Greensboro water, sewer impact fees challenged at second-highest NC court

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  • Home builders challenging water and sewer impact fees Greensboro assessed before 2018 made their case at the NC Court of Appeals Wednesday.
  • A trial judge ruled in favor of the builders, who seek refunds plus interest. The trial court would apply the ruling to any party who paid the fees between March 2016 and July 2018.
  • Greensboro argued that it had authority under state law to charge the fees.

The NC Court of Appeals will consider whether the state’s third-largest city charged illegal water and sewer impact fees before 2018. Two home building companies challenging Greensboro’s fees submitted written arguments Wednesday at North Carolina’s second-highest court.

A trial judge ruled in favor of the builders True Homes and D.R. Horton in August 2022.

“The issue in this case — the legality of water and sewer impact fees charged before the enactment of the ‘Public Water and Sewer System Development Fee Act’ — has already been addressed three times by our appellate courts,” according to the builders’ brief.

“It is now well settled law that, before the General Assembly enacted the Public Water and Sewer System Development Fee Act in 2017, and absent compliance with that statute after its enactment, cities that had not been granted special authority by the General Assembly to charge water and sewer impact fees acted illegally in doing so,” the brief continued.

“The City of Greensboro has for decades imposed impact fees identical to those held unlawful” in two previous cases, the builders’ lawyers argued. “Yet the City claims that it did not need special authority from the General Assembly to charge water and sewer impact fees. The City’s argument: (1) omits material language in its own ordinances and regulations; (2) requires holding that a prior unanimous panel of this Court misinterpreted controlling caselaw; and (3) invents a new ‘test’ making impact fees lawful if they are charged at a certain point in the development process. The trial court rejected the City’s flawed claim. So should this Court.”

Greensboro adopted its fees, known as capacity use fees, in 1988. After the General Assembly approved the 2017 legislation, the city adopted new system development fees. “Accordingly, the City had no authority to charge water and sewer impact fees until July 2018,” the builders argued.

The builders filed a class action lawsuit in March 2019 seeking refunds of “unlawful” capacity use fees, along with 6% annual interest. A trial court certified a class including all parties who paid the challenged fees after March 2016.

The brief points out that other cities and towns asked the General Assembly for permission to charge similar impact fees. Greensboro did not follow suit.

“The City is asking this Court to conclude that the General Assembly passed more than a dozen local acts granting special fee-charging authority to cities even though N.C.G.S. § 160A-314 had already granted that authority,” according to the brief. “This argument violates fundamental tenets of statutory construction. Courts presume that the General Assembly acts ‘with knowledge of prior and existing law.’ If Section 160A-314 had authorized all cities to charge impact fees — which it did not — drafting and enacting more than a dozen separate local acts would defy common sense.”

Builders challenge Greensboro’s argument that it had “unfettered impact fee authority” between October 2017 and July 2018.

“Accepting the City’s argument would mean that, although the General Assembly has always placed ‘conditions and limitations’ on cities’ power to charge impact fees — first in the local acts and then in the System Development Fee Act — no such conditions and limitations applied to Greensboro between October 1, 2017 and July 1, 2018. This would be an absurd result that violates the cardinal rule that ‘[i]n construing statutes courts normally adopt an interpretation which will avoid absurd or bizarre consequences, the presumption being that the legislature acted in accordance with reason and common sense and did not intend untoward results,’” the builders argued.

The Court of Appeals has not yet scheduled True Homes v. City of Greensboro for arguments.