Developer hopes to resolve $22M dispute as Cle Elum faces jarring bankruptcy

A town many pass through on the way to Eastern Washington is facing financial ruin.

Cle Elum, known for its hiking trails and scenic views, is considering bankruptcy, reported by The Seattle Times on Wednesday.

“People look at the Cle Elum as a great place to stop and get gas on your way to some other place,” John Curley said on “The Jake and Spike Show” on KIRO Newsradio Wednesday.

Cle Elum owes City Heights Holdings, LLC (CHH) more than $22 million, as awarded by an arbitrator in November. However, the town only has a budget of about $5 million for 2025, as shown in a recent report.

Why does Cle Elum owe $22 million?

John, who lives in Cle Elum, spoke with Sean Northrop, the developer pioneering CHH’s massive project in the town. In 2004, the plan was to buy 354 acres and build 962 new homes with 40% of the land being open space.

“And the city was like, ‘Yeah, that’s a good idea. Wow, look at you stepping up.’ And that was the plan was City Heights,” John explained.

However, John said work started slowing down and by 2019, Northrup realized plans were not being facilitated as expected. Subsequently, in 2024 an arbitrator awarded CHH around $22 million.

According to the arbitration letter, Cle Elum and CHH entered into a contract in 2011 that authorized the community project.

“In 2011, the parties understood that the housing market was slowly recovering from the 2008 financial crisis and that the market was not ready for the project. Thus, the Development Agreement authorizes a 25-year buildout period and expressly grants CHH sole discretion to determine when market conditions are ready,” Judge Paris Kallas wrote in the letter.

CHH announced it was ready to begin development in 2019 after studying the market. However, according to the judge, the town said it was not satisfied with the agreement eight years into the 25-year buildout period.

The letter states town leadership tried to add new conditions to the contract and failed to follow the contract’s permitting process, which led to litigation.

Cle Elum Mayor Matthew Lundh told The Seattle Times Wednesday the town isn’t trying to stop the project from being built. However, the media outlet said city leaders have continued to criticize the 2011 deal.

John told “Jake and Spike” Northrop just wants to build homes, adding “He doesn’t want to take over the city. He doesn’t want the responsibility to run it day to day.”

Developer leading City Heights project joins KIRO Newsradio

John had Northrop on “The John Curley Show” on KIRO Newsradio Wednesday to get an update on the project.

In recapping the series of events, Northrop noted in the 25-year building period there was a change in Cle Elum’s leadership.

“The simple bargain of the deal was we would get the benefits of being in the city, which includes sewer and water and some higher density and things, and the benefit that we would get is that all the terms of that agreement were set so they couldn’t be revisited, there were no more negotiations. And so in 2019 when we came in, that set of people said, let’s see what else we can negotiate out of this person,” Northrop explained.

He added the debacle has impacted everyone involved.

“Every sub, every vendor, every bill that’s being paid late, all the investors that trusted the agreement and trusted me in reading the agreement and interpreting the agreement,” he said.

What happens now?

Northrop said he wants to sit down with city leadership and find a resolution so bankruptcy is avoided.

“Municipal bankruptcy is a rare event and it requires an immense amount of transparency,” he added. “It requires a good faith intent on the municipality to pay the debt in full, it requires a demonstration of a genuine interest in resolving the matter. And so we’re looking for that time period when they would come to the table and respond and simply work it out. We could work this out very easily in a short exchange. And that’s what we need.”

“Have they sat down with you?” asked John,

“No, they have not responded to any of our offers to meet,” Northrop said. “And we’re perplexed, because bankruptcy or collections or receivership or any of the other units of options are really, really painful for everybody, the businesses, the citizens, the whole region. It’s completely avoidable and we don’t want to see it go that route.”

Last month, John asked Northrop a similar question.

“We want to move the development forward,” he responded. “I mean, nobody gets into this business to be in litigation. We want to build homes. We love the moment when we get to turn the keys over to a family. My personal passion is the land development part, where we get to kind of paint the landscape and figure out what we’re going to preserve and where a trail goes and what trees we get to save and that type of thing.”

Northrop added that if the issue of the project’s completion isn’t resolved, it won’t just affect him or his company but everyone in Cle Elum.

MyNorthwest has reached out to the town’s mayor’s office and has not heard back.

Listen to John Curley on “The John Curley Show” weekday afternoons from 3-7 p.m. on KIRO Newsradio, 97.3 FM. Subscribe to the podcast here.

Listen to Jake and Spike weekdays from noon-3 p.m. on KIRO Newsradio, 97.3 FM. Subscribe to the podcast here.

Julia Dallas is a content editor at MyNorthwest. You can read her stories here. Follow Julia on X and email her here.