Minutes: August 15, 2019*

Vernon Township Council and Vernon Municipal Utilities Authority Joint Meeting

The joint meeting of the Township Council and the Municipal Utility Authority of the Township of Vernon was convened at 7:30 p.m. on Thursday, August 15, 2019 in the Vernon Municipal Center, 21 Church Street, Vernon, New Jersey with Council President Jean Murphy and Chairman John Perry presiding.

Statement of Compliance

Adequate notice of this meeting had been provided to the public and the press on August 8, 2019, and was posted on the bulletin board in the Municipal Building in accordance with the Open Public Meetings Act, N.J.S.A. 10:4-7. The purpose of this meeting is Litigation: Mountain Creek Bankruptcy. Official Action may be taken.

Roll Call of Township Council

Present were Council Members John Auberger, Sandra Ooms, Mark Van Tassel and Council President Jean Murphy. Also present was, Township Attorney Josh Zielinski, Business Administrator Charles Voelker and Mayor Harry Shortway. Council Member Curreri was not present.

Roll Call of Vernon Township Municipal Utilities Authority

Present for the Vernon Township Municipal Utility Authority were: Commissioners John Perry, Thomas Buchney, Paul Kearney, Edward Seger, Kristin Wheaton, and David McDermott (Alt. 2). Commissioner Angela Erichsen was not present. Also present was Attorney Mo Bauer, Auditor Robert McNinch, CFO Donelle Bright and Attorney James Moscagiuri

Salute to the Flag

Council President Murphy led the assemblage to the flag.

Executive Session

Attorney Zielinski read the Resolution for the Council to enter Executive Session.

Resolution to Go into Executive Session

WHEREAS, the Open Public Meetings Act, N.J.S.A. 10:4-6 permits the exclusion of the public in certain circumstances; and

WHEREAS, this public body is of the opinion that such circumstances presently exist;

NOW, THEREFORE, BE IT RESOLVED by the Township Council of the Township of Vernon as follows:

1. The public shall be excluded from discussion of and action upon the hereinafter specified subject matter.

2. The general nature of the subject matters to be discussed are:

a. Litigation

Council President Murphy asked for a motion to go into Executive Session at 7:36 p.m.

It was moved and seconded to enter into executive session: Motion: John Auberger Second: Sandra Ooms All members present for both bodies were in favor.

At 8:17 p.m. Council President Murphy asked for a motion to end Executive Session and return to open session.
Motion: John Auberger
Second: Mark Van Tassel
All members present for both bodies were in favor.

The Council and MUA returned to open session at 8:17 p.m.

Public Comments

Council President Murphy asked for a motion to open the meeting to public comments.
Motion: John Auberger
Second: Mark Van Tassel
All members of the Council and MUA were in favor.

Seeing no members of the public wishing to come forward, Council President Murphy asked for a motion to close the public comments.
Motion: Mark Van Tassel
Second: John Auberger
All members of the Council and MUA were in favor.

Council President Murphy asked if Attorney Bauer would review the history of this matter for the public.

Attorney Bauer discussed Mountain Creek’s obligation to pay 63% of the MUA deficit each year based on the past agreements for 2005 and 2012. Attorney Bauer indicated that Mountain Creek had failed to make these payments and subsequently filed for bankruptcy to alleviate their obligations. Attorney Bauer discussed the Township and MUA along with Mountain Creek had fashioned a settlement agreement which would put a 7% municipal tax on the tickets sales. Attorney Bauer indicated the MUA would receive payments quarterly and the $918 from the past. Attorney Bauer noted there would be a shortfall in some years but this would provide the Township with cash flow. Attorney Bauer stated the agreement was approved by the Court pending the approval by the Boards this evening.

Council President Murphy invited Joe Hessian (Operator of Mountain Creek) to come forward. Mr. Hessian explained that the previous agreements occurred prior to him being involved with the operations. Mr. Hessian stated he runs several other resorts and a software company. Mr. Hessian advised he became involved in the Mountain in 2017. Mr. Hessian indicated he had the $918,000 payment and would provide same to the Township as soon as he was permitted by the Court.

