Council directs staff to go after developer for unpaid fees
SNOHOMISH - City leaders are willing to pursue new avenues to extract thousands of dollars in unpaid impact fees from the developer — instead of the homeowners — that the city failed to collect from the developer five years ago.
Thirteen homeowners have the unpaid fees hanging over their homes. At least three homeowners have been asked to each pay $20,000. Until last week’s City Council meeting, city leaders said they had no options left but to ask homeowners to foot the bill.
City Councilman Greg Guedel proposed the city demand a judgment from defunct Everett-based Dynasty Homes LLC and also pursue money from Dynasty’s insurance policy.
The council agreed unanimously after a 25-minute closed-door session.
City management will update the council next month on how those efforts are working out.
The state Auditor’s Office is planning an investigation into the unpaid fees starting next year.
The fees went unpaid because of what the city says were errors in procedures within the building department around 2007. Dynasty was given building permits before more than $300,000 in impact fees was paid.
The developer was supposed to pay school impact fees and sewer connection fees for each home before permits were issued.
“As city manager, I take responsibility,” City Manager Larry Bauman said in an apologetic statement.
A 2012 police investigation showed some of the unpaid fees could be tied to an insubordinate permitting manager who handed out building permits knowing she was supposed to collect the fees beforehand. Documents suggest the city’s former planning director knew fees weren’t being collected but was letting it slide. The city fired the permitting employee, agreed to a cash settlement, and later gave her a recommendation without mentioning her actions.
A 2008 city memo suggests city procedures weren’t consistently applied among departments going back to at least 2005. Including Dynasty’s fees, the official calculated a total of $454,000 in unpaid sewer connection and school mitigation fees owed to the city.
The city has repeatedly acknowledged the errors but said there’s little it can do. The city argues waiving the fees would be an illegal gifting of public funds.
About 25 homeowners from the Kendall and Denny plats off Ludwig Road came to the council meeting last week hoping for a solution.
The unpaid fees affect their ability to sell or refinance their homes because they show up as liens on their title insurance.
One homeowner who is trying to sell his home said his money is stuck in escrow because of this problem.
Earlier in the meeting, Mayor Karen Guzak upset the crowd by telling the homeowners they’d have to pay off the fees and the “best we can do right now is give time for this payment.”
“We’re all affected by this,” Guzak said. “We’re all in this together.”
That didn’t go over well with the crowd, with some yelling back “no” and two people walking out.
Affected homeowner Larry Coyle told Guzak her statement was offensive.
“We are not all in this together; we are simply not in this together,” Coyle said. He added: “There’s no complexity to this problem. It could have been solved by putting liens on these properties (before they were put on the market).”
After the meeting, Guzak stood by her opinion. She said she hopes for a resolution to the problem soon.
The homeowners say it’s unfair that they’re getting stuck with the bill as a result of a serious city error.
“Nobody cares how you handled it internally, just get it done,” affected homeowner Larry Thompson said.
They do not appear ready to file a class action lawsuit against Snohomish.
Paying the $20,000 in unpaid fees on Jamie and Adam Kemper’s home would bankrupt them, Jamie’s mother Michele Kemper said.
Affected homeowner Ric Saurez, who walked out after Guzak’s “we’re all in this together” comment, said before the meeting that he was embarrassed to live in Snohomish.
Most council members were sympathetic to the homeowners. Guedel and Councilman Derrick Burke both said the city should side with the homeowners.
Even though the developer closed down, it still has an insurance policy the city can pursue, Guedel said.
The issue is more complicated than just a simple question of fees going unpaid.
“In ambiguity, the city should come on the side of the citizens,” Guedel said.
The city has tried to get the money back.
So far, the city recouped $229,000, Bauman said. He has said previously that since Dynasty closed down, it is unlikely more money can be extracted from the company.
One of Dynasty’s partners, Jeff Gray, paid part of the fees out of his own pocket for some of the homes.
Dynasty partner George Fischer told the city the company is insolvent.