Anderson Creek Partners v. Cnty. of Harnett, 62PA21

Docket Nº62PA21
Citation2022 NCSC 93
Case DateAugust 19, 2022
CourtUnited States State Supreme Court of North Carolina





Nos. 62PA21, 63PA21

Supreme Court of North Carolina

August 19, 2022

Heard in the Supreme Court on 9 May 2022

On discretionary review pursuant to N.C. G.S. § 7A-31 of a unanimous decision of the Court of Appeals, 275 N.C.App. 423 (2020), affirming an order entered on 26 November 2018 by Judge Michael J. O'Foghludha in Superior Court, Harnett County.

Scarbrough, Scarbrough &Trilling, PLLC, by John F. Scarbrough, James E. Scarbrough, and Madeline J. Trilling; James R. DeMay, for plaintiffappellants.

Fox Rothschild, LLP, by Kip David Nelson, Bradley M. Risinger, and Troy D. Shelton; and Christopher Appel, for defendant-appellee.


Erin E. Wilcox for amicus curiae Pacific Legal Foundation; and J. Michael Carpenter, for amicus curiae North Carolina Homebuilders Association.

F. Paul Calamita for amicus curiae North Carolina Water Quality Association and the National Association of Clean Water Agencies.


¶ 1 This appeal arises from a challenge to an ordinance adopted by defendant Harnett County that requires residential property developers to pay one-time water and sewer "capacity use" fees associated with each lot that they wish to develop as a precondition for obtaining the County's concurrence in the developer's application for the issuance of required water and sewer permits by the North Carolina Department of Environmental Quality. After the trial court granted the County's motion for judgment on the pleadings and dismissed all the claims asserted against the County by plaintiff PF Development Group and all but one of the claims asserted against the County by plaintiffs Anderson Creek Partners, L.P.; Anderson Creek, Inc., LLC; Anderson Creek Developers, LLC; Fairway Point, LLC; Stone Cross, LLC d/b/a Stone Cross Estates, LLC; Ralph Huff Holdings, LLC; Woodshire Partners, LLC; Crestview Development, LLC; Oakmont Development Partners, LLC; Wellco Contractors, Inc.; North South Properties, LLC; W.S. Wellons Corporation; Rolling Springs Water Company, Inc.; and Stafford Land Company, Inc., the Court of Appeals affirmed the trial court's decision. Our review of the Court of Appeals' decision requires us to determine whether the challenged "capacity use" fees are monetary land-use


exactions subject to constitutional review under the "essential nexus" and "rough proportionality" test articulated by the United States Supreme Court in Nollan v. California Coastal Commission, 483 U.S. 825 (1987); Dolan v. City of Tigard, 512 U.S. 374 (1994); and Koontz v. St. Johns River Water Management District, 570 U.S. 595 (2013). After careful consideration of the parties' arguments in light of the record and the applicable law, we reverse the decision of the Court of Appeals and remand this case to Superior Court, Harnett County, for further proceedings not inconsistent with this opinion.

I. Factual Background A. Substantive Facts

¶ 2 On 20 October 1980, the Harnett County Board of Commissioners established the Buies Creek-Coats Water and Sewer District for the purpose of collecting and treating wastewater within the District's boundaries. On 23 July 1984, the County and the District entered an interlocal agreement pursuant to which the County agreed to operate the District's water and sewer systems. In resolving a legal challenge to the 1984 agreement, this Court held that counties had the authority to enter into interlocal cooperative agreements providing for the operation of a water and sewer system on behalf of a water and sewer district and to exercise all "rights, powers, and functions granted to water and sewer districts" in the course of doing so, McNeill v. Harnett County, 327 N.C. 552, 558-59 (1990) (citing N.C. G.S. § 153A-275


(1987)), with the powers that the County was authorized to exercise including the District's authority to "establish, revise, and collect rates, fees or other charges and penalties for the use of or the services furnished or to be furnished by any sanitary sewer system, water system or sanitary sewer and water system of the district[,]" id. (quoting N.C. G.S. § 162A-88 (1987)).

