Where the Fight Stands: LOSS, the Aquifer, and a New Inquiry into the Third-Party Guarantor
New information on LOSS
Fall City Neighbors has an article with the history of LOSS and the lived experience of our neighbors at Arrington Court. Read the full article at Neighbor’s Newsletter.
Legal Update: 3rd Party Guarantor for LOSS
On April 29, 2026, FCSG opened a formal inquiry (view PDF) into whether the third-party guarantor structures relied upon by the Taylor Development LOSSs satisfy the requirements of state law.
Every Large On-Site Sewage System is required to have a public third-party guarantor — a municipal entity (a city, county, sewer district, public utility district, or similar) standing behind the system to step in if something goes wrong. The requirement exists for a reason. Fixing a failed LOSS can be extremely expensive, and the homeowners who depend on it may not be willing or financially able to fund the repair — or the HOA holding the system may itself fail. A LOSS that sits non-operational is not a tolerable outcome: it contaminates groundwater and creates a public health risk. The LOSS law was written so that if you build one of these systems, the developer needs to find a public entity with the financial capacity, technical knowledge, and procedural authority to step in and make sure the system gets fixed when no one else can or will.
When Arrington Court went into operation, it had a qualifying public guarantor: Skagit County Sewer District No. 2. That guarantor has since dropped Arrington Court. After that, something unusual has happened. An entity called “Kittitas County Sewer District #8” has been named as the third-party guarantor for Arrington Court, and is the proposed guarantor for Mt. Si, Cha, Cedar 23, Stevens 24, Fall City II, the downtown business LOSS and Hazel. This entity does not appear to actually be a public entity at all. We cannot find a governing board, a mailing address, posted public meetings, a public-records process, or any record of a an entity at all. It appears to be a private water system company in Cle Elum run by an individual.
Why this matters. If Kittitas County Sewer District #8 is not in fact a valid public entity, it has neither the statutory authority nor the financial means to step in and fix a LOSS that has stopped working. And this is not a hypothetical concern — the exact scenario has already played out at Arrington Court. The Arrington Court LOSS failed in operation, and a major retrofit was required to bring it back into compliance. The community got lucky: the Department of Health had structured the permit so that Taylor Development still owned the system at the time of failure, and Taylor footed the bill for the fix. If the HOA had already taken ownership at that point, the third-party guarantor would have been the entity called on to step in and pay for the repair. We know from real experience, not theory, that having a valid third-party guarantor is critical infrastructure and not just a paperwork exercise.
And the financial backstop is only half of it. With seven LOSSs proposed in a one-mile radius over a single drinking-water aquifer, the public half of "public entity" matters just as much: it brings public records access, open meetings, elected oversight, and rate accountability - the basic transparency tools the community will need if any of these systems start to fail. With a private entity like “Kittitas County Sewer District #8”, none of that exists. There is no board to question, no rate process to inspect, no public records to request - we don't even have a phone number.
What is most frustrating to us is that this should not be a difficult question. State law is exceptionally clear about what qualifies an entity to serve as a third-party guarantor for a LOSS. What we do not understand is why the Department of Health has allowed this arrangement to come together at all. In its communications with us, DOH has not verified that “Kittitas County Sewer District #8” is a public entity, even when we have specifically asked. DOH has also characterized the guarantor role as something like an "insurance" function - language that significantly understates the operational, financial, and procedural responsibilities the rule actually assigns to a public entity. With seven of these systems queued up over Fall City's drinking-water aquifer, that is not a margin of comfort we can accept.
To sort this out, FCSG has formally initiated the process of asking the Department of Health to explain its determination that Kittitas County Sewer District #8 satisfies the public-entity requirement. We want a clear answer, on the record.
There is one larger question worth raising. We do not know why no qualifying public entity in the region has stepped forward to take on this role for the Fall City LOSSs. We are not in a position to say whether that is because LOSS systems of this size and complexity are simply not an attractive obligation for a real public entity to assume, but the absence of legitimate options is itself a meaningful signal about the viability of the underlying model. If a valid public guarantor cannot be secured for these systems, then the long-term operating model is not actually viable, and permitting needs to pause until the issue is resolved — not after another six LOSSs are in the ground.
Looking Ahead: the fight is still very active
For Stevens 24 and Hazel, the SEPA and preliminary-plat fights are ongoing. Stevens 24 is on remand back to King County DLS and we are waiting for a new hearing; Hazel has not yet reached the Examiner. We are focused on making sure these plats are never approved.
For Cedar, Mt. Si, and Cha, our challenge is to the LOSS permits themselves. None of these projects has a qualifying public-entity third-party guarantor and without one, the LOSS does not have a valid operating model. The April 29, 2026 APA petition challenging DOH's approval of K8 goes directly to that defect for all four LOSSs.
For Fall City II, our focus is twofold: (1) holding the builder to the three-bedroom-per-home limit that the LOSS nitrate balance depends on, and (2) requiring that the LOSS engineering - including the third-party guarantor structure - be sound and enforceable.
How you can help:
Sign up for case alerts with King County so you know when comment periods open and hearings are scheduled. Email Brian Lee and request you be added as a party of record for all Fall City developments: brlee@kingcounty.gov
Donate to the FCSG legal fund — appeals, expert hydrogeology, and PCHB proceedings are not free.
Share this page. The single most effective protection for the aquifer is an informed community!
We will continue to post updates as filings are made and decisions issue.
— Your neighbors at FCSG