PF Dev. Grp., LLC v. Cnty. of Harnett

• Court: Supreme Court of North Carolina
• Decided: August 19, 2022
• Docket: 63PA21
• Status: Published

Opinion

IN THE SUPREME COURT OF NORTH CAROLINA

2022-NCSC-93

No. 62PA21/63PA21

Filed 19 August 2022

ANDERSON CREEK PARTNERS, L.P.; ANDERSON CREEK INN, LLC; ANDERSON CREEK DEVELOPERS, LLC; FAIRWAY POINT, LLC; STONE CROSS, LLC d/b/a/ STONE CROSS ESTATES, LLC; RALPH HUFF HOLDINGS, LLC; WOODSHIRE PARTNERS, LLC; CRESTVIEW DEVELOPMENT, LLC; OAKMONT DEVELOPMENT PARTNERS, LLC; WELLCO CONTRACTORS, INC.; NORTH SOUTH PROPERTIES, LLC; W.S. WELLONS CORPORATION; ROLLING SPRINGS WATER COMPANY, INC; and STAFFORD LAND COMPANY, INC.

v.

COUNTY OF HARNETT

PF DEVELOPMENT GROUP, LLC

On discretionary review pursuant to N.C.G.S. § 7A-31 of a unanimous decision

of the Court of Appeals, 275 N.C. App. 423 (2020), affirming an order entered on 26

November 2018 by Judge Michael J. O’Foghludha in Superior Court, Harnett County.

Heard in the Supreme Court on 9 May 2022.

Scarbrough, Scarbrough & Trilling, PLLC, by John F. Scarbrough, James E. Scarbrough, and Madeline J. Trilling; James R. DeMay, for plaintiff- appellants.

Fox Rothschild, LLP, by Kip David Nelson, Bradley M. Risinger, and Troy D. Shelton; and Christopher Appel, for defendant-appellee. ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

Opinion of the Court

Erin E. Wilcox for amicus curiae Pacific Legal Foundation; and J. Michael Carpenter, for amicus curiae North Carolina Homebuilders Association.

F. Paul Calamita for amicus curiae North Carolina Water Quality Association and the National Association of Clean Water Agencies.

ERVIN, Justice.

¶1 This appeal arises from a challenge to an ordinance adopted by defendant

Harnett County that requires residential property developers to pay one-time water

and sewer “capacity use” fees associated with each lot that they wish to develop as a

precondition for obtaining the County’s concurrence in the developer’s application for

the issuance of required water and sewer permits by the North Carolina Department

of Environmental Quality. After the trial court granted the County’s motion for

judgment on the pleadings and dismissed all the claims asserted against the County

by plaintiff PF Development Group and all but one of the claims asserted against the

County by plaintiffs Anderson Creek Partners, L.P.; Anderson Creek, Inc., LLC;

Anderson Creek Developers, LLC; Fairway Point, LLC; Stone Cross, LLC d/b/a Stone

Cross Estates, LLC; Ralph Huff Holdings, LLC; Woodshire Partners, LLC; Crestview

Development, LLC; Oakmont Development Partners, LLC; Wellco Contractors, Inc.;

North South Properties, LLC; W.S. Wellons Corporation; Rolling Springs Water

Company, Inc.; and Stafford Land Company, Inc., the Court of Appeals affirmed the

trial court’s decision. Our review of the Court of Appeals’ decision requires us to

determine whether the challenged “capacity use” fees are monetary land-use ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

exactions subject to constitutional review under the “essential nexus” and “rough

proportionality” test articulated by the United States Supreme Court in Nollan v.

California Coastal Commission, 483 U.S. 825 (1987); Dolan v. City of Tigard, 512 U.S.

374 (1994); and Koontz v. St. Johns River Water Management District, 570 U.S. 595

(2013). After careful consideration of the parties’ arguments in light of the record

and the applicable law, we reverse the decision of the Court of Appeals and remand

this case to Superior Court, Harnett County, for further proceedings not inconsistent

with this opinion.

I. Factual Background

A. Substantive Facts

¶2 On 20 October 1980, the Harnett County Board of Commissioners established

the Buies Creek-Coats Water and Sewer District for the purpose of collecting and

treating wastewater within the District’s boundaries. On 23 July 1984, the County

and the District entered an interlocal agreement pursuant to which the County

agreed to operate the District’s water and sewer systems. In resolving a legal

challenge to the 1984 agreement, this Court held that counties had the authority to

enter into interlocal cooperative agreements providing for the operation of a water

and sewer system on behalf of a water and sewer district and to exercise all “rights,

powers, and functions granted to water and sewer districts” in the course of doing so,

McNeill v. Harnett County, 327 N.C. 552, 558–59 (1990) (citing N.C.G.S. § 153A-275 ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

(1987)), with the powers that the County was authorized to exercise including the

District’s authority to “establish, revise, and collect rates, fees or other charges and

penalties for the use of or the services furnished or to be furnished by any sanitary

sewer system, water system or sanitary sewer and water system of the district[,]” id.

(quoting N.C.G.S. § 162A-88 (1987)).

¶3 As of 1998, the County had established eight water and sewer districts for the

purpose of managing water and wastewater services throughout its entire land area.

In May 1998, the County and the districts entered a joint interlocal agreement which

governed the manner in which the County operated each district’s water and sewer

systems. In the 1998 agreement, the County and the districts agreed that the

districts would lease all of their real and personal property to the County, that the

districts would transfer their financial and intangible assets to the County, that the

County would assume most of the districts’ liabilities, and that the County’s

Department of Public Utilities would “administer all operations and maintenance of”

the water and sewer systems in each district. In addition, the County agreed to

“[e]stablish and revise from time to time schedules of rates, fees, charges, and

penalties for the use of or the water and sewer services furnished and to bill and

collect same.”

¶4 On 1 July 2016, acting in accordance with the 1998 Agreement, the County

adopted an ordinance “for the purpose of establishing a schedule of rents, rates, fees, ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

charges and penalties for the use of and services furnished by water supply and

distribution systems and sewer collections systems owned or operated by [the

Department of Public Utilities].” Section 28(h) of the ordinance provides for the

collection of “capacity use” fees for the purpose of “partially recover[ing] directly from

new customers the costs of capacity of the utility system to serve them.” More

specifically, the ordinance provides that, for each new residential connection to a

water or sewer system owned or operated by the County, the landowner must pay a

one-time, non-negotiable fee of $1,000 for water service and $1,200 for sewer service,

with the landowner being required to make the required payment prior to the

County’s concurrence in the landowner’s application to the North Carolina

Department of Environment and Natural Resources1 for the issuance of the required

water and/or sewer permits. According to the ordinance, “such charges are

reasonable and necessary and result in a more equitable and economically efficient

method of recovery of such costs to handle new growth and to serve new customers

without placing an additional financial burden on existing customers solely through

inordinate enhancement of water and sewer rates.” Plaintiffs, who are engaged in

the business of developing property in Harnett County, have paid the “capacity use”

1The Department of Environment and Natural Resources is now the Department of Environmental Quality. ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

fees required pursuant to the ordinance in the course of their development-related

activities.

B. Procedural History

¶5 On 1 March 2017, the Anderson Creek plaintiffs filed a complaint in which

they sought (1) a declaration that the County lacked the statutory authority to adopt

and enforce the ordinance; (2) a declaration that the adoption and enforcement of the

ordinance violated the Anderson Creek plaintiffs’ rights to equal protection and

substantive due process pursuant to Article I, Section 19 of the North Carolina

Constitution; (3) a refund of all “capacity use” fees that had been paid to the County

along with prejudgment interest; (4) an award of costs and attorney’s fees; (5) an

accounting for all “capacity use” fees that the Anderson Creek plaintiffs had paid to

the County; and (6) the entry of an order allowing the Anderson Creek plaintiffs to

deposit all future “capacity use” fees into an escrow account pending the entry of a

final judgment in this case. The Anderson Creek plaintiffs claimed to have paid more

than $25,000 in “capacity use” fees to the County pursuant to the ordinance.

¶6 On 19 May 2017, the County filed an amended answer denying the material

allegations of the complaint, asserting numerous affirmative defenses, advancing

counterclaims for breach of various agreements into which the individual Anderson

Creek plaintiffs had entered with the County, and seeking the imposition of sanctions ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

against counsel for the Anderson Creek plaintiffs.2 On 16 March 2018, the Anderson

Creek plaintiffs amended their complaint to add claims for breach of a 2018

settlement agreement between Anderson Creek Partners and the County and a

declaration concerning the severability of a provision contained in that agreement

addressing any future determination that the relevant “capacity use” fee payments

were unlawful. On 1 February 2018, the County filed an answer to the Anderson

Creek plaintiffs’ amended complaint and asserted an additional counterclaim seeking

a declaration that the County had the authority to collect the challenged “capacity

use” fees.3 On 12 February 2018, the County filed a motion seeking the entry of

judgment in its favor with respect to all but one of the claims that had been asserted

in the amended complaint and a motion to join necessary parties or, in the

alternative, a motion for permissive joinder of parties.

¶7 On 19 July 2017, plaintiff PF Development Group, LLC, filed a complaint

asserting six claims for relief against the County that were identical to those set out

in the initial complaint filed by the Anderson Creek plaintiffs. On 8 November 2018,

the trial court consolidated the two cases, entered an order granting the County’s

motion for judgment on the pleadings with respect to all but one of the claims asserted

2The County’s initial responsive pleading is not contained in the record on appeal. 3 Although the County’s answer to the amended complaint was filed before the Anderson Creek plaintiffs received authorization from the trial court to amend their complaint, no party has raised any issues about the timeliness of either the amended complaint or the amended answer or the parties’ authority to file either document. ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

by the Anderson Creek plaintiffs and all of the claims asserted by PF Development

and dismissing those claims with prejudice and concluded that its substantive

decision had rendered the County’s joinder motions moot. Plaintiffs noted an appeal

to the Court of Appeals from the trial court’s order.

C. Court of Appeals Decision

¶8 In seeking relief from the trial court’s orders before the Court of Appeals,

plaintiffs argued that the trial court had erred by entering judgment on the pleadings

in favor of the County on the grounds that (1) the pleadings disclosed the existence of

genuine issues of material fact; (2) the 1998 Agreement did not provide the County

with the authority afforded to water and sewer districts by N.C.G.S. § 162A-88 to

collect fees for water and sewer service “to be furnished;” and (3) plaintiffs had alleged

a valid claim that the challenged “capacity use” fees were an “unconstitutional

condition” for permit approval that failed to satisfy the “essential nexus” and “rough

proportionality” requirements articulated in Koontz. In addition, plaintiffs contended

that the trial court had erred by taking judicial notice of the 1984 and 1998

agreements without giving plaintiffs an adequate opportunity to challenge that

decision.

¶9 In rejecting plaintiffs’ challenges to the trial court’s order, the Court of Appeals

began by observing that “[j]udicial notice is appropriate where a fact is ‘not subject to

reasonable dispute in that it is either (1) generally known within the territorial ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

jurisdiction of the trial court or (2) capable of accurate and ready determination by

resort to sources whose accuracy cannot reasonably be questioned,’ ” Anderson Creek

Partners, L.P. v. Cnty. of Harnett, 275 N.C. App. 423, 429 (2020) (quoting N.C.G.S.

§ 8C-1, Rule 201 (2017)), and that trial court decisions to judicially notice particular

facts or items are subject to review on appeal only for abuse of discretion, id. at 429–

30 (citing Muteff v. Invacare Corp., 218 N.C. App. 558, 568 (2012)). After noting that

“important public documents will be judicially noticed,” id. at 429 (quoting State ex

rel Utils. Comm’n v. S. Bell Tel. & Tel. Co., 289 N.C. 286, 287 (1976)), the Court of

Appeals determined that the 1984 and 1998 agreements “are public contracts

between government entities” that are “subject to public review” that and “their

existence is therefore ‘not subject to reasonable dispute,’ ” id. at 430. In addition, the

Court of Appeals reasoned that “[t]he agreements are important public documents

germane to the resolution of this case” and that “some of the [plaintiffs] reference—

or even incorporate—the 1998 Agreement in their pleadings.” Id. As a result, the

Court of Appeals concluded, the trial court did not abuse its discretion by judicially

noticing the 1984 and 1998 agreements. Id.

¶ 10 Secondly, the Court of Appeal held that, while the relevant statutory

provisions “authorized the County only to assess fees for the ‘contemporaneous use’

of its water and sewer systems, and otherwise ‘clearly and unambiguously fail[ed] to

give [the County] the essential prospective charging power needed to assess [the ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

fees,]” id. at 432 (alterations in original) (quoting Quality Built Homes, Inc. v. Town

of Carthage, 369 N.C. 15, 22 (2016) (Quality Built Homes I)), the water and sewer

districts did have the authority to collect fees for service to be provided in the future

given that, unlike N.C.G.S. §§ 153A-277(a) or 160A-314(a), which govern the

authority of counties and cities, respectively, to set rates for water and sewer service,

N.C.G.S. § 162A-88 allowed water and sewer districts to set rates for “services

furnished or to be furnished,” id. at 433 (emphasis added).4 In addition, the Court of

Appeals observed that “local government entities may generally cooperate through

interlocal agreements to carry out their purposes,” id. (citing N.C.G.S. §§ 153A-275,

153A-278 (2015)), and determined that, in accordance with our decision in McNeill,

“a county may contract with another local government entity to enable the county to

exercise authority given to that entity,” id. As a result, even though the County

lacked the authority to charge fees for water and sewer service to be provided in the

future, the water and sewer districts operating in Harnett County had the authority

to do so and were free to enter into contracts with the County pursuant to which the

County was entitled to exercise the authority that had been granted to the water and

4In 2017, the General Assembly amended N.C.G.S. §§ 153A-277(a) and 160A-314(a) to permit cities and counties to establish prospective fees like those at issue here. See Public Water and Sewer System Development Fee Act, S.L. 2017- 138, §§ 3, 4, 2017 N.C. Sess. Laws 996, 1000. However, the amended language did not become effective until 1 October 2017, with the General Assembly having specified that “[n]othing in this act provides retroactive authority for any system development fee, or any similar fee for water or sewer services to be furnished, collected by a local governmental unit prior to October 1, 2017.” Id., § 11, 2017 N.C. Sess. Laws at 1002. ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

sewer districts. Id. at 433–34. For that reason, the Court of Appeals concluded that

“the only way the County could have had the authority to charge any prospective fees

would be pursuant to an interlocal agreement through which the county could

exercise authority held by the [d]istricts.” Id. at 434.

¶ 11 Thirdly, the Court of Appeals held that, since “the 1998 Agreement granted

the County the ability to exercise the [d]istricts’ prospective fee-collecting authority,”

the pleadings “failed to present a material issue of fact regarding the County’s

authority to collect prospective fees.” Id. at 436. In rejecting plaintiffs’ contention

that the record revealed the existence of a genuine issue of material fact concerning

the extent to which the County either managed infrastructure owned by the districts

or operated its own facilities, the Court of Appeals determined that this distinction

was immaterial on the grounds that, “[r]egardless of whether the County is operating

its own physical water and sewer infrastructure, the [d]istricts’ infrastructure,

infrastructure it acquired from the [d]istricts, or a combination thereof, the issue is

whether the County had the authority to use any means to assess prospective fees for

water and sewer services to be furnished in the future.” Id. As a result, the Court of

Appeals held that the trial court did not err in concluding that the 1998 agreement

permitted the County to exercise the districts’ fee-collecting authority “by any legal

means.” Id. at 437. ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

¶ 12 Finally, the Court of Appeals addressed plaintiffs’ contention that the record

revealed the existence of a genuine issue of material fact concerning the extent to

which the challenged “capacity use” fees were subject to “unconstitutional conditions”

analysis pursuant to Koontz. Id. The Court of Appeals noted that, in accordance with

Nollan and Dolan, “the government is allowed to condition approval of land-use

permits by requiring the landowner to mitigate the impact of his or her proposed use.”