¶ 3 As of 1998, the County had established eight water and sewer districts for the purpose of managing water and wastewater services throughout its entire land area. In May 1998, the County and the districts entered a joint interlocal agreement which governed the manner in which the County operated each district's water and sewer systems. In the 1998 agreement, the County and the districts agreed that the districts would lease all of their real and personal property to the County, that the districts would transfer their financial and intangible assets to the County, that the County would assume most of the districts' liabilities, and that the County's Department of Public Utilities would "administer all operations and maintenance of" the water and sewer systems in each district. In addition, the County agreed to "[e]stablish and revise from time to time schedules of rates, fees, charges, and penalties for the use of or the water and sewer services furnished and to bill and collect same."

¶ 4 On 1 July 2016, acting in accordance with the 1998 Agreement, the County adopted an ordinance "for the purpose of establishing a schedule of rents, rates, fees,


charges and penalties for the use of and services furnished by water supply and distribution systems and sewer collections systems owned or operated by [the Department of Public Utilities]." Section 28(h) of the ordinance provides for the collection of "capacity use" fees for the purpose of "partially recover[ing] directly from new customers the costs of capacity of the utility system to serve them." More specifically, the ordinance provides that, for each new residential connection to a water or sewer system owned or operated by the County, the landowner must pay a one-time, non-negotiable fee of $1,000 for water service and $1,200 for sewer service, with the landowner being required to make the required payment prior to the County's concurrence in the landowner's application to the North Carolina Department of Environment and Natural Resources[1] for the issuance of the required water and/or sewer permits. According to the ordinance, "such charges are reasonable and necessary and result in a more equitable and economically efficient method of recovery of such costs to handle new growth and to serve new customers without placing an additional financial burden on existing customers solely through inordinate enhancement of water and sewer rates." Plaintiffs, who are engaged in the business of developing property in Harnett County, have paid the "capacity use"


fees required pursuant to the ordinance in the course of their development-related activities.

B. Procedural History

¶ 5 On 1 March 2017, the Anderson Creek plaintiffs filed a complaint in which they sought (1) a declaration that the County lacked the statutory authority to adopt and enforce the ordinance; (2) a declaration that the adoption and enforcement of the ordinance violated the Anderson Creek plaintiffs' rights to equal protection and substantive due process pursuant to Article I, Section 19 of the North Carolina Constitution; (3) a refund of all "capacity use" fees that had been paid to the County along with prejudgment interest; (4) an award of costs and attorney's fees; (5) an accounting for all "capacity use" fees that the Anderson Creek plaintiffs had paid to the County; and (6) the entry of an order allowing the Anderson Creek plaintiffs to deposit all future "capacity use" fees into an escrow account pending the entry of a final judgment in this case. The Anderson Creek plaintiffs claimed to have paid more than $25,000 in "capacity use" fees to the County pursuant to the ordinance.

¶ 6 On 19 May 2017, the County filed an amended answer denying the material allegations of the complaint, asserting numerous affirmative defenses, advancing counterclaims for breach of various agreements into which the individual Anderson Creek plaintiffs had entered with the County, and seeking the imposition of sanctions


against counsel for the Anderson Creek plaintiffs.[2] On 16 March 2018, the Anderson Creek plaintiffs amended their complaint to add claims for breach of a 2018 settlement agreement between Anderson Creek Partners and the County and a declaration concerning the severability of a provision contained in that agreement addressing any future determination that the relevant "capacity use" fee payments were unlawful. On 1 February 2018, the County filed an answer to the Anderson Creek plaintiffs' amended complaint and asserted an additional counterclaim seeking a declaration that the County had the authority to collect the challenged "capacity use" fees.[3] On 12 February 2018, the County filed a motion seeking the entry of judgment in its favor with respect to all but one of the claims that had been asserted in the amended complaint and a motion to join necessary parties or, in the alternative, a motion for permissive joinder of parties.

¶ 7 On 19 July 2017, plaintiff PF Development Group, LLC, filed a complaint asserting six claims for relief against the County that were identical to those set out in the initial complaint filed by the Anderson Creek plaintiffs. On 8 November 2018, the trial court consolidated the two cases, entered an order granting the County's motion for judgment on the pleadings with respect to...

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