Development Fees

Review of Development Fees Timeline

Previously reported – February 2018

North Carolina General Assembly – House Bill 1730 / S.L. 2004-96
Enacted on 07/13/2004
Gives us the authority to impose sewer fees
For more information » click here

Holden Beach Sewer Treatment Fee
For more information » click here

House Bill 436 / Public Water and Sewer System Development Fee Act
Enacted on 07/20/2017
Eliminates the authority to charge the sewer fee
Authority to impose fees has been modified
Necessitates us having to retool water and sewer fee rate schedule
Recommends it be prepared by licensed professional engineer
Town must comply not later than July 1, 2018
Town Manager plans to commission McGill and Associates to develop rate schedule
For more information » click here

Previously reported – April 2018
McGill and Associates has prepared the System Development Fees Report for the Town. The report was posted to our website on March 26th and written comments were solicited. The report must be posted for at least 45 days.

In accordance with §162A-209, after expiration of the posting period, the Board needs to hold a public hearing prior to considering the adoption of the analysis. We recommend the Board schedule the public hearing for May 14th.

System Development Fees Report
Click here to view the System Development Fees Report prepared by McGill and Associates in accordance with HB 436. Written comments on the report may be sent to heather@hbtownhall.com. Comments will also be accepted by mail at Town of Holden Beach, Attn: Heather Finnell, 110 Rothschild Street, Holden Beach, NC 28462. The Board will schedule a public hearing prior to considering the adoption of the analysis. Information on the public hearing date will be provided when available.

Previously reported – May 2018
In accordance with §162A-209, after expiration of the posting period, the Board needs to hold a public hearing prior to considering the adoption of the analysis. The Board has scheduled to hold a Public Hearing on May 23rd at 1:00pm

Notice of Public Hearing
The Board of Commissioners of the Town of Holden Beach will hold a Public Hearing on May 23, 2018 at 1:00 p.m. or shortly thereafter in the Town Hall Public Assembly, 110 Rothschild Street, Holden Beach, NC 28462 to hear a presentation on the study of System Development Fees that could be levied by the Town. This hearing, the study and the presentation are in accordance with NC Administrative Code 15A NCAC 18C.0409 and 15A NCAC 02T.011. McGill Associates will present the study results which is posted on our website. Click here to view the study. All interested people are invited to attend.

Previously reported – June 2018
Agenda Packet –
Legislation House Bill 436 required a Public Hearing as one of the steps that must happen before the Town can move forward and implement the charges. HB436 is prescriptive, with precise instructions and the report given is in accordance with the legislation. The next steps are adoption of the study report and creating Ordinance that incorporates the recommended fees into a fee schedule. This process must be completed no later than July 1st. We are required to review the fee schedule and must reevaluate it in a maximum five-year timeframe.

