If the General Assembly exempts a school district from local building permit fees, can the school district and the county still work around that by having the county charge the contractor and the school district reimburse the contractor?
Plain-English summary
In 1997 the General Assembly passed a local act for Wake County (1997 N.C. Session Laws c. 450). The act exempted Wake County Public Schools (WCPSS) and qualified Wake County nonpublic schools from "development charges" assessed by Wake County or any municipality in the county on school-infrastructure construction, renovation, or repair. The definition of "development charge" sweeps broadly: impact fees, facility fees, development fees, project fees, regulatory fees based on student seating capacity, and building permit fees.
Representative J. Sam Ellis asked the AG two questions about the act:
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Can the county or a municipality still charge WCPSS a building permit fee for a school construction project? No. A building permit fee is explicitly within the act's definition of "development charges." After the act's effective date of August 28, 1997, the county and municipalities cannot charge a building permit fee against any WCPSS or qualified nonpublic school construction project in Wake County.
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Can the county and WCPSS make a deal where the county bills the contractor for inspection services, and WCPSS reimburses the contractor for that cost? No. The AG looked through the form to the substance. The county and municipalities remain obligated under G.S. § 153A-352 (counties) and Chapter 160A, Article 19, Part 5 (municipalities) to perform building inspections. The plain effect of the local act was to require those obligations to be performed for free for WCPSS and qualified nonpublic schools. A reimbursement workaround would do exactly what the act forbade. The AG ruled that "any agreement between WCPSS and the County or a municipality which obligates WCPSS to pay the County or a municipality 'development charges' as defined in the Act under the guise of consideration for services which the County or municipality is statutorily obligated to provide would be null and void."
The legal mechanics. Counties and municipalities are creatures of the State. They cannot exercise powers that the legislature has prohibited, expressly or impliedly. The AG cited Greene v. City of Winston-Salem, 287 N.C. 66 (1975), for the principle that a local unit cannot evade legislative intent by elevating form over substance. The Court there refused to let a city dodge a State preemption of sprinkler-system regulation by relabeling the same ordinance as a fire code instead of a building code. The same logic applied here: a contractor-reimbursement scheme would just be a relabeling.
The narrower point about user fees. The AG noted the contrast with Homebuilders Ass'n of Charlotte v. City of Charlotte, 336 N.C. 37 (1994), where municipalities were allowed to charge user fees for regulatory services as long as State law did not restrict them. The Wake County local act did restrict them as to WCPSS and qualified nonpublic schools, so the Homebuilders permission did not carry over.
Currency note
This opinion was issued in 1998. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
The general principle that NC local governments cannot evade clear State preemption by relabeling fees has been reinforced in later decisions and AG opinions. School fee exemptions, where granted, are commonly structured as local acts (as here) and continue to be enforced strictly. Anyone analyzing a current school fee question should check whether the controlling local act is still on the books, whether the General Assembly has displaced it with a general statute, and whether any later AG opinion or court decision speaks to the specific fee at issue.
Common questions
Q: What is a "local act" in North Carolina?
A: A statute the General Assembly passes that applies only to a single named county, municipality, or group of them. NC uses local acts heavily, in part because the State constitution restricts truly statewide special legislation. The Wake County school fee exemption was passed as 1997 N.C. Session Laws c. 450.
Q: Why couldn't the contractor just pay the fee out of pocket?
A: The contractor's price to the school would include those costs, so the school would effectively still pay them. The AG read the legislative intent as requiring the inspection departments to absorb the cost, not just rerouting the bill through a third party.
Q: Does this opinion apply to other NC school districts?
A: Directly, no. The 1997 act was a local act applying only to Wake County. But the reasoning about substance-over-form circumvention applies anywhere the General Assembly has exempted a class of entities from local fees.
Q: What if the county tries to make WCPSS pay through some other route, like an "administrative service charge"?
A: The AG signaled that any such arrangement would be tested against the same substance-over-form rule. If the payment is consideration for services the county is statutorily required to perform without charge for WCPSS, it falls inside the exemption no matter what label is used.
Q: Did the act save WCPSS money or just shift costs around?
A: It shifted them. The county and municipalities still had to perform inspections, just without WCPSS-funded revenue. That meant general fund money or other taxpayers covered the cost. The legislative judgment was that school construction shouldn't bear those costs at the school level.
Q: What about user fees for new services not statutorily required?
