current water/sewer legal issues...2/28/2017 1 current water/sewer legal issues kara millonzi,...

2/28/2017

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CURRENT WATER/SEWER LEGAL ISSUES

Kara Millonzi, Associate Professor of Public Law and Government

[email protected]

Impact Fees

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Government Water / Sewer Services


MunicipalitiesMunicipalities

CountiesCounties

Joint Agencies (City/County

Utility Commission)


Utility Commission)

County Water and Sewer Districts


Water and Sewer

Authorities

Water and Sewer

AuthoritiesSanitary DistrictsSanitary Districts

Metropolitan Water DistrictsMetropolitan Water Districts

Metropolitan Sewerage Districts


Metropolitan Water and Sewerage Districts


Fayetteville PWC /

Greenville Utilities

Commission

Fayetteville PWC /


Commission

Impact Fees

Contractual Charges

Availability Fees

Tap Fees User Fees

Assessed on developer as condition of development

Assessed pursuant to contract to extend water/ sewer lines to property

Assessed on property owner at time of connection

Assessed on certain properties when water/sewer lines available but property owner chooses not to connect

Assessed on water/sewer utility customer—typically has fixed and variable component

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What’s in a Name?

Impact Fees Contractual Charges

Capacity Fees

System Development

Fees

Tap / Connection

Fees

User Fees

Capital Fees

Capital Facility Fees

System Buy‐in Charges

Capital Investment

Fees

Capital Recovery Fees

Capital Reserve Fees

Capacity Use Fees

Development and Technology

Fees

Acreage Fees

Privilege Fees

Initial Hook‐up Fees

Monthly Fees

System Capacity Charge

???

Municipalities and Counties….

“may establish and revise from time to time schedules of rents, rates, fees, charges, and penalties for the use of or the services furnished by any public enterprise.”

G.S. 160A‐314; G.S. 153A‐277

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Fee Framework

Who can you charge?

When can you charge it?

What can you charge?

How can you spend the money?

Town of Carthage Impact Fee Case

Water Impact Fee• Assessed on new development (triggered off final plat approval)• Amount based water meter size• Revenue “used to cover the cost of expanding the water system. The costs of expansion are water treatment plant expansion, elevated storage expansion, and transmission mains.”

Sewer Impact Fee• Assessed on new development (triggered off final plat approval)• Amount based on meter size• Revenue “used to cover the cost of expanding the sewer system. . . . includ[ing] gravity mains, force mains, and lift stations.”

Tap Fee

Impact Fees

Contractual Charges

Availability Fees

Tap Fees User Fees

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To Be or Not To Be “Furnished”

“may establish and revise from time to time schedules of rents, rates, fees, charges, and penalties for the use of or the services furnished by any public enterprise.”

G.S. 160A‐314; G.S. 153A‐277

“may 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 . . . .”

G.S. 162A‐88; G.S. 162A‐9

Municipalities & Counties

County Water and Sewer District

&Water and Sewer

Authority

“for the use of”

“services furnished by”

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Town of Carthage Impact Fee CaseWater Impact Fee

• Assessed on new development (triggered off final plat approval)• Amount based water meter size• Revenue “used to cover the cost of expanding the water system. The costs of expansion are water treatment plant expansion, elevated storage expansion, and transmission mains.”

Sewer Impact Fee• Assessed on new development (triggered off final plat approval)• Amount based on meter size• Revenue “used to cover the cost of expanding the sewer system. . . . includ[ing] gravity mains, force mains, and lift stations.”

Tap Fee• Assessed when properties connected to water and sewer systems

Impact Fees

Contractual Charges

Availability Fees

Tap Fees User Fees

What if your unit also charged an unlawful fee?

10‐year statute of limitations

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Atlantic Construction Co. v. City of Raleigh, 230 N.C. 365 (1949) (city had authority to charge reasonable connection fees and to otherwise “fix the terms upon which the service may be rendered and its facilities used.”).

Town of Spring Hope v. Bissette, 53 N.C. App. 210 (1981), aff’d 305 N.C. 248 (1982) (holding that the setting of water rates pursuant to G.S. 160A‐314 is “a matter for the judgment and discretion of municipal authorities, not to be invalidated by the court absent some showing of arbitrary or discriminatory action.”).

Town of Spring Hope v. Bissette, 305 N.C. 248 (1982) (holding that town may charge current sewer customer reasonable user fees that are calculated to include “capital cost associated with actual or anticipated growth or improvement of the facilities required for the furnishing of such services.”).