RESOLUTION 18-04 / ADOPTING SYSTEM DEVELOPMENT FEES REPORT
RESOLUTION 18-05 / AMENDING THE HOLDEN BEACH FEE SCHEDULE

Fee Schedule / Water and Sewer System Development Fees

  1. Equivalent Residential Unit (ERU) Capacity Fees- based on a three-bedroom single family dwelling, NC Administrative Code 15A NCAC 18C.000409 & 15A NCAC 02T.0114 and McGill Associates Cost Justified Water and Wastewater System Development Fees Report Capacity dated March 2018.
    . a. Water Capacity Fee = $5,792 ($14.48 per gallon per day)
    . b.Sewer Capacity Fee= $14,785 ($41.07 per gallon per day)
  1. Residential capacities above/below the rated three-bedroom ERU in para 1 above shall be calculated and fees assessed on a pro rata per bedroom basis using the applicable Administrative code and the McGill Report as guide.
  1. Vacant lots that have never been connected to the Town’s sewer system will be credited in an amount equal to the sewer capacity fee for one ERU (3 bedrooms); however, no credit shall be provided for said vacant lots that have not paid sewer share fees to the Town of Holden Beach as previously authorized by Town of Holden Beach Ordinance 02·13 dated 10-14-02 “Chapter 52-04-Share Fees”
  1. Vacant lots that have been previously connected to the Town’s water and sewer systems and are being redeveloped will be credited in an amount equal to the prorated amount of water and sewer capacity fees in para 1 above per bedroom based on the actual number of bedrooms previously connected. The Town of Holden Beach Building Inspector may use any and all public information available to ascertain the number of bedrooms to use for the credit.
  1. Water and sewer service capacity requirements (gallons per day) for other than residential dwellings shall be determined in accordance with the applicable NC Administrative Code referenced above and fees calculated as follows:
    .
    a. Water Capacity Fee= Required gallons per day multiplied by $14.48 per
    . b.
    Sewer Capacity Fee= Required gallons per day multiplied by $41.07 per gallon.
    . c.
    Fee calculations for water and sewer capacity fees based on changes in uses of a property that cause capacity usage changes will provide for determining a credit for the existing use water and sewer capacity charges against the new uses’ water and sewer capacity requirements as established by the NC Administrative Code referenced above.
  2. Sewer Capacity charges and credits shall be calculated and collected at the time a building permit is applied for.

TOWN OF HOLDEN BEACH / RESOLUTION 18-04
RESOLUTION ADOPTING SYSTEM DEVELOPMENT FEES REPORT

WHEREAS, Session law 2017-138 (House Bill 436) known as the “Public Water and Sewer System Development Fee Act” sets certain standards and limitations before a town may adopt a system development fee for water and sewer service; and

WHEREAS, said Act requires that a system development fee be established only after written analysis prepared by a qualified financial professional or qualified licensed professional engineer in a manner as set forth in said Act; and

WHEREAS, the Town of Holden Beach has retained McGill Associates, a qualified and licensed professional engineer and consulting firm, to perform said analysis in accordance with said Act; and

WHEREAS, McGill Associates has performed said analysis and delivered a written report to the

Town of Holden Beach pursuant to said Act; and

WHEREAS, the Audit Committee of the Town of Holden Beach has reviewed the report and had no comment other than it appeared to be accomplished in accordance with the Act; and

WHEREAS, the analysis has been posted on the Town’s website as required in said Act and a public hearing has been held as required in said Act; and

WHEREAS, all other conditions, standards and requirements of said Act has been satisfied.

NOW THEREFORE BE IT RESOLIVED by the Holden Beach Board of Commissioners that the Town hereby adopts and approves the Cost-Justified Water and Wastewater System Development Fees Report created by McGill Associates, dated March 2018.
A decision was made – Approved unanimously

TOWN OF HOLDEN BEACH / RESOLUTION 18-05
RESOULUTION AMENDING THE HOLDEN BEACH FEE SCHEDULE

WHEREAS. the Town of Holden Beach Board of Commissioners adopted the Cost-Justified Water and Wastewater System Development Fees Report created by McGill Associates, dated March 2018; and

WHEREAS, the Holden Beach Fee Schedule needs to be updated to reflect the recommendations in the Report.

NOW THEREFORE BE IT RESOLVED, that the Board of Commissioners of the Town of Holden Beach, North Carolina does hereby approve the deletion of the Impact Fees and the Share Cost sections and the addition of the Water and Sewer System Development Fees (Attachment 1) to the Holden Beach Fee Schedule.
A decision was made – Approved unanimously

Previously reported – July 2018
RESOLUTION 18-04 / ADOPTING SYSTEM DEVELOPMENT FEES REPORT
RESOLUTION 18-05 / AMENDING THE HOLDEN BEACH FEE SCHEDULE

Fee is based on combination of existing system capacity and planned capital improvements to expand capacity

An unintended consequence of System Development Fee adopted in June
.
Seven (7) bedroom permit was $10,000 now costs $30,000 a difference of $20,000
. • Five (5) bedroom permit was $7,000 now costs $21,000 a difference of $14,000

That’s a whapping 300% increase which will negatively impact new construction on the island. By comparison, Ocean Isle Beach had a minor increase since their system is older and already paid for. I’d expect to see both the General Contractors and the Realtors up in arms. Unchanged we will have significantly reduced the future revenue stream from new construction from both our Ad Valorem and Occupancy taxes. Really don’t see how the Board doesn’t have to reevaluate the fee schedule.