Anderson Creek Partners, 275 N.C. App. at 438 (citing Dolan, 512 U.S. at 391; Nollan,

483 U.S. at 837). As part of this process, the Court of Appeals determined that “[t]he

government may require that the landowner agree to a particular public use of the

landowner’s real property, as long as there is an ‘essential nexus’ and ‘rough

proportionality’ between the public impact of the landowner’s proposed developments

and the government’s requirements.” Id. (citing Nollan, 438 U.S. at 837; Dolan, 512

U.S. at 391). According to the Court of Appeals, Koontz extended the “essential

nexus” and “rough proportionality” test enunciated in Nollan and Dolan to encompass

demands that a landowner make a monetary payment in exchange for permit

approval “where there is a ‘direct link between the government’s demand and a

specific parcel of property.’ ” Id. (quoting Koontz, 570 U.S. at 614).

¶ 13 In the Court of Appeals’ view, the challenged fees “were categorized as impact

fees and referred to as ‘capacity use fees,’ despite the County’s requirement that the

fees be paid prior to approval of a developer’s permits.” Id. at 439. After ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

acknowledging the Supreme Court’s statement that the “unconstitutional conditions”

doctrine “did not affect the ability of governments to impose property taxes, user fees,

and similar laws and regulations that may impose financial burdens on landowners,”

citing Koontz, 570 U.S. at 615, the Court of Appeals noted that the Supreme Court

had “otherwise provided little guidance on how courts should tread the fine line

between unconstitutional exactions and constitutional, routine taxes and fees” and

pointed out that “the application of the unconstitutional conditions doctrine to

monetary exactions in North Carolina” was a question of first impression, Anderson

Creek Partners, 275 N.C. App. at 439, 441. The Court of Appeals found the decisions

from other jurisdictions upon which plaintiffs relied “regarding the thin line between

unconstitutional exactions and constitutional user fees” to be unpersuasive given that

they were “part of the pre-Koontz division of authority over whether a demand for

money could give rise to an unconstitutional conditions claim under Nollan/Dolan—

a [question] which Koontz,” in the Court of Appeals’ opinion, “settled in the

affirmative.” Id. at 442 (citing Koontz, 570 U.S. at 603). On the contrary, the Court

of Appeals found Dabbs v. Anne Arundel County, 458 Md. 331 (2018), in which

Maryland’s highest court held that generally applicable fees do not implicate the

“unconstitutional conditions” doctrine, to be persuasive. Anderson Creek Partners,

275 N.C. App. at 442. ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

¶ 14 As the Court of Appeals noted, Dabbs involved a challenge to impact fees that

the defendant county had collected in connection with the development of real estate

that were designed to facilitate improvements to the county’s transportation and

education infrastructure, Dabbs, 458 Md. at 336–38, with these fees having been

“legislatively-imposed[,] predetermined, based on a specific monetary schedule, and

applie[d] to any person wishing to develop property in the district,” id. at 353. In

rejecting arguments similar to those that plaintiffs have advanced in this case, the

Maryland Court of Appeals concluded in Dabbs that the challenged fees were not

subject to constitutional scrutiny under Nollan and Dolan because, “unlike Koontz,

the [challenged ordinance] [did] not direct a [land]owner to make a conditional

monetary payment to obtain approval of an application for a permit of any particular

kind, nor [did] it impose the condition on a particularized or discretionary basis.” Id.

(citations omitted). On the contrary, the Maryland Court of Appeals held that the fee

at issue in Dabbs “applied on a generalized district-wide basis” rather than having

been established in the course of determining “whether an actual permit will issue to

a payor individual with a property interest.” Id. (citing Koontz, 570 U.S. at 628

(Kagan, J., dissenting) (suggesting that the Supreme Court should “approve the rule,

adopted in several states, that Nollan and Dolan apply only to permitting fees that

are imposed ad hoc, and not to fees that are generally applicable”)). ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

¶ 15 The Court of Appeals concluded that Dabbs was “in harmony with” both Koontz

and the definition of an “exaction” articulated in Franklin Road Properties v. City of

Raleigh, 94 N.C. App. 731, 736 (1989) (defining an “exaction” as a fee assessed “in

lieu of compliance with dedication or improvement provisions” or “reflecting

[developers’] respective prorated shares of the cost of providing new roads, utility

systems, parks, and similar facilities serving the entire area”) (citation omitted). In

the Court of Appeals’ view, “[t]his definition did not include fees assessed on a

generally applicable basis in a static quantity indifferent to the particular developers’

prorated share of any resulting impact.” Anderson Creek Partners, 275 N.C. App. at

443. As a result, the Court of Appeals held that

impact and user fees which are imposed by a municipality to mitigate the impact of a developer’s use of property, which are generally imposed upon all developers of real property located within that municipality’s geographic jurisdiction, and which are consistently imposed in a uniform, predetermined amount without regard to the actual impact of the developers’ project do not invoke scrutiny as an unconstitutional condition under Nollan/Dolan nor under North Carolina precedent.

Id. In view of the fact that the “capacity use” fees at issue in this case “are

predetermined, set out in the [ordinance], and non-negotiable” and “are not assessed

on an ad hoc basis or dependent upon the landowner’s particular project,” the Court

of Appeals concluded that they did not come within the ambit of the approach adopted

in Koontz. Id. In other words, the Court of Appeals held that, even though the ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

challenged fees “are assessed in conjunction with the landowners’ intent to make use

of real property located within the County’s jurisdiction,” they differ from the type of

fee that is subject to the “unconstitutional conditions” doctrine because, “unlike the

conditions imposed in Koontz, the County does not view a landowner’s proposed

project and then make a demand based upon that specific parcel of real property.” Id.

¶ 16 The Court of Appeals noted that Dabbs could be distinguished from this case

on the grounds that the challenged water and sewer “capacity use” fee was “assessed

prior to the County’s grant of building permits, thus making [it] a condition of

approval,” and that Dabbs “expressly [rested], in part, on the fact that the fees at

issue were not ‘a conditional monetary payment to obtain approval of an application

for a permit of any particular kind[.]’ ” Id. at 444 (quoting Dabbs, 458 Md. at 353)

(emphasis in original). According to the Court of Appeals, “this distinction” “speaks

directly to the type of coercive harms that the United States Supreme Court sought

to prevent in Koontz,” that is, “to prevent the government from leveraging its

legitimate interest in mitigating harms by imposing ‘[e]xtortionate demands’ which

may ‘pressure [a] [land]owner into voluntarily giving up property for which the Fifth

Amendment would otherwise require just compensation.’ ” Id. (quoting Koontz, 570

U.S. at 605–06). In the Court of Appeals’ view, this “distinction [was not] material in

this case” because, regardless of “whether the [f]ees were to be paid prior to or after

[plaintiffs] began their projects, the fees were predetermined and are uniformly ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

applied—not levied against [plaintiffs] on an ad hoc basis—and thus do not suggest

any intent by the County to bend the will or twist the arm of [plaintiffs].” Id. As a

result, the Court of Appeals held that plaintiffs had “failed to present a constitutional

takings claim under current federal and state unconstitutional conditions

jurisprudence as a matter of law.” Id. This Court allowed plaintiffs’ discretionary

review petitions for the purpose of examining “[w]hether the ‘essential nexus’ and

‘rough proportionality’ test under the application of the doctrine of unconstitutional

conditions to land-use exactions applies to generally applicable legislative impact

fees” and “[w]hether the pleadings demonstrate a genuine issue of material fact as to

whether the County’s ‘capacity use’ fees, as applied to [p]laintiffs, ha[ve] an ‘essential

nexus’ and ‘rough proportionality’ to the impact of [p]laintiff’s developments on the

County’s water and sewer systems.”

II. Analysis

A. Standard of Review

¶ 17 The purpose of a motion for judgment on the pleadings pursuant to N.C.G.S.

§ 1A-1, Rule 12(c), “is to dispose of baseless claims or defenses when the formal

pleadings reveal their lack of merit,” with the entry of judgment on the pleadings

being appropriate when “all the material allegations of fact are admitted in the

pleadings and only questions of law remain.” Ragsdale v. Kennedy, 286 N.C. 130, 137

(1974). In deciding whether to grant or deny a motion for judgment on the pleadings, ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

“[t]he trial court is required to view the facts and permissible inferences in the light

most favorable to the nonmoving party,” with “[a]ll well pleaded factual allegations

in the nonmoving party’s pleadings [being] taken as true and all contravening

assertions in the movant’s pleadings [being] taken as false.” Id. “A party seeking

judgment on the pleadings must show that the complaint fails to allege facts

sufficient to state a cause of action or admits facts which constitute a complete legal

bar thereto.” DiCesare v. Charlotte-Mecklenburg Hosp. Auth., 376 N.C. 63, 70 (2020)

(cleaned up). We review a trial court’s ruling granting or denying a motion for

judgment on the pleadings using a de novo standard of review. Id. (citing Old

Republic Nat’l Title Ins. Co. v. Hartford Fire Ins. Co., 369 N.C. 500, 507 (2017)).

B. The Unconstitutional Conditions Doctrine and Land-Use Exactions

¶ 18 According to the “unconstitutional conditions” doctrine, “the government may

not deny a benefit to a person because he [or she] exercises a constitutional right,”

Regan v. Taxation With Representation of Wash., 461 U.S. 540, 545 (1983) (citing

Perry v. Sinderman, 408 U.S. 593, 597 (1972)), which “vindicates the Constitution’s

enumerated rights by preventing the government from coercing people into giving

them up,” Koontz, 570 U.S. at 604. Nollan and Dolan “involve a special application”

of the “unconstitutional conditions” doctrine “that protects the Fifth Amendment

right to just compensation for property the government takes when owners apply for

land-use permits.” Id. Those cases recognize that, in instances involving “land-use ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

exactions,” applicants for land use permits “are especially vulnerable to the type of

coercion that the unconstitutional doctrine prohibits because the government often

has broad discretion to deny a permit that is worth far more than property it would

like to take,” thereby creating a situation in which the government can “pressure an

owner into voluntarily giving up property for which the Fifth Amendment would

otherwise require just compensation.” Id. at 604–05 (citing Dolan, 512 U.S. at 385;

Nollan, 483 U.S. at 831). On the other hand, Nollan and Dolan acknowledge that

“many proposed land uses threaten to impose costs on the public that dedications of

property can offset” and that “[i]nsisting that landowners internalize the negative

externalities of their conduct is a hallmark of responsible land-use policy,” with the

Supreme Court having “long sustained such regulations against constitutional

attack.” Id. at 605 (citing Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926)).

As a result, Nollan and Dolan sought to accommodate these two concerns by allowing

the government to condition approval of a land-use permit application on the

landowner’s agreement to dedicate a portion of his or her property to public use if

there is an “essential nexus” and “rough proportionality” between the property that

the government demands and the social costs of the landowner’s proposed use for the

remaining property, Dolan, 512 U.S. at 391; Nollan, 483 U.S. at 837, with this

arrangement serving to “enable permitting authorities to insist that [permit]

applicants bear the full costs of their proposals while still forbidding the government ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

from engaging in ‘out-and-out . . . extortion’ that would thwart the Fifth Amendment

right to just compensation.” Koontz, 570 U.S. at 606 (quoting Dolan, 512 U.S. at 387).

¶ 19 In Koontz, the Supreme Court extended the requirement to show an “essential

nexus” and “rough proportionality” to cases involving “monetary exactions.” Id. at

612. Koontz arose when a Florida resident sought to develop a portion of his property

by raising its elevation to make the land suitable for building, grading the land at the

southern edge of the building site down to the height of nearby high-voltage electrical

lines, and installing a dry-bed pond to retain and release stormwater runoff from the

proposed building and associated parking lot. Id. at 601. According to Florida law,

the plaintiff first had to obtain a Wetland Resources Management permit, which

“require[d] that permit applicants wishing to build on wetlands offset the resulting

environmental damage by creating, enhancing, and preserving wetlands elsewhere.”

Id. In an attempt to satisfy this requirement, the plaintiff offered to provide a

conservation easement on the southern 11-acre portion of his 14.9-acre property that

would have precluded the possibility of future development. Id. In response, the St.

Johns River Water Management District, the entity responsible for reviewing the

plaintiff’s permit application, proposed that the plaintiff limit the size of his

development to a single acre and make the remaining 13.9 acres subject to a

conservation easement. Id. In the alternative, the District offered to accept the ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

plaintiff’s original proposal if he agreed to pay for improvements to property that the

District already owned at another location. Id. at 602.

¶ 20 In addressing the plaintiff’s claim that the District’s alternative proposal

resulted in a taking of property without just compensation, the Florida Supreme

Court concluded that the Nollan/Dolan rule was inapplicable “because the subject of

the exaction at issue [in the case] was money rather than a more tangible interest in

real property.” Id. at 612 (citing St. Johns River Water Mgmt. Dist. v. Koontz, 77

So.3d 1220, 1230 (Fla. 2011)). On further review, however, the United States

Supreme Court observed that, “if we accepted this argument[,] it would be very easy

for land-use permitting officials to evade the limitations of Nollan and Dolan” by

“simply giv[ing] the [land]owner a choice of either surrendering an easement or

making a payment equal to the easement’s value.” Id. In the Court’s view, since

“[s]uch so-called ‘in lieu of’ fees’ ” were “functionally equivalent to other types of land

use exactions,” they “must satisfy the nexus and rough proportionality requirements

of Nollan and Dolan.” Id.

¶ 21 On the other hand, the Supreme Court also stated that “[i]t is beyond dispute

that taxes and user fees are not takings,” so that its decision had no bearing upon

“the ability of governments to impose property taxes, user fees, and similar laws and

regulations that may impose financial burdens on property owners.” Id. at 615

(cleaned up). According to the Supreme Court, “[t]he fulcrum this case turns on is ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

the direct link between the government’s demand and a specific parcel of property”

and therefore Koontz

implicate[d] the central concern of Nollan and Dolan: the risk that the government may use its substantial power and discretion in land-use permitting to pursue governmental ends that lack an essential nexus and rough proportionality to the effects of the proposed new use of the specific property at issue, thereby diminishing without justification the value of the property.

Id. at 614. As a result, the Supreme Court held that “the government’s demand for

property from a land-use permit applicant must satisfy the requirements of Nollan

and Dolan even when the government denies the permit and even when its demand

is for money.” Id. at 619.

¶ 22 Neither party has cited, nor has our own research discovered, any North

Carolina precedent other than the Court of Appeals’ decision in this case that

addresses the applicability of the “unconstitutional conditions” doctrine to monetary

exactions since the Supreme Court decided Koontz in 2013. In Batch v. Town of

Chapel Hill, which was decided prior to Koontz, the plaintiff applied to the town for

the issuance of a permit authorizing the subdivision of a 20-acre tract of property

located within the town’s extraterritorial jurisdiction into eleven lots. 92 N.C. App.

601, 603 (1989), rev’d on other grounds, 326 N.C. 1 (1990). Although the plaintiff

revised her application in response to concerns expressed by the town’s planning staff,

the planning staff ultimately recommended that the plaintiff’s application be denied ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

because, among other things, the plaintiff had “failed to indicate on her subdivision

plat an intent to dedicate to the Town of Chapel Hill a right-of-way through her

property for the proposed Laurel Hill Parkway.” Id. The Chapel Hill Town Council

adopted the planning staff’s recommendation on the grounds that the plaintiff’s

application was “not consistent with the orderly growth and development of the

[t]own” as contemplated in the town’s land use plan and “[did] not have streets which

coordinate with existing and planned streets and highways as required” by town

ordinance. Id. at 603–04. In seeking relief from the town’s decision, the plaintiff

asserted that it (1) violated her due process rights; (2) resulted in an unconstitutional

taking of her property; (3) deprived her of the equal protection of the laws; (4) worked

a temporary taking of her property; (5) violated her civil rights under 42 U.S.C.

§ 1983; and (6) involved an inverse condemnation of her property actionable pursuant

to N.C.G.S. § 40A-51. Id. at 604.

