The Town of Oak Island is facing its fourth lawsuit over the imposition of sewer district fees from a law professor, his wife and, this time, a third property owner. The action, filed October 11 against three town officials and six former or current members of Town Council, targets some of the defendants in their “individual capacity.”
At issue are the sewer district fees (SDF), imposed by Oak Island under a 2004 state law, which also opened the door to SDF by Holden Beach. The fees are used to pay interest and debt on the vacuum system expansion of the sewer system, town officials said.
That debt was more than $114-million.
Tax law professor Dr. Brad R. Johnson, his wife Elci Wijayaningsih, and former mayor Helen Cashwell have filed the latest action against Town Manager David Kelly, Finance Director David Hatten and Tax Collector Katie Coleman in their individual capacities, as well as against former members of Town Council Jim Medlin and Carol Painter and current council members Loman Scott, Sheila Bell, Charlie Blalock and Jeff Winecoff.
Johnson and his wife own both developed and undeveloped parcels in Oak Island. The lawsuit contends that the town’s practice of charging a sewer district fee on undeveloped land is unconstitutional under the equal protection clause of the 14th amendment to the Constitution. The fee, which is sometimes also referred to as a “tax” in the filing, was first imposed in 2009.
Two lawsuits over the same issue have been dismissed. The town prevailed in Brunswick County Superior Court on a third action, but
a 2-1 split decision by the N.C. Court of Appeals ruled in favor of the plaintiffs early this year. The town has appealed that case to the state Supreme Court.
The current action seeks refunds of sewer district fees on undeveloped parcels from 2015-2019, which range from $804 to $602 a year. It further asks the court for attorney fees and costs, interest and other relief as the court may see fit. The plaintiffs contend that the SDF fees require payments for “parcels that do not benefit from the availability of sewage treatment.”
The town’s previous practice was to charge the SDF to owners of developed and undeveloped properties, then rebate the fee to those who had developed land. The idea, they said, was that users of the system paid their share of debt service through use rates.
In 2018, the town lowered the SDF from $804 a year to $602 and charged everyone, with no rebates. In exchange, the town lowered usage rates to give a slightly lower rate to those who use more than 2,000 gallons a month, considered the minimum fee.
Council Member Charlie Blalock said the timing of the lawsuit – close to the elections – seemed questionable. He said he was not on council when the fee was imposed and did not understand the point of the lawsuit.
Town Attorney Brian Edes said one Superior Court judge and one Court of Appeals judge had ruled the town properly applied the law.
“The town is not making any money on this,” Edes said. “We’re trying to be fair and spread out the costs.”
Having the system in fact benefits owners of undeveloped property, Edes said. It allows lots that could not pass percolation tests for septic systems to be developed. Edes also said it helps the environment in general: it also allows the building footprint to be larger because septic systems are no longer needed.
The plaintiffs stated there are about 3,000 other property owners who also had to pay the SDF.
Edes said that there are more than 8,600 users on the system and if those users had to pay the costs of SDF rebates to owners of undeveloped property, it would increase the average water and sewer bill by $60 a month.
Town records show Oak Island has paid an outside law firm $286,789 so far to defend the SDF lawsuits. That number does not include fees by Edes. Hatten said none of that amount has been reimbursed by insurance.