A: The AG's reasoning did not foreclose those. Homebuilders v. City of Charlotte allows user fees for services the locality is not otherwise required to provide. The 1997 act only swept up "development charges" tied to the inspection obligation; new categories of service might fall outside.
Background and statutory framework
Counties and municipalities in NC are required to regulate building construction within their jurisdictions. G.S. § 153A-352 imposes the duty on counties; Chapter 160A, Article 19, Part 5 imposes the parallel duty on municipalities. The duties include issuing permits, performing inspections, issuing certificates of compliance, and bringing enforcement actions.
To fund those obligations, the legislature authorized counties and municipalities to charge fees for permits and inspections. G.S. §§ 153-354 and 160A-414. The fees underwrite the inspection departments.
School construction projects historically paid the same fees as private construction. By the mid-1990s, several school districts and county governments had asked the legislature to relieve school districts from those costs, on the theory that the State-mandated school facility costs already strained school budgets. The Wake County local act of 1997 was one response.
The act's broad definition of "development charge" was the legislative drafter's effort to head off exactly the workaround Representative Ellis was asking about. By sweeping in building permit fees, impact fees, facility fees, regulatory fees, and so on, the drafter tried to capture every label a local government might use. The AG's opinion confirmed that even labels the drafter didn't anticipate (like a contractor-reimbursement scheme) would be treated as covered if the substance shifted the cost back to the school.
Citations
- 1997 N.C. Session Laws c. 450 (Wake County local act exempting WCPSS and qualified nonpublic schools from development charges)
- N.C. Gen. Stat. § 153A-352 (county building inspection duty)
- N.C. Gen. Stat. § 153A-351(a1) (county options for fulfilling inspection duty)
- N.C. Gen. Stat. Chapter 160A, Article 19, Part 5 (municipal building inspection authority)
- N.C. Gen. Stat. § 153-354 (county authorization for inspection fees)
- N.C. Gen. Stat. § 160A-414 (municipal authorization for inspection fees)
- Greene v. City of Winston-Salem, 287 N.C. 66, 213 S.E.2d 231 (1975) (locality cannot evade State preemption by formal relabeling)
- Homebuilders Ass'n of Charlotte, Inc. v. City of Charlotte, 336 N.C. 37, 442 S.E.2d 45 (1994) (municipalities may charge user fees for regulatory services where State law does not restrict)
Source
- Landing page: https://ncdoj.gov/opinions/wake-county-public-schools-and-qualified-nonpublic-schools-exempt/
Original opinion text
October 13, 1998
The Honorable J. Sam Ellis
House of Representatives
State Legislative Building
Raleigh, NC 27601
Re: Advisory Opinion; Wake County Public Schools and Qualified Nonpublic Schools Exempt from Certain Local Government "Development Charges"; 1997 N.C. Session Laws c. 450.
Dear Representative Ellis:
You have written to ask for this office's opinion on the application of a local act entitled "An Act Exempting the Wake County Public School System and Qualified Nonpublic Schools of Wake County from Development Charges Related to the Construction, Renovation, and Repair of School Infrastructure Facilities in Wake County and the Municipalities Therein, and to Change Several Other Laws Affecting Wake County." 1997 N.C. Session Laws c. 450. Section 1 of this Act, provides in pertinent part:
Notwithstanding any other provision of law, the Wake County Public School System and qualified nonpublic schools of Wake County shall be exempt from development charges assessed by Wake County or any municipality having territory within Wake County where the development charge is assessed against the construction, renovation, or repair of school infrastructure facilities.
The Act then goes on to define "development charge" to include a wide variety of fees related to the regulation of building construction, renovation and repair, e.g., impact fees, facility fees, development fees, project fees and regulatory fees based on student seating capacity and building permit fees.
In light of the General Assembly's enactment of this local bill, you have asked two questions. Those questions and our responses follow.
Question: Could Wake County, or any municipality in Wake County, charge the Wake County Public School System a building permit fee for a school construction project, if the building permit was issued after the effective date of the Act?
Answer: No.
The Act provides that the Wake County Public School System (WCPSS) and qualified nonpublic schools in Wake County are "exempt" from development charges "assessed" against its construction projects by Wake County and its municipalities. "Building permit fee[s]" are among the fees specifically included in the Act's definition of "development charges." Therefore, it is our opinion that, after the effective date of the Act, i.e., August 28, 1997, Wake County and its municipalities are prohibited from assessing a building permit fee against a WCPSS school construction project or a school construction project of a qualified nonpublic school in Wake County.