¶ 23 In seeking to defend an order granting summary judgment in her favor on

appeal, the plaintiff argued that “the conditions imposed by the town were unlawful

exactions of defendant’s property and [are subject to] the Fifth Amendment

regulatory taking doctrine enunciated in [Nollan].” Id. at 612. The Court of Appeals

agreed with the plaintiff’s contention, holding that the requirement that the plaintiff

dedicate a right-of-way for the future Laurel Hill Parkway was “an exaction with

Fifth Amendment implications” and defining an “exaction” as ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

a condition of development permission that requires a public facility or improvement to be provided at the developer’s expense. Most exactions fall into one of four categories: (1) requirements that land be dedicated for street rights-of-way, parks, or utility easements and the like; (2) requirements that improvements be constructed or installed on land so dedicated; (3) requirements that fees be paid in lieu of compliance with dedication or improvement provisions; and (4) requirements that developers pay “impact” or “facility” fees reflecting their respective prorated shares of the cost of providing new roads, utility systems, parks, and similar facilities serving the entire area.

Id. at 613 (emphasis added) (quoting Richard D. Ducker, “Taking” Found for Beach

Access Dedication Requirement, 30 Local Gov’t Law Bulletin 2, Institute of

Government (1987)). After acknowledging that “[n]ot all exactions are constitutional

takings” and that determining which exactions were and were not constitutionally

permissible required identification of “when an individual property owner should pay

for community improvement and when that cost fairly lies with the ‘public as a

whole,’ ” id. at 614–15 (quoting Nollan, 483 U.S. at 836 n.4), the Court of Appeals,

relying, in part, upon statutory authority delegated to municipalities by the General

Assembly, adopted a “rational nexus test” for the purpose of “guid[ing] the trial court

in evaluating when an exaction is tantamount to a taking,” stating that,

[t]o determine whether an exaction amounts to an unconstitutional taking, the court shall: (1) identify the condition imposed; (2) identify the regulation which caused the condition to be imposed; (3) [and] determine whether the regulation substantially advances a legitimate state interest. If the regulation substantially advances a ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

legitimate state interest, the court shall then determine (4) whether the condition imposed advances that interest; and (5) whether the condition imposed is proportionally related to the impact of the development.

Id. at 621 (emphasis in original). After conducting what it believed to be the required

analysis, the Court of Appeals held that the challenged condition failed to satisfy the

final component of this “rational nexus” test because it was “not proportionately

related to the impact of the development” and there was “no commensurate benefit

to the subdivision for its forfeit of land to preserve the Parkway Plan.” Id. at 622.5

¶ 24 Shortly after deciding Batch, the Court of Appeals applied the “rational nexus

test” in evaluating the validity of a determination made by the City of Raleigh in

enforcing its setback ordinance by refusing to approve the plaintiff’s application for a

building permit unless the plaintiff agreed to dedicate a portion of its property for use

in widening a portion of the adjacent public street and to pay for the necessary paving

work. Franklin Road Properties, 94 N.C App. at 736–37. Although the “rational

nexus” test and definition of “exaction” utilized in these cases antedated the Supreme

5 Although this Court subsequently reversed the Court of Appeals’ decision in Batch, our decision rested upon a determination that the town had the authority to deny the plaintiff’s permit application on the grounds that the proposed subdivision plan failed to comply and coordinate with the town’s transportation plan, as required by a municipal ordinance. Batch, 326 N.C. at 12–13. In addition, we determined that the trial court erred by making its own findings of fact concerning the Town’s justification for denying the plaintiff’s permit application because those findings were not supported by the evidence in the record. Id. at 12. In light of these determinations, we concluded that we did not need to consider the lawfulness of the other reasons upon which the Town relied in denying the plaintiff’s permit application, expressly declining “to review or decide any of plaintiff’s constitutional claims or other issues arising in her complaint.” Id. at 14. ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

Court’s decisions in Dolan and Koontz, the Court of Appeals appropriately recognized

in this case that the “rational nexus” test enunciated in Batch closely resembles the

“essential nexus” and “rough proportionality” requirements set out in Nollan and

Dolan and that Franklin Road anticipated, at least to some extent, the Supreme

Court’s application of those criteria to “monetary exactions” in Koontz. Anderson

Creek Partners, 275 N.C. App. at 441–42. As a result, we find Batch and Franklin

Road helpful in resolving the issues that are before us in this case.

C. Classification of the “Capacity Use Fee”

¶ 25 A crucial, albeit non-dispositive, determination that we must make at the

beginning of our analysis is the manner in which the “capacity use” fees at issue in

this case should be classified. The County, on the one hand, contends that the

relevant payments are nothing more than the sort of “user fees” that we discussed in

Homebuilders Association of Charlotte v. City of Charlotte, 336 N.C. 37 (1994), and

that the United States Supreme Court discussed in decisions such as United States

v. Sperry Corporation, 493 U.S. 52, 53 (1989). Plaintiffs, on the other hand, assert

that the “capacity use” fees at issue in this case are “impact fees” that result in an

“exaction” as the Court of Appeals defined that term in Batch. 92 N.C. App. 613. In

our view, plaintiffs have the better of this disagreement.

¶ 26 As we clearly determined in Quality Built Homes I, “impact fees,” which are

designed to “offset [the] costs to expand [water and sewer] system[s] to accommodate ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

development,” are not the same as “user fees,” which are associated with the

contemporaneous provision of water and sewer service. 369 N.C. at 17, 21. According

to a well-recognized treatise concerning North Carolina land use law, impact fees are

“assessments upon the owners or developers of land made by local governments to

recoup the capital costs for services needed to serve new development” and are

collected as an alternative to the use of general tax revenues “to finance the new

roads, water, sewers, fire stations, public safety services, parks, schools, and other

public facilities that must be provided to service new development.” David C. Owens,

Land Use Law in North Carolina, p. 110 (3d ed. 2020). “User fees,” on the other hand,

are “charge[s] assessed for the use of a particular item or facility,” User Fee, Black’s

Law Dictionary (11th ed. 2019), include fees intended to cover the cost of regulatory

services provided by the relevant unit of government, Homebuilders Ass’n of

Charlotte, 336 N.C. at 42, and are generally upheld in the event that they are

reasonable, id. at 46. See also Sperry Corp., 493 U.S. at 62 (holding that a fee

deducted from money recovered by American claimants appearing before the Iran-

United States Claims Tribunal that was intended to recoup the costs of administering

the tribunal was a reasonable user fee rather than an unconstitutional taking).

¶ 27 Although the County labeled the payments at issue in this case as “capacity

use” fees and has denied that they constituted “impact fees,” the Court of Appeals

correctly treated these payments as “impact fees.” See Anderson Creek Partners, 275 ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

N.C. App. at 439. As the County admits in its brief, the challenged “capacity use”

fees are intended to “cover the cost of expanding the infrastructure of the water and

sewer system to accommodate the new development,” a description that falls squarely

within the definition of an “impact fee” discussed above.6 The fees at issue in this

case are not water and sewer service fees, paid by customers at a fixed rate in

accordance with their monthly metered water and sewer usage for the purpose of

paying for the service that they used. In addition, the challenged fees are not “tap-

on fees” paid at the time that individual lots are connected to the County’s water and

sewer system.7 Instead, the fees at issue in this case are intended to provide the

County with a contribution toward the cost of expanding its water and sewer

infrastructure to account for the additional customers that will be added as a result

of the developer’s development. Thus, the “capacity use” fees at issue in this case,

which are not intended to cover the cost of any service that is currently being provided

to the person paying them “at the time of actual use,” Quality Built Homes, I, 369

N.C. at 21, are clearly different from those at issue in Homebuilders Association of

Charlotte, which were specifically intended to “cover the costs of regulatory services

provided by the city,” including the labor costs associated with reviewing permit

6 As an aside, we note that the amicus curiae brief filed by the North Carolina Water Quality Association and the National Association of Clean Water Agencies in support of the County consistently refers to the challenged “capacity use” fees as “impact fees.” 7 The parties dispute whether plaintiffs have been charged separate “tap-on fees” in

addition to the “capacity use fees,” but resolution of that factual question is not germane to the issue that is before us in this case. ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

applications, 336 N.C. at 45. As a result, for all of these reasons, we hold that the

challenged “capacity use fees” are properly categorized as impact fees rather than

“user fees,” a determination that renders much of the authority upon which the

County relies inapplicable.

¶ 28 In addition, we conclude that the challenged “capacity use” fees are “exactions”

as the Court of Appeals used that term in Batch and as contemplated by the Supreme

Court in Koontz. As we have already noted, the definition of “exaction” set out in

Batch encompasses both “requirements that land be dedicated for street rights-of-

way, parks, or utility easements” and “requirements that developers pay ‘impact’ or

‘facility’ fees reflecting their respective prorated shares of the cost of providing new

roads, utility systems, parks, and similar facilities serving the entire area.” Batch,

92 N.C. App. at 613 (emphasis added). Although this Court has yet to specifically

define the term “exaction” for purposes of North Carolina law, we have not rejected

the definition that the Court of Appeals adopted in Batch and reiterated in both

Franklin Road Properties and more recently in TAC Stafford, LLC v. Town of

Mooresville, 2022-NCCOA-217, ¶ 34. The definition adopted by the Court of Appeals

in Batch is consistent with that set out in Black’s Law Dictionary, which defines a

“land-use exaction” as “[a] requirement imposed by a local government that a

developer dedicate real property for a public facility or pay a fee to mitigate the

impacts of the project, as a condition of receiving a discretionary land-use approval.” ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

Land-Use Exaction, Black’s Law Dictionary (11th ed. 2019). Finally, inclusion of a

monetary payment within the definition of an “exaction” is, in our view, fully

consistent with how that term was used in Koontz. As a result, we adopt the

definition of “exaction” set forth in the Court of Appeals’ decision in Batch as our own

and hold that the challenged “capacity use fees” constitute both “impact fees” and

“monetary exactions.”

D. Koontz and Generally Applicable Fees

¶ 29 In light of our determination that the challenged “capacity use” fees are

“impact fees” and “monetary exactions,” we must address the issue of whether those

fees are subject to the “unconstitutional conditions” doctrine enunciated in Nollan,

Dolan, and Koontz. According to plaintiffs, any “impact fee” assessed by a local

government should be treated as a “taking” subject to scrutiny under the

“unconstitutional conditions” doctrine regardless of whether the relevant fee is

assessed on an ad hoc basis or pursuant to a uniform, generally applicable

assessment and regardless of the identity of the governmental entity engaging in the

“taking.” In plaintiffs’ view, the challenged “capacity use” fees implicate the same

constitutional concerns that resulted in the adoption of the test delineated in Nollan

and Dolan. More specifically, plaintiffs argue that the ordinance requiring the

payment of “capacity use” fees “does not reflect any supporting analysis or

methodology that would ensure a sufficient ‘nexus’ or ‘proportionality’ to the ‘impact’ ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

of [p]laintiffs’ developments on the County’s water and sewer systems.” See American

Water Works Association, “M1 Manual, Principals of Water Rates, Fees, and Charges”

p. 324 (7th ed. 2017) (identifying the minimum “key criteria” for use in determining

whether a “rational nexus” exists as including system planning criteria financing

criteria, and compliance with state or local laws)). After noting that the County

doubled its capacity use fees between 2005 and the dates upon which they filed their

complaints in 2017, plaintiffs emphasize that the ordinance requires developers to

construct their own water and sewer infrastructure—in addition to paying the

capacity use fees—which must then be deeded to the county, arguing that

this contributed infrastructure for the County to use in the operation of its water and sewer system should reasonably be valued and factored into consideration of the true “impact” of [p]laintiffs’ developments and whether the fees still serve to “mitigate” any impact of the development above the value of [p]laintiffs’ infrastructure contributions, or if the fees instead lack the necessary “nexus” and “proportionality.”

Moreover, plaintiffs point out that “the fact that the 1998 [a]greement between the

County and the [water and sewer] districts provides that the impact fee revenue from

the individual districts [is] commingled in the County’s enterprise funds, without a

separate ‘equitable and pro-rata’ accounting for each [d]istrict, violates ‘nexus’ and

‘proportionality’ principles.” See AWWA Manual p. 343 (providing that a utility

should ensure that impact fees are “managed and used for the facilities needed to

provide service to new development in the utility’s service area.”). For all of these ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

reasons, plaintiffs contend that “impact fees inherently give rise to concerns involving

coercion and fairness which the ‘unconstitutional conditions’ doctrine is meant to

address.”

¶ 30 Secondly, plaintiffs contend that, contrary to the conclusion reached by the

Court of Appeals, the fact that the challenged “capacity use” fees are generally

applicable and were enacted by a legislative body, rather than being assessed on an

ad hoc basis by an administrative agency, does not exempt them from constitutional

scrutiny. According to plaintiffs, “[t]here is nothing in Nollan, Dolan, or Koontz to

support the view that the Supreme Court meant to limit application of the

unconstitutional conditions doctrine to ‘ad hoc’ or ‘administrative’ decisions,” with

“each of the three decisions [having] involved exactions that were legislatively

mandated,” a conclusion that has led two state appellate courts to apply “a version of

the Nollan/Dolan test” to impact fees. See N. Ill. Home Builders Ass’n v. Cnty. of Du

Page, 165 Ill.2d 25 (1995); Home Builders Ass’n of Dayton & the Miami Valley v.

Beavercreek, 89 Ohio St.3d 121 (2000)).

¶ 31 Plaintiffs assert that the Court of Appeals erred by relying upon Dabbs for a

number of reasons. First, plaintiffs contend that, as the Court of Appeals recognized,

Dabbs did not involve an application for the issuance of a permit conditioned on the

payment of money to the issuing governmental entity. See Anderson Creek Partners,

275 N.C. App. at 444. Secondly, plaintiffs note that “[t]he Court of Appeals went so ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

far as to say that ‘[t]his distinction speaks directly to the types of coercive harms that

the United States Supreme Court sought to prevent in Koontz’ ” before concluding

that it “did not find the distinction ‘material’ for the sole reason that ‘the fees were

predetermined and are uniformly applied.’ ” Id. “In essence,” plaintiffs argue, “the

Court of Appeals recognized that the County’s impact fees implicated the coercive

harms which the unconstitutional conditions doctrine seeks to prevent, but the court

was content that the legislative process would prevent those harms from

materializing.” Plaintiffs dispute the validity of this contention, arguing that “one of

the reasons impact fees are popular with local government[s] is the lack of political

opposition,” given that future residents, who will bear the cost of the impact fees in

the form of higher housing prices, do not currently vote. As a result, plaintiffs

conclude that the challenged “capacity use” fees are “monetary exactions” subject to

the “unconstitutional conditions” analysis enunciated in Koontz.

¶ 32 In seeking to persuade us to reach a different result, the County argues that

“[t]he unconstitutional conditions doctrine does not apply to generally applicable fees”

because “[a] fee charged by the government is not a ‘taking’ in the constitutional

sense.” In the County’s view, “[t]he established rule in North Carolina is that a

government’s power ‘to regulate an activity implies the power to impose a fee in an

amount sufficient to cover the cost of regulation,’ ” such that “a local government acts

reasonably ‘by requiring that those who desire a particular service bear some of the ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

costs associated with the provision of that service,’ ” quoting Homebuilders Ass’n of

Charlotte, 336 N.C. at 42, 45. According to the County, plaintiffs’ reliance upon

Koontz is misplaced because it “applies to ‘in lieu of’ fees” and plaintiffs “have not

alleged any such fees here.” The County argues that “[t]akings and fees ‘are

essentially different’ ” because, “when the government charges a fee or tax, it ‘only

exacts a contribution from individuals’ that is used ‘for the support of the government,

or to meet some public expenditure authorized by it, for which they receive

compensation in the protection which government affords, or in the benefits of the

special expenditure,’ ” quoting Mobile Cnty. v. Kimball, 102 U.S. 691, 703 (1880). In

the County’s view, “[i]t was a ‘well-settled’ rule even before Koontz ‘that the

government may require fees for public use of certain services without causing a

taking,’ ” quoting Dudley v. United States, 61 Fed. Cl. 685, 689 (2004)), with Koontz

having done nothing to “alter this well-settled rule.” In addition, the County contends

that “[f]ees that apply the same to everyone do not target ‘a specific parcel of real

property’ as required by Koontz, 570 U.S. at 614, citing several decisions from other

jurisdictions that it describes as holding that Koontz does not apply to “generally

applicable fees.”8

8 Among the decisions upon which the County relies in support of this assertion are Santiago-Ramos v. Autoridad de Energia Electrica de P.R., AEE, 834 F.3d 103, 107 (1st Cir. 2016) (concluding that the plaintiffs “cannot assert a valid property interest in funds paid for electricity” for purposes of Koontz because “[c]ustomers lose their interest in money paid to utilities companies for their service”); United States v. King Mountain Tobacco Co., 131 F. Supp. 3d 1088, 1092–93 (E.D. Wash. 2015) (finding Koontz inapplicable to quarterly ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

¶ 33 Next, the County argues that “[t]he overwhelming weight of authority is that

non-discretionary, generally applicable fees are not subject to the unconstitutional

conditions doctrine.” In support of this assertion, the County cites Building Industry

Association-Bay Area v. City of Oakland, in which a federal district court held that

an ordinance requiring developers to display or fund art as a condition of project

approval did not implicate Koontz. See 289 F. Supp. 3d 1056, 1057 (N.D. Cal. 2018).

