Developer owed nearly $26M by Cle Elum speaks on city filing for bankruptcy

The City of Cle Elum has filed for Chapter 9 bankruptcy, citing nearly $26 million in debt stemming from a land development dispute with City Heights Holdings (CHH) more than a decade ago.

Sean Northrop, CHH land developer, specified how the agreement started and where the dispute between CHH and Cle Elum currently stands on “The John Curley Show” on KIRO Newsradio Wednesday.

Cle Elum bankruptcy dispute

Cle Elum entered into a housing development contract with CHH to build 950 homesites across 358 acres north of downtown. At the time, both parties understood that the local housing market may not be ready for such a large development project because it was still recovering from the 2008 financial crisis.

“There was a great opportunity for a public-private partnership that Cle Elum approached us about in the early 2000s. We entered into that agreement, ultimately in 2011,” Northrop said. “Then, in 2019, we started the process of developing that, and the city didn’t see eye to eye with how that was going.

In 2019, when CHH determined it was ready to begin building the community, it appeared Cle Elum was not. The city expressed it was no longer satisfied with the agreement, adding the deal was outdated and claimed it benefited CHH more than the city.

“When you took it to a court, and the judge looked at it, the judge’s ruling was that they intentionally delayed you,” KIRO host John Curley said. “There was intentional malice that they threw roadblocks in your way to slow you down and maybe discourage you from going through with this.”

The judge ruled that the City of Cle Elum’s delay caused a violation in the development contract, which caused CHH to lose out on potential profit throughout this time.

“Ultimately, that ended up in litigation in which the court or the arbitrator found that the city was not following the agreement,” Northrop said. “We thought honorable parties would move forward and resolve their differences. The city continued not to follow that agreement, and the last resolution was trying to find some financial mitigation.”

King County judge’s ruling

The decision for bankruptcy followed a ruling by a King County judge, who found the city liable for more than $22 million for damages to CHH, as awarded by an arbitrator in November. However, the City of Cle Elum only has a budget of about $5 million for 2025, as shown in a recent report.

“When the city only has a $5 million operating budget, how are they going to come up with $22 million that they owe to the developer?” Curley asked.

“When you look forward in the future, absolutely everybody’s already agreed that if the expectation was that this judgment was paid in cash today, it’s impossible,” Northrop said. “We knew that when the judgment happened.”

The City of Cle Elum publicly stated that it simply cannot afford to pay the money it owes to CHH, or the 12% interest, which amounts to $7,300 a day, also ordered to be paid by Judge Kallas.

“From our perspective, if the city does want to continue good faith negotiations, then that would get concluded. The mediator would be contacted. We would, as parties, have a mini mediation, and go back and forth,” Northrop said.

CHH said it made several attempts to have a conversation, or what they call “direct collaboration,” with Cle Elum’s mayor and city council to work out a payment plan or enter some other sort of deal to get their money and help Cle Elum from entering the bankruptcy process.

“If the intent is rather that the city wants to try and utilize the bankruptcy process to do something different, then obviously we just say we’re going to protect our interests and collect through that process, which is miserable for everybody,” Northrop said.

“We got an immense amount of participation from the city, their planners, engineers, lawyers, council members, and mayor—it appeared very productive,” he continued. “At the end of that, the mediator said, ‘OK, I think the two parties have exchanged the fundamental pieces,’ and we never heard back from the city. Instead, they filed for bankruptcy on Tuesday.”

Listen to the full conversation here.

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