The Flagstaff City Council this week may consider a proposed agreement with developers of a resort complex that calls for the city to acquire part of the site after the project failed to make a debt-service payment in December.

The city issued $19 million of bonds in 2007 for the Aspen Place at the Sawmill Improvement District to finance infrastructure projects on the 40-acre site. The bonds were to be supported by a special property tax assessment on 25 parcels in the complex.

The bonds were rated A1 by Moody’s Investors Service. RBC Capital ­Markets was the underwriter.

The Aspen Group, which developed the partially built project, failed to make a debt-service payment last month. The city made the $465,000 debt payment for 2010 from a letter of credit provided by the developer.

The proposed agreement calls for the city to take back the undeveloped portion of the project if the development group cannot provide $485,000 by Feb. 26 to prepay the debt-service payment for 2011 that is due this the summer.

City manager Kevin Burke said that if Flagstaff does take over part of the development, it would sell the parcels to make the annual debt-service payments. However, the city estimates the project could be worth only $12 million in the current property market.

Burke said the structure of any final agreement is uncertain, as negotiations are still under way.

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