According to the district court, Koontz did not hold that “generally applicable land-

use regulations are subject to facial challenge under the exactions doctrine” and held,

instead, “that the exactions doctrine applies to demands for money (not merely

demands for encroachments on property).” Id., 289 F. Supp. 3d at 1057–58. In

assessments collected from tobacco manufacturers by the Department of Agriculture), aff’d 745 F. App’x 700 (9th Cir. 2018); Fitchburg Gas & Elec. Light Co. v. Dep’t of Publ. Utils., 467 Mass. 768, 779 (2014) (rejecting an electric company’s claim that an annual assessment for the benefit of the state’s Storm Trust Fund constituted a per se taking, citing Koontz for the proposition that “[f]ederal courts have established that an obligation to pay money is not a per se taking where the obligation does not affect or operate on a specific, identified property interest.”); Page v. City of Wyandotte, 2018 WL 6331339, at *6 (Mich. Ct. App. Dec. 4, 2018) (per curiam) (unpublished) (holding that charges for water and cable services provided by the city were user fees that did not result in a taking); In re Buffets, LLC, 979 F.3d 366, 381 (5th Cir. 2020) (holding that federal legislation increasing the quarterly fees applicable to bankruptcy filings was not unconstitutional because “[t]axes and user fees are not takings under the Fifth Amendment”); Edmonson v. Fregmen, 590 F. App’x 613, 615 (7th Cir. 2014) (unpublished) (determining that the imposition of a freeze on an indigent prisoner’s trust account based upon a failure to pay court filing fees did not constitute an unconstitutional taking and was, instead, a “reasonable user fee” for “reimbursement of the cost of government services”); Better Hous. for Long Beach v. Newsom, 452 F. Supp. 3d 921, 934–35 (C.D. Cal. 2020) (rejecting an argument that Koontz “expanded the definition of per se takings to include all government-imposed financial obligations ‘linked to a specific, identifiable piece of property’ ” and concluding that a state law requiring landlords to pay or waive one month’s rent before terminating a residential tenancy under certain circumstances did not constitute a per se taking). ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

addition, the County cites Douglass Properties II, LLC v. City of Olympia, in which

the Washington Court of Appeals held that conditioning the issuance of a building

permit upon the payment of a generally applicable traffic impact fee did not implicate

Koontz because, even though “Koontz expanded the scope of takings that require

Nollan/Dolan scrutiny to include ‘monetary exactions,’ it did not expand that scope

to include legislatively prescribed development fees like those at issue here.” 16

Wash. App. 2d 158, 171 (2021). The distinctions made in these cases make sense, in

the County’s view, “because the ‘sine qua non’ for application of the

Nollan/Dolan/Koontz analysis is the ‘discretionary deployment of the police power

in the imposition of land-use conditions in individual cases,’ ” quoting Action

Apartment Ass’n v. City of Santa Monica, 82 Cal. Rptr. 3d 722, 732 (Cal. Ct. App.

2008)).9 According to the County, “[w]hen a government imposes a generally

9 In addition, the County directs our attention to Tex. Manufactured Hous. Ass’n v. City of Nederland, 101 F.3d 1095, 1105 (5th Cir. 1996) (declining to apply Nollan to a municipal zoning ordinance that prohibited placement of manufactured homes on any lot within the city outside a designated trailer park and observing that the plaintiff landowner had not been singled out for differential treatment like the landowner before the Court in Nollan); Harris v. City of Wichita, 862 F. Supp. 287, 294 (D. Kan. 1994) (declining to apply the Dolan “rough proportionality” test to zoning regulations prohibiting the use of property surrounding an Air Force base on the grounds that the regulations (1) “are land use restrictions and do not impose upon plaintiffs the obligation to deed portions of their land to the local government,” (2) that the city’s and county’s decisions “were legislative rather than adjudicative in nature,” and (3) the regulations affected all of the land surrounding the Air Force base, “not merely the individual parcels owned by plaintiffs”); Krupp v. Breckenridge Sanitation Dist., 19 P.3d 687, 696–97 (Colo. 2001) (determining that Nollan and Dolan did not apply to a one-time “plant-improvement fee” that was intended to defray the cost of expanding the sanitation district’s infrastructure despite the fact that the payment of the fee was a prerequisite for the issuance of a building permit on the grounds that the fee was a ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

applicable fee, it is not subject to the same test . . . even when the fees have some

connection to property development.”

¶ 34 The County contends that, “as in Dabbs, the County’s water and sewer fees are

‘predetermined, based on a specific monetary schedule,’ and apply ‘to any person

wishing to develop property in the district,’ ” quoting Dabbs, 458 Md. at 353. As a

result, the County asserts that “[f]ees that are ‘imposed on a generally applicable

basis are not subject to a rough proportionality or nexus analysis,’ ” quoting Dabbs,

“generally applicable service fee on all new development within the [d]istrict,” no adjudication was involved, and the fee was “purely a monetary assessment rather than a dedication of real property for public use”); Greater Atlanta Homebuilders Ass’n v. DeKalb Cnty., 277 Ga. 295, 297–98 (2003) (refusing to apply Dolan to a county tree preservation ordinance because it “involve[d] “a facial challenge to a generally applicable land-use regulation” that resulted from a “legislative determination” rather than “an adjudicative decision”); Arcadia Dev. Corp. v. City of Bloomington, 552 N.W. 2d 281, 286 (Minn. Ct. App. 1996) (concluding that the Dolan “rough proportionality” standard did not apply to a city ordinance requiring mobile home park owners to assist residents with relocation costs when the park closed on the grounds that a Dolan analysis is only required for “adjudicative determinations that condition approval of a proposed land use on a property transfer to the government”); Home Builders Ass’n of N. Cal. v. City of Napa, 108 Cal. Rptr. 2d 60, 65–66 (Cal. Ct. App. 2001) (declining to apply Nollan and Dolan to a city inclusionary zoning ordinance that required residential property developers to dedicate 10 percent of their developed land to affordable housing or, in the alterative, to pay an “in-lieu fee” on the grounds that the ordinance did not involve a “land use bargain between a governmental agency and a person who wants to develop his or her land” and was, instead, “economic legislation that is generally applicable to all development in [the] City”) (emphasis in original); Common Sense Alliance v. Growth Mgmt. Hearings Bd., 2015 WL 4730204, at *7 (Wash. Ct. App. Aug. 10, 2015) (unpublished) (rejecting a facial challenge to a county ordinance requiring that habitat buffers and tree protection zones be provided as a prerequisite for development approval within the relevant county on the grounds that “it appears that the courts have confined Nollan/Dolan analysis to land use decisions that condition approval of a specific project on a dedication of property to public use” and that “legislative determinations do not present the same risk of coercion as adjudicative decisions”). ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

458 Md. at 353. In the same vein, the County denies that Dabbs is some sort of

outlier, citing San Remo Hotel L.P. v. City & County of San Francisco, in which the

Supreme Court of California held that the Nollan/Dolan test did not apply to

“development fees that are generally applicable through legislative action because

the heightened risk of the ‘extortionate’ use of the police power to exact

unconstitutional conditions is not present.” 27 Cal. 4th 643, 668 (2002) (cleaned up).

As a result, the California Supreme Court held that, while “individualized

development fees warrant a type of review akin to the conditional conveyances at

issue in Nollan and Dolan . . . generally applicable fees warrant a more deferential

type of review.” Id. (cleaned up).

¶ 35 The County contends that the Court of Appeals “joined [the] overwhelming line

of authority” by holding that Koontz did not apply to generally applicable legislative

fees and that plaintiffs “have not cited a single case” in which a court held to the

contrary. In the County’s view, the cases cited by plaintiffs either did not involve a

generally applicable fee or were decided based upon state law, rather than the federal

constitution. In addition, the County argues that plaintiffs’ argument is flawed

because “[t]he Supreme Court has said that the rough proportionality test requires

the government to ‘make some sort of individualized determination,’ [512 U.S. Dolan

at 391] ” but that “generally applicable fees, by their very nature, cannot contain an

individualized determination” and indeed “are more fair because they lack the ad hoc, ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

discretionary nature that comes into play in the unconstitutional conditions

doctrine.” According to the County, generally applicable fees like those at issue in

this case mitigate any concerns about the lack of transparency inherent in ad hoc

exactions because “all landowners are aware of the fees in advance” and, “[i]f they

choose to develop property in the County, they know what the cost will be.”

¶ 36 Next, the County claims that plaintiffs erroneously contend that Koontz

answered the question before the Court in this case on the theory that the issue of

“whether the monetary assessment is made by a legislature or an administrator” is

“a red herring.” From the County’s perspective, the “capacity use” fees at issue in

this case “are not permissible because they are ‘legislative;’ ” instead, the County

contends that the challenged “capacity use” fees “are generally applicable, non-

discretionary, and set in advance,” with “the relevant line” between fees that do and

do not implicate the “unconstitutional conditions” doctrine being “the nature of the

government action, not the branch of government that is acting.”

¶ 37 In the County’s view, plaintiffs’ argument should also fail because “they never

identified a constitutional right that they were coerced into giving up.” According to

the County, “[t]here is no constitutional right to expand or use an existing water and

sewer system” or “not to pay fees for government services.” The County argues that

“the water and sewer districts could ‘command directly’ that those who seek to expand

the water and sewer systems pay for that expansion” and that “the water and sewer ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

fees would not ‘otherwise require just compensation,’ ” citing Koontz, 570 U.S. at 604–

05. In addition, the County asserts that, even though the “unconstitutional

conditions” doctrine requires some sort of coercion by the government, plaintiffs have

“not allege[d] coercion of any kind” and that “[r]equiring a developer to pay the same

fee as everyone else for certain services can hardly be described as the ‘out and out

plan of extortion’ targeted by the Supreme Court,” quoting Nollan, 483 U.S. at 837.

In other words, the County argues that, “[w]hen a payment is made in exchange for

services offered by the government, the coercive element is missing,” with the

necessary coercion being absent in this case because “[plaintiffs] wanted to connect to

the County’s water and sewer system.”

¶ 38 The County asserts that, while plaintiffs “could have used their properties for

other purposes” or “sought to develop properties that used well water and septic

tanks,” they “elected to use their developments’ connection to the County’s water and

sewer system as a way to increase density and market their homes to potential

buyers.” In the County’s view, “[i]t was not an unlawful ‘exaction’ to ask [plaintiffs]

to pay a standard fee for a service desired to improve the system that buttressed the

sale prospects of their investment” given that new housing developments “place

pressure on the water and sewer system and use portions of its capacity, which is ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

why each new development must offset some of the costs of improving and expanding

the existing system.”10

¶ 39 The County argues that the legislative process, rather than the courts, is the

proper forum for consideration of plaintiffs’ complaints on the theory that, “[i]f

someone considers a generally applicable fee exorbitant, the fee is ‘subject to the

ordinary restraints of the democratic political process,’ ” because “[a] government

‘that charged extortionate fees for all property development, unjustifiable by

mitigation needs, would likely face widespread and well-financed opposition at the

next election,’ ” quoting San Remo Hotel, 27 Cal. 4th at 671. On the other hand, the

County asserts that the judicial branch has no role in resolving the present dispute

given that “ ‘the Takings Clause is meant to bar [the] [g]overnment from forcing some

people alone to bear public burdens which, in all fairness and justice, should be borne

by the public as a whole’ ” and that “[j]ustice does not require that current residents

pay for new costs created by incoming developments,” quoting Lingle v. Chevron

U.S.A., Inc., 544 U.S. 528, 542 (2005)). According to the County, “[t]he ‘capacity fees’

at issue here are not ‘cost recovery mechanisms,’ but rather a means to ‘equitably

10 The County also argues in a footnote that “the coercive element is missing here because the County does not even control the permit at issue” and, instead, “merely conditions its concurrence on an application for a permit from the State—another governmental entity,” with this fact serving to distinguish this case from Nollan, Dolan, and Koontz. However, it is not clear from the record (nor does either party explain) whether the county’s concurrence is required for the Department of Environmental Quality to approve the permits at issue. Assuming that it is, the County’s argument on this point is a meaningless distinction. ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

allocate to new users access to an existing system possessing an existing value’ and

a ‘resource through which the utility purveyor may fund necessary capital

improvements to the utility system,’ ” quoting Landmark Dev., Inc. v. City of Roy, 138

Wash.2d 561, 572 (1999), and that “[n]othing in the Constitution forbids ‘permitting

authorities [from] insist[ing] that applicants bear the full costs of their proposals’ so

long as they do not ‘engag[e] in out-and-out extortion,’ ” quoting Koontz, 570 U.S. at

606.

¶ 40 Furthermore, the County contends that a decision to accept plaintiffs’

argument would “subject every fee payment to a governmental entity to the

Nollan/Dolan/Koontz analysis,” a result that would be “unworkable” given that local

governments have been permitted to charge fees for varied purposes, including using

a city’s parking facilities, opening graves in a cemetery, issuing permits for the

operation of flea markets, granting licenses to engage in certain trades and

occupations, registering golf carts, collecting garbage, accessing regional sports

facilities, or using natural gas service. According to the County, “[e]xpanding the

unconstitutional conditions doctrine to cover fees like these would cripple the ability

of governments to tax, mandate fees, and levy other types of monetary payments that

finance and make possible the services that governments provide.” In addition, the

County argues that “[i]t would be improper to allow [plaintiffs] to recoup the fees

when they have presumably passed on those costs to others,” resulting in a “windfall” ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

to them. See 36 Am. Jur. 3d Proof of Facts 417 (1996) (describing how developers

pass costs associated with expanding infrastructure to ultimate purchasers in the

form of higher prices for land and construction)).

¶ 41 In addition to their assertion that the challenged “capacity use” fees were

subject to an “unconstitutional conditions” analysis pursuant to Nollan, Dolan, and

Koontz, the County argues that plaintiffs have failed to allege sufficient facts to

support a conclusion that the relevant fees did not satisfy the “essential nexus” and

“rough proportionality” test given the County’s legitimate interests in mitigating the

impact of the cost of expanding existing infrastructure upon existing customers or the

taxpayers. According to the County, plaintiffs have alleged that “the water and sewer

fees are imposed to connect new developments to the County’s existing water and

sewer systems” and have “acknowledge[d] the minimal amounts charged by the

County.” More specifically, the County argues that plaintiffs have “alleged that the

water and sewer fees are used for improvements to the water and sewer system,” so

as to satisfy the “essential nexus” requirement, and that plaintiffs have “alleged no

facts to show that the [$2,200 in fees per residential property] was disproportionate

to the effect of new development on the County’s water and sewer system,” with their

legal conclusion to this effect not needing to “be credited at the Rule 12 stage.” See

Azure Dolphin, LLC v. Barton, 371 N.C. 579, 599 (2018). In addition, the County

claims that showing “rough proportionality” does not require the use of a “formulaic ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

analysis” or “invite judges to pull out calculators or create spreadsheets to check a

local government’s math.” On the contrary, the County contends that the inquiry

involves the exercise of “common sense” and that the “capacity use” fees described in

the complaint “meet that common-sense test and do not require a further factual

inquiry.”

