Monday, November 28, 2022

Brunswick County responds to D.R. Horton suit, says it operated utility systems at loss

Brunswick County filed an answer to D.R. Horton's complaint late last month, denying it charged the "nation's largest homebuilder" illegal fees.

Brunswick County claims, in a federal answer filed late last month, it couldn't have collected illegal utility fees because it operated its water and sewer systems at a loss between 2015 and 2018. (Port City Daily/File photo)
In a response filed in the federal lawsuit late last month, Brunswick County alleged that it couldn’t have collected illegal utility fees because it operated its water and sewer systems at a loss between 2015 and 2018. (Port City Daily/File photo)

BRUNSWICK COUNTY — Brunswick County denies D.R. Horton’s federal class action complaint that alleges the homebuilder is owed over $5 million in illegal and over-charged water and sewer fees.

The lawsuit questions Brunswick County’s legality in charging capital recovery fees — also referred to as system development fees or impact fees — at a rate that allegedly breached its state-mandated authority.

Related: D.R. Horton files federal class action against Brunswick County seeking over $5 million in damages

A precedent-setting 2016 N.C. Supreme Court decision ruled local governments lacked the authority to charge for future services in assessing utility impact fees. These fees are charged in addition to actual connection costs, known as tap-on fees.

A year later, the General Assembly passed House Bill 436, which legalized charging for future services, but required extensive and professional analysis to do so. The new law did not retroactively legalize impact fees, which left open a window for a series of impact fee-related suits in the state.

In response to D.R. Horton’s complaint, filed March 5 in U.S. District Court, Brunswick County’s answer was simple: it actually lost money while operating its utility systems between July 2015 and June 2018.

By collecting less in water and sewer fees than what was required to operate its systems, Brunswick County couldn’t have collected fees for future expansion, according to the county’s response, filed on April 23.

Defenses

In the legal response, Brunswick County asserts it has sovereign immunity. The county also pleads unjust enrichment as a defense to D.R. Horton’s claims — this means the homebuilder profits at the expense of another party with benefits it should not ethically or morally keep.

D.R. Horton’s complaint claimed the county’s utility fees ate into its profits. Brunswick County countered this by pointing out the cost burden was carried by D.R. Horton’s customers, rather than the homebuilder: “[D.R. Horton] lacks standing to bring this action because it passed the fees at issue on to its customers in the form of the sale price of the properties it constructed,” Brunswick County’s April answer states.

The fees that Brunswick County allegedly illegally charged apparently didn’t help; the county claims it operated its system at a loss during the three-year time period in question. Tap fees — charged separately from system development fees — were assessed at a lower rate than the county’s actual cost to connect a new unit to the existing water or sewer system, the response claims. Revenue from system development fees was not “specifically used for future expansion of the systems or new development,” the response claims.

What’s next

A discovery plan is due by the end of the month, according to a recent order signed by U.S. District Judge Louise Flanagan.

D.R. Horton filed its suit in federal court because of an alleged violation of its constitutionally-protected property rights under the Fourteenth Amendment. The homebuilder is represented by the same Concord-based firm, Scarbrough & Scarbrough, that successfully litigated the 2016 Quality Built Homes v. Town of Carthage case before the N.C. Supreme Court.

In its first filing, D.R. Horton asserted it could afford to see its claims vetted out in federal court: “Plaintiff and its counsel are committed to prosecuting this action vigorously on behalf of Plaintiff and the Class and have the financial resources to do so,” D.R. Horton’s March complaint states.


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

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