Because that is not possible, they want this upscale city in northern Utah County to walk away from its golf-course loan with Zions Bank.

And that could affect the city's ownership of its City Hall, which Zions holds as collateral along with the course.

To keep making payments on the course, Councilman Rob Fotheringham says the town may have to impose a "massive" tax hike - roughly $11 per month on every household.

"The losses the golf course is generating will bankrupt the city by late 2005," Fotheringham warned. "We're anticipating $300,000 in losses this year."

That - combined with the $223,780 in red ink the course racked up last fiscal year, its first in operation - has some crying uncle. Indeed, business at the golf course is half of what was predicted by THK Associates Inc., the Aurora, Colo., firm that did a feasibility study showing the course would be a moneymaker.

Former Councilman Ken Cromar says THK's study was flawed, and Zions made the loan despite a warning from Fotheringham, who was not on the council at the time.

"Small-town folks should be protected from questionable bankers and other profiteers," Cromar said this week. "Lawsuits should be considered against THK for a potentially fraudulent feasibility study and Zions Bank for making a bad loan based on that feasibility study that they were warned was bad."

THK and Zions officials could not be reached for comment for this story.

Before deciding on whether to default or sue, Cedar Hills is asking the bank to lengthen the loan and/or lower the interest payments.

Nonetheless, Mayor Mike McGee argues the city has a moral obligation to repay the bond. He noted residents voted in favor of purchasing the course in 2001 before the city agreed to the bond.

"I'm not in favor of defaulting until we exhaust every other alternative," said McGee, who had no part in the decision to buy the course. "We shouldn't be in the business of running a golf course. But given the fact that we are, we need to show some integrity and make the best of the situation."

Even state Treasurer Ed Alter has weighed in on the debate.

If Cedar Hills does default, Alter says, the town will be forfeiting its reputation along with the golf course - and that could cast a cloud over cities throughout Utah.

"We're like Abe Lincoln," Alter said. "We pay our debts and toughen up and do what we need to do."

Alter does not remember another Utah city ever defaulting on its obligations, and says it's an outrage for an upscale community such as Cedar Hills to even consider such an action.

He says Cedar Hills is a wealthy city, with homes ranging from $300,000 to $700,000. An $11 fee, he added, would be "chump change" to most there. The city could create a special-service district to levy the fee, or voters could approve a property-tax hike at the ballot box.

Fotheringham argues that because the bond is supposed to be repaid from golf revenues, residents are not obligated. The bank can take back its course - and Cedar Hills' $750,000 City Hall, also built with Zions' money. Cedar Hills has about $120,000 equity in the building.

No matter, Cromar says.

"Give Zions Bank back what they wanted as collateral: a golf course and a city building," he says.

"We'll just go out and build a new city building, and save Cedar Hills residents [from] being cheated out of millions of dollars."

Even if Zions retakes City Hall, default supporters say, the bank would have difficulty finding a tenant. The building is zoned exclusively for public - not private - use.

Councilwoman Melissa Willie is not convinced. Like others, she says defaulting will hurt the city's bond rating and is plain wrong.

"[It] will invite more problems," she said. "It's not the right thing to do, even if it means the city has to place a fee on residents."

Meanwhile, Alter says Cedar Hills' course could become profitable and is one of the assets that make the town an attractive place to live.

If Zions takes it over, he added, it might elect to cut its losses and sell the course for a shopping center or for more homes - and the open space will be lost forever.

City officials are waiting for a proposal from Zions before deciding what to do about the golf course.

meddington@sltrib.com

Big payment coming

Cedar Hills made its first interest payment on the golf-course loan - roughly $80,000 - in December. It is slated to pay another approximately $360,000 in interest this year. In 2007, Cedar Hills will be faced with paying off the loan's $5.4 million balance.