Resolutions Requiring Separate Action

Vernon Township Municipal Utility Authority

Attorney Zielinski noted there were two Resolutions on the agenda each requiring separate action.

Resolution #2019-34: Resolution Approving a Settlement Agreement by and between the Vernon Township Municipal Utilities Authority, Vernon Township and Mountain Creek Resort, Inc. and Authorizing the Execution Thereof

A motion to approve Resolution #2019-34 was requested.
Moved: Edward Seger
Second: Thomas Buchney

A roll call vote was taken:
Ayes: John Perry, Edward Seger, Paul Kearney, Kristin Wheaton, Thomas Buchney
Nays: None
Abstain: None
Absent: Angela Erichsen, Alt. #1
Present but not voting: David McDermott, Alt. #2
Motion carried to adopt Resolution #2019-34.

Resolution #2019-34: Resolution Approving a Settlement Agreement by and between the Vernon Township Municipal Utilities Authority, Vernon Township and Mountain Creek Resort, Inc. and Authorizing the Execution Thereof

WHEREAS, Vernon Township (“Vernon”) and Mountain Creek Resort, Inc. (“Mountain Creek”) entered into a sewer agreement dated October 24, 2005 (“2005 Sewer Agreement”), in which Mountain Creek agreed, subject to the terms thereof, to pay the debt service on the Sewer Bonds (as that term is defined in the Settlement Agreement), plus certain costs associated with the development, construction, operation, and maintenance of the Project, less the revenue obtained by Vernon for sewer charges on an annual basis; and

WHEREAS, by agreement dated on July 18, 2012, Vernon and Mountain Creek entered into an agreement (“Sewer Agreement”), which modified and superseded the 2005 Sewer Agreement; and

WHEREAS, subject to the terms thereof, the Sewer Agreement Obligations continue annually until the Sewer Bonds are paid in full; and

WHEREAS, on May 15, 2017 (the “Petition Date”), Mountain Creek and certain of its affiliates each filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code, commencing their chapter 11 cases (collectively, the “Chapter 11 Cases”) in the United States Bankruptcy Court for the District of New Jersey under case number 17-19899 (SLM) (the “Court”);

WHEREAS, Vernon and the Vernon Township Municipal Utilities Authority (“VTMUA”) (collectively, the “Vernon Parties”) allege that Mountain Creek subsequently defaulted on its obligations under the Sewer Agreement; and

WHEREAS, on November 13, 2017, Vernon filed a proof of claim [Claim No. 140] asserting that the sum of $28,345,874.94 (the “Vernon Township Claim”) is due under the Sewer Agreement and further alleging that such sums are secured by assets of Mountain Creek; and

WHEREAS, on November 13, 2017, the VTMUA filed a proof of claim [Claim No. 141] (the “VTMUA Claim,” and together with the Vernon Township Claim, the “Vernon Claims”) asserting that the sum of $28,345,874.94 is due under the Sewer Agreement and further alleging that such sums are secured by assets of Mountain Creek; and

WHEREAS, on March 30, 2018, the Vernon Parties filed an adversary proceeding (the “Vernon Adversary Proceeding”) in the Chapter 11 Cases captioned In re Mountain Creek Resort, Inc., et al., (Township of Vernon et al. v. Mountain Creek Resort, Inc., et al.), Adv. Pro. No. 18-01664 (SLM) (Bankr. D.N.J. Mar. 30, 2018), seeking, among other things, a declaration that the Vernon Parties hold first priority liens on all of Mountain Creek’s real property to secure in excess of $28 million allegedly due under the Sewer Agreement; Mountain Creek and all the other defendants in the Vernon Adversary Proceeding disputed that the Vernon Parties hold liens, or are entitled to assert any liens, on any of Mountain Creek’s property including its real estate; and

WHEREAS, on June 5, 2018, following a May 31, 2018 status conference in the Vernon Adversary Proceeding, the Court entered an order pursuant to D.N.J. LBR 9019(a)(1) [Adv. Pro. Doc. No. 20] (the “Mediation Order”) requiring that the parties to the Vernon Adversary Proceeding make a good faith attempt to settle the litigation through mediation; and

