Sprouting among the weedy thickets at Highland Knoll are tiny signs, one on each of the 28 abandoned lots.

In this stunted development, only one house was built before Central Bank took back the rest of the development in a foreclosure.

Last July, Central Bank forfeited the whole development in south Woodbury to the state of Minnesota for not paying taxes for five years on the lots.

In a rare twist, Washington County is holding an auction to sell all 28 lots in one package, and each of those signs marks a lot that's now up for sale.

From that auction, the City of Woodbury hopes to collect more than $1.43 million it's owed for streets and utilities for the failed development. Special assessments for those properties were never paid because the lots were never sold.

"The city will be made whole," said Eric Searles, a Woodbury planner.

He and his colleagues have been meeting with developers and builders, and there's plenty of interest in the property, Searles said.

On March 21, it will be auctioned in a tax-forfeiture proceeding, which is the first time Washington County has seen anything like this -- the forfeiture of an entire subdivision, said Steve Gransee, manager of Washington County taxpayer services.

Watching the progress is a young couple who built the first home in the subdivision and who have been left for years with only piles of dirt and noxious weeds as their neighbors.

"That's the risk we take with being the first house on the block," said Kory Mortel, who with his wife, Heather Mortel, moved into their home in 2007.

Since then, uncertainty has hung over their stalled development, and they welcome the auction, he said.

"That's encouraging. It will move this development toward stability faster," he said.

High hopes, dashed

Originally planned as an upscale development, Highland Knoll is situated north of Oak View Drive, west of Cottage Grove Drive and south of the Eagle Valley development.

It was platted as 30 single-family lots and 25 twin-home units on a little more than 21 acres. Each lot is ready to build, with a starting price of $56,000.

Now the development is being auctioned with $1.568 million set as a minimum.

The unpaid assessments for streets and utilities average $51,800 per lot, Gransee said. In addition, each lot had roughly $25,000 in unpaid taxes from 2007 through 2011, plus interest and penalties, he said.

After the county's costs of holding the auction are paid, along with Woodbury's assessments, any remaining proceeds would go to county parks, Gransee said.

Anxious neighbors

Soon after moving into their home, the Mortels realized their development was becoming insolvent.

Since then, Kory Mortel had a job transfer and they've tried to sell their home, once appraised at more than $600,000. But potential buyers didn't want a development that lacked assurances it would ever be completed, he said.

He likes the city's plan to have a single developer take over the project.

"It's good, it's reassuring, and it's promising to know that at least it's moving in the right direction for us," he said.

High on a knoll overlooking the vacant lots is the home of Ben and Liz Peake. They live on the edge of another subdivision but are directly across the street from Highland Knoll.

"It will be nice to have something other than weeds there," said Ben Peake.

"It will be nice to have people there," agreed his wife, Liz Peake.

Their 4-year-old, Luke, wants friends to play with, he said one recent afternoon as he put together a SpongeBob puzzle. Right now, he has nobody near his age living nearby.

Ben Peake said it would be a selling point for their home if they had a neighborhood nearby, too, and they hope for better maintenance of the lots.

Financial losses all around

Highland Knoll LLC was created in 2004 to buy and develop the land for $3 million.

The corporation was owned by two entities, Jenik Ventures and LDI Enterprises. Dan Fesler, Joseph Gisch and Rick Lingen owned Jenik, and Thomas Dvorak owned LDI. Their lender was the doomed Mainstreet Bank, later acquired by Central Bank.

Highland defaulted on the note. Central began foreclosure proceedings and then bought the property for $1.4 million at a sheriff's auction.

In July 2009, the City of Woodbury sued Highland Knoll over the developer's agreement, asking that the special assessments be paid. The city hasn't been able to collect, Searles said.

The property was forfeited to the state last July for the unpaid taxes.

Joy Powell • 651-925-5038