Elmwood Township’s plan to purchase the former Brewery Creek development for use as a parking lot across from the township marina on M-22 has hit a major snag.

The current owner of the 15-acre development, a Texas financial institution known as Brown Bark I, L.P. is appealing a federal court decision that required the company to pay a $240,000 lien imposed by Traverse City Light and Power (TCLP).

“Until TCLP releases that lien the whole deal is in limbo,” Elmwood Township supervisor Jack Kelly said.

The development’s purchase is seen as a cornerstone to the township’s efforts to improve and promote the M-22 corridor in Greilickville, billed as the “gateway to Leelanau County.”

Peter Doren, a Traverse City attorney representing TCLP, said that if Brown Bark convinces a federal appeals court panel to overturn a previous decision that it must pay off the lien, TCLP might be required to reimburse Leelanau County the $240,000 that came out of the county’s tax revolving fund to cover the lien as well as unpaid taxes on the property.

“We already have a federal court judgment against Brown Bark and have already presented oral arguments against their appeal,” Doren explained, “but there’s no telling when the federal appeals court will rule on Brown Bark’s appeal or how they will rule. In the meantime, TCLP needs to protect its interests.”

The Elmwood Township Board held a special meeting last week to finalize its deal to purchase the Brewery Creek property from Brown Bark.

Kelly began the June 27 special meeting by announcing that he had just been in a conference call with attorneys associated with the case, and was hopeful that issues related to TCLP’s lien on the property would be resolved in time to meet a June 30 target for closing the deal.

As of this week, however, the issue remained unresolved — and the deal has been postponed for an unknown period.

Elmwood Township already has a signed purchase agreement with Brown Bark that requires the Texasbased mortgage speculators to follow through with the deal once Elmwood Township officials sign closing documents.

The township board earlier this year approved the purchase agreement pending an extensive “due diligence” effort to uncover any additional information about the property. One of the items uncovered in a detailed search of records showed that the township stood to receive not only the five acres it expected to acquire for use as a parking lot, but also a 91-percent interest in undeveloped common areas — a much better deal than originally anticipated.

If the township does acquire the property, it will also become the “successor developer” of the property and may sell off much of the property in the future, possibly y at a substantial profit. In addition, the property also includes a 100-foot easement connecting it to the nearby Leelanau Trail.

The township could pay off the lien and go through with the sale, but that’s something township officials have deemed unacceptable.

The township plans to use money in its Marina Fund to pay for the property. Money in the Marina Fund comes entirely from marina user fees — not from property taxes or the township’s general fund.

Although the township has more than enough cash in its Marina Fund to pay the $385,000 it would owe on the property, the board decided last week that it would finance the purchase over a seven-year period through Huntington Bank at an interest rate of 2.5-percent. Township officials had solicited bids from several financial institutions.

“With interest rates so low, it’s almost stupid to pay cash,” said trustee Terry Lautner.

Supervisor Kelly agreed, and noted that keeping more cash in the Marina Fund would allow the township to leverage more matching funds for grants it hopes to receive to improve the township marina.

In a 5-1 vote, with trustee Don Gallagher opposed and trustee Dave Darga absent, the board authorized Kelly to sign closing documents for the purchase pending resolution of the TCLP lien issue. That issue remained unresolved, however.

Also in a 5-1 vote, with Gallagher opposed and Darga absent, the board approved the proposed 7-year financing deal with Huntington Bank.

Darga did not attend the meeting because he has an acknowledged confl ict of interest in the issue as an adjacent property owner in the boat storage business.

Gallagher said he opposes the deal because he believes it will result only in the township providing another parking lot for neighboring Traverse City.

“I look at this as fostering economic development in our township,” Elmwood Township clerk Connie Preston said, “and I hope we can make this deal happen soon.”

Back in 2002, developer Devereau Trepp and real estate agent Ted Lockwood envisioned a “village center” project of about 20 shops and office suites on the 15-acre property, with several acres left open near Brewery Creek. Their development company went belly up in 2005 before mortgages on the property were acquired by Brown Bark.

Only a few of the lots in the project were sold. One building near the entrance to the property is owned and occupied by a Subway store and the Shaw Chiropractic Center. The other building in the development is owned by the Korner Gem jewelry and rare stone business.