Business

City drops impact fees after NC court ruling

By Bill Moss, Published: October 6, 2016

The city of Hendersonville has dropped impact fees it imposed on new development following a state Supreme Court that struck down similar charges in the Piedmont town of Carthage. The loss system development charges will cost the city of Hendersonville roughly $518,000 a year.

The City Council took the action on Sept. 1 after a closed session in which members heard about the Supreme Court case and a staff recommendation that the city drop the charges at least for now.
“We suspended them,” City Manager John Connet said. “The long and short of it is there is a North Carolina Supreme Court case that came out in August.” Homebuilders successfully “challenged the enabling legislation as it relates to a city’s abilities to charge impact fees. We saw, as did other local governments of North Carolina, that it brought into question our ability to charge impact fees.”
The council voted to suspend the impact fees rather than repealing them outright while the city learns more about the scope of the Supreme Court ruling. The Supreme Court sent the case back to the N.C. Appeals Court, which will decide if the homebuilders can recoup payments going back as much as 10 years — an outcome that could cost the city millions of dollars if it encompasses all local government units in the state.
“It’s so new, no one’s quite sure,” Connet said. The ruling “affected the town of Carthage but they used the same enabling legislation we did. We thought that the prudent thing to do was to suspend until we know more.”
Supporters of impact fees, which other states also allow, help cities and counties cope with population growth and demands for better roads, schools and infrastructure. The city of Hendersonville set the money aside to pay for future water and sewer lines and treatment plants. The state’s highest court ruled that Carthage, of town of 2,310 people in Moore County, had overstepped its authority to impose the fees on homebuilders. The two contractors that sued the town in 2013 had paid the city a total of $123,000 in impact fees.
Hendersonville officials hope to get further guidance from the UNC School of Government and the N.C. League of Municipalities. In the meantime, city administrators and the City Council may have to look elsewhere for a revenue source to set aside money for future expansion of the city water and sewer system. The city’s projected annual revenue of $518,000 is subject to economic conditions.
“Obviously, when development is not happening, it’s not as large as the high impact years,” Connet said. “But from year to year it’s a good chunk of money. The impact of the court ruling is if we don’t use the system development charge to help fund future capital improvement then ultimately that cost has to be passed on to the ratepayers or (collected through) some other mechanism. That’s what we’re all talking about. How do we fund our system improvements, especially in fast-growing area? How do you do that without just raising the water and sewer rates?”

City refunds Fairfield Inn impact fees

A collateral issue broke in favor of developer Chris Cormier and Carolina Specialties, the contractor that had asked the city to refund $21,000 it charged before it issued a permit for the construction of a new Fairfield Inn on Upward Road. The council voted, 3-2, with council members Jerry Smith and Ron Stephens voting no, to refund $14,250. The council didn’t refund the full $21,000 because part of that was tap fees the council decided were justified, Connet said.
Smith said the Supreme Court case didn’t apply to any past charges.
“The case came out after they had already paid theirs,” he said of the Fairfield Inn. “We’re under no obligation to refund anybody’s right now. This (court case) was something that happened right before our council meeting.”

An earlier version of this story incorrectly reported the vote on the Fairfield Inn impact fee refund. Mayor Barbara Volk and council members Jeff Miller and Steve Caraker voted yes. Council members Jerry Smith and Ron Stephens voted no.