WHEREAS, after engaging in several mediation sessions with all of the parties to the Vernon Adversary Proceeding, and separate negotiations among the Vernon Parties and Mountain Creek, the Vernon Parties and Mountain Creek have reached an agreement to resolve the Vernon Adversary Proceeding and the Vernon Claims and all claims arising from or relating to the Sewer Agreement and the transactions relating thereto; and

WHEREAS, a settlement agreement (the “Settlement Agreement”) has been drafted and approved by counsel for the Vernon Parties and counsel for Mountain Creek and other interested parties; and

WHEREAS, the Settlement Agreement sets forth the complete understanding of the Vernon Parties and Mountain Creek as it relates to the issues raised by the Vernon Parties in the Adversary Proceeding including, inter alia, the Vernon Claims and all claims arising from or relating to the Sewer Agreement and the transactions relating thereto; and

WHEREAS, the VTMUA desires to authorize the execution of the Settlement Agreement.

NOW THEREFORE BE IT RESOLVED by the Board of Commissioners of the Vernon Township Municipal Utilities Authority that the Settlement Agreement in the form attached hereto as Exhibit A is hereby approved.

BE IT FURTHER RESOLVED that the Chair of the Board of Commissioners of the Vernon Township Municipal Utilities Authority is hereby authorized and directed to execute the Settlement Agreement.

Vernon Township Council

Council President Murphy noted the second resolution was:

Resolution #19-171: Resolution Authorizing Settlement of Litigation between the Township of Vernon and Mountain Creek Resort, Inc.

A motion to approve Resolution #19-171 was requested.
Moved: John Auberger
Second: Mark Van Tassel

A roll call vote was taken:
Ayes: Sandra Ooms, Mark Van Tassel, John Auberger, Jean Murphy
Nays: None
Abstain: None
Absent: Patrick Curreri
Motion carried to adopt Resolution #19-171.

Resolution #19-171: Resolution Authorizing Settlement of Litigation between the Township of Vernon and Mountain Creek Resort, Inc.

WHEREAS, Mountain Creek Resort, Inc. (“Mountain Creek”) owns and operates a four-season resort located in the Township of Vernon (“Township”) that is commonly known as the Mountain Creek Resort (“Resort”); and

WHEREAS, Mountain Creek owns and/or leases multiple parcels of real property to operate the Resort (“Property”); and

WHEREAS, Mountain Creek intended to further develop the Resort and its contemplated development required additional wastewater capacity; and

WHEREAS, Mountain Creek requested the Township acquire the necessary additional wastewater capacity from the Sussex County Municipal Utilities Authority (“SCUMA”) and build the infrastructure necessary for the additional wastewater capacity (“Project”); and

WHEREAS, the Township required Mountain Creek to share the costs of the Project; and

WHEREAS, the Township and Mountain Creek entered into a sewer agreement on October 24, 2005 (“2005 Sewer Agreement”), in which Mountain Creek agreed to pay the debt service on SCMUA bonds plus the costs associated with the development, construction, operation, and maintenance of the Project less the revenue obtained by the Township for sewer charges on an annual basis; and

WHEREAS, on July 18, 2012, the Township and Mountain Creek entered into a sewer funding agreement (“Sewer Funding Agreement”), which modified and superseded the 2005 Sewer Agreement; and

WHEREAS, the Sewer Funding Agreement, among other things, modified Mountain Creek’s financial obligation in respect of the Project and thereafter required Mountain Creek to pay 63% of any yearly budget deficit incurred by the Vernon Township Municipal Utilities Authority (“VTMUA” together with the Township “Vernon Parties”) in relation to the Project; and

WHEREAS, on May 15, 2017 (the “Petition Date”), Mountain Creek and certain of its affiliates each filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code, commencing their chapter 11 cases (collectively, the “Chapter 11 Cases”) in the United States Bankruptcy Court for the District of New Jersey under case number 17-19899 (SLM) (the “Court”); and

WHEREAS, the Vernon Parties allege that Mountain Creek subsequently defaulted on its obligations under the Sewer Agreement; and

