NC Supreme Court Finds Water and Sewer Impact Fee Ordinances Exceeded City’s Authority under Public Enterprise Statutes

Plaintiffs, North Carolina corporations engaged in residential homebuilding, brought action seeking declaration that the Town of Carthage exceeded its municipal authority under the Public Enterprise Statutes, by adopting certain water and sewer “impact fee” ordinances. Upon approval of a subdivision of real property, the ordinances trigger immediate charges for future water and sewer system expansion, regardless of whether the landowner ever connects to the system or whether Carthage ever expands the system. In 2003, following a period of rapid population growth, Carthage adopted two similar impact fee ordinances: one pertaining to its water system, and the other pertaining to its sewer system. Under both ordinances, a landowner who seeks to subdivide property and receives “final plat approval,” must pay water and sewer impact fees “based on water meter size according to the town’s fee schedule,” in amounts ranging from $1,000 to $30,000 per connection. The Superior Court granted summary judgment in favor of city, and the developers appealed. The Court of Appeals affirmed.

At the outset the court noted that when determining the extent of legislative power conferred upon a municipality, the plain language of the enabling statute governs. Here, while the enabling statutes allowed Carthage to charge for the contemporaneous use of its water and sewer systems, the plain language of the Public Enterprise Statutes failed to empower the Town to impose impact fees for future services. Specifically, the enabling statutes unambiguously empower Carthage to charge for the contemporaneous use of water and sewer services: not to collect fees for future discretionary spending. Furthermore, Carthage had the authority to charge tap fees and to establish water and sewer rates to fund necessary improvements and maintain services to its inhabitants, which was sufficient to address its expansion needs.

Because the legislature alone controlled the extension of municipal authority, the impact fee ordinances on their face exceeded the powers delegated to the Town by the General Assembly, and thus overstepped Carthage’s rightful authority. The court therefore found the ordinances were therefore invalid and reversed the decision of the Court of Appeals.

Quality Built Homes Inc. v. Town of Carthage, 789 S.E.2d 454 (N.C. 2016)