An arbitrator in November ruled in favor of the developer of a building a 358-acre community just north of Cle Elum’s downtown. The city says it now owes the developer $25.9 million.
Courtesy of Trailside Group
By Rick Morgan – Inno Senior Reporter, Puget Sound Business Journal
Jun 25, 2025
Updated Jun 25, 2025 4:14pm PDT
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Story Highlights
- Cle Elum filed for Chapter 9 bankruptcy due to $25.9 million debt.
- City lost dispute with developer over 358-acre Ederra community project.
- Bankruptcy allows Cle Elum to maintain services while reorganizing debt.
The city of Cle Elum on Tuesday filed for Chapter 9 bankruptcy.
The decision comes after a messy dispute with developer City Heights Holdings LLC and its registered agent, Issaquah-based Trailside Homes, which is developing a 358-acre community called Ederra just north of downtown in the small Kittitas County city. An arbitrator in November ruled in favor of City Heights and awarded $22.2 million in damages, but that number has increased to $25.9 million, according to the city.
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“We did not make this decision lightly,” Cle Elum Mayor Matthew Lundh said in a news release. “For months, we pursued every reasonable avenue to reach a fair and responsible settlement with City Heights. Unfortunately, we were unable to do so. Our priority continues to be protecting Cle Elum’s residents, essential services and our financial future. Chapter 9 allows us to do just that.”
Cle Elum and Trailside first entered a development agreement in 2011, but Trailside didn’t contact the city until 2019 about starting construction, according to the city. By then, the city’s attitude toward the project had soured, as officials felt the deal was outdated and too favorable to the developer. But the ruling, from retired judge Paris K. Kallas, noted there was a 25-year project buildout in the agreement, and the city had tried to delay the project through the permitting application process.
“But for the city’s breach, (Ederra) would have been able to promote an exciting project in a thriving market — the market it was contractually entitled to select,” the November ruling said.
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The city said it tried to negotiate with City Heights during the three-month mediation process, but City Heights rejected the city’s final offer. Cle Elum also said in the release City Heights initiated garnishments to seize the city’s bank accounts before the last mediation session, which forced the bankruptcy route after City Heights rejected a June 16 offer. The bankruptcy filing allows Cle Elum to work toward a resolution while continuing to pay for essential city services over the next 20 years, according to a release.
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In a statement, City Heights said it was surprised by the bankruptcy filing given the two sides were close to striking a deal through a draft agreement circulated June 20. The only remaining issue, according to City Heights, was whether the city would fully use “existing tools and resources available to it,” but that wasn’t a strict condition and “remains a solvable detail.”
“At no time did the city indicate to CHH or the mediator that it was rejecting the June 20 draft,” City Heights said in the statement. “We continue to believe the mediator’s June 20 draft — developed with thoughtful input from the City’s own team — offers a workable and sustainable resolution. If the city agrees that the framework reflects shared intent, and that only minor clarifications remain, the parties could conclude a deal swiftly and cooperatively. CHH greatly appreciates the effort and professionalism of the City’s mediation team: councilmembers brought forward-thinking leadership; the mayor provided vital historical and fiscal knowledge; planning staff offered actionable land use solutions; and legal and financial advisors were constructive and collaborative. … Bankruptcy was not inevitable. It still isn’t.”
Trailside CEO Sean Northrop added via email there are 962 total homes planned for Ederra, with 14 built or under construction so far.
The $25.9 million debt, which accrues interest at 12%, is a major blow to the 2,300-person town 80 miles east of Seattle, tucked on the picturesque eastern slope of the Cascades. The city’s general fund revenue in 2025 totals $4.4 million.
Chapter 9 bankruptcy is designed for municipalities, according to the U.S. bankruptcy code, allowing them to reorganize their debts by extending their debt maturities, reducing principal or interest, or refinancing the debt through a new loan.
Editor’s note: The story has been updated with comments from the developer.