¶ 42 A careful review of the record and the applicable law convinces us that the

County’s capacity use fees are subject to scrutiny under the “essential nexus” and

“rough proportionality” tests articulated in Nollan and Dolan. In Koontz, the

Supreme Court specifically held that “the government’s demand for property from a

land-use permit application must satisfy the requirements of Nollan and Dolan even

when the government denies the permit and even when its demand is for money,” 570

U.S. at 619 (emphasis added), with the Supreme Court’s reference to “in lieu of” fees,

rather than limiting the reach of the Supreme Court’s decision, simply being a

response to the Florida Supreme Court’s conclusion that a governmental demand for

money rather than an interference in tangible property rights did not constitute a

taking. As the Supreme Court explained,

if we accepted this argument it would be very easy for land- use permitting officials to evade the limitations in Nollan and Dolan. Because the government need only provide a permit applicant with one alternative that satisfies the nexus and rough proportionality standards, a permitting authority wishing to exact an easement could simply give the owner a choice of either surrendering an easement or making a payment equal to the easement’s value. Such so- ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

called “in lieu of” fees are utterly commonplace and they are functionally equivalent to other types of land use exactions. . . . [W]e reject respondent’s argument and hold that so-called ‘monetary exactions’ must satisfy the nexus and rough proportionality requirements of Nollan and Dolan.

Id. at 612. Based upon this logic, the Supreme Court held that “[t]he fulcrum this

case turns on is the direct link between the government’s demand and a specific

parcel of real property,” id. at 614, and that this link

implicates the central concern of Nollan and Dolan: the risk that the government may use its substantial power and discretion in land-use permitting to pursue governmental ends that lack an essential nexus and rough proportionality to the effects of the proposed new use of the specific property at issue, thereby diminishing without justification the value of the property.

Id. As a result, we conclude that the “monetary exactions” with which Koontz was

concerned were not limited to “in lieu of” fees and, instead, encompassed a broader

range of governmental demands for the payment of money as a precondition for the

approval of a land-use permit.11

¶ 43 In arguing that the principles enunciated in Koontz are inapplicable to the

challenged “capacity use” fees on the grounds that “[f]ees that apply the same to

everyone do not target ‘a specific parcel of real property,’ ” Koontz, 570 U.S. at 614,

11The dissent in Koontz objected to the majority’s decision, in part, because it extended the Nollan/Dolan test “to all monetary exactions” and limited the flexibility of local governments “to mitigate a new development’s impact on the community[.]” Koontz, 570 U.S. at 629 (Kagan, J., dissenting) (emphasis in original). As plaintiffs point out, this statement recognizes that the Court’s holding was not limited to “in lieu of” fees. ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

the County overlooks the fact that, by emphasizing the “specific parcel of real

property” at issue in that case, the Supreme Court sought to distinguish Koontz from

Eastern Enterprises v. Apfel, 524 U.S. 498 (1998), in which a majority of the Supreme

Court agreed that a federal statute that required a coal mining company to pay

medical benefits for retired miners and their families did not constitute a taking for

constitutional purposes because “the Takings Clause does not apply to government-

imposed financial obligations that ‘d[o] not operate upon or alter an identified

property interest.’ ” Koontz, 570 U.S. at 613 (quoting E. Enters., 524 U.S. at 540

(Kennedy, J., concurring in the judgment)). As the Supreme Court explained in

Koontz, “[u]nlike the financial obligation in Eastern Enterprises, the demand for

money at issue [in Koontz] did ‘operate upon . . . an identified property interest’ by

directing the owner of a particular piece of property to make a monetary payment.”

Id. The same is true in this instance given that, by requiring the payment of the

challenged “capacity use” fees as a precondition for its concurrence in applications for

the issuance of the necessary water and sewer permits, the County is “directing the

owner[s] of [each] particular piece of property to make a monetary payment,”

regardless of whether the same fee is applicable to all tracts of property and

regardless of who owns the property. Id. In other words, the fee at issue in this case

is, in fact, linked to a specific piece of property, in each case the specific parcel of land

that has been proposed for development. ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

¶ 44 In addition, a careful examination of Koontz does not suggest that its holding

is limited to “ad hoc” fees or exempts “non-discretionary, generally applicable fees,”

with this position having been advocated for in the dissenting opinion, rather than

that of the majority. See Koontz, 570 U.S. at 628 (Kagan, J., dissenting) (suggesting

that, in the future, “[t]he majority might, for example, approve the rule, adopted in

several States, that Nollan and Dolan apply only to permitting fees that are imposed

ad hoc and not to fees that are generally applicable” while acknowledging that the

majority had not clearly resolved this issue). In the same vein, we are not persuaded

that the non-discretionary, generally applicable nature of the “capacity use” fees at

issue in this case eliminates or mitigates the “coercive pressure” concerns that

motivated the Supreme Court in Nollan, Dolan, and Koontz given that, regardless of

whether the fee is imposed on a single developer or on all developers, the County is

exercising its “substantial power and discretion in land-use permitting” to exact

money from those wishing to develop their land.12 In the absence of any sort of

limitation upon the County’s authority to condition permit approval or concurrence

in permit approval upon the payment of fees, the County would have the unfettered

Despite the fact that the challenged “capacity use” fees are generally applicable, the 12

County retains “discretion” in the sense that it may, at any time, decide to increase the amount of the impact fee, an authority it exercised when it doubled the fees between 2005 and 2017. ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

ability to increase the relevant fees substantially or to use the proceeds from the

payment of the challenged fees for purposes unrelated to the development.

¶ 45 Similar concerns have been reflected in a number of prior decisions by this

Court. In Lanvale Properties, LLC v. County of Cabarrus, Cabarrus County had

adopted an “adequate public facilities ordinance” that “effectively condition[ed]

approval of new residential construction projects on developers paying a fee to

subsidize new school construction to prevent overcrowding in the [c]ounty’s public

schools.” 366 N.C. 142, 143 (2012). In holding that the county lacked the authority

to implement the ordinance through the exercise of its zoning power on the grounds

that the ordinance did not “define the specific land uses that are permitted, or

prohibited, within a particular zoning district,” we noted that the relevant fees had

increased by over 1,600 percent from 2003 to 2008 and concluded that the ordinance

was nothing more than “a carefully crafted revenue generation mechanism that

effectively establishes a ‘pay-to-build’ system for developers.” Id. at 160–61. After

rejecting the county’s argument that the relevant fees constituted “voluntary

mitigation payments” on the grounds that several members of the county commission

had stated that approval of the required construction permits was conditioned on the

county’s receipt of payment, we opined that “[r]ecognizing that the [c]ounty’s

[ordinance] could generate significant amounts of revenue from a possibly unpopular

group—residential developers—the [board of commissioners] substantially increased ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

its adequate public facilities fee over a five year period,” thereby “illustrat[ing] the

precise harm that may occur when [such ordinances] are adopted absent specific

enabling legislation.” Id. at 162.

¶ 46 Similarly, in Quality Built Homes v. Town of Carthage, the Town of Carthage

operated a public water and sewer system for the benefit of its residents and, as part

of that service, adopted two ordinances that required the assessment of “water and

sewer impact fees” for new developments that were designed to cover the cost of

expanding its existing water and sewer infrastructure to accommodate those

developments. 371 N.C. 60, 61–62 (2018) (Quality Built Homes II). After this Court

determined that the town lacked the authority to assess such fees in Quality Built

Homes I, we remanded that case to the Court of Appeals “to address whether [the]

plaintiffs’ claims were barred by the applicable statute of limitations or the doctrine

of estoppel by the acceptance of benefits.” Id. at 62 (describing the Court’s action in

Quality Built Homes I, 369 N.C. at 19–22). In a second appeal arising from the Court

of Appeals’ decision on remand, this Court rejected the town’s estoppel by benefits

argument on the grounds that

plaintiffs do not appear to have received any benefit from the payment of the challenged water and sewer impact fees that they would not have otherwise been entitled to receive. As we held in [Virginia-Carolina Peanut Co. v. Atlantic Coast Line R. Co., 166 N.C. 62, 74–75 (1914)], in an instance in which “[t]he only alternative was to submit to an illegal exaction or discontinue its business,” the ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

payment of money “under such pressure[ ] has never been regarded as a voluntary act.”

Quality Built Homes II, 371 N.C. at 75.

¶ 47 Admittedly, neither Lanvale Properties nor Quality Built Homes II addressed

a Takings Clause claim or referenced Koontz and Lanvale Properties antedates

Koontz. Nevertheless, this Court expressed concern in both of these decisions that

local governments might use impact fee ordinances to force landowners to choose

between paying a monetary exaction or forgoing development of their land entirely.

The Court of Appeals recognized this concern in its discussion of Dabbs when it

acknowledged that the Maryland case “is distinguishable from the present case”

because, unlike the challenged “capacity use” fees, “the fees at issue [in Dabbs] were

not ‘a conditional monetary payment to obtain approval of an application for a permit

of any particular kind,’ ” Anderson Creek Partners, 275 N.C. App. at 444 (quoting

Dabbs, 458 Md. at 353), before observing that “[t]his distinction speaks directly to the

types of coercive harms that the United States Supreme Court sought to prevent in

Koontz” given that “the unconstitutional conditions doctrine seeks to prevent the

government from leveraging its legitimate interest in mitigating harms by imposing

‘[e]xtortinate demands’ which may ‘pressure [a landowner] into voluntarily giving up

property for which the Fifth Amendment would otherwise require just compensation,’

” id. (quoting Koontz, 57 U.S. at 605–06). Even so, the Court of Appeals found this

distinction to be immaterial on the grounds that, ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

[r]egardless of whether the [f]ees were to be paid prior to or after [plaintiffs] began their projects, the fees were predetermined and are uniformly applied—not levied against [plaintiffs] on an ad hoc basis—and thus do not suggest any intent by the County to bend the will or twist the arm of [plaintiffs].

Id. We do not find this logic to be persuasive.

¶ 48 As an initial matter, the fact that the ordinance at issue in Dabbs did not

condition the issuance of a permit upon the payment of the impact fee was the very

reason that the Maryland Court of Appeals deemed Koontz to be inapplicable in that

case. See Dabbs, 458 Md. at 353. Aside from this significant distinction, we note that

conditioning permit approval upon a landowner’s decision to relinquish a property

right goes to the heart of the manner in which the “unconstitutional conditions”

doctrine has been deemed to be applicable in the land use context and animated the

concerns that led to the Supreme Court’s decision in Koontz. See 570 U.S. at 605

(observing that, “[b]y conditioning a building permit on the owner’s deeding over a

public right-of-way, for example, the government can pressure an owner into

voluntarily giving up property for which the Fifth Amendment would otherwise

require just compensation”). Finally, the Court of Appeals’ determination that,

because the challenged “capacity use” fees were “predetermined” and “uniformly

applied,” they “do not suggest any intent by the County to bend the will or twist the

arm of [plaintiffs],” Anderson Creek Partners, 275 N.C. App. at 444, overlooks the fact

that the test enunciated in Nollan and Dolan is designed to address the risk that local ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

governments might use their permitting power to coerce landowners into

relinquishing property, with the extent to which the local government actually

attempted to engage in such conduct representing a separate issue going to the merits

of the claim rather than the identity of the legal standard used to evaluate such

claims. Although the trial court may very well conclude on remand from our decision

in this case that the County’s capacity use fees satisfy both the “essential nexus” and

“rough proportionality” requirements and do not, for that reason, result in a “taking,”

such a determination is irrelevant to the resolution of the issue of whether the

“essential nexus” and “rough proportionality” test must be satisfied in the first place.

As a result, we cannot agree with the Court of Appeals’ determination that Dabbs

provides the appropriate framework for use in deciding this case.

¶ 49 Aside from its reliance upon Dabbs, the County directs our attention to what

it claims to be “[t]he overwhelming weight of authority” that “non-discretionary,

generally applicable fees are not subject to the unconstitutional conditions doctrine.”

A careful analysis of the decisions upon which the County relies in making this

argument shows that most of them were decided prior to Koontz, do not address the

lawfulness of land-use exactions, or both, leaving only decisions such as Building

Industries Association-Bay Area, 289 F. Supp. 3d at 1057–08, Douglass Properties II,

LLC, 16 Wash. App. 2d at 171, and American Furniture Warehouse Co. v. Town of

Gilbert, 245 Ariz. 156 (Ct. App. 2018) (concluding that “Koontz did not hold that Dolan ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

applied to generally applicable legislative development fees” such as those used to

develop traffic signal systems), to support the County’s position. Aside from the fact

that none of these decisions are binding on this Court, we are not persuaded by their

reasoning or their interpretation of Koontz, which generally echo the arguments

advanced by the County in its brief and strike us as inconsistent with existing North

Carolina precedent relating to the validity of land use exactions and the logic upon

which Koontz rests. As a result, we do not find these decisions persuasive as we

attempt to understand the force and effect of the principles enunciated in Koontz as

applied to the facts of this case.

¶ 50 In addition, we are not persuaded that the applicability of the test enunciated

in Nollan and Dolan depends upon whether the challenged condition was imposed

administratively or legislatively. As at least one member of the Supreme Court has

recognized, the lower courts have reached differing conclusions with respect to this

issue, which the Supreme Court has yet to address. See Cal. Bldg. Indus. Ass’n v.

City of San Jose, 577 U.S. 1179 (2016) (Thomas, J., concurring in the denial of

certiorari).13 After carefully reviewing the relevant decisions, we agree with plaintiffs

13 A number of courts have applied the test enunciated in Nollan and Dolan to generally applicable, legislatively imposed impact fees such as those at issue in this case, see e.g., Beavercreek, 89 Ohio St.3d at 128; Curtis v. Town of S. Thomaston, 1998 Me. 63 (1998); N. Ill. Home Builders Ass’n, Inc., 165 Ill.2d at 28, while others have limited the applicability of that test to administratively imposed conditions, see, e.g., St. Clair Cnty. Home Builders Ass’n v. City of Pell City, 61 So.3d 992 (Ala. 2010); Spinell Homes, Inc. v. Mun. of Anchorage, 78 P.3d 692 (Alaska 2003); Home Builders Ass’n of Cent. Ariz. V. City of Scottsdale, 187 Ariz. 479 (1997). ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

that nothing in Nollan, Dolan, or Koontz supports a view that those decisions only

apply in the context of “administrative” decisions,14 with the Supreme Court having

consistently described the “unconstitutional conditions” doctrine as “preventing the

government from coercing people into giving up” a constitutional right rather than

preventing a particular branch of government from acting in a particular manner.

Koontz, 570 U.S. at 604 (emphasis added); see also Dolan, 512 U.S. at 385 (noting that

“the government may not require a person to give up a constitutional right—here the

right to receive just compensation when property is taken for a public use—in

exchange for a discretionary benefit conferred by the government where the benefit

sought has little or no relationship to the property”) (emphasis added).

¶ 51 Admittedly, the fact that the challenged “capacity use” fees were imposed as

the result of a legislative, rather than an administrative, process, may tend to suggest

that those fees “more likely represent[ ] a carefully crafted determination of need

tempered by the political and legislative process rather than a ‘plan of extortion’

directed at a particular landowner.” Curtis, 1998 Me. 63, ¶ 7 (citing Dolan, 512 U.S.

14 A number of courts have focused on language from Dolan distinguishing prior cases upholding the constitutionality of land use planning from the situation before the Court in that case because those prior decisions “involved essentially legislative determinations classifying entire areas of the city, whereas here the city made an adjudicative decision to condition petitioner’s application for a building permit on an individual parcel,” 512 U.S. at 385. See, e.g., St. Clair Cnty. Home Builders Ass’n, 61 So.3d at 1007. However, those prior cases involved zoning power and general land-use regulations rather than impact fees. See Agins v. City of Tiburon, 447 U.S. 255 (1980), abrogated by Lingle, 544 U.S. at 528; Village of Euclid, 272 U.S. at 365; Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922). ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

at 387). In light of that logic, the General Assembly’s recent decision to enact the

Public Water and Sewer System Development Act, S.L. 2017-138, 2017 N.C. Sess.

