The owners of Long Gulch Ranch will negotiate with Groveland Community Services District to settle an outstanding debt tied to the failure of a long-proposed housing development.

Ron Kopf, a Tuolumne County business advocate and representative for Long Gulch Ranch's land-ownership group, asked the district's Board of Directors at a meeting Monday to authorize negotiations over the possible release of a lien GCSD placed on the 1,158-acre property in 2008, which is preventing the partnership from selling parcels.

"The way it's structured right now, it's a lose-lose situation," Kopf told the board.

A proposal for a 327-home and golf course community at Long Gulch Ranch was first approved by the Tuolumne County Board of Supervisors in 1996, but with 130 conditions, including annexation into the Groveland district for water, sewer and fire protection services.

The property's former owner, Yosemite Club Partners, started looking for investors to finance the project after purchasing the property for $5 million in 2005 from Petaluma-based Long Gulch Ranch, Limited Partnership.

After the 2008 housing market crash, financing for real estate projects dried up nationwide, and Long Gulch Ranch was eventually lost in foreclosure. Yosemite Club Partners filed for bankruptcy and the property reverted back to its original owners.

Meanwhile, GCSD was left with about $84,000 in unpaid bills for consultants that were hired to review the development plans.

Kopf said the current owners have been trying to "salvage the property'sdevelopment potential," but the lien and other expenses placed on the property means they would have to pay money "out-of-pocket" just to sell a parcel.

New plans for development also hit a snag in recent years after the California Department of Fish and Wildlife found a portion of the land to be "viable habitat" for the endangered Great Gray Owl, according to Kopf.

"We've sort of inherited this albatross," he told the board.

Kopf said the owners were now looking to possibly sell a portion of the property to a land conservancy group for the owl habitat, and develop the rest as large-acre lots.

On Monday, the GCSD board unanimously voted to authorize the district staff's to enter negotiations with the property owners.

"It's a positive thing for the district, and I think it's better if we move forward with this," said Director John Armstrong.

Kopf said he plans to discuss the issue with the district over the next couple months and hopefully come to an agreement sometime soon, which the board would have to review and approve at a future meeting.

Sterling said he thinks the two sides can come to a "very positive solution."

"We're going to try to do this with no lawyers and become neighbors," he said.