DRAPER — The city and Zions Bank have agreed on terms to end a $25 million lawsuit over the unfinished SunCrest development.
The development failed in 2007, leaving Zions Bank on the hook for about $40 million in unpaid loan debt. The bank bought the development out of bankruptcy in 2008 for $25.3 million with the intention of selling it as quickly as possible to help recoup losses.
Failed infrastructure in the development surfaced as a concern by the city, and Zions brought the suit in June 2009, accusing the city of sabotaging deals with potential buyers of the unfinished development.
The Draper City Council voted 5-0 Tuesday night to accept terms agreed upon with Zions to see the suit dismissed, said Draper City Attorney Doug Ahlstrom. Zions has already agreed to the terms and is awaiting an official copy of documents to sign, Ahlstrom said.
Under the agreement, the city would accept SunCrest Drive and the paved portion of Deer Ridge Drive and take responsibility for correcting problems with the design and construction. Several people attending the Council meeting where the settlement was discussed objected to the anticipated use of funds collected from the Traverse Road Special Service District to make those improvements, Ahlstrom said.
Other design agreements include stipulations affecting undeveloped areas based on historic landslide data and other improvements to roadways.
Zions or its successor or developer will be responsible to resolve issues with Detention Pond 7A. As an alternative, the city would design and build a regional storm water facility there as a city project, if approved by participating property owners. Zions would pay a share of the cost of such a project.
The terms also acknowledge the existing culinary water system is operating at a loss and lacks the capacity to service future growth within the SunCrest project and lays out conditions for both city and developer participation to improve an extended water system.
Ahlstrom said about five individual developers have been waiting for a resolution to the lawsuit. "The first thing we're going to do is see if we can get some zoning in place that will help all of them."
After that, conditions in the open market will dictate how long it takes before new development is underway.
Zions Bank announced in February it reached an agreement to sell the SunCrest development to MCO Properties, in Fountain Hills, Ariz. Tuesday's agreement plays into the bank's agreement with MCO, which the bank said is poised to build more than 3,000 homes in undeveloped portions of the 4,500-acre development.