McNeil v. Harnett County, 327 N.C. 552 (1990) (noting that local government may use connection charges and monthly user fees to finance the debt associated with a capital project).

Ricks v. Town of Selma, 99 N.C. App. 82 (1990) (holding that ability to charge fees for the use of or services furnished by the town includes the ability to charge an availability fee when sewer services are available to property but property is not connected).

Davis v. Town of Southern Pines, 1010 N.C. App. 570 (1991) (upholding town’s sewer tap fee as valid charge “for using the facilities involved.”).

General Textile Printing and Processing Corp. v. City of Rocky Mount, 908 F.Supp. 1295 (E.D.N.C. 1995) (noting that local governments authorized to set water and sewer fees so as to generate a profit).

Fees “for the use of or services furnished by”Not Allowed Allowed

IMPACT FEE:

• Automatically assessed on developer as condition of development;

• Calculated to fund future capital costs of water/sewer system

*Unless unit has local act authority

CONTRACTUAL CHARGE:

• Assessed on developer or property owner pursuant to development agreement or other contractual agreement;

• Calculated to cover direct and indirect costs of expanding / extending public infrastructure to serve property(ies)

TAP/CONNECTION FEE:

• Assessed on developer or property owner when property connects to water or sewer system;

• Calculated to cover direct and indirect costs of connecting property to system

USER FEE:

• Assessed on water/sewer customer (after property connected);

• Calculated to cover past, current, and future costs necessary to serve property;

• May include profit component

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Fees “for the use of or services furnished by”Not Allowed ??? AllowedIMPACT FEE:*

• Assessed on developer as condition of development;

• Calculated to fund future capital maintenance / expansion

CAPACITY FEE: CONTRACTUAL CHARGE:

• Assessed on Developer or Property Owner Pursuant to Contractual Agreement;

• Calculated to Cover Costs of Expanding Infrastructure to Serve Property(ies)

TAP/CONNECTION FEE:

• Assessed on developer or property owner when property connects to water/sewer system;

• Calculated to cover costs of making connection between property and system

*Unless unit has local act authority USER FEE:

• Assessed on water/sewer customer; • Calculated to cover past, current, and

future costs necessary to serve property;


Fees “for the use of or services furnished by”Not Allowed Capacity Fee Allowed

IMPACT FEE:

• Automatically assessed on developer as condition of development;

• Calculated to fund future capital costs of water/sewer system

*Unless unit has local act authority

1. Assessed on developer as condition ofdevelopment

2. Assessed when property connects (or contracts to connect) to water/sewer system; Calculated solely to cover future expansion costs

1. Assessed when property connects (or contracts to connect) to water/sewer system; Calculated to cover some measure of reserved capacity in system (combined or hybrid approach—includes both existing and planned capacity)

2. Assessed when property connects (or contracts to connect) to water/sewer system; Calculated to cover unknown future maintenance / upgrade costs of system

1. Assessed when property connects (or contracts to connect) to water/sewer system;Calculated by equity or system buy‐in method as reimbursement for past investments in system

2. Assessed when property connects (or contracts to connect) to water/sewer system;Calculated to cover known or predictable future maintenance / upgrade costs necessary to provide service to property

CONTRACTUAL CHARGE:

• Assessed on developer or property owner pursuant to development agreement or other contractual agreement;

• Calculated to cover direct and indirect costs of expanding / extending public infrastructure to serve property(ies)

TAP/CONNECTION FEE:

• Assessed on developer or property owner when property connects to water or sewer system;

• Calculated to cover direct and indirect costs of connecting property to system

USER FEE:

• Assessed on water/sewer customer (after property connected);

• Calculated to cover past, current, and future costs necessary to serve property;


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Impact/System Development

Fees

Contractual Charges

Capacity Fees

Availability Fees

Tap Fees User Fees

Assessed on developer as condition of development

Assessed pursuant to contract to

extend water/sewer services to property(ies)

Assessed either on developer as condition of development or on property owner when property connects

Assessed on property owner

at time of connection

Assessed on certain properties when water/sewer

available but property owners choose not to

connect

Assessed on water/sewer utility

customers—typically has fixed

and variable component

?

Other Funding Sources for Water/Sewer Capital

General fund revenue (capital and operating)

Availability fee (capital and operating)

Special assessment (capital only)

Special taxing district (capital and operating)

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CountiesCounties


Utility Commission)


Utility Commission)



Water and Sewer

Authorities

Water and Sewer







Fayetteville PWC /


Commission

Fayetteville PWC /


Commission

“may establish, revise and collect rates, fees or other charges and penalties for the use of or the services furnished or to be furnished by [water or sewer system] . . . .”

