Kidd Constr. Grp., LLC v. Greenville Utilities Comm'n

• Decision Date: 19 May 2020
• Docket Number: No. COA19-910,COA19-910
• Citation: 845 S.E.2d 797,271 N.C.App. 392
• Parties: KIDD CONSTRUCTION GROUP, LLC, Rocky Russell Builders, Inc., and Tommy Williams Builders, LLC, Plaintiffs, v. GREENVILLE UTILITIES COMMISSION, Defendant.
• Court: North Carolina Court of Appeals

271 N.C.App. 392

845 S.E.2d 797

KIDD CONSTRUCTION GROUP, LLC, Rocky Russell Builders, Inc., and Tommy Williams Builders, LLC, Plaintiffs,

v.GREENVILLE UTILITIES COMMISSION, Defendant.

No. COA19-910

Court of Appeals of North Carolina.

Filed: May 19, 2020

Whitfield, Bryson, and Mason, LLP, by Daniel K. Bryson, Martha A. Geer, Scott C. Harris, and J. Hunter Bryson, for Plaintiffs-Appellants.

Hartzog Law Group, LLC, by Dan M. Hartzog, Jr., and Katherine Barber-Jones, for Defendant-Appellee.

BROOK, Judge.

Kidd Construction Group, LLC, Rocky Russell Builders, Inc., and Tommy Williams Builders, Inc. (collectively "Plaintiffs") appeal from the trial court's order entering summary judgment in favor of Greenville Utilities Commission ("Defendant" or "GUC"). On appeal, Plaintiffs argue that Defendant lacked the authority to charge impact fees for water and sewer services and that the charging of such fees is ultra vires . Plaintiffs argue that the trial court erred in concluding otherwise and that we must reverse the trial court's order. For the following reasons, we agree with Plaintiffs.

I. Factual and Procedural Background

The North Carolina General Assembly created GUC, a local government entity ("LGE") in 1991 by passing Session Law 1991-861, "An Act to Amend and Restate the Charter of the Greenville Utilities Commission of the City of Greenville" (the "Charter"). The bill delegated power to GUC for "the proper management of the public utilities of the City of Greenville," including "electric, natural gas, water, and sewer services[.]" GUC provides water and sewer services to all of Pitt County.

GUC's Charter states in pertinent part:

Sec. 5. The Greenville Utilities Commission shall have entire supervision and control of the management, operation, maintenance, improvement, and extension of the public utilities of the City, which public utilities shall include electric, natural gas, water, and sewer services, and shall fix uniform rates for all services rendered[.] ...

Sec. 6. The Greenville Utilities Commission shall employ a competent and qualified General Manager whose duties shall be to supervise and manage the said public utilities, subject to the approval of the Greenville Utilities Commission. The General Manager, under the direction of and subject to the approval of the Greenville Utilities Commission, shall cause the said utilities to be orderly and properly conducted; the General Manager shall provide for the operation, maintenance, and improvement of utilities; the General Manager shall provide for the extension of all utilities, except sewer extensions made beyond the area regulated by the City of Greenville are subject to the approval of the City Council, and shall furnish, on application, proper connections and service to all citizens and inhabitants who make proper application for the same, and shall in all respects provide adequate service for the said utilities to the customers thereof; the General Manager shall attend to all complaints as to defective service and shall cause the same to be remedied, and otherwise manage and control said utilities for the best interests of the City of Greenville and the customers receiving service, and shall provide for the prompt collection of all rentals and charges for service to customers and shall promptly and faithfully cause said rentals and charges to be collected and received, all under such rules and regulations as the Greenville Utilities Commission shall, from time to time, adopt and in accordance with the ordinances of the City of Greenville in such case made and provided.

Sec. 7. All monies accruing from the charges or rentals of said utilities shall be deposited into the appropriate enterprise fund of the Greenville Utilities Commission and the Greenville Utilities Commission's Director of Finance shall keep an account of the same.... [T]he Greenville Utilities Commission shall pay out of its receipts the costs and expense incurred in managing, operating, improving, maintaining, extending, and planning for future improvements and expansions of said utilities; provided, however, that should the funds arising from the charges and rentals of said utilities be insufficient at any time to pay the necessary expenses for managing, operating, improving, and extending said utilities, then and in that event only, the City Council of the City of Greenville shall provide and pay into the appropriate enterprise fund of the Greenville Utilities Commission a sum sufficient, when added to the funds that have accrued from the rents and charges, to pay the costs and expenses of managing, operating, improving, maintaining, extending, and planning for future improvements and expansions of said utilities[.]

