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Town of Leland set to approve combined $500,000 for lawsuit settlement and final judgement for alleged ‘unlawful fees’

The Town of Leland has created a new zoning district.
The Town of Leland has created a new zoning district.(Leland)
Updated: Aug. 18, 2020 at 7:47 AM EDT
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WILMINGTON, N.C. (WECT) - The Town of Leland is prepared to pay nearly $150,000 for a ‘potential final judgement’ in a court case that has been ongoing since 2018 that alleges the town unlawfully charged fees to builders developing property in the town. The town is also set to approve the transfer of $500,000 for ‘lawsuit settlements’ which will include the $148,644 for the final judgement.

Plantation Building of Wilmington, Inc. filed the lawsuit against the town in 2018 and alleges the town unlawfully charged and collected fees, known as impact fees, to builders in Leland.

Impact fees have gone by many different names, but are essentially fees charged by a locality on new development for the predicted future cost of infrastructure to that area. This was a common occurrence across the state for years but in 2016, the State Supreme Court issued a decision that would change the way things were done.

“In 2016, the North Carolina Supreme Court held that municipalities (and by analogy counties) lack the statutory authority to impose certain upfront charges for water and sewer services. Upfront charges are charges imposed on new or existing development before a property parcel is actually connected (or under contract to connect) to a local government’s water or sewer system, according to the North Carolina School of Government.

“Local government utilities across the state impose a wide variety of upfront charges, some that are assessed only on developers as a condition of securing development approvals, and others that are imposed on both new and existing property owners. The purposes of these fees range from reimbursing the utility for past investments, to reserving capacity, to covering the costs of extending infrastructure, to establishing a reserve for future maintenance or expansion of the system.”

This decision from the court opened the door to lawsuits across the state, and ended up costing the Town of Leland (and others) significant losses in revenues.

In Leland, the developer claims the town illegally charged impact fees for approximately three years (the Supreme Court ruled in 2018 that a town’s liability to refund the impact fees was subject to a three year statute of limitations). It wasn’t until 2017 that the Town of Leland amended its town ordinance regarding the collection of impact fees outlining the steps the town would follow to calculate future system development fees. Regardless of the changes, the lawsuit was still filed and although the town defended its charging of impact fees, the lawsuit is going to cost the town.

“On September 7, 2018, Plantation Building of Wilmington, Inc. filed a complaint in Brunswick County Superior Court alleging that the Town unlawfully charged and collected “Impact Fees” and “Capacity Fees” in violation of North Carolina law through the claim period of September 7, 2015 through June 30, 2018. They subsequently amended the complaint with leave of court to assert a rational nexus claim under the equal protection and substantive due process clauses of the North Carolina Constitution. Upon receipt of both the original complaint and amended complaint, the Town timely responded, raising multiple justifications and defenses to its collection of Capacity Fees. Further, the Town argued the fees were used for lawful contemporaneous debt service and various water and sewer projects that were constructed in the Town during the relevant period,” according to the Town Council’s agenda which is set to be discussed on Thursday.

Last month, Town Manager David Hollis authorized a payment in the amount of $148,644.80 for the potential final judgement which was filed with the Brunswick County Clerk of Court, the action on Thursday will see the Town Council ratify that payment.

Another resolution will have the Town Council approve the transfer of $500,000 from the Public Utility Reserve Fund to the Public Utility Enterprise Fund for the purpose of ‘lawsuit settlements.’ The request is directly related to the ongoing ‘Capacity Fee Lawsuit’ according to the council agenda.

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