August 21, 2008
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Durham Land Owners v. County of Durham, No. 05-736 (N.C. App. June 06, 2006)


The North Carolina Court of Appeals has unanimously affirmed in part and reversed in part a lower court's decision that counties cannot levy school impact fees on home developers without the necessary state enabling legislation. Durham County petitioned the state legislature numerous times requesting enabling legislation that would allow them to impose a school impact fee on residential construction. After these petitions were rejected, the county passed its own ordinance allowing it to assess school impact fees of $2,000 for each new home built and $1,155 for an apartment or townhouse. Land developers and construction companies filed a class-action suit protesting the fees. The Court of Appeals found that even though the statute authorized the board of commissioners to set "fees and commissions," the legislature did not intend for this language to mean that counties could assess school impact fees. The Court of Appeals also declared that charging a school impact fee did not constitute an appropriate use of zoning and general police powers. "While a laudable goal, the county must have statutory authority to pass the ordinance requiring the fee," the court indicated. A lower court's order had called for the county to refund the school impact fees, plus interest. The Court of Appeals rejected the county's argument that it was protected by sovereign immunity. Because the county acted beyond its statutory authority, it must return the approximately $7.5 million collected. However, the appeals court reversed the awarding of interest, as such a reward lacked statutory and common law authority in North Carolina.

Durham Land Owners v. County of Durham, No. 05-736 (N.C. App. June 06, 2006)
[Full opinion]

[Editor's Note: The Charlotte Observer reports that three other geographically similar counties and the North Carolina School Boards Association filed amicus briefs in support of Durham County. Durham County plans to appeal to the North Carolina Supreme Court. The NSBA newsletter below features two articles on an installment financing mechanism developed in South Carolina, where school impact fees also were precluded.]
Charlotte Observer
By Gary D. Robertson (Associated Press)
[Link to full story]
[Leadership Insider on construction and financing]