DarkHorse lender Owens Financial Group wants Nevada County to take over the sewage treatment system for the luxury development off Combie Road.

The filing of an administrative claim against the county by DarkHorse Golf Club and Baldwin Ranch Subdivision is an attempt resolve the dispute that has dragged on for two years.

It's also a precursor to potential legal action against the county and Sanitation District No. 1, said Owens lawyer Andrew Tauriainen. The county has 45 days to respond to the claim.

“Our hope is that the county will now begin negotiations in earnest to resolve the situation, to take over the wastewater treatment plant and assume its obligations that it's had since day one,” Tauriainen said.

The claim “is a necessary precursor to being able to file a lawsuit,” he added. “Owens hasn't yet decided whether a lawsuit will follow, but it's certainly an option.”

Sanitation Department Director Mark Miller and county interim counsel Michael Jamison could not be reached for comment Tuesday.

First billed as the “Street of Dreams,” the development next to Lake of the Pines went into foreclosure when developer Ed Fralick defaulted on the property. Funding for unfinished electrical hook-ups and wastewater treatment dried up.

Owens Financial Group foreclosed on the golf course in August 2007 and on the residential lots in what is known as Baldwin Ranch in September 2007. The group owns 75 of the 234 lots in the DarkHorse development.

“Very shortly” after acquiring the property, Owens discovered the waste treatment plant for the development had not been completed, said Owens vice president of real estate assets Bob Bridge.

“There was a requirement that no houses were to be connected until the system was complete and accepted by the county, and yet there were houses connected to the system,” Bridge said. Waste was being partially treated at DarkHorse, then hauled to Lake of the Pines and dumped into its system.

“The plant was locked up and wastewater was collecting,” Bridge said. “We were concerned about the potential of a spill, so we hired a new operator, took bolt cutters and unlocked the plant and started processing the wastewater.”

The big question is how building permits could have been issued in the first place, Bridge said.

“We have never gotten a satisfactory answer as to how that happened,” he said.

The wastewater treatment plant at DarkHorse was supposed to have been taken over by the county or the sanitation district, Owens lawyer Tauriainen said.

“But in 2003, the county started issuing building permits despite the fact that the plant hadn't even been completed at that point,” he said.

In 2005, the county allowed the developer to begin operating the plant, despite all the legal requirements, Tauriainen added.

“We have sought to obtain records from the county to try to determine what happened and when, to piece together who made the approvals and continued to issue building permits, even after foreclosure,” he said. “The county's response to our public records act request was incomplete.”

Few, if any, of the Sanitation Department's correspondence for the period in question — between 2003 and early 2007 — were provided, Tauriainen said.

Since 2007, Owens has been paying for a certified operator to oversee the treatment plant — which is partially treating the sewage because the plant remains unfinished. Owens also pays plant maintenance costs.

In addition, Owens has paid to truck the partially treated sewage to Lake of the Pines and disposal fees for the treatment, for an estimated total cost of $8,000 to $14,000 a month.

“Owens has continued to operate the plant as a good neighbor,” Tauriainen said. “They have no legal obligation to do so — or to continue to do so.”

In August 2007, county officials told Owens they would call in the bonds on the project to get the sewage treatment plant fixed, Bridge said.

“Two years later, we've spent hundreds of thousands of dollars ... and our patience is at an end,” he said.

In July 2008, the Regional Water Quality Control Board issued a moratorium on building permits and sewer connections. Until the sewage treatment issue is settled, the residential lots at DarkHorse are worthless, Bridge said.

In April, county officials were in negotiations with the bond company to collect funds to hook up the landholders to a permanent sewage system.

The unfinished wastewater treatment plant at DarkHorse is not an attractive option for the county, Bridge said.

“Across from the Street of Dreams is the emitter (leach) field, and there should be a backup field,” Bridge said. “But the county never got the easements from Fralick, so the field is incomplete. Now that land has been foreclosed on by another developer, and Fralick does not have control of it ... They would have to get those lots back by eminent domain.”

A $1.2 million plan to hook up to the existing treatment plant in Lake of the Pines has been approved by a majority of DarkHorse lot owners. The plan also must be approved by the Board of Supervisors.

Hooking up to the Lake of the Pines plant would take six months from the design phase to the final placement of pipeline along Combie Road.

In the meantime, Owens tried to reach a cost-sharing agreement with the homeowners that “went nowhere,” Tauriainen said. “The county has been more than happy to allow Owens to continue paying the way.”

The administrative claim is an attempt to force the county's hand, Owens representatives said. The lender also stopped paying the county a fee of 5 cents per gallon of partially treated sewage since January.

“We stopped paying for the hauling to try and get their attention,” Bridge said. “But it hasn't.”

To contact Staff Writer Liz Kellar, e-mail lkellar@theunion.com or call 477-4229.