The city issued the permits to developer Dynasty Homes, but the developer didn't pay. The total comes to more than $240,000, and city residents are being asked to foot the bill.
Some homeowners have been sent bills in excess of $10,000.
"We can't refinance or sell them until that debt is paid. How would you like to be financially paralyzed? It's not pleasant let me tell you that," one homeowner said.
Two city employees have been let go since the information came to light, and there is now a state audit and a criminal investigation.
The city manager and the mayor say Snohomish is bound by law to collect the fees because they would otherwise be seen as gifts. But residents say it should be considered a loss, especially since it's the city's fault that fees were not collected and permits were granted to the developer.
"If we owed the money we'd pay the money, but negligence on their part, we shouldn't pay that," said another resident.
The mayor said the city would work with residents to pay the bills over time, but that idea was met with laughter and more anger.