Michael C. Thelen | Womble Bond Dickinson
Infrastructure fees are a common battleground between landowners/developers and local governments. The Supreme Court decided a case this week that counts as a “win” for the local governments, reversing a Court of Appeals decision. That is, the Supreme Court determined that the unambiguous language of a State law granted to the local government broader powers than the Court of Appeals otherwise thought. Let’s dig in.
The Town of Oak Island constructed a sewer system at a cost of $140M. In 2006, the North Carolina General Assembly enacted a local act – which is a State law that relates to one or more local governments – designed to assist the Town in reducing its outstanding debt for the sewer system. The law authorized the Town “to impose annual fees for the availability of sewer service within” its sewer treatment district.
The Town’s sewer lines run in front of both developed and undeveloped parcels in the district, but the system had the capacity to serve all parcels in the district. Beginning in 2009, owners of developed parcels began paying fees as an additional charge on their monthly sewer bills. Owners of undeveloped parcels began paying fees in 2010, with charges appearing on their real property tax bills.
The Trial Court
In 2015, certain owners of undeveloped property filed suit against the Town challenging the authority to assess the sewer service availability fees against undeveloped properties. In 2018, the trial court granted summary judgment to the Town, which the property owners appealed.
On appeal, the North Carolina Court of Appeals was divided. In a published decision, the majority concluded: “[A]lthough the Session Laws do not define the term “availability” for purposes of imposing the sewer service availability fees, it is clear that the enabling Session Laws do not, as a matter of law, apply to Plaintiffs’ undeveloped property.” The majority determined that the language of the State law was unambiguous, requiring the Court “to give effect to the plain meaning of the statute” and leading the Court to a dictionary definition of “availability” that read: “the quality or state of being available” and “”present or ready for immediate use”. The Court determined that the “complex, costly additional requirements—many of them conditional— that the owner of an undeveloped lot must fulfill in order to benefit from Oak Island’s sewer services foreclose any conclusion that such services are ‘present or ready for immediate use’ by those owners”, such that undeveloped lots did not have the “availability of sewer service” as compared to developed lots; therefore, “annual fees for availability” were not chargeable to the undeveloped lots under State law.
The dissent agrees that the statute is unambiguous and cites to the same dictionary provisions as does the majority, however, the dissent spends more time than does the majority on the Session Law, itself, and reaches a different conclusion as to what “availability” means.
Originally adopted in 2004 (S.L. 2004-96) as applied only to the Town of Holden Beach, the local act was amended in 2006 to apply both to the Town and the Town of Holden Beach. The actual law, as amended, provides: (1) “A municipality may create a fee-supported sewer treatment district for all properties that are or can be served by the sewage collection and treatment plant serving properties within the Town”, (2) “The Town may impose annual fees for the availability of sewer service within the district”, and (3) “Said fees shall be imposed on owners of each dwelling unit or parcel of property that could or does benefit from the availability of sewage treatment”. The dissent focuses on the language of the Session Law, that “fees shall be imposed on owners of each dwelling unit or parcel of property that could or does benefit from the availability of sewage treatment“. That is, to the dissent, the statute clearly authorizes the charging of fees to developed property (does benefit) and undeveloped property (could benefit). More to the point, however, the dissent is concerned that the majority’s analysis “would require terms be added to the Session Law, while rendering the terms ‘can be served [,]’ ‘within the district[,]’ and ‘parcel of property that could . . . benefit’ superfluous”, which the dissent notes neglects the judicial duty “not to delete words used or to insert words not used” when construing laws.
The Supreme Court’s Decision
On March 3, 2019, the Supreme Court reversed the Court of Appeals “for the reasons stated in the dissenting opinion”. That is, the Supreme Court agreed with the dissent’s analysis and conclusion regarding the meaning of “availability” and the ability of the Town, pursuant to the local law, to charge sewer system fees to owners of developed and undeveloped properties, alike.