Town Attorney Noel Fox walked them through the prescriptive legislation and all the protocols that were followed which was a lengthy and complicated procedure. Most of the community including contractors and realtors were unaware of the significant fee increase. Based on what was presented to the public, a reasonable case could be made that posting System Development Fees without any explanation given as to the effect on construction cost is why no one questioned the report or even knew the building permit fees would be impacted. Although the process was followed as required, they are now aware that people who needed to know didn’t. Thus, the brouhaha. In an attempt to address any misunderstanding, the Board submitted some thirty (30) questions for the Town Manager to complete and post on the Town website. It appears that they are at least willing to give it a second look. They were elected, and it is strictly their call whether to make an adjustment or not. I got the feeling that the Board took umbrage to some of the comments that were made, particularly a lack of understating what the fee schedule change would actually translate to in dollars and cents. In addition, they questioned the negative economic impact that was suggested by some of the speakers. If in fact they decide to reduce the development fee it was established that they can’t make it retroactive.

 


This Board –
. 1)
chose to implement the max recommended fee schedule
. 2)
did not adequately consider whether the increased fee would “unduly burden new development”

Previously reported – August 2018
Water and Sewer System Development Fee
The North Carolina General Assembly passed House Bill 436 in July 2017, amending Chapter 162A of the General Statutes by adding “Article 8, System Development Fees.” This amendment was enacted as “An Act to Provide for Uniform Authority to Implement System Development Fees for Public Water and Sewer Systems in North Carolina and to Clarify the Applicable Statute of Limitations.” in HB436, which requires compliance with designated calculation methodology by July 1, 2018.

In response to the House Bill 436, the Town of Holden Beach retained McGill and Associates to complete a system development fee analysis. Based on the Town of Holden Beach’s combination of existing system capacity and planned capital improvements to expand capacity, the development fee, in accordance with HB 436 rules for an Equivalent Residential Unit (ERU) for water and sewer was calculated to be $20,577. ERU is defined as the water and sewer capacities required to serve the most typical user type, which is a three-bedroom single-family dwelling.

McGill Associates has calculated costs for water and wastewater capacity on a per gallon per day basis for the Town of Holden Beach. This calculation was performed using the Combined Method to account for the Town’s combination of existing capacity and planned future capacity expansion through capital expenditure. This calculation resulted in a development fee of $20,577 for an Equivalent Residential Unit (ERU). ERU is defined as the water and sewer capacities required to serve the most typical user type, which is a three-bedroom single-family dwelling. The fee for other types of development can be calculated by applying the calculated the cost of capacity per gallon of flow per day to the water and wastewater demands for various uses as defined by NC Administrative Code 15A NCAC 18C .0409 and 15A NCAC 02T.0114. Using NC Administrative Code 15A NCAC 18C.0409 and 15A NCAC 02T.0114 ensures that the same standard used to plan, design, construct and finance capital assets is applied as the same cost recovery basis to be applied to new development.

The Town may elect to charge less than the cost-justified System Development Fee documented in this report. Any adjustment must be calculated on a cost per unit volume basis, meaning the same cost per gallon adjustment must be applied equally to all customers.