Laws 996, which provides uniform guidelines for the implementation of water and

sewer system development fees on a prospective basis, suggests that, in the future,

such fees are likely to satisfy the “essential nexus” and “rough proportionality”

requirement enunciated in Nollan and Dolan. Even so, as a constitutional matter,

we believe that a decision to limit the applicability of the test set out in Nollan and

Dolan to administratively determined land-use exactions would undermine the

purpose and function of the “unconstitutional conditions” doctrine. See James

Burling & Graham Owen, The Implications of Lingle on Inclusionary Zoning and

other Legislative and Monetary Exactions, 28 Stan. Envtl. L. J., 397, 438 (2009)

(observing that “[g]iving greater leeway to conditions imposed by the legislative

branch is inconsistent with the theoretical justifications for the doctrine because

those justifications are concerned with questions of the exercise [of] government

power and not the specific source of that power”); David L. Callies, Regulatory

Takings and the Supreme Court: How Perspectives on Property Rights Have Changed

from Penn Central to Dolan, and What State and Federal Courts Are Doing About It,

28 Stetson L. Rev. 523, 567–68 (1999) (finding “little doctrinal basis beyond blind

deference to legislative decisions to limit [the application of the test enunciated in

Nollan and Dolan] only to administrative or quasi-judicial acts of government ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

regulators”); see also Town of Flower Mound v. Stafford Ests. Ltd. P’ship, 135 S.W.3d

620, 641 (Tex. 2004) (expressing skepticism that “a workable distinction can always

be drawn between actions denominated adjudicative and legislative” and noting that

the conditions under consideration in both Nollan and Dolan were imposed pursuant

to authority granted by state law). At the end of the day, we conclude that the

applicability of the test enunciated in Nollan and Dolan hinges upon the fact that the

government has demanded property from a land-use permit applicant, either through

a dedication of land or the payment of money, as a pre-condition for permit approval

rather than the identity of the governmental actor that imposed the challenged

condition. See Koontz, 570 U.S. at 619.

¶ 52 We are equally unpersuaded by the County’s contention that plaintiffs “never

identified a constitutional right that they were coerced into giving up” or “allege[d]

coercion of any kind. According to their complaint, plaintiffs’ claim rests upon a

contention that, in accordance with Koontz, “[m]onetary exactions by a local

government as a condition to development approval, plat approval, permit approval,

and/or approval of construction, which are designed to offset the impact of a proposed

development phase, must bear an essential nexus or rough proportionality to the

impact that the development will have on existing infrastructure.” In this case,

payment of the challenged “capacity use” fees is not just a requirement to ensure that

adequate water and sewer capacity is available to for plaintiffs’ developments, but ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

also a precondition for the County’s support for the issuance of a water and sewer

permit from the Department of Environmental Quality. For that reason, we have

little difficulty in concluding that plaintiffs have contended that the County violated

the “unconstitutional conditions” doctrine set out in Koontz, Dolan, and Nollan, which

rests upon the Fifth Amendment right to be free from governmental takings of one’s

property without just compensation. See Koontz, 570 U.S. at 605.

¶ 53 Similarly, the County’s decision to condition its support for the issuance of the

required water and sewer permits upon the payment of the challenged “capacity use”

fees is inherently coercive in the constitutional sense. See id. at 614 (recognizing that

the “central concern” underlying Nollan and Dolan was “the risk that the government

may use its substantial power and discretion in land-use permitting to pursue

governmental ends that lack an essential nexus and rough proportionality to the

effects of the proposed new use of the specific property at issue”). The County’s

contention that it had not engaged in any coercive conduct in this instance because

“[plaintiffs] wanted to connect to the County’s water and sewer system” and “could

have used their properties for other purposes” or “sought to develop properties that

used well water and septic tanks” is not persuasive for several reasons.

¶ 54 As an initial matter, we note that the payment of the challenged “capacity use”

fees was not just necessary to permit the landowner to connect to the County’s water

and sewer system; instead, as we have already explained, the making of those ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

payments implicated plaintiff’s ability to develop their property at all given that

plaintiffs were required to pay the challenged “capacity use” fees before the County

would support plaintiffs’ applications for the issuance of a water and sewer permit,

with the issuance of such a permit constituting a necessary precondition for the

recording of a residential subdivision plot. In other words, as a practical matter,

plaintiffs would have been unable to proceed with their development plans had they

refused to make the necessary “capacity use” fee payments to the County, a situation

that places them squarely within the ambit of Nollan, Dolan, and Koontz. In the

same vein, the fact that plaintiffs “could have used their properties for some other

purposes” would have been equally true of the plaintiffs in each of the other relevant

Supreme Court land-use exactions cases, with none of those cases having held that

the availability of alternative uses for the plaintiff’s property sufficed to justify an

otherwise unconstitutional land-use exaction.15

15 This argument might be relevant to a contention that the County’s ordinance amounts to a “regulatory taking,” in which government action violates the Takings Clause because it “denies [a landowner] all economically beneficial or productive use of [his or her] land.” Lucas v. S.C. Coastal Council, 505 U.S. 1003, 1015 (1992). Plaintiffs have not advanced any sort of “regulatory taking” claim in this case and we do not believe the facts would support such a claim. The imposition of the challenged “capacity use” fee at issue in this case is simply not a regulation of the type discussed by the Supreme Court in Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978), which held that a New York City law placing restrictions upon development activities involving individual historic landmarks was not an unconstitutional regulatory taking but was, instead, a valid exercise of the City’s police power. See Lingle, 544 U.S. at 528 (noting that cases involving “the special context of land-use exactions” are governed by Nollan and Dolan, rather than Penn Central); see also Lanvale Properties, 366 N.C. at 160 (holding that an ordinance requiring residential ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

¶ 55 Similarly, we are not persuaded by the County’s argument that plaintiffs’

concerns should be directed to the legislative, rather than the judicial, branch. To be

sure, the Supreme Court of California has opined that,

[w]hile legislatively mandated fees do present some danger of improper leveraging, such generally applicable legislation is subject to the ordinary restraints of the democratic political process. A city council that charged extortionate fees for all property development, unjustifiable by mitigation needs, would likely face widespread and well-financed opposition at the next election. Ad hoc individual monetary exactions deserve special judicial scrutiny mainly because, affecting fewer citizens and evading systematic assessment, they are more likely to escape such political controls.

San Remo Hotel, 27 Cal. 4th, 643 at 671. On the other hand, the Texas Supreme

Court has rejected this view, stating that

[w]hile we recognize that an ad hoc decision is more likely to constitute a taking than general legislation, we think it entirely possible that the government could “gang up” on particular groups to force exactions that a majority of constituents would not only tolerate but applaud, so long as burdens they would otherwise bear were shifted to others.

Town of Flower Mound, 135 S.W.3d at 641. The view expressed by the Texas

Supreme Court echoes in our observation in Lanvale Properties that Cabarrus County

property developers to pay a fee to subsidize new school construction was a mechanism for generating revenue, rather than a land-use regulation); Durham Land Owners Ass’n v. County of Durham, 177 N.C. App. 629, 638 (concluding that Durham County lacked the authority under its “zoning and general police powers” to impose a school impact fee), disc. rev. denied, 360 N.C. 532 (2006)). ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

had an incentive to increase the impact fees that it charged because it “could generate

significant amounts of revenue from a possibly unpopular group—residential

developers[.]” 366 N.C. at 162. See also Ronald H. Rosenberg, The Changing Culture

of American Land Use Regulation: Paying for Growth with Impact Fees, 59 SMU L.

Rev. 177, 262 (2006) (observing that, “[w]ithout having to face the opposition of future

residents who do not currently live or vote in the locality, [local government] officials

find impact fees an irresistible policy option” with “continuing political support”).

¶ 56 As we have already noted, the Takings Clause “was designed to bar

Government from forcing some people alone to bear public burdens which, in all

fairness and justice, should be borne by the public as a whole.” Armstrong v. United

States, 364 U.S. 40, 49 (1960). Consistent with this logic, to the extent that the

challenged “capacity use” fees at issue in this case are intended to cover the cost of

expanding the County’s water and sewer systems to accommodate the developments

in which plaintiffs were involved, then plaintiffs, rather than the public at large (who

already support the existing system through the payment of user fees and, perhaps,

taxes), can appropriately be made to bear those costs to the extent that they are

“roughly proportional” to the impact of the proposed developments upon the County’s

water and sewer system.16 As the Supreme Court recognized in Koontz, its own

16 In other words, the issue before us is not whether the County may charge developers for the cost that the County may incur to expand its water and sewer capacity in order to serve the new customers that will result from successful development activities. The County ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

precedents “enable permitting authorities to insist that applicants bear the full cost

of their proposals,” with “[i]nsisting that landowners internalize the negative

externalities of their conduct [being] a hallmark of responsible land-use

management[.]” 570 U.S. at 605–06. Acceptance of this logic does not mean, however,

that the courts have no role to play in analyzing the lawfulness of such exactions,

since a state or local government’s ability to require property owners to internalize

the cost of development does not allow such governmental entities to “engag[e] in ‘out-

and-out . . . extortion’ that would thwart the Fifth Amendment right to just

compensation.” Id. at 606 (quoting Dolan, 512 U.S. at 387). See also Lucas, 505 U.S.

at 1014 (warning that, if “the uses of private property were subject to unbridled,

uncompensated qualification under the police power, ‘the natural tendency of human

nature [would be] to extend the qualification more and more until at last private

property disappear[ed]’ ”) (alterations in original) (quoting Mahon, 260 U.S. at 415).

¶ 57 A number of the arguments that the County has advanced in this case rest

upon an erroneous belief that the challenged “capacity use” fees are “user fees” rather

than “impact fees.” Nothing in the logic of the decision that we believe to be

may clearly do so if it has the necessary statutory authority, an issue which the Court of Appeals resolved in the affirmative and which is not before us for further review in this appeal, and if the fees in question satisfy the test enunciated in Nollan, Dolan, and Koontz. To be clear, if the impact fees like those at issue in this case have an “essential nexus” and are “roughly proportional” to the costs that the developers’ activities will impose upon the County’s water and sewer system, then no taking will have occurred. However, for the reasons set forth in elsewhere in this opinion, we cannot assume that this test will be satisfied based on the present record and must leave that issue for resolution by the trial court. ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

appropriate in this case will “subject every fee payment to a governmental entity to

the Nollan/Dolan/Koontz analysis” or “cripple the ability of governments to tax,

mandate fees, and levy other types of monetary payments that finance and make

possible the services that governments provide.”17 On the contrary, the logic

underlying our decision in this case is limited to “impact fees” or “monetary exactions”

and does not extend to true user fees such as charges for garbage collection, charges

for the provision of actual water or sewer service or the right to tap on to existing

water or sewer infrastructure, or fees assessed to cover the cost of enforcing particular

regulatory regimes, so that our holding in this case should not be construed as

inconsistent with anything that we said in Homebuilders Association of Charlotte.

See 336 N.C. at 42 (discussing the relationship between regulatory authority and

fees). In addition, we are confident that the definitions of “impact fee” and “exaction”

set out earlier in this opinion will provide the trial courts with the ability to

17 Amici North Carolina Water Quality Association and National Association of Clean Water Agencies separately argue that application of the “unconstitutional conditions” doctrine to impact fees like those at issue in this case would be “an unnecessary and costly exercise” because the Public Water and Sewer System Development Fee Act “now expressly requires that impact fees be tied to the actual capital cost impacts to water and sewer systems imposed by new development, thereby ensuring that fees will exhibit a rational relationship to the costs imposed.” See S.L. 2017-138, 2017 N.C. Sess. Laws 996. In the event that the analysis outlined by amici is now statutorily required, we fail to see how a requirement that an impact fee satisfy the “essential nexus” and “rough proportionality” test enunciated in Nollan and Dolan would impose any additional burden upon any unit of local government and that this requirement would serve, instead, to ensure that any properly established impact fee satisfies the relevant constitutional standard. ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

distinguish between different types of payments required by local governments in

future proceedings.

¶ 58 The County further contends that, even if Koontz is applicable in this case,

plaintiffs have failed to allege sufficient facts to support the legal conclusion set out

in their complaint that the challenged “capacity use” fees lacked an “essential nexus”

and “rough proportionality” to the County’s goal of mitigating the impact on existing

water and sewer infrastructure. Aside from the fact that the County, not plaintiffs,

has the burden of showing that the challenged “capacity use” fees satisfy the

“essential nexus” and “rough proportionality” test, see F.P. Dev., LLC v. Charter Twp.

of Canton, Mich., 16 F.4th 198, 206 (6th Cir. 2021) (noting that the township had

“fail[ed] to carry its burden to show that it made the required individualized

determination” that “the required dedication is related both in nature and extent to

the impact of the proposed development”) (citing Dolan, 512 U.S. at 391), we note

that, while the entry of judgment on the pleadings is appropriate in situations in

which the plaintiff alleges facts that defeat his, her, or its legal theory, DiCesare, 376

N.C. at 98–99, no such situation exists in this case.

¶ 59 Admittedly, plaintiffs’ allegation that “the water and sewer impact fees are

collected by the County to pay for the costs of future improvements to the County’s

water and sewer system” suffices to defeat any argument that the challenged

“capacity use” fees lack an “essential nexus” to the County’s objective of properly ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

funding the expansion of its water and sewer system capacity. However, plaintiffs’

complaint does not, as the County claims, “confirm[ ] that the fees are roughly

proportional to the costs of the expansion.” Instead, plaintiffs’ complaint simply

identifies the rates at which “capacity use” fees for water and sewer service are

currently set and alleges that “[t]he water and sewer impact fees for commercial

development is an amount determined by the County based upon the estimated water

and sewer usage of the property.” As a result, while plaintiffs’ complaint admits that

the challenged “capacity use” fees are based upon what the County estimates to be

the cost of expanding existing water and sewer capacity to serve the properties

contained in plaintiffs’ development, it does not concede that these estimates

accurately reflect the impact of plaintiffs’ proposed developments upon the County’s

water and sewer systems. Although “[n]o mathematical calculation is required,” the

County must still show that its estimates are “roughly proportional” to the actual cost

of expanding the County’s water and sewer system to accommodate plaintiffs’

proposed developments, see Dolan, 512 U.S. at 391, with the County having provided

no support for its assertions that “rough proportionality” inquiry is simply “one of

common sense” or that the challenged “capacity use” fees “meet that common-sense

test and do not require a further factual inquiry.” As a result, whether the challenged

“capacity use” fees are or are not “roughly proportional” to the costs that plaintiffs’ ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

developments impose upon the County’s water and sewer infrastructure is an issue

that must be determined on remand.

¶ 60 Finally, despite our acceptance of the plaintiffs’ underlying legal theory, we

agree with the County that it would be improper for plaintiffs to recover the “capacity

use” fees that they have already paid in the event that plaintiffs have passed those

costs along to others, such as ultimate purchasers, in order to ensure that no party

receives a “windfall.” For that reason, we hold that, on remand, the County shall be

permitted to present evidence concerning the extent to which, if at all, plaintiffs

factored the cost of the challenged “capacity use” fees into the prices at which they

have sold lots to ultimate purchasers. In the event that the trial court finds that

plaintiffs have done so, it shall be permitted to hear evidence regarding the

appropriate manner by which any such amount should be distributed to the parties

in order to ensure that no party receives a windfall as a result of these proceedings.

E. Mootness

¶ 61 In the alternative, the County requests that this Court dismiss plaintiffs’

petition for discretionary review as improvidently allowed on the grounds that the

issues that are before the Court have become moot. According to the County,

“[plaintiffs’] Koontz theory appears in the complaint’s complaint for declaratory

relief,” but “[plaintiffs] no longer have a justiciable claim for a declaration because a

declaration about the validity of the old ordinance would not prospectively redress ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

any injury that [plaintiffs] claim[ed] to have suffered.” In addition, the County argues

that plaintiffs have not sought “money damages—retrospective relief—on their

Koontz theory” and have “only sought money damages [for] claims that are not before

this Court.” As a result, in the County’s view, plaintiffs’ request for declaratory relief

has been rendered moot given that the relevant statutory provisions have been

amended during the pendency of this case, citing Cape Fear River Watch v. N.C. Env’t

Mgmt. Comm’n, 368 N.C. 92, 98 (2015) (holding that the enactment of new legislation

by the General Assembly rendered the trial court’s declaratory ruling moot because

it superseded the administrative agency rule challenged in the case).

