Just when we thought the N.C. Court of Appeals had fully resolved all matters related to APFOs (“Adequate Public Facilities Ordinances”) the N.C. Supreme Court has decided to review the issue by granting certiorari in two cases: Lanvale v. Cabarrus County (a previously unpublished opinion) and Amward Homes v. Town of Cary (a case that was both published and publicized).

             Let’s review what APFOs are, what our courts have said about them, and then visit the Lanvale and Amward cases to see what’s going on.

 What is an APFO?

             APFOs are, broadly described, local ordinances that generate revenue from developers at the subdivision approval stage to fund school construction.  Although other types of public improvements are possible, it’s usually about schools.


             One, because the cost of utilities to serve the development actually can be shifted to the developments that they serve.  Two, because schools are never funded forward (before being needed) but only after there is a clear need, meaning growth is always ahead of school construction.  Three, rather than “blame” the new industries coming into town as the cause of population and school growth, we tend to place the bulls eye on the developer’s back as though subdivisions created the growth in the first place. 

             In a previous blog post on the Union County APFO decision, I said this:

          Housing demand is primarily a function of two things: organic population growth (i.e. mom and dad have children) and jobs.  Nobody from Ohio has ever come to North Carolina just because they especially liked one of our new subdivisions.  But North Carolina is full of folks from Ohio and New York and Pennsylvania and West Virginia who came here looking for jobs.

            This raises an interesting irony.  Some counties spend millions of dollars in incentives to lure new companies that will create jobs and expand the tax base so that infrastructure such as schools can be more easily paid for.  But instead of using the added tax base to build more schools to meet the expanding population that came for the jobs, these same counties are tempted to restrict the ensuing population growth to protect existing school budgets.

What Have Our Courts Said About APFOs?

             Three panels of the N.C. Court of Appeals have said emphatically that our statutes do not allow APFOs.  In 2006 the Court of Appeals first said that a county could not shift the burden of funding school construction through “impact fees” (an APFO) in Durham Land Owners Ass’n v. County of Durham.  

            Then, in 2009, the Court of Appeals went a step further in Union Land Owner’s Ass’n v. County of Union, saying that neither the subdivision nor general zoning powers enabled a county to impose a school impact fee.

             And just last year, in Amward Homes v. Town of Cary, the Court of Appeals not only placed extra exclamation points on the previous holdings, but it made the Town of Cary pay the developer’s legal fees.  To read my commentary on Amward Homes where I described how Judge Robert N. Hunter (of Greensboro) subjected Cary to what I then called “a full body slam,” click here.

             [Side Bar:  In both the Amward Homes and the Lanvale cases, the counties claimed that the developers – who did not have standing to sue at the time the ordinances were originally adopted – could not sue them now because the two month statute of limitations had run.  In my opinion, this is nothing but a cynical defense that says, essentially, “we might be operating completely illegally, but you have no legal recourse because you missed the small window of opportunity to file your suit.”  Of course, had they done it within the two months, the county then would have claimed that they didn’t have standing yet.  End Side Bar]

             Judge Hunter was not amused and determined that the two month statute of limitations did not apply.  Essentially, he said, Cary’s APFO was a school revenue generating ordinance, not a zoning ordinance, even if it was placed within the local zoning regulations.

 How is Lanvale v. Cabarrus Different?

             Lanvale is different in one key way.  The General Assembly granted Cabarrus County, in HB 224, specific authority in 2004 “to enforce  . . . any provision of the school adequacy review . . . under the Cabarrus County Subdivision Regulations.”

            But the Lanvale opinion, written by Judge Robert C. Hunter (of Marion) said that special legislation made no difference, stating “The language of House Bill 224 is unambiguous: the County may ‘enforce’ its “school adequacy review’ provisions; it does not provide the County with the ‘authority’ to adopt a revenue-generating impact fee.”

             In other words, words matter.  The Court adopted a narrow and strict interpretation of the local bill based upon what the language of the statute unambiguously said, not what Cabarrus wanted it to say.  Judge Hunter added, had the General Assembly adopted HB 224 after the Union Landowner’s case, then the Court possibly could conclude the legislature intended something else.

 How Does Certiorari Work?

             Court of Appeals cases are assigned to three-judge panels.  If there is a dissent, then the case can be appealed by right to the N.C. Supreme Court.  If the decision is unanimous, then the losing party must petition the higher court to grant discretionary review and explain why.

             Lanvale was decided unanimously last September 7, 2010, and Amward Homes was decided seven months before that.  However, last week the N.C. Supreme Court decided to hear both cases, granting what lawyers colloquially call “cert.”

             It is probable that the N.C. Supreme Court wants to look at the entire issue of APFOs because Amward and Lanvale, while similar, have different fact patterns.  And it is possible, but I doubt it, that it will look only at whether the 2004 legislation granted Cabarrus County special rights and the technical defenses related to statutes of limitation.

             When the decisions are published, you will find descriptions of the cases in many places.  But you’ll find the insights and commentary here.

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Tom Terrell

Terrell_TomMr. Terrell is widely regarded as one of North Carolina’s leading land use attorneys, representing both private and governmental entities in matters related to real estate development. His practice “footprint” covers the state from the mountain counties to the coast and occasionally includes…

Terrell_TomMr. Terrell is widely regarded as one of North Carolina’s leading land use attorneys, representing both private and governmental entities in matters related to real estate development. His practice “footprint” covers the state from the mountain counties to the coast and occasionally includes parts of Virginia and South Carolina. His many clients are involved in commercial and residential real estate, solid waste hauling and disposal, telecommunications, quarries/asphalt and miscellaneous litigation related to permit denials, vested rights and rezonings.

He has published numerous articles and speaks regularly to legal, governmental and business groups on a variety of issues related to land use and zoning.

Mr. Terrell has served as a leader in numerous civic and legal endeavors, including Chairman of the Board of Trustees of the N.C. State Health Plan, Chairman of the Board of Trustees of Winston-Salem State University, and service on the Board of Directors of the UNC-CH General Alumni Association, Board of Directors of the High Point Chamber of Commerce, Board of Visitors of Guilford College and Board of Center Associates of the Center for Creative Leadership, and as a founding member of the N.C. Bar Association Zoning, Planning and Land Use Section.

More information can be found at https://www.foxrothschild.com/thomas-e-terrell-jr/.

Mr. Terrell can be contacted at mailto:tterrell@foxrothschild.com.