“About 20 years or so ago, towns interpreted the general statutes to allow us to charge fees to developers when they want to extend and add water and sewer to their developments,” said Waynesville Town Manager Rob Hites.
What some towns did was develop a fee that not only helped the town pay for the previous cost of building water and sewer plants and trunk lines, but also gave them the ability to pay for the projected future costs of adding capacity to the water and sewer plants, and future trunk lines.
A group of developers sued the Town of Carthage, in Moore County, asserting that the town didn’t have the statutory authority to charge fees for future use.
The N.C. Supreme Court found that the language stating sanitary districts — like Junaluska or Maggie Valley — could charge capacity fees for the future cost of expanding infrastructure conferred no such authority on local governments like Carthage and Waynesville.
“So all capacity fees that were developed with the words ‘future cost’ in them had to be repaid to the developers,” said Hites.
That threw everyone into a frenzy, Hites said, because many local governments had collected millions of dollars in capacity use fees over the years.
Waynesville’s capacity use formula, developed in 2006, does not take into account future cost; however, had a class-action lawsuit emerged, Waynesville would have still had to spend thousands to make an appearance and prove it didn’t owe anyone any money.
The possibility of losing that case, although remote, prompted Waynesville last fall to place a moratorium on collecting any capacity use fees at all.
Insulation against that exposure came from an unlikely place — in July, House Bill 436 was passed by the North Carolina General Assembly, which in recent years has taken an adversarial stance toward municipalities, stripping them of revenue and some local control.
“It’s really a credit to the North Carolina League of Municipalities, that they were able to convince the leadership,” Hites said. “It’s a really good bill.”
Towns maintained that it would be unfair to force them to reimburse developers because the developers had passed those capacity use fees on to their customers — homebuyers — and that capacity use fees taking future costs into account were crucial to the infrastructure of towns large and small.
Legislators agreed; sponsored by Speaker Pro Temp Sarah Stevens, R-Mt. Airy, and Bryson City Republican Rep. Mike Clampitt, who represents a portion of Haywood County, HB 436 limits the exposure of towns that had collected the fees, and charts a path forward.
Haywood’s other representative, Burnsville Republican Michele Presnell, voted for the bill.
“It really did a good job of settling the issue of capacity use fees,” Hites said.
Municipalities, however, aren’t free to speculate as to what those future costs might be; in order to begin collecting the fees, they have to be set by a qualified professional after a study is undertaken.
On Sept. 26, Waynesville aldermen voted unanimously to engage Asheville consulting firm McGill and Associates to undertake that study at a cost of $8,500; once it’s complete and the fees are set, it’s expected to clear up any uncertainty with developers that need accurate costing for projects.
“We’re getting some more interest, we’re getting more development,” said Hites. “I think we’ll get a payback on that $8,500 within the first 12 months of adopting the fees.”