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When Durango-Georgia Paper Co. closed in 2002, city officials believed the Cumberland Harbour development would play an important role in transforming St. Marys from a mill town to an upscale retirement community.

Cumberland Harbour owners promised to build more than 1,000 homes - 92 of them with private docks - a commercial village and two marinas with 296 slips on the St. Marys River.

But the downturn in the housing market, combined with problems in the banking industry, now have the project in jeopardy.

Officials with Land Resource, the Orlando company that owns the development, said the company could face bankruptcy if an agreement can't be reached with bankers to restructure finances.

Only about 25 homes have been built.

"What you have right now is Land Resource is suffering from the credit crisis," said Will Hurst, a company spokesman. "Compounding the situation is the lackluster sales. But that doesn't mean bankruptcy is imminent."

The company's financial woes have city officials considering enacting a clause in the development's performance bond that guarantees roads, water and sewer and utilities are built so property owners can build their homes.

City Manager Bill Shanahan said enacting the performance bond clause is "a very real possibility."
"We're looking at pulling the performance bonds because of the possibility they are going into bankruptcy and they aren't doing work on their infrastructure," Shanahan said.

A performance bond is like an insurance policy that guarantees to pay for the work if a developer declares bankruptcy or goes out of business. If the city enacts the bond, the private company holding the bond could complete the work or give the city the money to hire another company to build the roads and underground utilities in the development.

Lori Sirovy said she has been trying to get Cumberland Harbour developers to respond to her complaints about the infrastructure and other problems in the development since her home was cited with 32 code violations more than two years ago.

"They haven't done nothing, no support, no returned calls, e-mails or letters," she said. "We should have walked away at that point."

Before she bought the property, Sirovy said, developers told her the live oaks would be preserved there and throughout the development. But before construction began, three large live oaks on her property were bulldozed and nobody associated with the development has responded to her complaints.

Despite the roof on her home that still leaks, Sirovy said she is one of the lucky residents because the road in front of her house has been built.
"You have people who own lots with no infrastructure," she said. "They cannot build. Who's going to finish this infrastructure?"

City Councilman Greg Bird said elected officials made a significant commitment to increase the city's water and sewer capacity to meet the needs of large developments coming into the city. The city also built a fire station near the entrance of Cumberland Harbour so residents would have good protection and the lowest insurance rates available.

Bird now questions whether the city was premature in building a fire station. Sirovy said she and other residents recently received a $1,600 bill to help pay for the fire station.

"It may be years before that project does anything else," Bird said. "I think this city will be in a downturn for six or seven years. I do think it's going to cost us."

Bird said city officials have to be cautious about promises they make to developers and residents because of problems with the housing market, banking industry and the economy.

"We have to be careful about what we're passing on to our residents," he said. "It's extremely bad right now."

Hurst, however, predicts Land Resource will resolve its financial problems with lenders. The company intends to make Cumberland Harbour its "flagship community" and predicts the development "will go through."

"It depends on the outcome between Land Resource and its creditors," Hurst said. "The community is going to be completed."