By Noah Haglund and Diana Hefley Herald Writers
SNOHOMISH — The burden has started to ease for a group of homeowners told they owed thousands of dollars in building fees due to the city’s mistakes.
Days after Snohomish city leaders announced they would release neighbors from having to pay up, one of the developers forked over more than $30,000 owed the city. For more than a year, the city had been pressuring the homeowners for the money.
The welcome news arrived for 13 affected neighbors in the Denny and Kendall development the same week they began receiving letters explaining how the city plans to clear them of any responsibility for the uncollected fees, regardless of what the developers do.
“After a series of wrong decisions and wrong actions on the part of the city, the right actions are taking place,” said John Poteete, who has had $6,000 tied up in escrow since his house sold in June.
Poteete and his wife, Cindy, both work as custodians in the Monroe School District. They hope to put the extra cash toward remodeling their new house in Lake Stevens.
“Hopefully, the city will have changed procedures in the way it deals with people,” said Cindy Poteete, who was relieved they didn’t have to fight city hall in court.
The Poteetes and another five homeowners are now clear of the city financial obligations, thanks to developer George Fischer’s Dec. 6 payment. That chipped away at $112,000 in fees outstanding earlier this month. Another $82,119 remains. There are hints the developer’s former business partner may be preparing to pay up, too.
The city has promised to send follow-up letters, within a week or so, documenting that three other homeowners have been cleared of more than $13,000 each in unpaid sewer-connection fees.
The city still needs to get the Snohomish School District’s approval to release seven homeowners who have been told they owe a combined $42,168 in school-impact fees.
“The city will be paying the outstanding fees to the school district as part of the release,” Snohomish planning director Owen Dennison said.
That process could take more than a week, because the city is waiting to see whether Fischer’s former business partner, Jeff Gray, makes any payments.
Gray, on Friday, said he will, but declined to say how much.
“We’re going pay what we owe,” he said.
Gray said his company, Dynasty Homes of Everett, has been unfairly singled out in news stories about the unpaid fees, which have focused on lapses by Snohomish city officials. Gray was the primary builder of the homes, which began construction about six years ago.
Ownership varied when the homes sold. Some were owned by LLCs associated with Fischer. Others were bank foreclosures.
Fischer’s financial troubles extended well beyond unpaid building fees in Snohomish.
The developer filed for bankruptcy April 24, 2012, a week after he met with city officials about the outstanding fees.
A day after the meeting he sent a letter indicating that he had been aware that some fees were still owed.
“As I said previously, city staff and myself knew of this entire situation and a list of the unpaid fees was documented by staff early on,” Fischer wrote Snohomish officials on April 18, 2012.
In that same letter he advised the city he was “not in a financial position to help pay these fees.”
In a letter Fischer sent the city along with his payment earlier this month, the developer explained the fee arrangement he believed he had for the houses, which were built in 2009. He claimed the city failed to tell him about other unpaid fees on houses that, by that time, had already sold.
City manager Larry Bauman declined to address Fischer’s allegation.
“I’m really not interested in getting into a point-by-point discussion on George Fischer’s comments since we may be in litigation with him in the future,” Bauman said Friday.
Fischer’s bankruptcy closed in October with more than $6.2 million in debt being discharged.
It doesn’t appear that Snohomish was listed as one of the creditors. Gray was, however.
One of the other creditors in the bankruptcy is a Mukilteo corporation that sued Fischer and others in 2010 over an unpaid promissory note for some property. Snohomish’s assistant attorney, Thom Graafstra, represented one of Fischer’s codefendants, according to a notice of appearance that was filed Sept. 30, 2010 in Snohomish County Superior Court.
Fischer reportedly subdivided the property and sold lots to three different people. The lawsuit alleged that Fischer and the other property owners, including the one represented by Graafstra, owed an outstanding balance of nearly $200,000. The Mukilteo corporation dismissed the lawsuit a couple weeks later.
Reached at his Wenatchee office on Friday, Graafstra said he didn’t remember the 2010 lawsuit. He also said he didn’t think it was a conflict that he is now advising Snohomish on how to handle legal matters involving Fischer.
Graafstra wrote the letters that were sent to the homeowners in April 2012, saying that they were on the hook for the unpaid fees. He warned them that they had two weeks to make arrangements to pay the city. That was the first the homeowners learned of the problem.
The city later recanted, apologizing for the letters’ harsh tone. The city claimed it needed more time to investigate and would be contacting the homeowners later.
This spring, after an inconclusive criminal investigation into a forged building document in another home from the development, the city again told the homeowners they owed the money.
By law, the city should have collected the fees before issuing final building permits.
City records show that Bauman and other top managers were aware of problems by late 2008 — well before some of the homes were sold. At one point the uncollected fees in the Denny and Kendall development, and other Snohomish neighborhoods, approached half a million dollars.
Homeowners never learned anything was wrong until they received Graafstra’s letter in April 2012. By that time, about $240,000 was left unpaid.
Between the spring of 2012 and this fall, payments by Gray and Fischer, or people working with them, had helped lower the amount by more than half.
Until this month, Snohomish city administrators had insisted that state law forced them to make the homeowners pay, since the original developers had then claimed to be unable to do so.
That changed Dec. 3 when the City Council directed staff to release the homeowners and seek payment from the developers.
The motion doesn’t appear to have addressed what to do about the lone homeowner who paid the city after getting the letter.
Larry Thompson said he and Gray agreed to split $6,024 in unpaid fees that almost derailed the sale of Thompson’s daughter’s house earlier this year. Thompson said he wants the city to give back his share.
“Our issue has never been with the builder, because we didn’t have the house built,” Thompson said. “Our issue has always been with the city. It’s amazing to me that it’s taken 18 to 20 months for the City Council to make the right the right thing happen.”
Noah Haglund: 425-339-3465; firstname.lastname@example.org.