¶ 62 In support of this contention, the County argues that, after plaintiffs had filed

their complaints, the General Assembly passed the Public Water and Sewer

Development Fee Act, which outlines the process by which local governments are

entitled to calculate and assess “system development fees.” See S.L. 2017-138, 2017

N.C. Sess. Laws 996. The County claims that it has assessed water and sewer system

development fees in accordance with these newly enacted statutory provisions since

2017 and that current law “allows the County to impose much higher fees than what

[plaintiffs] paid and contest[ed] here.” As a result, the County contends that, “even

if this Court were to side with [plaintiffs] on their constitutional contentions, that

would not affect [plaintiffs’] legal rights going forward.” ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

¶ 63 A careful analysis of plaintiffs’ complaints clearly shows that plaintiffs are

seeking both a declaration that the challenged “capacity use” fees are unlawful and

a return of “all water and sewer impact fees paid to the County as damages,” along

with prejudgment interest, pursuant to former N.C.G.S. § 153A-324, with plaintiffs’

request for monetary damages appearing in its claim pursuant to N.C. Const. art. I,

§ 19, and their contention that the challenged “capacity use” fees lack the required

“essential nexus” and “rough proportionality” appearing in its request for declaratory

relief. In our view, the fact that these allegations appear in separate portions of

plaintiffs’ complaint does not suffice to support the County’s mootness argument

given that plaintiffs’ claim for monetary relief expressly “reincorporate[s] by

reference as if fully set forth herein” all of the earlier allegations set out in the

complaint, including those referencing Koontz, and given that N.C. Const. art. I, § 19

contains an implicit prohibition against the taking of property without just

compensation, Finch v. City of Durham, 325 N.C. 352, 362–63 (1989) (citing Long v.

City of Charlotte, 306 N.C. 187, 196 (1982)), which is the same constitutional right

that underlies Nollan, Dolan, and Koontz. As a result, since plaintiffs’ claim for

monetary relief is inextricably intertwined with their request for declaratory relief

based upon Koontz, we are unable to agree with the County that the claims that are

before us in this case have been rendered moot. ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

¶ 64 As further support for our determination with respect to the mootness issue,

we conclude that the passage of the Public Water and Sewer Development Fee Act,

while relevant to the validity of any challenge to the County’s statutory authority to

enact “capacity use” fees like those at issue here, has no bearing on the

constitutionality of those fees. “A constitutional prohibition against taking or

damaging private property for public use without just compensation is self-executing

and neither requires any law for its enforcement, nor is susceptible of impairment by

legislation.” Sale v. State Highway & Pub. Works Comm’n, 242 N.C. 612, 617 (1955)

(citations omitted). As a result, even if plaintiffs had sought nothing more than a

declaration that the “capacity use” fees at issue in this case are unconstitutional

under Koontz, the enactment of the 2017 legislation does not have the effect of

rendering any constitutional claim that plaintiffs may have asserted moot.

F. Demonstration of an Issue of Material Fact

¶ 65 Finally, plaintiffs argue that the trial erred by entering judgment on the

pleadings in the County’s favor because the pleadings demonstrate the existence of a

genuine issue of material fact concerning the extent to which the challenged “capacity

use” fees, as applied to plaintiffs, had an “essential nexus” and “rough

proportionality” to the anticipated impact that plaintiffs’ proposed developments

would have on the County’s water and sewer infrastructure. Although plaintiffs have

not advanced any specific argument with respect to this issue in their brief, a careful ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

examination of the pleadings does tend to show, as we have already noted, that, while

there is no genuine issue of material fact concerning the extent to which the

challenged “capacity use” fees had an “essential nexus” to the impact of plaintiffs’

development upon the County’s water and sewer systems, the parties clearly dispute

the extent to which relevant fees were “roughly proportional” to the actual impact on

the County’s water and sewer systems. As a result, on remand, the parties shall be

permitted to conduct discovery and present evidence concerning the issue of whether

the challenged “capacity use” fees satisfy the “rough proportionality” component of

the Nollan/Dolan test. In the event that the amount of the “capacity use” fees that

the County has assessed is no more than is “roughly proportional” to the additional

costs that the County will incur in providing the facilities needed to ensure the

availability of adequate water and sewer services for plaintiffs’ developments, then

no taking should be found to have occurred. In addition, as we have already

discussed, if the trial court determines that the challenged “capacity use” fees are not

“roughly proportional” to the impact of plaintiffs’ proposed developments upon the

County’s water and sewer systems, the parties shall be permitted to present evidence

regarding the extent to which, if at all, plaintiffs have passed the “capacity use” fees

they have already paid to ultimate purchasers and the manner in which any such

amount should be distributed in order to ensure that no person receives a “windfall.”

III. Conclusion ANDERSON CREEK PARTNERS, L.P. V. COUNTY OF HARNETT

¶ 66 Thus, for the reasons set forth above, we hold that the “capacity use” fees at

issue in this case are “monetary exactions” subject to constitutional scrutiny under

Koontz and must, therefore, satisfy the “essential nexus” and “rough proportionality”

test in order to avoid being treated as takings of plaintiffs’ property. As a result, the

decision of the Court of Appeals is reversed and this case is remanded to the Court of

Appeals for further remand to Superior Court, Harnett County, for further

proceedings not inconsistent with this opinion.

REVERSED AND REMANDED.

Justice BERGER concurring in part and dissenting in part

¶ 67 I join in the majority opinion generally. However, if an unconstitutional taking

occurred, there is no scenario in which the county can retain the fees collected. The

county should not profit from its taking, and I respectfully dissent from that portion

of the opinion.

¶ 68 I write separately because “[a] frequent recurrence to fundamental principles

is absolutely necessary to preserve the blessings of liberty.” N.C. Const. art. I, § 35.

The admonition of the Constitution requiring frequent recurrence to fundamental principles is politically sound. . . . We violate no precedent in referring to the important ANDERSON CREEK V. COUNTY OF HARNETT

Berger, J., concurring in part and dissenting in part

function these guaranties of personal liberty perform in determining the form and character of our Government. . . . If those whose duty it is to uphold tradition falter in the task, these guaranties may be defeated temporarily, or permanently lost through obsolescence.

State v. Harris, 216 N.C. 746, 762–63, 6 S.E.2d 854, 865–66 (1940).

¶ 69 State constitutional provisions often provide greater protections for our rights,

liberties, and freedoms than those secured by the Constitution of the United States.

State v. Jackson, 348 N.C. 644, 648, 503 S.E.2d 74, 91 (1998). This Court has

recognized that

[o]ur Constitution is more detailed and specific than the federal Constitution in the protection of the rights of its citizens. We give our Constitution a liberal interpretation in favor of its citizens with respect to those provisions which were designed to safeguard the liberty and security of the citizens in regard to both person and property.

Corum v. University of North Carolina, 330 N.C. 761, 783, 413 S.E.2d 276, 290 (1992)

(cleaned up).

¶ 70 Our Declaration of Rights begins with the foundational statement that “[w]e

hold it to be self-evident that all persons are created equal; that they are endowed by

their Creator with certain inalienable rights; that among these are life, liberty, the

enjoyment of the fruits of their own labor, and the pursuit of happiness.” N.C. Const.

art. I, § 1. The “fundamental guaranties” of Article I, section 1 are “very broad in

scope.” State v. Ballance, 229 N.C. 764, 769, 51 S.E.2d 731, 734 (1949). “This Court’s

duty to protect fundamental rights includes preventing arbitrary government actions ANDERSON CREEK V. COUNTY OF HARNETT

that interfere with” these fundamental rights. King v. Town of Chapel Hill, 367 N.C.

400, 408, 758 S.E.2d 364, 371 (2014) (citing N.C. Const. art. I, § 1).

¶ 71 The unconstitutional conditions doctrine and the Takings Clause of the Fifth

Amendment provide protections from government exactions that require just

compensation. Nollan v. California Coastal Comm’n, 483 U.S. 825, 829, 107 S. Ct.

3141, 3144, 97 L. Ed. 2d 677 (1987); and Dolan v. City of Tigard, 512 U.S. 374, 378,

114 S. Ct. 2309, 2313, 129 L. Ed. 2d 304 (1994). Nollan and Dolan provide the

constitutional floor. Although not argued by the parties, given our State’s history of

jealously guarding property rights, heightened scrutiny requiring such exactions be

directly proportional to the projected impact may be available under the North

Carolina Constitution.

Chief Justice NEWBY joins in this concurring in part and dissenting in part

opinion.

Justice EARLS dissenting.

¶ 72 At its core, the unconstitutional conditions doctrine is about coercion: the

doctrine “vindicates the Constitution’s enumerated rights by preventing the ANDERSON CREEK PARTNERS V. HARNETT

Earls, J., dissenting.

government from coercing people into giving them up.” Koontz v. St. Johns River

Water Mgmt. Dist., 570 U.S. 595, 604 (2013). The basic insight is that allowing

governmental entities to impose conditions on the exercise of a constitutional right

makes individuals vulnerable to potentially “extortionate demands.” Id. at 619. In

the land-use context, the doctrine has been applied to conditions that require a

property owner to cede an interest in their property to the government—or to pay a

“monetary exaction” in lieu of conveying a property interest—as a condition of

obtaining the permits necessary to develop their property. When a government seeks

to impose such a condition, there must be “an essential nexus and rough

proportionality” between the condition and “the effects of the proposed new use of the

specific property at issue.” Id. at 614.

¶ 73 In this case, the majority concludes that Harnett County’s imposition of a

generally applicable impact fee that all property owners must pay if they wish to have

the County’s water and sewer infrastructure expanded to their property is a

potentially “extortionate demand[ ]” that threatens the plaintiffs’ rights under the

Takings Clause. This conclusion rests on a mischaracterization of the County’s

actions and the choices presented to property owners in Harnett County. Specifically,

the impact fee is not a monetary exaction subject to the unconstitutional conditions

doctrine, requiring property owners who want the County to expand its water and

sewer infrastructure to their property to offset a portion of the cost is not a taking, ANDERSON CREEK PARTNERS V. HARNETT

and imposition of a generally applicable non-discretionary legislative fee is not

coercive. The result is an unwarranted and unwise expansion of the scope of the

Takings Clause that will engender frequent litigation and may ultimately diminish

the capacity of municipalities to recoup fees to offset the costs of maintaining vital

public infrastructure for the public’s benefit. Even if this decision has few immediate

practical consequences, it also signals an increased hostility towards government that

hearkens back to a bygone era. Accordingly, I respectfully dissent.

I. The County’s infrastructure fee is not equivalent to the “monetary exaction” at issue in Koontz

¶ 74 In Nollan v. California Coastal Commission, 483 U.S. 825 (1987), and Dolan v.

City of Tigard, 512 U.S. 374 (1994), the United States Supreme Court applied the

unconstitutional conditions doctrine to ad hoc demands requiring property owners to

cede an interest in their property as a prerequisite to obtaining a building permit. In

Koontz, the Court applied the unconstitutional conditions doctrine for the first time

to a government’s demand for payment of a fee instead of a demand for an interest in

property, or what the Court termed a “monetary exaction.” 570 U.S. 595, 612 (2013)

(“[S]o-called ‘monetary exactions’ must satisfy the nexus and rough proportionality

requirements of Nollan and Dolan.”). Specifically, the Court made subject to the

doctrine a Florida municipality’s requirement that, in order to obtain a building

permit, a property owner needed either to (1) dedicate a “conservation easement,” or

(2) pay for the municipality to hire contractors to make improvements to property ANDERSON CREEK PARTNERS V. HARNETT

owned by the municipality. Id. at 601–02. The majority holds that the infrastructure

fee at issue in the present case is analogous to the monetary exaction at issue in

Koontz.

¶ 75 There are obvious differences between the monetary exactions at issue in

Koontz and the County’s infrastructure fee. The most notable is the absence of a

governmental demand for an interest in the developers’ real property in this case. In

Koontz, the Court recognized that a choice between dedicating an easement and being

unable to develop property is not meaningfully different from the choice between

dedicating an easement or paying money equivalent to the value of the easement and

being unable to develop property. See Koontz, 570 U.S. at 612 (explaining that “a

permitting authority wishing to exact an easement could simply give the owner a

choice of either surrendering an easement or making a payment equal to the

easement’s value”). Koontz was primarily concerned with closing a perceived loophole

arising under Nollan and Dolan whereby governments, cognizant that the

unconstitutional conditions doctrine limited their authority to require conveyance of

an actual interest in land as a condition of issuing a building permit, required

payment of an equally valuable “monetary exaction” as a supposed alternative. Id. at

619. The municipality in Koontz was trying to do through the permitting process what

would have been “a per se taking” if done “directly”: seize land without providing just

compensation. Id. at 612. Koontz affirmed that governments could not “evade the ANDERSON CREEK PARTNERS V. HARNETT

limitations of Nollan and Dolan by recharacterizing the demand for an easement as

a requirement for “payment equal to the easement’s value.” Id. By contrast, in this

case, there is no demand for an interest in land lurking behind the County’s

requirement that the developers help defray the cost of the public service they wish

to obtain.

¶ 76 Moreover, the exaction sought in Koontz was also not levied to offset the costs

of any particular service the municipality was providing to the landowner; instead,

the exaction was sought to mitigate the diffuse impacts of development on the

municipality’s water resources. Id. at 600–01. The landowner in Koontz did not obtain

any specific service in exchange for the exaction; the exaction was merely the price of

obtaining permission to build. Id. at 602. By contrast, in this case, the County has

demanded that all of the developers pay a sum of money in order to offset the costs of

providing a particular public service to the developers. As the majority recognizes,

the fees are imposed to achieve the County’s “objective of properly funding the

expansion of its water and sewer system capacity.” Ante, at ¶ 59. The County is asking

all property owners who wish to obtain access to a service to bear part of the cost of

expanding that service. That is not equivalent to the monetary exaction at issue in

Koontz. Even if, as the majority asserts, the logic of the Court’s decision in Koontz

“encompassed a broader range of governmental demands for the payment of money

as a precondition for the approval of a land-use permit” than the precise kind of ANDERSON CREEK PARTNERS V. HARNETT

demand imposed by the municipality in that case, ante, at ¶ 42, Koontz does not

justify the majority’s characterization of the County’s impact fee.

II. Requiring developers to pay the infrastructure fee prior to expanding water and sewer infrastructure does not coerce them into ceding their constitutional rights

¶ 77 Even assuming that the fee at issue in this case is akin to the monetary

exaction at issue in Koontz, application of the unconstitutional conditions doctrine is

still improper for two additional reasons: First, the requirement that developers pay

a fee to offset the costs of extending the County’s existing water and sewer

infrastructure to their property before the County extends its existing water and

sewer infrastructure to their property does not threaten any enumerated rights

provided under the Takings Clause of the United States Constitution. Second, fees

that are imposed via legislation on a generally applicable, non-discretionary, and

uniform basis do not give rise to a meaningful risk of coercion in the constitutional

sense. Accordingly, the justifications for subjecting a monetary fee to the

unconstitutional conditions doctrine are not present under the circumstances of this

case.

A. Requiring payment of the infrastructure fee does not coerce the developers into giving up a constitutional right

¶ 78 The unconstitutional conditions doctrine recognizes that when “someone

refuses to cede a constitutional right in the face of coercive pressure, the ANDERSON CREEK PARTNERS V. HARNETT

impermissible denial of a governmental benefit is a constitutionally cognizable

injury.” Koontz, 570 U.S. at 607 (emphasis added). As articulated in Nollan, Dolan,

and Koontz, the doctrine applies when the government tries to do something by

imposition of a permitting condition that would be a per se taking if done directly.

See id. at 612 (“A predicate for any unconstitutional conditions claim is that the

government could not have constitutionally ordered the person asserting the claim to

do what it attempted to pressure that person into doing. . . . [I]f the government had

directly seized the easements it sought to obtain through the permitting process, it

would have committed a per se taking.”). The gravamen of an unconstitutional

conditions claim is thus the existence of an underlying enumerated constitutional

right that is threatened by the government’s actions.