Repeal the Board’s Previous Vote on Implementation of the Water and Sewer Development Fees

They repealed and replaced the development fee schedule
. 1)
Repealed Resolution 18-05
. 2)
Replaced with the following interim fee schedule:
.
Water Capacity Fee is $100 per bedroom
.
Sewer Capacity Fee is $2,700 per bedroom

A five (5) bedroom in the sewer fee schedule before June 30th was $13,125
A five (5) bedroom in the new interim sewer fee schedule after June 30th is $13,500
A five (5) bedroom in both the old and the new interim water fee schedule is $500
Total cost of $14,000 vs. $13,625, approximately what the fees were before July 1st

For those property owners that already paid their sewer share fee they will get a credit of $2,700 per bedroom up to and including a five-bedroom house; additional bedrooms will be assessed at $2,700 per bedroom

This is an interim fee schedule until they have an opportunity to reevaluate the situation

A decision was made – Approved (3-2)
Vote was three (3) to two (2), no surprise there
Mayor Pro Tem Sullivan and Commissioner Kwiatkowski both voted against the motion

Previously reported – October 2018
Discussion of Activities and Timelines to Re-conduct the Determination of Maximum Sewer and Water System Development Fees and Subsequently Set “Permanent Fees Before the End of 2018 – Commissioner Kwiatkowski

All Pat said is that the interim rates would remain in effect for the next ninety (90) days which takes us into 2019.

No discussion of activities, timelines, or variables being considered were shared with the public.

Previously reported – February 2019

¯\_(ツ)_/¯

This was supposed to be an interim fee schedule
They committed to permanent fees before the end of 2018
Then they said the interim fees would remain in effect for the next ninety (90) days
Well both of those dates have come and gone
A permanent fee schedule has yet to be adopted

Previously reported –September 2019
System Development Fees lawsuit filed on Oak Island
We have filed an Amicus Brief in support of their position
THB will delay activity on our System Development Fees until this has been adjudicated

In split decision, court sides with property owners in Oak Island sewer lawsuit, town plans to appeal
Reversing the decision of the lower court, the Court of Appeals of North Carolina ruled against the Town of Oak Island in a lawsuit raised by property owners of undeveloped lots, despite one judge on the panel dissenting. The issue between property owners and the town dates back to 2015, when owners of undeveloped property on the island filed suit regarding the town’s sewer service fees. Tuesday, Oak Island’s sewer system cost $140 million to install. In 2004, action from North Carolina’s General Assembly allowed the town to charge property owners fees related to the sewer system in order to help reduce the debt the town carried as a result of the sewer installation. The action allows Oak Island to “impose annual fees for the availability of sewer service” on property owners who could or do benefit from the service. From 2010 to 2017, that resulted in developed property owners paying a total of $4,478.57 in fees, while undeveloped property owners would have paid $3,978.08. Additionally, the court pointed out in its ruling that from 2015 to 2017, the owners of undeveloped properties were actually paying more per year than those who owned developed lots. The term “availability” is what the court’s decision ultimately hinged upon, because the plaintiff property owners argued that for those with undeveloped lots, the sewer system is not actually “available” to them. Therefore, they argued, they should not be subject to the fees. They further argued charging undeveloped properties went beyond what the statute establishing the fees allows, and that the collection of the fees was unconstitutional. The appeals court agreed, saying: “although 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.” Originally, the plaintiffs wanted the court to declare the fees unconstitutional, as well as order the town to refund the fees paid by the owners of the undeveloped properties. In May 2018, when Brunswick County Superior Court Judge James Ammons found in favor of Oak Island, the plaintiffs attempted to change their plea, only asking for the refund. However, the court declined their motion to amend, and instead ruled in favor of Oak Island’s countersuit, therefore upholding the fee structure. As far as those occurrences, the appeals court said it could not weigh in, because the matters were never ruled upon, and therefore couldn’t be appealed. Judge Allegra Collins disagreed with her two fellow judicial colleagues, arguing the opposite with regard to the “availability” language. Collins argues that just because property owners would have to go through the development process in order to connect to the sewer system, doesn’t mean that it isn’t “available” to them. Despite the split decision, the Court of Appeals ruling reverses the ruling and remands the issue back to Brunswick County Superior Court. Town Attorney Brian Edes said in an email Tuesday the town will likely appeal the decision to the state Supreme Court. His statement read: The North Carolina Court of Appeals issued a split opinion today ultimately holding that the subject 2006 N.C. Session Law does not authorize the Town of Oak Island to charge a sewer district fee to owners of undeveloped lots. Naturally, we are disappointed with this holding.
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