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PHOENIX-A deal to build a big hotel adjacent to Arizona’s largest manmade lake has apparently sunk, but the first of several lawsuits involving the deal has floated to the surface.

Officials in the suburb of Tempe have filed a lawsuit in Maricopa County Superior Court against the proposed project’s developer, Ciudad del Lago, seeking unspecified damages and a termination of the contract. Ciudad del Lago–a consortium of lead developer Belz Enterprises, Peabody Hotel Group and Fluor Daniel Inc.–failed after more than three years to obtain financing to build the $220-million, 1,000-room hotel.

The hotel was to be the centerpiece of a two-mile long lake, Tempe Town Lake, which runs near Downtown Tempe. The Peabody Hotel was eventually expected to create 4,300 jobs and contribute $1.3 million toward the annual operating expenses, the city’s lawsuit says.

An attorney representing lead developer Marty Belz says he plans to file a multimillion-dollar lawsuit against Tempe for terminating the agreement. Belz had sought a $40-million settlement from tempe to walk away from the project, but Tempe declined the proposal.

Tempe plans to continue to look for a developer to build a hotel on the lake. The city pumped the last of 1.5-billion gallons of water into the lake about a year ago and has patiently waited for development to come.

Tempe hopes to ring the lake with office, retail and residential developments. Picerne Development recently announced plans to build an $18-million, 136-unit condominium project at the water’s western edge.

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