Broader fee authority

All fees may be calculated to include proportional share of future maintenance, upgrade, and expansion costs

• But, cannot charge an impact fee if unit has no concrete plan to serve property

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CountiesCounties


Utility Commission)


Utility Commission)



Water and Sewer

Authorities

Water and Sewer







Fayetteville PWC /


Commission

Fayetteville PWC /


Commission

“sanitary district board shall apply service charges and rates based upon the exact benefits derived. These service charges and rates shall be sufficient to provide funds for the maintenance, adequate depreciation and operation of the work of the district. If reasonable, the service charges and rates may include an amount sufficient to pay the principal and interest maturing on the outstanding bonds and, to the extent not otherwise provided for, bond anticipation notes of the district. Any surplus from operating revenues shall be set aside as a separate fund to be applied to the payment of interest on or to the retirement of bonds or bond anticipation notes. The sanitary district board may modify and adjust these service charges and rates.”

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Mandated Connections

As of August 1, 2016

Mandate Connection to Water System?

Drinking well permit issuedDrinking well permit

not issued

Property is DEVELOPED or IMPROVED

*

Property is UNDEVELOPED and UNIMPROVED

* *

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* Exceptions

1. Private drinking water well has failed and can’t be repaired

2. Drinking well water is contaminated or likely to become contaminated

3. The government utility is being “assisted” by the LGC due to financial distress

4. The government utility is expanding or repairing the government water system and is actively making progress so that the property can be served within 24 months

• This exception only applies until July 1, 2017.

As of August 1, 2016:Drinking Water Well Permits

Public water system is not and cannot currently serve

property

Public water system is currently serving (or can currently serve) property

Property is DEVELOPED or IMPROVED

Must issue drinking water well permit

Property is UNDEVELOPED and UNIMPROVED



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Availability Fees

Municipality

In lieu of requiring connection, may charge availability fee

• If unit cannot require property to connect, cannot charge an availability fee

Charge may not exceed “periodic service charge” that unit assesses on properties that are connected

County, Sanitary District, Water and Sewer Authority

May charge availability fee only on properties that qualify for issuance of building permit but have not yet been developed

• Authority to assess availability fee not specifically connected to authority to mandate connections

Charge may not exceed “periodic service charge” that unit assesses on properties that are connected

Preaudits

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Budget Resolution

Determine costs of goods or services

Preauditprocess

Order goods / execute contracts

Goods arrive / services

performed

Disbursement process

Pay for goods / services

G.S. 159-28

Budget Resolution

Determine costs of goods or services

Preauditprocess

Order goods / execute contracts

Goods arrive / services

performed

Disbursement process

Pay for goods / services

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Process triggered when:

1. A unit enters into contract or agreement (or places an order) for goods or services that are accounted for in the budget resolution; AND

2. the unit is obligated to pay money by the terms of the contract/agreement/order; AND

3. the unit anticipates paying at least some of the money in the current fiscal year (fiscal year in which the contract/agreement/order entered into).

Before an obligation is incurred, finance officer (or appointed deputy finance officer) must:

1. Check to see if there is an appropriation in budget ordinance or project ordinance for amount due this fiscal year

2. Check to see if sufficient funds remain in the appropriation to cover amount that will come due this fiscal year

3. Memorialize contract/agreement/order in writing

4. Affix signed preaudit certificate to “writing” that evidences contract/agreement/order , if a writing exists*

As of October 1, 2015

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YesNo

Step 1:

Step 2:

Step 3:

“This instrument has been preaudited in the manner required by Local Government Budget and Fiscal Control Act.

/s/ Finance Officer

*Exemptions from Step 3 (Certificate Requirement)

Obligation approved by the Local Government Commission (LGC)

• Most borrowings, certain leases, other financing agreements

“Payroll expenditures, including all benefits for employees of the local government.”

Electronic transactions (charge card, credit card, debit card, gas card, procurement card)

• BUT only if the Local Government Commission (LGC) adopts rules governing these transactions AND only if the school unit follows the LGC rules

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If No Preaudit…..

Contract/agreement/order is VOID and cannot be enforced

Any individual or officer who enters into contract/agreement /order or causes funds to be disbursed without following statutory processes may be held personally liable for amounts committed or disbursed

current water/sewer legal issues...2/28/2017 1 current water/sewer legal issues kara millonzi,...

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