Elizabeth Zander and Evan Galloway wanted to build a modest home in Chapel Hill three years ago. Now they’re at the center of a lawsuit that could cost Orange County over $8 million.
The couple had a $200,000 budget for the home at 310 Collums Road, their attorneys wrote in the lawsuit. They planned to do much of the work themselves and have Zander’s father, who is an architect, design the home to save money, the attorneys said.
When they found out Orange County’s school impact fee — a charge on new residential projects to help pay for school construction — was going to take nearly 6 percent of their budget, they asked for a waiver.
The county planning director denied their request, the attorneys said, and an appeal to the county attorney also was unsuccessful.
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In March 2017, Zander and Galloway sued the county for a refund, plus interest. The lawsuit claims the county exceeded its authority in setting the impact fees. The lawsuit also names Chapel Hill and Carrboro, because the towns help collect the fees and enforce them by refusing to let residents occupy the homes until the fees are paid.
An Orange County Superior Court judge ruled Aug. 3 that the lawsuit could be expanded to cover anyone who paid the impact fee on a new home in Orange County between 2009 and 2016. The homeowners’ attorneys, Robert King III and Matthew Tynan, with Raleigh law firm Brooks Pierce, estimated that could include at least 250 residents and developers.
The county has appealed the court’s decision to the N.C. Supreme Court. Attorneys with Womble Bond Dickinson law firm, representing the county and towns, have rejected most of the lawsuit’s claims.
The case has not been scheduled for trial, but a website has been set up to provide more information to homeowners and developers with potential claims.
Millions for schools
Orange County got its authority to charge a school impact fee from the state legislature in 1987.
The fee was a way to get new residents to help pay for the school construction needed to serve a growing student population.
It has raised roughly $45.7 million for school construction and expansion projects over the years.
The commissioners last revised the fee in 2016 to account for more apartments being built and to charge more for housing with more bedrooms, which was considered most likely to add students. Developers balked at the changes, and one asked state lawmakers for help.
The commissioners backpedaled in early 2017, agreeing to charge the old fees for previously approved projects underway. The board then voted in May 2017 to reinstate the old fees for all projects, but the state repealed its impact fee authority in June 2017.
The fees, which were expected to provide over $3.3 million for school construction projects last year, are no longer collected.
Fees called ‘excessive’
Buyers and developers of single-family homes paid the highest fees — $5,623 in the county school district and $11,423 in the city school district — from 2009 to 2016, according to court documents.
Those fees were based largely on student enrollment numbers and the average cost of building elementary, middle and high school facilities. They were set at 32 percent to 60 percent of the maximum possible charge for each type of housing, documents show.
But the lawsuit alleges those fees didn’t account for how new homeowners might specifically affect school construction needs, or how many new students might be added depending on the type of housing. The decision also didn’t address whether existing schools were adequate to handle more students, the lawsuit says.
“The fee amounts required by the 2008 Amendment are excessive and lack a rational nexus and rough proportionality to the reasonably expected impacts caused by fee payers,” the lawsuit says.
In November 2016, the commissioners addressed one of those concerns by creating different categories of single- and multifamily homes based on the number of bedrooms and whether the property included a second dwelling. The commissioners also voted to charge 43 percent of the maximum possible impact fee they could have sought for all housing types.
Those decisions significantly lowered the impact fees charged for most single-family homes in 2017.
The lawsuit contends that since the fees were reduced for reasons other than an updated school impact fee study, the county owes those who paid the higher fees a refund. The 2008 fees “deprived class members of property in violation of the substantive due process rights guaranteed” by the N.C. Constitution, it adds.
“Specifically, the reduction in fees was due to policy determinations of the Board [of County Commissioners] including the Board’s self-imposed requirement that all housing unit types pay the same percent of [maximum supportable impact fees] and the Board’s desire not to increase certain fee amounts,” the lawsuit says.
County attorneys have filed documents arguing the homeowners don’t have a case for a refund.
The commissioners lowered the maximum possible impact fees in 2016 to more directly reflect the actual impact of new development on school enrollment, the attorneys said. A higher or lower fee was not required simply because the board was given that information.
The attorneys also are claiming government immunity from lawsuits based on the board’s decisions.