An Act to Amend and Restate the Charter of the Greenville Utilities Commission of the City of Greenville, ch. 861, §§ 5-7, 1992 N.C. Sess. Law 370, 373-74 (hereinafter "S.L. 1991-861").

Starting in 2008, at the time of a developer's application for water and sewer service, GUC began requiring contractors and developers of new construction and new developments to pay service connection fees, which consist of two components: a tapping fee and a capacity fee. The tapping fee recovers the cost for physically making a service tap. Capacity fees, or impact fees, are collected in an effort to "recover a proportional share of the cost of capital facilities constructed to provide service capacity for new development or new customers connecting to the water/sewer system." Capacity fees are imposed as a precondition to development approval, to the issuance of building permits, and to receiving service.

In 2016, our Supreme Court decided Quality Built Homes v. Town of Carthage , 369 N.C. 15, 789 S.E.2d 454 (2016) (" Quality Built Homes I "), which examined the Town of Carthage's authority to impose impact fees on developers as a precondition for the issuance of building permits. The Court concluded that municipalities, including Carthage, did not have the statutory authority to impose impact fees for future services. Id. at 20-21, 789 S.E.2d at 458. Subsequent appeals led our Supreme Court to hold that a municipality's liability to refund unlawful impact fee revenue was subject to a three-year statute of limitations. Quality Built Homes v. Town of Carthage , 371 N.C. 60, 74, 813 S.E.2d 218, 228-29 (2018) (" Quality Built Homes II ").

In response to our Supreme Court's holding in Quality Built Homes I , on 20 July 2017 the General Assembly enacted the Public Water and Sewer System Development Fee Act ("the Act" or "System Development Fee Act") to clarify a local government utility's authority to assess upfront charges for water and sewer services. S.L. 2017-138, 2017 N.C. Sess. Laws 996, 996-1002 (codified at N.C. Gen. Stat. § 162A-200 –215 (2019)). The law grants local government utilities specific authority to assess one type of upfront charge—a system development fee—as long as that fee is calculated in accordance with the statute's "written analysis" process. N.C. Gen. Stat. § 162A-205 (2019). The Act became effective on 1 October 2017, providing, "Nothing in this act provides retroactive authority for any system development fee, or any similar fee for water or sewer services to be furnished, collected by a local government unit prior to October 1, 2017." S.L. 2017-138 § 11.

After the legislature passed the System Development Fee Act, GUC hired Raftelis Financial Consultants, Inc. ("Raftelis"), an independent financial consultant, to perform the financial study required by N.C. Gen. Stat. § 162A-205. GUC adopted Raftelis's new fee calculation system, which became effective on 1 July 2018.

Plaintiffs are North Carolina licensed general contractors who work in and around the Greenville, North Carolina area. Plaintiffs initiated a class action suit on 24 April 2018, alleging that Defendant lacked the authority to collect impact fees from the three years prior to the commencement of the action, and thus within the three-year statute of limitations period, and sought recovery of all impact fees paid within that time period—totaling $1.2 million dollars. Defendant filed a motion for summary judgment on 4 March 2019 contending that its Charter authorized GUC to collect impact fees prior to the enactment of the System Development Act. On 20 May 2019, Judge Lamont Wiggins heard arguments on Defendant's motion for summary judgment and entered an order granting summary judgment in favor of Defendant on 3 June 2019.

Plaintiffs timely noticed appeal.

II. Analysis

On appeal, Plaintiffs argue that the trial court erred by granting Defendant's motion for summary judgment because GUC's Charter does not specifically authorize GUC to charge impact fees for future water and sewer services. Plaintiffs further argue that GUC's Charter only authorizes the charging of uniform rates and charges, not impact fees. Finally, Plaintiffs argue that the charging of impact fees is outside the authority of GUC because these fees are not reasonably necessary or expedient to carry GUC's express powers into execution and effect.

After careful review, we conclude that GUC does not possess the authority to charge impact fees and that the charging of such fees was ultra vires . We therefore do not reach Plaintiffs’ arguments in the alternative.

A. Standard of Review

"Summary judgment is properly granted when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgement as a matter of law." Campbell v. Duke Univ. Health Sys, Inc. , 203 N.C. App. 37, 42, 691 S.E.2d 31, 35 (2010) (citations and marks omitted). This Court reviews a trial court's ruling on summary judgment de novo. Forbis v. Neal , 361 N.C. 519, 524, 649 S.E.2d 382, 385 (2007). "The de novo standard also applies to questions of statutory interpretation." JVC Enters., LLC v. City of Concord , ––– N.C. App. ––––,...