Impact Fee Lawsuits in North Carolina Allege Unlawful, Illegal Charges

Allegations have surfaced that several municipalities in North Carolina are unlawfully charging builders and developers “capacity replacement” or “impact” fees. In fact, class action lawsuits have already been filed against the towns of Holly Springs and Garner saying that these fees are illegal and should be returned with interest to those who paid them. These lawsuits follow a ruling by the North Carolina Supreme Court stating that the fees are unconstitutional.

Attorneys working with ClassAction.org are looking to sue other municipalities to help ensure builders and developers throughout the state have a chance to get their money back.

What Exactly Are Impact Fees – and How Could They Be Illegal?

“Impact” or “capacity replacement” fees are charged for future water and sewer capacity. These are levied in addition to regular sewer and water fees, which include connection or tap fees, user fees or any other fee that related to the actual usage or maintenance of water and sewer services.

Attorneys believe that builders shouldn’t be getting charged for something the town may add. In fact, they believe these small towns are trying to shake down builders and developers to get them to pay exorbitant fees – when, by law, they should only be getting charged for what they are actually using.

Impact Fees May Go by Different Names

The name of these “impact” fees may vary by municipality. For instance, Wilmington calls them “utility development” fees, while Raleigh calls them “capital facilities” fees. Holly Springs calls them “capacity replacement” fees.

Towns Try to Justify the Fees – But Lawsuits Say They’re Still Unlawful

The lawsuits filed against the towns of Holly Springs and Garner claim that the municipalities are trying to justify the collection of these “impact” fees. For instance, in the suit against Garner, the case claims that a local ordinance states that the “capacity replacement” fee is used to:

“Provide the town with a means to link the water and sewer capacity needs of new development with the increased demand for the protection, upgrade and future expansion of its water and sewer treatment facilities or the construction of such new facilities.”

Because these fees are not being put toward the actual cost of water and sewer systems and services, the lawsuits say that they are unlawful. Further, the lawsuits claim that the municipalities do not have the authority to charge these fees.

What’s worse is that attorneys suspect these fees aren’t even going toward future development of the water and sewer systems, but rather other areas of the town that need financing, such as roads or schools. This means that developers may be paying for local development that has no connection to their business.

How a Class Action Lawsuit Can Help

Impact fees have become such an issue that the matter was brought before the North Carolina Supreme Court. The Court ruled that local government cannot charge for the future expense of water and sewer systems or for services to be furnished. Now, in light of this ruling, class actions are being filed to help builders get their money back.  

According to the lawsuits, builders are entitled to, under North Carolina law, a return of the fees plus 6% interest. Further, the suits want the court to hand down an order stating that municipalities in North Carolina do not have the authority to charge “impact” and “capacity replacement” fees.

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