Default looks less likely for Cedar Hills

CEDAR HILLS — Contrary to voices raised at prickly public meetings last week, Cedar Hills officials say most residents want the city to avoid defaulting on repayment of a loan that financed construction of the city's golf course.

And the Utah Taxpayers Association, which lobbied against the city's golf course plan in 2001, is pushing city leaders to bite the bullet and not default on the loan.

Leaders of the taxpayer organization warn that the city's future borrowing ability could be seriously impacted by such a default.

"I've received a great number of e-mails and messages from people since our hearings last week," Mayor Mike McGee told the Deseret Morning News on Tuesday. "Of those, only two were in favor of default."

The public information meetings were held to help residents understand the city's financial bind, which revolves around a repayment plan for the course that increases by $300,000 annually until a $6 million balloon payment comes due in 2007.

The golf course is currently generating about half of the income projected when it was proposed, leaving the bulk of the repayment to come from the city's general fund. City leaders say the general fund can no longer sustain that obligation.

If the city defaults, Zions Bank can take possession of the 160-acre course as well as the city's new $800,000 public safety building.

Options that council members are considering include asking the residents to support a special service district fee of about $11 per month or an increase in the city's property tax levy.

McGee and the current members of the City Council were not in office when the course decision was made. Several actively lobbied against the proposal. But now that it's fallen to the city to own, pay for and manage the course, McGee believes the city should behave honorably. Council members appear to agree.

"I don't want anything to do with a default," McGee said.

McGee said he believes the public meetings were effective in helping most residents understand how damaging and long-lasting it would be for a municipality to disavow its obligation to pay back the bankers who advanced $6.4 million for the golf course's construction.

Councilman Jim Perry said his research shows that no city in Utah has defaulted on a municipal loan since the Great Depression.

The taxpayers association warns that walking away from its financial obligation will increase Cedar Hill's borrowing costs in the future.

"Realistically, Cedar Hills has three options," said Rep. Howard Stephenson, R-Draper, who head's the taxpayers association, in the association's December newsletter.