In North Carolina, Coastal Towns Face An Ethical Dilemma as To Who Shall Pay For Debt Service and Operating Expenses Of Their Sewer Systems

Abstract

In North Carolina, coastal towns that need to generate additional enterprise revenue to pay debt service and operating expenses of their sewer systems face an ethical dilemma as to who shall pay. Certain North Carolina coastal towns, including the Town of Oak Island (“the Town”), have been delegated the authority by the North Carolina General Assembly to generate non-operating enterprise revenue by imposing a Sewer Treatment Fee/Tax against owners of parcels that “could or [do] benefit from the availability of sewage treatment.” SECTION 4 of S.L. 2004-96 (as amended by S.L. 2006-54). In the alternative, to generate additional operating revenue, Towns could raise the rates that sewer users of developed parcels pay to receive sewage collection and treatment services. In this case, the sewer user and the owner of a developed parcel have a different legal relationship, although they may be the same person. The sewer user contracts with a town for the receipt of sewer collection and treatment services. In contrast, owners of undeveloped parcels pay taxes, both ad valorem taxes and taxes for a local benefit. Similar to the owner of a developed parcel, the owner of an undeveloped parcel pays taxes, both ad valorem taxes and taxes for a local benefit. However, the owner of an undeveloped parcel cannot also be a sewer user because the undeveloped parcel generates no sewage and, as a result, cannot benefit from the receipt of sewage collection and treatment services.