Sunday, July 3, 2022

Legal spending by Boiling Spring Lakes nears $400,000, expected to end this summer

Lawsuits from 2014 have cost Boiling Spring Lakes nearly $400,000 in attorneys fees and a settlement to its own finance director, who still works for the city. But the years of litigation haven't put the city in a bad financial position, according to its manager.

Boiling Spring Lakes has paid out plenty in recent years to defend itself on a 2013 lake-raising decision. Though costs are nearing $400,000, overall, the city's financial position has not been compromised, according to its manager. (Port City Daily photo/Johanna Ferebee)
Boiling Spring Lakes has paid out plenty in recent years to defend itself on a 2013 lake-raising decision. Though costs are nearing $400,000, overall, the city’s financial position has not been compromised, according to its manager. (Port City Daily photo/Johanna Ferebee)

BOILING SPRING LAKES — Boiling Spring Lakes is still paying for its 2013 decision to raise Spring Lake’s water level.

Legal spending between two cases brought against the city stemming from rising Spring Lake is nearing $400,000 to date. One of the cases, filed against the city by its own finance director, settled this summer.

Related: Boiling Spring Lakes’ empty lakes could take years to refill

A second case made its way to the North Carolina Supreme Court and back. Higher courts affirmed that the city took private property for public use — without compensation — when it raised the level of the 32-acre Spring Lake. The amount plaintiffs Edward and Debra Wilkie are entitled to is yet to be determined. But so far, on the Wilkie case, the city has spent $308,878.90 in attorneys fees, according to Boiling Spring Lakes’ manager Jeff Repp.

“Obviously the city would rather have spent that money on other things,” Repp said. “But when you get hauled into court, you’ve got to defend yourself.”

Wilkie case

Both lawsuits stem from a move to install “elbows” on Spring Lakes’ two pipes. About 100 lakeside properties surround Spring Lake, northwest of Boiling Spring Road.

In 2006, replacement pipes lowered Spring Lakes’ water level. A petition with 21 signatures was presented to Boiling Spring Lakes Board of Commissioners in June 2013, asking to restore Spring Lake to its original level. One month later, the city installed two elbows intended to raise lake levels by eight or nine inches, court filings show.

By the next month, lakeside property owners presented Commissioners with a second petition. Rain complicated the matter, according to legal filings, causing the lake to rise higher than intended. This time, the petition asked Commissioners to remove the elbows. The board voted to lower the lake by nearly three inches, but the elbows weren’t removed for another year.

At halfway through the fiscal year, Boiling Spring Lakes is 1,997 percent over what it budgeted in attorneys fees. (Port City Daily/Courtesy Boiling Spring Lakes)
At halfway through the fiscal year, Boiling Spring Lakes is 1,997 percent over what it budgeted in attorneys fees. (Port City Daily/Courtesy Boiling Spring Lakes)

It’s this time gap that the state’s higher courts take issue with. The Wilkies filed their first complaint against the city in May 2014, one month before the elbows were removed. Before the filing, the Wilkies, and others, repeatedly complained to the board about the lake level. Conversely, some property owners asked the board to raise the lake levels even higher, filings show.

The complaint alleges 20-to-30 feet of the Wilkies’ two lakeside lots, totaling just over an acre, were taken by raised water levels. Because of the change, the Wilkies’ property value declined, according to their complaint.

Compensation is required when a ruling authority takes private property for public use, outlined in the U.S. Constitution. Boiling Spring Lakes argued against the trial courts’ finding that a taking occurred through inverse condemnation. The city argued the flooding was temporary and not a compensable taking.

Boiling Spring Lakes did not compensate lakeside property owners after raising lake levels. Though Edward Wilkie signed the first petition to raise the lake, and the city argued this action should preclude plaintiffs from filing action, the North Carolina Court of Appeals ruled the city is still constitutionally required to compensate for taking property.

Brunswick County’s trial court first ruled in favor of the Wilkies in November 2015. Boiling Spring Lakes appealed in December 2016 to the North Carolina Court of Appeals (COA). The COA’s first opinion reversed the trial court’s decision, and upon appeal by the Wilkies, the North Carolina Supreme Court reversed the COA’s opinion in March 2018, reaffirming the trial court’s 2015 decision. The COA issued its second opinion in December 2018, further expanding on the Supreme Court’s decision.

