxes. The Inn has stated this amount to be $8,169.27, which excludes penalty amounts included as part of the County's claim. The Inn will pay this on the effective date of the Plan, with interest at 12%. (d) Real and personal property tax administrative expenses. The Inn will start paying taxes the 1992-1993 taxes as required by law, with the first payments to be made on November 16, 1992. As for the post-petition 1991-1992 taxes, the Inn will pay these taxes in March at 16% interest. In addition, the Plan now includes as one of the risks of the Plan a statement that the Inn could be subject to a cash call by the Seventh Mountain Golf Village Partnership. It states that the consequence for failure to pay on such a call would be a reduction in the amount of the Inn's partnership interest. Issues for the Board The issues the Board needs to address are as follows: (1) whether the delay until September 1993 of the first payment of room tax claim is acceptable; (2) whether the proposed $50,000 cash reserve is acceptable; and (3) whether the disclosure on the potential golf course liability is acceptable.