Owners on hook for unpaid developer fees, city mistake
SNOHOMISH - The city is asking residents to foot the bill for thousands of dollars in unpaid impact fees the city failed to collect from the developer that built their homes five years ago.
A document trail, though, shows that some city officials were aware school impact and sewer connection fees weren’t being collected from the developer before residents moved in.
The unpaid fees amount to hundreds of thousands of dollars, and three homeowners have been asked by the city to pay $20,000 each toward the unpaid fees.
The affected neighborhood is the Kendall and Denny plats located in the western edge of town. About 15 homeowners have these unpaid fees hanging over their homes.
The Snohomish County Auditor’s Office is planning an investigation into this matter next year.
The city error prompted a police criminal investigation last year that found the city’s failure to collect the fees was a result of poor practices within the city’s building department. The investigation lacked enough evidence to proceed with charges. The city was giving builder Dynasty Homes LLC of Everett permits without having to pay the impact fees first, which violates city ordinance.
In fact, the city’s former planning director knew of this and allowed permits to go forward without collecting the fees first, according to 2007 documents obtained by the Herald.
Furthermore, during part of 2008, an insubordinate permit coordinator continued to issue building permits without collecting the fees. The coordinator was later fired.
The unpaid fees could impact the homeowner’s ability to sell their houses. Some homeowners opted to pay the fees so they could sell their homes, even though the developer was supposed to be on the hook for paying.
The city says it is stuck.
Snohomish is required by law to collect school impact fees for the Snohomish School District. The city collects sewer connection fees for its budget.
Twelve homeowners have unpaid school impact fees and three have unpaid sewer connection fees after one of the development partners agreed to help pay some of the costs.
In 2012, the city’s attorney scared many neighbors with a blunt letter demanding the fees be paid or liens would be placed on their homes.
The city apologized in a follow up letter days later, calling attorney Thom Graafstra’s letter “unnecessarily harsh.”
There is currently no deadline to collect the fees, and the city has not pursued tax liens on the homes, the Herald reported.
It is unlikely the city can collect from developer Dynasty, City Manager Larry Bauman told the Herald.
Development companies are created specifically for projects and shuttered soon after project completion.
Bauman did not return the Tribune’s requests for comments by press time.
In 2012, the Snohomish Police Department launched a criminal investigation into whether inspection documents were forged to allow the developer to sell the homes.
“Suffice to say some of the practices were less than standard and a forgery of some of the inspection sheets was most certainly completed,” detective Dave Fontenot wrote to one affected homeowner.
Fontenot’s report states there is paperwork that clearly showed the city wasn’t requesting payment “for the known fees to escrow companies as the properties sold or were returned to the bank.” He added that the city “failed to act in a timely manner when it was discovered the fees had not been paid.”
The city’s finance department never got wind of the missing money until years later because the building department never communicated the information, Bauman told the Herald. The city says it has since tightened up internal communication gaps.
Some homeowners wrote in e-mails shared with the Tribune that Bauman should be fired over this issue.
The city plans to continue pursuing the unpaid fees, according to a letter from Mayor Karen Guzak written last month.
Guzak, Bauman and the new planning director met with a handful of homeowners demanding the neighborhood be released of the fees.
She wrote the city legally must collect the fees from somewhere.
“The city, however, has continuing legal and statutory responsibilities that we cannot ignore without serious consequences,” Guzak wrote. “Despite the errors in process, we cannot legally absolve property owners” of these fees.
She added: “If fees are not recovered for properties in your neighborhood, then the assessment on other properties, or the rates and charges of other rate payers or tax payers will have to be higher to pay for the shortage in your neighborhood,” Guzak wrote.
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