North Carolina Supreme Court Holds Municipal Sewer Impact Fees Subject to Federal Constitutional “Takings” Analysis

Aug 24, 2022

Last Friday the North Carolina Supreme Court held that routine sewer impact fees charged by municipalities amount to monetary land-use exactions that are subject to review under the U.S. Constitution as “takings.”

Harnett County, N.C. had imposed the fees at issue on land developers for existing or planned water and sewer infrastructure that would be required for and used by the new development.  Notably, the fees were moderate ($1,000 for water and $1,200 for wastewater service per residential connection) and had been adopted by the County Board.  These fees were then challenged by developers.

However, the North Carolina Supreme Court held that the fees were not taxes or user fees, which the U.S. Supreme Court has held are “beyond dispute not takings,” but were instead “monetary exactions” subject to a Fifth Amendment takings analysis.  As such, the North Carolina Supreme Court ruled that the County had to show that the fees had an “essential nexus” and “rough proportionality” to the impacts being caused by the development. 

While the County will likely be able to successfully defend the fees even under this heightened scrutiny, it will be more burdensome for municipalities in North Carolina to impose such fees going forward.  Additionally, because such fees are used nationwide by the clean water community to recover infrastructure development costs, the national litigious property rights group involved in the case, the Pacific Legal Foundation, may employ similar legal strategies to challenge fees in other states. 

NACWA previously joined with the North Carolina Water Quality Association in filing an amicus brief defending sewer impact fees in the case, and will continue to monitor the issue and engage in litigation in support of clean water agencies where appropriate.  In the interim, please contact NACWA’s General Counsel, Amanda Aspatore, with any questions.  

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