¶ 79 Here, the majority holds that the unconstitutional conditions doctrine applies

to the circumstances of this case because the County’s imposition of the infrastructure

fee threatens the developers’ enumerated constitutional rights under the Takings

Clause. See ante, at ¶ 52. Under the Takings Clause, property owners have the “right

to receive just compensation when [their] property is taken for a public use.” Dolan,

512 U.S. at 385. “[T]he appropriation of an easement constitutes a physical taking.”

Cedar Point Nursery v. Hassid, 141 S. Ct. 2063, 2073 (2021). Thus, in both Nollan

and Dolan, it was obvious what constitutional right the municipalities’ conditions

implicated: the government had conditioned approval of a building permit on the ANDERSON CREEK PARTNERS V. HARNETT

property owner’s conveyance of an easement on a portion of their property.

See Nollan, 483 U.S. at 827 (addressing the question of whether “the California

Coastal Commission could condition its grant of permission to [landowners to] rebuild

their house on their transfer to the public of an easement across their beachfront

property”); Dolan, 512 U.S. at 395 (considering whether a city could require

dedication of a “floodplain easement” and a “pedestrian/bicycle pathway easement”

as a condition of granting a building permit). The County’s imposition of an

infrastructure fee in this case obviously does not threaten a taking in the Nollan /

Dolan sense.

¶ 80 Nonetheless, relying on Koontz, the majority concludes that imposition of the

infrastructure fee implicates the developers’ “Fifth Amendment right to be free from

governmental takings of one’s property without just compensation.” Ante, at ¶ 52.

However, Koontz does not support the conclusion that imposition of an impact fee

connected to a specific service a government provides to a specific property owner is

akin to a taking. The developers are not being coerced to give up any constitutional

rights. If the developers refused to pay the infrastructure fee, the County would not

provide the benefit of extending the County’s water and sewer infrastructure to their

property. The developers do not have a constitutional right to access the County’s

water and sewer infrastructure without contributing to the cost of its provision.

See, e.g., Massachusetts v. United States, 435 U.S. 444, 462 (1978) (“A governmental ANDERSON CREEK PARTNERS V. HARNETT

body has an obvious interest in making those who specifically benefit from its services

pay the cost . . . .”). If the developers did not obtain access to the County’s water and

sewer infrastructure, the County would not sign off on its application for a permit

that the developers need to build residential subdivisions. The developers also do not

have a constitutional right to build residential subdivisions without complying with

applicable regulations. See, e.g., Batch v. Town of Chapel Hill, 326 N.C. 1, 13 (1990)

(concluding that a developer’s “failure to comply with [a municipal] ordinance is a

sufficient basis to support the council’s refusal to approve plaintiff’s subdivision

plan”).

¶ 81 When Harnett County refuses to extend its water and sewer infrastructure to

property owned by individuals who refuse to pay the infrastructure fee, the County

is not “deny[ing] a benefit to a person because he [is] exercis[ing] a constitutional

right.” Regan v. Taxation With Representation of Wash., 461 U.S. 540, 545 (1983). The

developers have “not alleged a physical taking of any of [their] property” because

“[r]equiring money to be spent is not a taking of property,” Atlas Corp. v. United

States, 895 F.2d 745, 756 (Fed. Cir. 1990), at least when the money was “charged as

a fee for service or a tax,” Homebuilders Ass’n of Metro. Portland v. Tualatin Hills

Park & Recreation Dist., 185 Or. App. 729, 740 (2003). The only thing the County is

denying the developers is the benefit of a service they would prefer not to pay for. If

that is a taking, then it is difficult to see why all user fees are not also monetary ANDERSON CREEK PARTNERS V. HARNETT

exactions subject to the doctrine, notwithstanding the majority’s assertion to the

contrary: conceptually, “charges for garbage collection, charges for the provision of

actual water or sewer service . . . or fees assessed to cover the cost of enforcing

particular regulatory regimes,” ante, at ¶ 57, are also fees imposed to mitigate the

(fiscal) impacts of endeavoring to provide a specific public service to residents.

¶ 82 The majority suggests that the potential taking arises from depriving the

developers of the opportunity to “proceed with their development plans,” ante, at ¶ 54,

specifically “the recording of a residential subdivision plot,” id., even if they have

failed to offset the costs of a service the government provides them and, as a result,

cannot comply with applicable building regulations. To begin with, this is really a

complaint directed at the North Carolina Department of Environmental Quality

based on its refusal to issue a building permit, not at Harnett County. Regardless,

this type of claim—that a regulation precludes a property owner from developing

their land in one particular way—does not threaten a per se taking as in Nollan,

Dolan, and Koontz. Rather, it is a type of claim that fits neatly within the “regulatory

takings” doctrine established in Penn Central Transportation Co. v. City of New York,

438 U.S. 104 (1978). A regulation which limits a property owner’s ability to develop

their property but which does not “completely deprive an owner of ‘all economically

beneficial use’ of her property,” Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 538 (2005)

(cleaned up), may constitute a regulatory taking depending on (1) “[t]he economic ANDERSON CREEK PARTNERS V. HARNETT

impact of the regulation on the claimant,” (2) “the extent to which the regulation has

interfered with distinct investment-backed expectations,” and (3) “the character of

the governmental action.” Penn Central, 438 U.S. at 124. Accordingly, “the

appropriate test here is a Penn Central regulatory takings analysis.” Better Hous. for

Long Beach v. Newsom, 452 F. Supp. 3d 921, 933 (C.D. Cal. 2020); see also Mead v.

City of Cotati, 389 F. App’x 637, 638–39 (9th Cir. 2010) (“A generally applicable

development fee is not an adjudicative land-use exaction subject to the [Nollan and

Dolan]. Instead, the proper framework for analyzing whether such a fee constitutes

a taking is the fact-specific inquiry developed by the Supreme Court in [Penn

Central].”).

¶ 83 The choice presented to the developers in this case is not the same as the choice

that was presented to the landowner in Koontz: it is not the choice between conveying

an interest in their property or paying an equivalent fee and being denied permission

to develop their property. Rather, the choice is between paying a portion of the costs

of extending a public service that will enable the developers to develop their property

in one particularly desired way and not paying for the service. Under Koontz, that is

not the kind of choice that is subject to the unconstitutional conditions doctrine.

B. Application of a non-discretionary, generally applicable, uniform legislative fee does not give rise to a meaningful risk of coercion

¶ 84 The majority’s decision to subject the County’s infrastructure fee to the

unconstitutional conditions doctrine overlooks another important distinction between ANDERSON CREEK PARTNERS V. HARNETT

the requirements at issue in the Supreme Court’s unconstitutional conditions cases

and the requirement at issue here. In Nollan, Dolan, and Koontz, the challenged

permit conditions were discretionary conditions imposed on an ad hoc basis by a

governmental entity after a permit application had been submitted. By contrast, the

County’s infrastructure fee is imposed on a non-discretionary, generally applicable,

and uniform basis. Notwithstanding the majority’s tautological assertion that the

County’s infrastructure fee is “inherently coercive in the constitutional sense,” ante,

at ¶ 54, these features substantially diminish the risk of coercion arising from

imposition of the infrastructure fee. The salient distinctions involve both the manner

in which the fees are applied and the manner in which they are enacted.

¶ 85 In Koontz, the property owner challenged a condition devised by a water

management district under a Florida statute that authorized the district to require

developers to “offset . . . resulting environmental damage by creating, enhancing, or

preserving wetlands elsewhere.” 570 U.S. at 601. This kind of permitting process

gives rise to a risk of coercion “because the government often has broad discretion to

deny a permit that is worth far more than property it would like to take.” Id. at 605

(emphasis added). For example, if developing the undeveloped land imposes costs to

the municipality of $1,000, and issuing a building permit will enable the property

owner to develop the land in a way that increases its value by $10,000,000, then the

municipality has the power to demand a fee that far exceeds the costs of development ANDERSON CREEK PARTNERS V. HARNETT

it will be forced to bear. This is the kind of coercive power the unconstitutional

conditions doctrine attempts to mitigate. Id. (“So long as the building permit is more

valuable than any just compensation the owner could hope to receive for the right-of-

way, the owner is likely to accede to the government’s demand, no matter how

unreasonable.”). Under this scenario, there is a significant risk that a municipality

will “leverage its legitimate interest in mitigation to pursue governmental ends that

lack an essential nexus and rough proportionality to those impacts.” Id. at 606.

¶ 86 As numerous other courts have recognized, the same risk of coercion is not

present when the amount of a fee is fixed beforehand at a set amount for all property

owners without regard for the potential value of their property. See, e.g., Knight v.

Metro. Gov’t of Nashville & Davidson Cnty., 572 F. Supp. 3d 428, 443 (M.D. Tenn.

2021) (“The Nollan/Dolan standard of review does not apply to generally applicable

land use regulations, as opposed to adjudicative land-use exactions.”); Am. Furniture

Warehouse Co. v. Town of Gilbert, 245 Ariz. 156, 163 (Ct. App. 2018) (“Koontz

addressed the constitutionality of a government’s ‘adjudicative decision’ unique to a

parcel. . . . Koontz did not hold that Dolan applied to generally applicable legislative

development fees.”); Better Hous. for Long Beach v. Newsom, 452 F. Supp. 3d at 932

(“Koontz itself involved an adjudicative, individual determination, and the majority

never addressed Nollan/Dolan’s application to general legislation. Instead, it

repeatedly emphasized the special vulnerability of land use permit applicants to ANDERSON CREEK PARTNERS V. HARNETT

extortionate demands for money.” (cleaned up)); Douglass Properties II, LLC v. City

of Olympia, 16 Wash. App. 2d 158, 164, rev. denied, 197 Wash. 2d 1018 (2021), and

cert. denied, 142 S. Ct. 900 (2022) (“[T]he Nollan/Dolan test does not apply to the

traffic impact fees, because such fees are legislatively prescribed generally applicable

fees outside the scope of Koontz.”); Willie Pearl Burrell Tr. v. City of Kankakee, 2016

IL App (3d) 150655, ¶ 44 (“Defendant’s demand for money stems from . . . a generally

applicable ordinance . . . [and] is thus not the sort of ad hoc demand contemplated in

Koontz, but simple compliance with a straightforward ordinance.”); Dabbs v. Anne

Arundel Cnty., 458 Md. 331, 353–54 (2018) (“This case falls squarely within Dolan’s

recognition that impact fees imposed on a generally applicable basis are not subject

to a rough proportionality or nexus analysis.”). The fees in this case “are

predetermined, set out in [an] Ordinance, and non-negotiable; the Fees are not

assessed on an ad hoc basis or dependent upon the landowner’s particular project.”

Anderson Creek, 275 N.C. App. at 443. There is no opportunity for the government to

assess the value of the permit to an individual property owner and adjust the demand

for money accordingly. Instead, “[t]he legislatively-imposed development impact fee

is predetermined . . . and applies to any person wishing to develop property in the

[County].” Dabbs, 458 Md. at 353. There is a meaningful difference between the

scenario at issue in this case and the circumstances of Koontz: It is the difference

between a driver pulling up to a gas station where prices are listed prominently on ANDERSON CREEK PARTNERS V. HARNETT

the pumps and a driver pulling up to a gas station where the attendant chooses a

price after the driver asks for a certain amount of gas. In both cases, drivers might

not be thrilled at the hit to their wallet, but only in the latter circumstance does the

gas station attendant have the chance to levy an “extortionate demand[ ]” based on

what kind of car the driver is driving and how important it is to the driver to arrive

at his or her destination.

¶ 87 The majority concludes that this distinction in how fees are calculated is

irrelevant, suggesting that even a legislature can choose to “exercise . . . government

power” in a coercive manner. Ante, at ¶ 51. While it may be theoretically possible for

a municipality to set predetermined impact fees at an amount totally

incommensurate with the cost of providing a service, it is legally prohibited and

practically unlikely. As noted above, the regulatory takings doctrine already restrains

the capacity of governments to limit how property owners utilize their property; in

addition, state law already precludes municipalities from assessing fees to defray the

costs of public services that are “unreasonable.” Homebuilders Ass’n of Charlotte, Inc.

v. City of Charlotte, 336 N.C. 37, 46 (1994). Moreover, the developers have a

meaningful opportunity to influence the enactment of legislative impact fees through

participation in the political process. See San Remo Hotel L.P. v. City And Cnty. of

San Francisco, 27 Cal. 4th 643, 671 (2002) (“[G]enerally applicable legislation is

subject to the ordinary restraints of the democratic political process.”). Quoting the ANDERSON CREEK PARTNERS V. HARNETT

Texas Supreme Court, the majority opines that it is “entirely possible that the

government could ‘gang up’ on particular groups to force exactions that a majority of

constituents would not only tolerate but applaud.” Ante, at ¶ 55. But “[l]egislation

designed to promote the general welfare commonly burdens some more than others.”

Penn Central, 438 U.S. at 133. The developers have a right to participate in the

process of enacting legislation, not to dictate the results of that process. Their concern

that the result may not reflect their preferences is not the same as a complaint that

they have been excluded from the political process in any constitutionally salient way.

III. Conclusion

¶ 88 Ultimately, the majority is correct in suggesting that its decision will have

little practical effect, either on the parties to this case or on land-use law in North

Carolina more generally. The majority opinion attempts to preclude the developers

from collecting a “windfall” by recouping fees they passed on to ultimate purchasers,

ante, at ¶ 61, and the majority notes that passage of the Public Water and Sewer

System Development Act should mean that “in the future, such fees are likely to

satisfy the ‘essential nexus’ and ‘rough proportionality’ requirement enunciated in

Nollan and Dolan,” id., at ¶ 51. But the majority’s decision to convert generally

applicable legislative impact fees into monetary exactions subject to the

unconstitutional conditions doctrine is not without consequence. Although the

majority purports to limit application of the rule it has announced to “impact fees” as ANDERSON CREEK PARTNERS V. HARNETT

distinct from the “true user fees” and taxes governments rely upon to fund their

continued operations, id. at ¶ 57, the lines that separate these categories are blurry

and, often, more semantic than essential. At a minimum, governments will need to

expend more resources justifying the imposition of reasonable fees used to defray the

costs of providing public services.1

¶ 89 More broadly, the majority’s willingness to expand both the unconstitutional

conditions doctrine and the Takings Clause to shield property owners from

governmental efforts to recoup the costs of providing public services is a troubling

throwback to an antiquated jurisprudence. The unconstitutional conditions doctrine

is “a product of Lochner-like, pre-New Deal understandings” initially designed “to

protect common law rights in the face of threats to those rights created by the rise of

the regulatory state.” Cass R. Sunstein, Why the Unconstitutional Conditions

Doctrine Is an Anachronism (with Particular Reference to Religion, Speech, and

Abortion), 70 B.U. L. Rev. 593, 597 (1990). By constitutionalizing a property owner’s

objection to a democratically legitimate non-discriminatory policy choice, the majority

risks conveying the message that certain constitutional rights asserted by certain

litigants are most favored. The Court can dispel this notion in future cases by

evenhandedly applying the unconstitutional conditions doctrine with the same

1 Although we disagree with the majority that the unconstitutional conditions doctrine applies, we agree that, having determined that it does, on remand, it is appropriate for the trial court to consider whether ordering the developers to be refunded for prior infrastructure fees would provide them with a windfall. ANDERSON CREEK PARTNERS V. HARNETT

solicitousness towards claims brought by other categories of litigants whose rights

are allegedly burdened by onerous conditions imposed on their receipt of public

benefits. See Kathleen M. Sullivan, Unconstitutional Conditions, 102 Harv. L. Rev.

1413, 1416 (1989) (describing how the unconstitutional conditions doctrine has also

been applied “to protect personal liberties of speech, association, religion, and privacy

just as it once had protected the economic liberties of foreign corporations and private

truckers” in the Lochner era). Otherwise, we risk perpetuating an “inconsistent

application” of a doctrine which “has never been an overarching principle of

constitutional law that operates with equal force regardless of the nature of the rights

and powers in question.” Dolan, 512 U.S. at 407 n.12 (Stevens, J., dissenting).

Accordingly, I respectfully dissent.

Justice HUDSON and Justice MORGAN join in this dissenting opinion.