LOS ANGELES, CA (Catholic Online) - Mammoth Lakes officials said "bankruptcy, unfortunately, is the only option left" for the town, officials said in a statement. The town's largest creditor, Mammoth Lakes Land Acquisition had won a state court order requiring full payment by June 30, 2012.

With a financial judgment nearly three times the size of its annual operating budget in addition to a $2.8-million shortfall in its 2011-12 fiscal year, Mammoth Lakes had already cut many services and asked employees to take reductions in pay. On top of existing woes, the adjacent Mammoth Mountain ski resort was forced to lay off 70 full-time employees last year due on account of a lack of snowfall.

A breakdown in negotiations with the developer is being called the straw that broke the camel's back.

The town plans to ask the bankruptcy court to approve a payment plan which will maintain the safety of residents and tourists: $500,000 a year over the next 10 years.

Officials say that Mammoth Lakes, with 7,700 permanent residents, about 300 miles north of Los Angeles, will remain open for business, and local police and fire departments will continue to provide "high levels of response and care."

Mammoth Hospital, the Mammoth Community Water District and Mono County are separate from the town and won't be affected, officials said.

A state appellate court decision in December 2010 upheld the judgment and repudiated the town for trying to back out of the agreement it signed in 1997 with Mammoth Lakes Land Acquisition.

The court found that Mammoth Lakes changed its priorities in 2007 after it determined the project would interfere with Federal Aviation Administration policy governing the use of the airport property for aeronautical purposes and, as a result, derail the town's plans to extend the runway to accommodate Boeing 757 passenger jets.

The developer, which had invested in some improvements at the airport, filed a breach of contract lawsuit against the town after it refused to move forward with the hotel project until the FAA policy issues were resolved.

The court found the city had not lived up to its end of the bargain.

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