The Hailey City Council bowed to public pressure Monday night and will require the developer of Old Cutters subdivision to pay $2.5 million in annexation fees after all.
The council had been expected to put the finishing touches on an April 11 agreement under which the city would have taken ownership of eight residential lots in Old Cutters in lieu of $2.5 million in annexation fees.
The decision to require the payment will satisfy Hailey residents who thought Campbell was getting a sweetheart deal from the city, but also has the city facing a potential lawsuit from Mountain West Bank over the legality of the fees.
The council also had previously indicated that it would strike from the annexation agreement with Campbell an obligation to build 20 community housing units, worth about $2 million. That concession, too, is no longer in effect.
During recent negotiations, both Campbell and city leaders had said their greatest concern was keeping the price of Old Cutters residential lots from falling through the floor due to sales to "vulture developers."
On Monday night, however, it appeared that both parties had a deeper interest in remaining free to liquidate assets there. Campbell declined to sign a "no-flip" clause keeping him from selling his properties in the development for at least four years, unless the city also agreed to do the same.
"I don't want restrictions on selling my lots if the city does not have restrictions on selling its lots," he said.
That stance created a crack in the almost-finalized agreement that by the end of the discussion resulted in its complete collapse.
Several Hailey residents, including Doug Werth, Jon Marvel, Geoffrey Moore and Pam Ritzau, spoke in favor of holding Campbell to the agreement that he made in 2005 to pay the city $2.5 million in annexation fees.
"There is no reason to ensure that developers achieve their goals at the expense of the citizens of Hailey," Marvel said.
Following the public comments, the council passed a motion to reconsider the amendment to the annexation agreement and then voted unanimously to toss out the amendment altogether.
Campbell now once again owes the city a payment of $880,000 in November, followed by several smaller installments over the next few years.
In 2005 he had plans to make the payments from sales of lots in the subdivision, but has claimed that the fees are "arguably illegal."
In 2009, after the beginning of the real estate and housing crisis that swept the nation, Campbell swapped a portion of an 1883 water right worth $930,000 to the city in lieu of an annexation fee payment.
Campbell's lawyer, Ed Lawson, earlier this month said the water rights trade put the city in jeopardy of losing first position on a mortgage on Old Cutters and the $2.5 million in the case of bank foreclosure on the development.
City Attorney Ned Williamson disagrees.
"I strongly believe that Hailey will retain first position for most if not all of the $2.5 million that is owed to Hailey," Williamson said in an interview.
But the city can expect to face a lawsuit from Mountain West Bank, which has financed the development, following Monday's decision.
In a letter sent by Mountain West CEO Russ Porter and President Rod Colwell to Mayor Rick Davis on April 21, the bank officials warned that the city could face a lawsuit over its annexation fees if the amendment were not ratified.
"The bank will be forced to either litigate or take the property back from the owner," the letter states.
Councilmen Fritz Haemmerle and Don Keirn joined Councilwomen Carol Brown and Martha Burke in a unanimous vote to toss the amendment and face legal challenges.
"We should not forgo the money due to threats," Burke said.
"We may win or we may lose," Haemmerle said.
Tony Evans: firstname.lastname@example.org