By Jim Scarbrough, Association Attorney
In October, 2009, Judge David Lee of Union County declared invalid the Cabarrus County Adequate Public Facilities Ordinance (APFO). Now, the Court of Appeals in Raleigh has issued a statewide decision agreeing with Judge Lee and declaring that the Union County APFO is also invalid as an illegal development impact fee. The fees charged by both counties (called “mitigation payments”) are illegal because the General Assembly has not granted authority to either county to impose such a fee. Under North Carolina law, counties only have the authority specifically granted to them by the General Assembly.
For those who make a living in real estate sales but are unfamiliar with how local government has been taxing new housing to the point of collapse, please listen up. In 1999 Cabarrus County began charging residential developers $500.00 per lot for the school impact fee (aka an adequate public facilities fee). Innocently, the real estate industry did not challenge this low fee because it was helping the county and not hurting the industry. Over the years, however, the county took advantage of the industry’s failure to object and increased the fee many times. Today the fee is over $8,000.00 per lot.
Now, to make matters worse, the county has refused to accept payment at
the time of the sale. Instead, the county wants its money upfront. The county
requires that the total amount for the entire subdivision plat must be paid
in advance before the first lot is sold and the first house is built. Why
is this? Apparently, it is too much work for the county to receive all of
those checks each time a lot or house is sold.
The Court of Appeals has now issued the following statement of law.
Counties may not use an APFO to obtain indirectly the payment of what amounts
to an impact fee when a county lacks the authority to impose school impact
fees directly. The North Carolina Constitution places the duty to fund public
schools on the General Assembly and local governments. The General Assembly
has neither expressly nor impliedly authorized local government to shift
that duty by charging fees to developers for the construction of schools.
Therefore, counties are not allowed to charge mitigation fees.
Why did the county commissions of two counties charge large illegal fees?
To be fair, they were not aware the fees were illegal. But, at the end of
the day, there was a great temptation to charge impact fees that produced
revenues to relieve the pressure to raise property taxes. To be re-elected,
commissioners must often promise no increase in property taxes. Enough said.