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County attorney: tax claims tied to promissory note after Paradox bankruptcy; early recovery unlikely
Summary
County attorney Mora told the board that tax claims against bankrupt operators Paradox Upstream and Paradox Midstream were converted into a promissory note (about $7 million) after asset sale; the county’s claim remains active but attorneys say early recovery is unlikely and any payout may be a fraction of owed taxes.
County Attorney Mora updated the San Miguel County Board of County Commissioners on efforts to recover property taxes owed by former operators Paradox Upstream and Paradox Midstream following a 2023 bankruptcy and asset sale.
Mora said the county filed claims in the bankruptcy that initially reflected roughly $800,000 in unpaid taxes stretching back to 2020, but when the assets were sold the proceeds first went to secured lenders. "The remaining proceeds of that sale was what's called a promissory note…which is about $7 million," she said, adding that the note is not due until 2031. Mora said county claims were amended to include accrued interest but that early recovery is unlikely: "Our attorneys advised us that it probably wasn't worth the county spending more money to try and actively pursue any effort to get the money sooner."
Commissioners and staff described the outcome as frustrating. A commissioner summarized the county’s experience as a drawn‑out process that exposed weaknesses in prior advisory work and the limits of bankruptcy remedies. Mora said the county will continue to assert its claims and monitor the promissory‑note repayment, but cautioned that the bank holding senior priority and the buyer’s uncertain operating status make full recovery unlikely.
What this means for districts that expected revenue: Mora said the county filed claims that would be distributed to taxing districts, including fire districts, and that any eventual distribution will depend on the promissory‑note recovery and priority of creditors. The county’s most recent bankruptcy counsel included Colorado tax attorneys to clarify interplay of state tax law with the Texas‑filed bankruptcy; the county has chosen not to pursue aggressive motions because expected return does not justify additional legal expense.
The board did not take immediate formal action but asked staff to continue monitoring the case and to alert taxing districts if any proceeds become available.
Ending: County staff said they will continue to maintain active claims and report back if there are developments; no additional litigation motions were authorized at the meeting.
