By DAVID BORAKS
DavidsonNews.net

A developer’s lawsuit against the Town of Davidson is making its way through federal court, seeking to take away a tool town officials say they need to cope with the costs of growth, but which can add thousands of dollars to the price of a new home.

The suit is the first against the town in more than a decade, Town Manager Leamon Brice said Tuesday. It challenges the constitutionality of Davidson’s Adequate Public Facilities Ordinance, or APFO, which asks developers of new housing to share the costs of additional fire and police protection, public parks or other public services needed because of their projects.

Lawyers for FC Summers Walk LLC, developer of the 329-home Summers Walk neighborhood off N.C. 73 on the eastern edge of town, hope recent North Carolina court rulings in similar cases elsewhere will bode well for their attempt to have the town’s APFO thrown out. They argue the law is unconstitutional and has been improperly applied.

The Town has asked a federal judge in Charlotte to dismiss the case. The two sides are awaiting a decision, which could come soon, according to Davidson town attorney Richard Kline.

As the Summers Walk case proceeds, it is beginning to rack up costs. So far, the town has spent just under $20,000 on legal fees to defend the case, Mr. Brice said. The town has hired outside lawyers – including the Charlotte firm of Clawson & Staubes, and lawyer Mark White of Kansas City, a national expert on APFO law who advised the town when it was writing its ordinance.

Some legal fees will be paid through the town’s legal insurance. But Mr. Brice, the town manager, said he may need to ask the Town Board to amend the budget in 2010 to cover legal expenses. The money likely would come from the town’s contingency fund, or savings.

MANAGING GROWTH

Davidson’s adequate public facilities ordinance was among a collection of new planning rules adopted in 2001 as the town looked for ways to control growth. It applies only to new residential projects.

The ordinance established what public services (police protection, fire stations and equipment, parks, etc.) were available in 2001, and set that as a baseline to follow amid future growth, Davidson planning director Kris Krider said. As new residences are added, the APFO requires developers to help maintain the baseline level of services. It gives developers three main options, Mr. Krider said:

• Pay for new services or facilities in their entirety to ensure that the need is met.
• Pay a pro-rated per-home fee to share in the costs of new services or facilities.
• Wait until the needs are met by some other means before proceeding with a project.

In that year, the town had one community park or recreation facility for every 500 homes, and the ordinance aims to keep that. The cost can vary depending on when a development comes up for approval. Likewise, the ordinance seeks to add a new police car and equipment ($55,000) for each additional group of new homes. (At the time of the Summers Walk case, that was one new car for every 400 homes; now it’s one per 225 homes, according to Mr. Krider.)

Any APFO assessment would be divided between the number of units in a project. Assessments can add thousands of dollars to the cost of each new home.

“It was pursued by the town to have new development to pay for some of the costs that the the town was inherently creating. … We want to maintain a level of service. It’s somewhat of a ‘pay as you grow’ approach,” Mr. Krider said.

(In some communities, APFOs cover the cost of schools as well. Since Mecklenburg County – not Davidson – runs the local public school system, that’s not part of Davidson’s APFO.)

As planning director, Mr. Krider is responsible for enforcing the ordinance. Since he was involved in calculating the APFO assessment on FC Summers Walk, he did not talk specifically about the pending case.

In the Summer’s Walk case, the town assessed developer FC Summers Walk $275 per home for law enforcement needs, $1,700 per unit for parks and recreation needs (a share of the cost of a new community center, which is the next project on the town’s capital improvements list), and $1,174 for the cost of a new fire station and equipment.

“This is just another tool to manage growth,” Mr. Krider said. “It’s fair, it’s equitable.”

LAWSUIT FILED

FC Summers Walk disagrees. And it has fought the town both over the way the law was applied, and the validity of the law in general.

In late 2008, FC Summers Walk appealed the APFO assessment to the town’s Board of Adjustment, which ruled against the developer. So in May 2009, FC Summer’s Walk appealed the case in Mecklenburg County Superior Court.

At the town’s request, the case was later moved to U.S. District Court in Charlotte, where the two sides have exchanged motions and are awaiting a judge’s decision whether the case will go forward.

