Lake Zurich owes almost $1.2 million

Lake Zurich will pay almost $1.2 million to a developer of a partially constructed downtown townhouse project and a bank as part of a foreclosure lawsuit settlement.

Village board members Monday night voted 6-0 in favor of the settlement with McCaffery Entities Inc. and Bank of America. The bank included Lake Zurich in the foreclosure suit it filed against McCaffery.

"For anyone who has spent time in litigation," said Trustee Rich Sustich, "it is not pleasant and it is not cheap."

By paying the nearly $1.2 million settlement, said Village Administrator Bob Vitas, Lake Zurich will have a clean slate to pursue downtown redevelopment. He also said the village risked a much greater loss by continuing a court fight without any guarantees of prevailing.

"It probably, in the long haul, will cost the village less," Vitas said of the settlement agreement.

Lake Zurich has only the half-built townhouse development along East Lakeview Place to show for having spent more than $32 million in total downtown revitalization costs. McCaffery's Somerset project has 20 of a planned 39 homes.

Bank of America, formerly operating as LaSalle Bank, foreclosed on McCaffery in September 2008, contending the builder defaulted on loan interest payments and owed roughly $7.1 million.

At one point, Lake Zurich stopped making payments to McCaffery for public improvements made by the company and then fired the developer from the downtown project in December 2007.

Under the court agreement, Lake Zurich will pay $820,000 to McCaffery and $353,000 to Bank of America. That adds up to about $1.17 million.

Village resident Jim Tarbett, who monitors Lake Zurich government, said while he doesn't have a quibble about the settlement, it's still disappointing to part with the $1.17 million in public money.

Tarbett said Lake Zurich now needs a solid marketing and business plan to spur downtown redevelopment.

Zurich: Payment to use public money