Because the city did not petition the Supreme Court to review COA’s opinion by late last month, the case will remain in Brunswick County. Financial damages are still yet to be determined.

Thompson case

"Governing body" expenses typically include modest stipends to elected officials and attorneys fees for run-of-the-mill paperwork. But in recent years, Boiling Spring Lakes' governing body expenses have exceeded what the city budgeted. As of Dec. 31, 2018, the city was 1,997 percent over what it had budgeted in attorneys fees, and 217 percent over what it budged for its governing body. (Port City Daily/Courtesy Boiling Spring Lakes)
“Governing body” expenses typically include modest stipends to elected officials and attorneys fees for run-of-the-mill paperwork. But in recent years, Boiling Spring Lakes’ governing body expenses have exceeded what the city budgeted. As of Dec. 31, 2018, the city was 1,997 percent over what it had budgeted in attorneys fees, and 217 percent over what it budged for its governing body. (Port City Daily/Courtesy Boiling Spring Lakes)

Karen Thompson, Boiling Spring Lakes’ finance director, also filed a lawsuit against the city over the same matter. Thompson and her husband also claimed their property was devalued as a result of the lake levels being raised. In a June 2015 affidavit, Thompson stated her position as the city’s finance director provided her with knowledge of records kept by the city.

In September 2016, Brunswick County Superior Court Judge Richard Brown ordered to stay  — essentially pause — the proceedings in the Thompson case, pending results of the Wilkie case, because the two alleged similar complaints from the same action. The Thompsons voluntarily dismissed the suit in July 2018, months after the Supreme Court’s ruling on the Wilkie case.

All the while, Thompson has remained employed by the city. According to records provided upon request by Repp, the city’s manager, Thompson was given a $70,000 settlement payment in July 2018, one week before the suit was dismissed.

That payment, partnered with $9,872.99 in attorneys fees, tipped the city well over its budgeted expenses.

Finances

At halfway through the fiscal year, Boiling Spring Lakes’ attorneys’ fees expenses are 1,997 percent over what it budgeted: $4,000. Asked why the city did not budget higher, given the years of litigation associated with the lake event, Repp said the estimate is based on a “historical” figure. Before litigation, Repp said Boiling Spring Lakes usually only requires a few thousand dollars for legal services.

In 2015, Boiling Spring Lakes spent $121,806 on city attorneys fees, $123,678 in 2016, and $36,412 in 2017. According to Boiling Spring Lakes’ 2019 adopted budget. These higher fees can be attributed to the legal cases, Repp said.

These fees are projected to go back to a “normal amount,” the adopted budget states.

Including both cases, the city has spent $378,878.89. But the costs haven’t had an adverse effect on Boiling Spring Lakes’ financial position, according to Repp’s opinion, shared with auditors last fiscal year“It’s the normal course of doing business,” he said. “Sometimes litigation happens, sometimes it doesn’t.”

Repp could not comment on the specifics of either lawsuit. He confirmed that the Thompson settlement was a one-time payment, and will not cost the city further. As for the Wilkie case, he hoped all expenses would wrap up by this summer.

“I would anticipate that within this current fiscal year all of the expenses will be incurred one way or another on this particular item,” he said. 

Outside of the lawsuits, the city appears to be in a healthy financial state, according to recent audit documents. Compared to other coastal governments, in a post-hurricane bind, Boiling Spring Lakes has maintained 49 percent of its fund balance, with approximately $2 million in the tank.

“Most of the money we are spending will be reimbursed by [Federal Emergency Management Agency],” Repp said. “Like most communities, we’re just plugging along. That’s part of the reason you want to have a relatively healthy fund balance.” 

Though Boiling Spring Lakes current fund balance is lower than “it’s been in a long time,” according to Repp, it will be buffered by federal reimbursements.

“Everybody would like to have the check the next week, but I would say we’re in the normal process in how these events take place.”


Send tips and comments to Johanna Ferebee at johanna@localvoicemedia.com

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