Tom Smart, Deseret News
SunCrest developers have faced numerous problems over the years, including severe erosion in 2005.

Draper city on Tuesday filed a legal objection to the proposed sale of the bankrupt development SunCrest to Zions Bank, citing concerns about the millions of dollars that will be required to complete infrastructure in the subdivision.

The conditional objection ensures that the judge understands all the contractual agreements that must be taken on by a new buyer, said Draper City Attorney Doug Ahlstrom. Steve McCardell, a private attorney working for Draper, filed the motion.

Zions Bank put in a winning $25.3 million bid Monday to purchase Draper's hilltop SunCrest community at a U.S. Bankruptcy Court auction, according to a court transcript. Zions had been a lender to SunCrest. At the auction, the bank said it wanted to deal with Draper city to resolve any outstanding issues.

Two other investors were at the bidding table, the transcript states: R&B SunCrest LLC and Huffines. The opening bid was $7 million.

A hearing about the sale is scheduled for this afternoon before U.S. Bankruptcy Court Judge William T. Thurman.

Zions Bank declined to comment on its plans for SunCrest until after the hearing, Zions' marketing and communications executive vice president Rob Brough said Tuesday.

SunCrest in 1999 took out about $58 million in loans from Zions Bank. As of April, about $41 million of that remained unpaid.

The bankruptcy of SunCrest followed dozens of lawsuits, geological instability and ongoing conflict with the city over infrastructure costs.

The next owner of the SunCrest property would have to take on a master development agreement that the city and developers signed at the project's conception in the late 1990s, Ahlstrom said. The agreement allowed SunCrest to build its own infrastructure, rather than paying impact fees to the city for each new home.

But SunCrest didn't finish its infrastructure, and now the city has no funds from impact fees to do the work. Officials have considered increasing fees citywide to pay for the needed construction, but the City Council has opted to wait as long as possible for a new developer to come in.

The two big-ticket items remaining in that agreement are roads and water, Ahlstrom said.

Any new developer taking on the project would have to spend about $6.5 million to build a new water tank and $4.6 million to build pipeline in the development, where only half the lots have been sold to homeowners. The neighborhood currently has enough water capacity, but no room for growth.

The new developer would also have to repair or rebuild SunCrest Drive, which has worn out quickly due to shoddy construction and the use of improper soils. Draper has estimated that cost at $25 million.

The defaults would have to be corrected even if a new developer opted to stop building, said Draper City Manager Layne Long. The developer can negotiate with the city once the purchase is finished, Ahlstrom said.

Any new company would also have to finish a promised recreation center and manage a neighborhood market.


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