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Holmes Harbor asks for refunds, imposes surcharges

As their district starts a long legal fight over $20 million in apparently illegally-sold bonds, the commissioners of the Holmes Harbor Sewer District last week began to chase down $2.1 million of the proceeds from that sale.

The district’s legal counsel, Inslee Best Doezie & Ryder, sent letters to eight individuals, law firms and mortgage companies demanding the return of payments ranging from $35,000 to $1.2 million — payments made within days of the bond sale last October.

Included in the list are the attorneys who handled the bond sale, the mortgage company that helped direct the purchase of 40 acres of Snohomish County land with $6.2 million in bond money, and the developer who proposed the bond sale in the first place.

Writing to some that no services were rendered in exchange for the payments while calling some of the other payments an “illegal gift of public funds,” the district’s attorney Michael Ruark asked for the immediate return of the money. As of Tuesday, the district had received no response to the letters.

The district is facing the possibility of multimillion-dollar lawsuits and hundreds of thousands of dollars in legal bills directly related to the bond sale. In early August, the state auditor’s office declared the bond sale illegal after it determined the sewer district could not legally use the bonds to purchase land and create public improvements on that land that would benefit an Everett office complex planned by developer Terry Martin.

Both Ruark and attorneys with the state attorney general’s office have said it is likely that a court will find elements of fraud in the bond sale and will place the sale into default. That could bring lawsuits from people who purchased the district’s bonds.

At the district’s Sept. 20 meeting, Holmes Harbor residents began to feel the financial sting of the bond sale. Faced with a negotiated $5,000 monthly payment to Inslee Best Doezie & Ryder, the district’s commissioners raised residents’ sewer assessment by $120 a year. Commissioner Meg Wingard said this surcharge will likely be on sewer assessment bills for at least three years.

The commissioners meet again this Thursday at the district’s offices on Antelope Drive. The meeting begins at 6:30 p.m.

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