Brunswick County was considering a dramatic increase in its system development fees as part of its ongoing budget process, but now, that rate hike is under review.
System development fees, also known as impact fees, are costs paid by developers per new unit of construction to cover the charge of “capital improvements necessitated by and attributable to such new development” and/or “to recoup costs of existing facilities which serve such new development,” according to state law.
Legal questions and expensive lawsuits have bubbled up across the state in recent years, with builders often successfully litigating against municipalities that charge these fees. Questions surround what types of capital improvements are fair game when spreading these costs among new development. Utilities have been forced to pay back millions in fees courts ruled they inappropriately tacked on developers.
Last year, for instance,
Brunswick County settled with PBC Design + Build in a class action lawsuit for $15.2 million that alleged builders were overcharged for system development fees. That suit involved nearly 1,000 plaintiffs.
To quell legal concerns, the General Assembly in 2017 required utilities to conduct a professional analysis to calculate the fees before they were charged to developers.
In Brunswick County’s latest system development fee (SDF) analysis prepared in March, Remington & Vernick Engineers proposed a new water per-unit cost of $33.56 per gallon and a wastewater rate of $33.53.
This amounts to 490% and 74% percent rate increases compared to the previous system development fee analysis conducted in 2018.
In a letter sent on May 22, the business advocacy group Business Alliance for a Sound Economy (BASE) warned the county these increases weren’t warranted. “In reviewing over 100 SDF studies for local governments in North Carolina, I do not recall seeing a water per-unit cost that is even remotely close to this amount,” BASE’s attorney James DeMay wrote.
DeMay, who helped represent builders in the PBC Design + Build case against the county, said the new proposed water rate was “grossly inflated.”
The proposed water rate accounted for the entire $168 million Northwest Water Treatment Plant upgrades, among other projects. Much of the upgrade cost for the Northwest Water Treatment Plant project involves enhancing water treatment mechanisms to filter out per- and polyfluoroalkyl substances (PFAS) contamination. Construction on that project began in 2020 and is anticipated to reach substantial completion by the end of the year with final completion in 2024. “New development cannot be made to pay for the cost of PFAS contamination that has existed [in] the County’s water supply for years,” DeMay wrote in the letter.
Brunswick County had a hearing scheduled for June 5 to receive comments on its proposed fees as part of its 2024 budget adoption process.
Brunswick County spokesperson Meagan Kascsak said the engineering firm responded to comments received and “staff removed the item on system development fees from the agenda pending further study.”
“There has been no decision yet on conducting another study,” Kascsak said. So far, the county has not yet paid Remington & Vernick Engineers for its March analysis; the total contract was for about $36,000, according to Kascsak. The firm could not be immediately reached for comment.
At this time, Kascsak said the county does not yet have an anticipated date for when it will adopt new SDF fees.
The 2024 budget is expected to take effect July 1.