WHEREAS, on November 13, 2017, Vernon filed a proof of claim [Claim No. 140] asserting that the sum of $28,345,874.94 (the “Vernon Township Claim”) is due under the Sewer Agreement and that such sums are secured by assets of Mountain Creek; and

WHEREAS, on November 13, 2017, the VTMUA filed a proof of claim [Claim No. 141] (the “VTMUA Claim,” and together with the Vernon Township Claim, the “Vernon Claims“) asserting that the sum of $28,345,874.94 is due under the Sewer Agreement and that such sums are secured by assets of Mountain Creek; and

WHEREAS, on March 30, 2018, the Vernon Parties filed an adversary proceeding (the “Vernon Adversary Proceeding”) in the Chapter 11 Cases captioned In re Mountain Creek Resort, Inc., et al., (Township of Vernon et al. v. Mountain Creek Resort, Inc., et al.), Adv. Pro. No. 18-01664 (SLM) (Bankr. D.N.J. Mar. 30, 2018), seeking, among other things, a declaration that the Vernon Parties hold first priority liens on all of Mountain Creek’s real property to secure the more than $28 million allegedly due under the Sewer Agreement; Mountain Creek and all the other defendants in the Vernon Adversary Proceeding disputed that the Vernon Parties hold liens, or are entitled to assert any liens, on any of Mountain Creek’s property including its real estate; and

WHEREAS, on June 5, 2018, following a May 31, 2018 status conference in the Vernon Adversary Proceeding, the Court entered an order pursuant to D.N.J. LBR 9019(a)(1) (the “Mediation Order”) requiring that the parties to the Vernon Adversary Proceeding make a good faith attempt to settle the litigation through mediation, and appointing the Honorable Michael B. Kaplan as mediator; and

WHEREAS, after engaging in several mediation sessions with all of the parties to the Vernon Adversary Proceeding, and separate negotiations among the Vernon Parties and Mountain Creek, the Vernon Parties and Mountain Creek have reached an agreement to resolve the Vernon Adversary Proceeding and the Vernon Claims and all claims arising from or relating to the Sewer Agreement and the transactions relating thereto (“Settlement Agreement”); and

WHEREAS, by entering into the Settlement Agreement, the Vernon Parties will reduce the expense of continued litigation with Mountain Creek and limit any potential exposure to the Vernon Parties if the Court were to rule against the Vernon Parties in the Vernon Adversary Proceeding or the Chapter 11 Cases.

NOW, THEREFORE, BE IT RESOVLED by the Township Council of the Township of Vernon that entering into the Settlement Agreement is a fair and reasonable resolution of the claims raised by and between the Township of Vernon and Mountain Creek in the Chapter 11 Cases and the Vernon Adversary Proceeding.

BE IT FURTHER RESOVLED by the Township Council of the Township of Vernon that the Mayor is authorized to execute the Settlement Agreement on behalf of the Township of Vernon.

BE IT FURTHER RESOVLED that the Settlement Agreement and this Resolution shall not be effective until the Court approves the Settlement Agreement.

Public Comments

Council President Murphy asked for a motion to open the meeting to public comments.
Motion: Mark Van Tassel
Second: John Auberger
All members of the Council and MUA were in favor.

Seeing no members of the public wishing to come forward, Council President Murphy asked for a motion to close the public comments.
Motion: Mark Van Tassel
Second: John Auberger
All members of the Council and MUA were in favor.

Council and MUA Commissioners Comments

Commissioner Perry asked if there were any comments from the Commissioners.

Commissioner Perry stated he felt this was a win for the Township and the rate payers.

Commissioner Wheaton thanked the parties who were involved since the beginning.

There were no further comments.

Council President Murphy asked if there were any comments from the Council, no other Council Members had comment.

Council President Murphy thanked Joe Hessian and his Attorney Scott Baldassano for being present this evening.

Adjournment

There being no further items of business to be conducted on the agenda, a motion for Adjournment was made by Council Member Auberger, seconded by Council Member Van Tassel with all members voting in favor.

The Joint Meeting of the Township Council and Vernon MUA of the Township of Vernon was adjourned at 8:43 p.m.

Respectfully submitted,
Lauren Kirkman, RMC, CMR
Municipal Clerk

Minutes approved: August 26, 2019