FC Summers Walk has asked the court to invalidate Davidson’s ordinance on the grounds that it violates both the state and federal constitutions. “That’s ultimately the crux of the matter,” said Roy H. Michaux Jr., the developer’s Charlotte-based lawyer.

The developer also argues the APFO is not allowed under state law. And if the APFO is valid, FC Summers Walk believes it has been unfairly applied and that the town has failed to demonstrate a need for the services and facilities it wants help paying for.

Mr. Michaux said two other recent court rulings against local APFOs have given his side cause for optimism. The N.C. Court of Appeals recently ruled in favor of developers who challenged Union County’s rules requiring them to help build new schools.

And a Cabarrus County court ruled for home builders in a suit over that county’s adequate public facilities ordinance.

Mr. Michaux said the Union County case appears to offer a precedent. “It’s essentially the same principle,” he said. “The issue is whether there is enabling legislation in North Carolina to support the APFO.”

But Davidson officials – and those in other local governments that have successfully defended their APFOs – argue that such fees are allowed under the general zoning authority that the state grants to counties, cities and towns. They say local governments have the right to establish a basic level of services, and to impose rules to maintain that level.

APFOs are increasingly popular nationwide as a way to control growth, said David Owens, a professor in the School of Government at the University of North Carolina at Chapel Hill. Some states, including Florida, actually mandate APFOs, to help communities where development approvals are outpacing the addition of services, he said.

“Nationally, variations on looking at the adequacy of public services over the last 20 years have increasingly been incorporated into development regulations, and generally upheld by courts,” Mr. Owens said. “Looking not only at the type and intensity of development, but the timing of development, has been an important factor in land-use regulatory decisions, particularly in areas that are experiencing high rates of growth.”

Years ago, a North Carolina state court upheld an APFO in Currituck County, on the coast. But that ruling did not directly address the law’s constitutionality, Mr. Owens said.

“Union County is the first one that addressed this directly,” Mr. Owens said.

APFO vs. IMPACT FEE

Mr. Owens said the arguments over APFOs come down to how courts view the fees they impose. The state Court of Appeals two years ago ruled against Durham County in a case over “impact fees” – per-unit fees charged for new housing units. Impact fees typically do not address levels of service, but simply assess a fee for all new development.

Since the Durham case, “impact fees” have been explicitly illegal in North Carolina without specific authorization from the legislature, he said.

But APFOs like Davidson’s – which address levels of service – are slightly different. They approach the problem by calculating the costs of services, and offer developers options, including voluntary payments.

In North Carolina, APFOs have not been fully tested in the courts – until now. And while the Union County school-fee case appears to offer a precedent, it may not necessarily apply to other APFOs, Mr. Owens said.

“A key component the court was most concerned about is the voluntary mitigation payment, and whether that was the same thing as a school impact fee,” Mr. Owens said.

And the Union County case may not be resolved. The county may still try to appeal the Court of Appeals decision to the state Supreme Court.

WHAT IF?

What if the law is thrown out? Mr. Kline, the Davidson town attorney, said the town would have to find other ways to control growth, or stop approving new developments.

“If courts rule that municipalities in North Carolina don’t have the right to (adopt adequate public facilities ordinances), then the town will want to look at alternative ways to control the timing of growth,” Mr. Kline said. “This is a really good tool to control growth – not to stop it, but to control it and to time it with the availability of the public facilities that are needed as we get more people – such as public parks, greenways, fire protection and police protection.”

Ultimately, the question for courts and policymakers may come down to who should pay for new growth: existing residents, or new ones.

“That is the key policy issue,” Mr. Owens said. “Should we consider the availability of services in approving new development? Should we have a mechanism to examine the adequacy of services, and a mechanism to either deny, delay or otherwise condition the intensity or rate of development? The question is how do you put this into your regulatory program?”

RELATED LINKS

Town of Davidson website, Planning Ordinance. Click on the purple link on the left of the page to download a copy of the planning ordinance.

Dec. 10, 2009, Charlotte Observer, “N.C. court rules for developers in Union: It says homebuilders can’t be required to pay for new schools.”

Dec. 4, 2009, Charlotte Observer, “Cash crunch fuels fight over impact fees: Crescent Resources joins list of developers challenging Cabarrus County in court.”

Oct. 4, 2009, Charlotte Observer, “Developers file suit over fees in Cabarrus.”