SAN FRANCISCO - Mammoth Lakes, Calif., has redeemed short-term notes that matured yesterday, a town official said, despite Standard & Poor's stated concern about its ability to do so.

The town's $2 million 2008 capital project notes were redeemed on schedule, finance director Brad Koehn said Tuesday.

On June 8, Standard & Poor's downgraded the notes to SP3, its lowest short-term rating, from its top SP1-plus rating, citing doubts about the town's ability to roll the financing over as expected.

The doubts stemmed from a lawsuit brought against the town by a developer, who in 2008 won a $30 million judgment at the state trial court level against the town of 7,400.

Mammoth Lakes appealed the ruling, and no appeals court date has yet been set.

Uncertainty about the lawsuit was likely to impede the town's ability to access the credit market to roll over the notes with either short- or long-term debt as the town had planned, according to Standard & Poor's, which also downgraded about $5 million in outstanding certificates of participation to BB from A-minus and assigned a developing outlook.

Access to credit markets remains a challenge for the town.

Mammoth Lakes redeemed the notes with internal borrowing, Koehn said.

"We haven't found the right rollover mechanism for us," he said.

The town government issued the capital notes to refurbish a building for use as a terminal at the airport to support commercial passenger service for its winter ski season.

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