More than a year after the City of Cle Elum filed for Chapter 9 bankruptcy, its fight with developer City Heights Holdings is moving out of the courtroom and back to the negotiating table. At a Sept. 23 status conference in U.S. Bankruptcy Court, the parties asked the court to appoint Bankruptcy Judge Klein as a settlement judge, and the court said the confirmation hearing that had been planned for December will be rescheduled while those negotiations play out. The order appointing the settlement judge was entered Sept. 30, according to the court docket.
For anyone who owns, rents, or vacations at Suncadia, the short version is this: Suncadia is not part of the city, so Cle Elum’s debt is not Suncadia’s debt. But the city still matters to the resort in a few practical ways, starting with where Suncadia’s wastewater goes.
How Cle Elum Got Here
The dispute dates to 2011, when Cle Elum signed a 25-year development agreement with City Heights for a 962-home community on 358 acres on the city’s north side. After the developer moved to start building in 2019, the city sought to add new conditions to what it called an outdated deal. In late 2024, an arbitrator found the city had repeatedly violated the agreement and awarded City Heights $22.2 million, a decision upheld by a King County judge. With interest accruing at 12% a year, the debt has since grown to roughly $26 million.
That is several times what the city can absorb. Cle Elum’s general fund is about $5 million a year, and in a court declaration Mayor Matthew Lundh said the city could not even cover the interest on the judgment, which he put at about $230,000 a month. The city offered $250,000 a year for 15 years; City Heights rejected it. After months of mediation, and after City Heights moved to garnish the city’s bank accounts, Cle Elum filed for Chapter 9 on June 24, 2025. City Heights has maintained that a settlement was nearly finished when the city filed.
The case cleared a major hurdle in June 2026, when Chief Bankruptcy Judge Whitman Holt rejected City Heights’ challenge and ruled the city eligible for bankruptcy protection, finding it had negotiated in good faith. In August, the city council approved its Plan of Adjustment “in substance” ahead of an Aug. 21 court deadline. The plan is the city’s proposal for how it will restructure the debt; its terms have not been laid out publicly in detail.
What Happened Sept. 23
Two things came out of the September hearing. First, the court approved Schwabe, Williamson & Wyatt as counsel for the Official Committee of Unsecured Creditors, a committee formed this summer to represent the city’s other creditors. That gives a third party a formal seat at the table alongside the city and City Heights.
Second, and more significant, the parties asked for a settlement judge. In August the court had reserved Dec. 7–9 in Yakima for a confirmation hearing, where a judge would decide whether to approve the city’s plan. That hearing is now off the calendar until negotiations run their course. It is not the first try at a negotiated deal: a different settlement judge oversaw talks earlier in the case that did not produce an agreement. The difference this time is that the city’s eligibility is settled and the council has approved a plan, which changes the leverage on both sides.
What It Means for Suncadia
Suncadia isn’t in the city. Despite the Cle Elum mailing address, Suncadia is a master planned resort in unincorporated Kittitas County. Its land use is governed by a development agreement with the county, and fire protection comes from Kittitas County Fire District 7, according to a 2026 county staff report. City property taxes and the city’s budget decisions don’t reach Suncadia homes directly.
The city does treat Suncadia’s wastewater. The same county report lists the City of Cle Elum as Suncadia’s sewage treatment provider. The city’s regional treatment plant, built in 2005 and operated by Veolia, serves Cle Elum, South Cle Elum, Roslyn and Suncadia. Under Chapter 9 the city stays in control of its operations, and nothing in the case so far points to any change in service. Still, utilities are worth watching: when the city first tried to settle with City Heights in late 2024, its offer depended in part on utility tax increases, according to the city’s own FAQ. We will report on any plan terms that touch utility rates as they become public.
You’re already paying a little more in town. On Jan. 1, 2026, a new 0.1% sales tax took effect inside Cle Elum city limits, imposed by the newly formed Cle Elum Transportation Benefit District. City officials said it would raise about $200,000 a year for streets, freeing up general fund money to put toward the City Heights debt, as the Daily Record reported. It applies to purchases at grocery stores, gas stations and restaurants in town, but not to shopping at Suncadia Social, which sits outside the district.
Housing supply is part of the story. When the council approved City Heights in 2011, the project was billed as one that could roughly double the size of Cle Elum over 25 years, all just down the road from Suncadia. Its future, and with it a big chunk of potential new supply in the local market, remains tied to how this case ends. For context on what is being built inside the resort itself, see our guide to Suncadia neighborhoods.
For visitors, nothing changes. It is the city government that is in bankruptcy, not the town. Downtown businesses are privately owned and unaffected by the case, and the city has said its services will continue throughout the process.
What to Watch Next
- Settlement conferences. The city, City Heights and the creditors’ committee are expected to schedule sessions with the settlement judge.
- A new confirmation date. If talks fail, the court will reset the hearing on the city’s plan.
- The plan’s terms. How much City Heights would be paid, over how long, and from which revenue sources will determine whether residents, and possibly utility customers outside the city, see further changes.
The Suncadia News will keep following the case and will update this story as the settlement talks progress.
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