Land Use and Local Government Law and Litigation

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Sarasota County Claims Concurrency Allows It to Retire Existing Capacity Debts on Backs of New Users - Big Case Coming

In Save Our Septic Systems v. Sarasota County, the 2d DCA reversed (in part) summary judgment granted to Sarasota County in a case involving mandatory hook up fees being charged to sewer system customers. A key issue is Sarasota County plan to use a bunch of the money to pay back existing debt in the system and the relation of that to the calculation of the connection fee.

It is unclear how much the 2d DCA understood of the County's arguments, but the court thought the County argued that because of the concurrency requirement, the County must provide new infrastructure and in that case, if bonding or financing requirements demand that old debt (for old capacity for existing users, not future users) must be retired, such payments are a "cost" for the new infrastructure that can be charged to the new users.

This is radical!!! Understand -- the County is claiming that the requirement that impact fees be used to provide new capacity and not be used to cover costs for existing users is trumped by "financing requirements" and the concurrency requirement. The County attempted to use this to avoid providing the actual cost-accounting type approaches that would distinguish the actual capacity used by the new users and paid for by previous debt and force a blanket pay back.

The 2d DCA reversed summary judgment for the County, requiring the circuit court to make a record and reach conclusions on the cost-accounting issue, but clearly was a bit non-plussed about the nature of the cost accounting arguments:

Although the record does not conclusively establish how this impact fee was calculated and the intentions regarding the specific allocation of any revenues received from the fee, the parties have presented general arguments regarding the proper calculation of the fee or the proper use of revenue collected from the fee. SOSS argues that the capacity fee cannot be used to pay off any existing County debt or to pay for expansion other than in an amount that directly and strictly relates to the impact of these new users.

The County, however, points out that modern financing requires the payment of existing debt to permit further expansion. The County notes that other states have expressly recognized that impact fees can be used to pay the debts incurred in building capacity for the future. See, e.g., Airwick Indus., Inc. v. Carlstadt Sewerage Auth., 270 A.2d 18 (N.J. 1970). In addition, the County argues that concurrency now requires that an expansion of the sewer system must include a provision for excess capacity to ensure the efficient use of capital and to ensure that the County can accommodate new growth as it occurs.

Given the concurrency requirements now in place and the modern requirements for financing capital expansion as discussed above, we are inclined to reject SOSS's arguments that the revenues from an impact fee can never be used to pay existing indebtedness or that the amount of the impact fee cannot be based in part upon a recognized need for future capacity. Nevertheless, the supreme court's distinction between the proper use of impact fees to finance reasonably anticipated costs of expansion versus the prohibited use of such fees to pay for the existing system as a whole remains in place. See Contractors & Builders Ass'n, 329 So. 2d at 320-21; St. Johns County, 583 So. 2d 635, 637-39; Volusia County v. Aberdeen
at Ormond Beach, L.P., 760 So. 2d 126, 134-36 (Fla. 2000).

This distinction requires the circuit court to carefully review the calculation of the impact fee and the intended expenditures from the revenue generated by that
fee to assess whether the fee meets the dual rational nexus test. That is, the circuit court must assess whether the County has met its burden of demonstrating a reasonable connection or rational nexus between the need for additional capital facilities because of the anticipated new users of the system who will pay this fee, and a reasonable connection or rational nexus between the intended expenditures of the collected funds and benefits accruing to those new users. See Aberdeen at Ormond Beach, L.P., 760 So. 2d at 134.2 Because disputed issues of material fact remain in this record as to the calculation of the fee and the intended use of the revenues
from the fee, summary judgment on this count was improper.

To clarify. If a local government at time 1 takes on 10M debt in order to provide future infrastructure for 20 years, there is nothing wrong in having an impact fee paid by users who come on in years 1-20 used to retire that debt.

However, if the year 1 debt provides capacity and quality improvements for existing users AND provides additional capacity for new users, the existing users must repay that portion of the cost applicable to the existing user base.

What Sarasota County and a number of other jurisdictions are doing is playing a game where they claim that quality improvements (like bringing drainage, sidewalks and lane width) to existing roads to meet current standards can be 100% charged to new development in the impact fees. So far, they are getting away with it by claiming that they wouldn't bring their own infrastructure up to these standards (ever) and that it's new development that "triggers" the need to spend the extra money. Right. This is just another approach to the political game of "existing residents don't to pay for the quality of roads, environment (storm water), water and sewer that they want, so the politicians conveniently blame it on new development and hand the new development the bill."

It appears to me (but we won't know until the circuit court reviews this case on remand) that Sarasota County tried to play a similar game with these charges. We'll see what happens next.

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