New Hanover County accused of charging illegal fees

Several builders are suing a coastal county in eastern North Carolina for charging what they say were illegal impact fees on developments that were never connected to the municipal sewer and water system.

The builders were required to pay the New Hanover County Water & Sewer District impact fees in the early and mid-2000s in order to get building permits, despite the fact that their projects were reliant on a private utility company called Aqua North Carolina.

The county stopped assessing the fees when it conveyed ownership of its Water & Sewer District to the Cape Fear Public Utility Authority in the summer of 2008. But by then builders had already shelled out hundreds of thousands of dollars in impact fees to the county.

One builder, Tommy Davis, owner of an eponymous construction company, reluctantly paid the county more than $34,000 between March 2005 and April 2006 to get the permits he needed to build 23 new homes in the Becker Woods section of The Cape subdivision south of the Wilmington city limits and north of Snow’s Cut.

When Davis went back to the county in early 2010 to pay impact fees for a new permit to resume building in Becker Woods, he was surprised to hear that he could close his checkbook because the subdivision would not be hooked up to county utilities.

Now, Davis and his attorney, Bradley A. Coxe of Hodges & Coxe in Wilmington, are arguing in a complaint against the Cape Fear Public Utility Authority in U.S. District Court that the county had no right to charge the impact fees in the first place and should be ordered to repay Davis with interest.

Coxe also asserts a due process claim in the suit, contending that Davis was “deprived of [his] fundamental property interest by government action that shocks the conscience and has no rational relation to a valid state objective as the Defendant’s predecessor had no statutory authority to assess those fees.”

So far, seven other builders have brought similar allegations against New Hanover County in two separate suits filed in the local Superior Court. The suits are in the early discovery stages, but at this point they each appear to involve more than $200,000 in damages, said an attorney for the plaintiffs, William G. Wright of Shipman & Wright in Wilmington.

“I believe there are a lot more builders out there,” he said, “but whether they developed in the volume that Bradley Coxe’s and my clients did, I don’t know.”

Ryal W. Tayloe of Ward and Smith in Wilmington is defending the county against all three actions. He did not respond to an interview request, but contended in responses to the suits that the county was authorized to collect the impact fees because it plans to eventually provide services to the subdivisions that get their water and sewer services from Aqua NC.

Tayloe further asserts that the builders are not entitled to reimbursement because they passed the cost of the impact fees along to homebuyers, and also that the statute of limitations has expired on the builders’ claims.

Coxe and Wright dispute each of those three defenses. Coxe said he requested documents from the county regarding its plans for utilities expansion and was given more than 1,800 pages, but the only plan he found was an “assumption” that the county might sell water in bulk to Aqua NC, Wrightsville Beach and some other areas by 2055.

Coxe added that North Carolina’s default statute of limitations of 10 years should apply to the due process claims because no other time limitation exists for the actions under either state or federal law.

Finally, he and Wright also said that their clients had to sell their developments at market value, so the impact fees ate into their profits and were not absorbed by buyers.

Follow Phillip Bantz on Twitter @NCLWBantz