SNOHOMISH — A dozen homeowners no longer face the prospect of paying the city thousands of dollars in fees when they sell or refinance their homes.

The city of Snohomish finalized documents at the end of January making it official.

“It’s good that it’s finally over,” homeowner Adam Kemper said last week. “Its nice after so long to finally be putting a close to this.”

Since December, the city of Snohomish and two developers have paid a combined $112,239 in outstanding sewer and school fees. That’s the entire amount owed in the Kendall and Denny neighborhood.

Until late last year, a dozen households in the middle-class neighborhood on the west side of town were on the hook for $3,000 to nearly $20,000 each. The homeowners had done nothing wrong. They were being asked to pay sewer- and school-impact fees the city failed to collect from developers who built their homes, starting in 2007.

Kemper and his wife, Jamie, own a house with nearly $20,000 in unpaid fees. They said the burden prevented them from refinancing last year, when interest rates hit historic lows.

It wasn’t until the spring of 2012 that the city informed any homeowners about the unpaid fees. By then, some had lived in their homes for four years. Others lived in houses that had been bought and sold multiple times.

The city administration insisted that it was legally impossible to make the fees go away. Mayor Karen Guzak and City Manager Larry Bauman said that state law prevented the city from writing off the unpaid fees, as it would have been a gift of public funds to the homeowners. Furthermore, they said, the city was unable to collect from the now-insolvent companies that built the homes.

On Dec. 3, the City Council voted unanimously to order city staff to change course and avoid making the homeowners pay. They also asked staff to look into collecting money from the builders.

At that point, sewer fees totalled $13,317 each for three houses; school-impact fees for those houses and 10 others exceeded $70,000 combined.

On Dec. 6, one of the original developers, George Fischer, paid the city more than $30,000 in school-impact fees. Another, Jeff Gray, on Dec. 16 paid more than $18,000 in school fees.

The city’s general fund is covering the more than $24,000 remaining in uncollected school fees plus nearly $40,000 in sewer fees, city planning director Owen Dennison said.

The mayor said the city faced a tough decision: Do the right thing by homeowners and break state law, or obey the law and leave the homeowners with an unfair financial burden.

“It’s one of those situations where you look at the trade-offs and there are two bad choices,” Guzak said last week. “I think that council did the right thing and I certainly support the decision that the council made.”

It took until Jan. 31 to record the final documents because the city had to coordinate the agreement with the Snohomish School District, Dennison said.

Larry and Kathryn Coyle, like the Kempers, had nearly $20,000 in unpaid fees on their house. Larry Coyle said he was grateful for the council’s action but disappointed the city only tried to resolve the situation after it hit the media.

“I didn’t see them backing down, and I thought at some point we might have to take legal action,” he said.

Public records from Snohomish city government show city leaders knew about the unpaid fees by 2008 but made no obvious attempts to collect them as houses were bought and sold.

At one point, uncollected fees approached a half-million dollars citywide.

The city now has more oversight in the building department, Guzak said. More than one employee now reviews permits to ensure fees are collected. The mayor said she does not believe any policy changes are needed to provide additional safeguards.

A police investigation initiated in 2012 looked into a forged inspection document for a house in the subdivision. Detectives found insufficient evidence to support charging anyone with a crime.

One house in the neighborhood still has outstanding fees of nearly $20,000, Dennison said. The home is in foreclosure, and the city hopes to collect the money when it sells.

Noah Haglund: 425-339-3465, nhaglund@heraldnet.com.