- The N.C. Supreme Court will not rehear a case that produced a 4-3 split over disputed water and sewer capacity fees in Harnett County.
- Plaintiffs in the case argued that the court "may have overlooked or misapprehended" state law regarding refunds of unlawful development fees.
The N.C. Supreme Court has rejected a request from developers to rehear a case involving disputed water and sewer fees in Harnett County. An Oct. 13 order denied the request without comment.
The court split, 4-3, in its Aug. 19 ruling in Anderson Creek Partners v. County of Harnett. The court’s majority reversed lower court rulings favoring the county. The majority ordered a trial court to conduct further hearings into whether the challenged fees amounted to an unconstitutional taking of property.
That ruling represented a win for the developers, but they requested the rehearing. In a Sept. 23 court petition, the plaintiffs explained that they objected to one piece of the Supreme Court’s ruling.
Plaintiffs cited the following passage from Justice Sam “Jimmy” Ervin IV’s majority opinion.
“[O]n remand, the County shall be permitted to present evidence concerning the extent to which, if at all, plaintiffs factored the cost of the challenged ‘capacity use’ fees into the prices at which they have sold lots to ultimate purchasers. In the event that the trial court finds that plaintiffs have done so, it shall be permitted to hear evidence regarding the appropriate manner by which any such amount should be distributed to the parties in order to ensure that no party receives a windfall as a result of these proceedings.”
Ervin and the state Supreme Court’s three Republicans formed the majority in the case. The other three Democratic justices dissented.
The developers argue that the court “may have overlooked or misapprehended” state law, “which directs that local government must return unlawful development fees to the party who made the payment to the local government.”
With no rehearing, a trial judge will be able to hear evidence about the extent to which developers passed along the disputed fees to homebuyers.
At issue in the case are fees charged in 2016 for any landowners seeking a connection to water and sewer service owned or operated by the county. The county charged $1,000 for water service and $1,200 for sewer service for each new residential connection. Until those fees were paid, the county would not sign off on landowners getting essential state permits.
The state Supreme Court majority determined that these fees were “impact fees,” not “user fees.”
“As the County admits in its brief, the challenged ‘capacity use’ fees are intended to ‘cover the cost of expanding the infrastructure of the water and sewer system to accommodate the new development,’ a description that falls squarely within the definition of an ‘impact fee,’” Ervin wrote. “The fees at issue in this case are not water and sewer service fees, paid by customers at a fixed rate in accordance with their monthly metered water and sewer usage for the purpose of paying for the service that they used. In addition, the challenged fees are not ‘tap-on fees’ paid at the time that individual lots are connected to the County’s water and sewer system.”
“Instead, the fees at issue in this case are intended to provide the County with a contribution toward the cost of expanding its water and sewer infrastructure to account for the additional customers that will be added as a result of the developer’s development.”
Ervin and the majority also treated the capacity use fees as “exactions,” which means they face additional constitutional scrutiny.
“[T]o the extent that the challenged ‘capacity use’ fees at issue in this case are intended to cover the cost of expanding the County’s water and sewer systems to accommodate the developments in which plaintiffs were involved, then plaintiffs, rather than the public at large (who already support the existing system through the payment of user fees and, perhaps, taxes), can appropriately be made to bear those costs to the extent that they are ‘roughly proportional’ to the impact of the proposed developments upon the County’s water and sewer system,” Ervin wrote.
Further court proceedings should determine whether the water and sewer capacity use fees meet the test of being “roughly proportional,” Ervin explained.
Two members of the four-vote majority dissented from part of Ervin’s opinion.
“I join in the majority opinion generally,” wrote Justice Phil Berger Jr., joined by Chief Justice Paul Newby. “However, if an unconstitutional taking occurred, there is no scenario in which the county can retain the fees collected. The county should not profit from its taking, and I respectfully dissent from that portion of the opinion.”
Meanwhile, the court’s three Democratic dissenters rejected the entire majority opinion.
The majority’s decision “rests on a mischaracterization of the County’s actions and the choices presented to property owners in Harnett County,” wrote dissenting Justice Anita Earls.
“The result is an unwarranted and unwise expansion of the scope of the Takings Clause that will engender frequent litigation and may ultimately diminish the capacity of municipalities to recoup fees to offset the costs of maintaining vital public infrastructure for the public’s benefit,” Earls added. “Even if this decision has few immediate practical consequences, it also signals an increased hostility towards government that hearkens back to a bygone era.”