Question: After the effective date of the Act, could Wake County or a municipality in Wake County enter into an agreement with the Wake County School System under which the County or municipality would agree to conduct building inspections on a school project and charge a fee to a contractor and the Wake County School System would agree to reimburse the contractor for the fee?
Answer: No.
The effect of the Act can only be understood in the context of counties' and municipalities' obligations to regulate the construction of buildings within their jurisdiction. Pursuant to G.S. § 153A-352, counties are obligated to regulate the construction and maintenance of buildings within their territorial jurisdiction. That statute expressly states:
These duties and responsibilities include receiving applications for permits and issuing or denying permits, making necessary inspections, issuing or denying certificates of compliance, issuing orders to correct violations, bringing judicial actions against actual or threatened violations, keeping adequate records, and taking any other actions that may be required to adequately enforce the laws and ordinances and regulations.
(Emphasis added). G.S. § 153A-351(a1), in turn, provides that counties may fulfill their obligations under G.S. § 153A-352 by creating their own inspection departments, creating joint inspection departments with other local units of government or contracting with other units of local government to provide inspection services. Municipalities are subject to the same inspection obligations and Chapter 160A, Article 19, Part 5 of the General Statutes provides them with the same means for fulfilling those obligations. In order to raise funds to support their building inspection departments, counties and municipalities are authorized to appropriate funds and fix fees for "issuing permits, for inspections, and for other services of the inspection department." G.S. §§ 153-354 and 160A-414.
The plain effect of the Act was to exempt WCPSS and qualified nonpublic schools from paying many of the fees that Wake County and its municipalities charge to support their inspection departments. The Act, however, left unaltered the County's or municipalities' obligation to continue to perform the related statutory duties and responsibilities. Consequently, the ultimate effect of the Act, and the apparent legislative purpose, was to require the County and its municipalities to provide the services associated with the "development charges" to WCPSS and qualified nonpublic schools free of charge.
The question, therefore, becomes: Can WCPSS and the County or municipalities circumvent the exemption which the Act grants to WCPSS and shift the cost of regulating the construction and maintenance of school buildings back to WCPSS by entering into a contract under which WCPSS is obligated to pay for building inspections and other construction services that the County and municipalities are statutorily obligated to provide? In our opinion, they cannot.
The cardinal rule of statutory construction is that legislation must be construed to accomplish the General Assembly's intent. Sutton v. Aetna Casualty and Surety Co., 325 N.C. 259, 265, 280 S.E.2d 759 (1989). When ascertaining legislative intention, statutes must be interpreted as a whole. In re Brownlee, 301 N.C. 532, 272 S.E.2d 851 (1981). The law looks to the substance of an act, not its form, to determine whether it is prohibited. State v. Lipkin, 169 N.C. 265, 271, 84 S.E. 340, 343 (1915) (interpreting gambling statutes); Animal Protection Soc. of Durham, Inc. v. State, 95 N.C. App. 258, 382 S.E.2d 801, 807 (1989) (interpreting gambling statutes).
Moreover, local units of government cannot act contrary to the desire of the General Assembly. The powers of counties and municipalities emanate from the State; they cannot contravene the policy of the State nor can they exercise powers which they are expressly or impliedly prohibited from exercising. E.g., Greene v. City of Winston-Salem, 287 N.C. 66, 72, 213 S.E.2d 231, 235 (1975). When exercising their delegated authorities, counties and municipalities must recognize and give effect to the intent of the legislature. They cannot evade the purpose of legislation by elevating form over substance. Id. at 76 (city cannot evade legislature's intent to completely regulate installation of sprinkler systems by codifying city ordinance requiring sprinklers in highrise buildings as part of its fire code rather than building code). Compare, Homebuilders Ass'n of Charlotte, Inc. v. City of Charlotte, 336 N.C. 37, 442 S.E.2d 45 (1994) (municipalities can charge user fees to cover the cost of regulatory services provided by the city when such fees are not contrary to or restricted by State or federal law).
In light of those legal principles, it is our opinion that in passing the Act the legislature intended to absolve WCPSS and qualified nonpublic schools from the obligation to pay the costs associated with building inspections and other County and municipal activities related to building construction and to require the County and municipality building inspection departments to absorb the cost of providing those building construction services to the schools. Therefore, in our opinion, any agreement between WCPSS and the County or a municipality which obligates WCPSS to pay the County or a municipality "development charges" as defined in the Act under the guise of consideration for services which the County or municipality is statutorily obligated to provide would be null and void as contrary to that legislative intent.
We hope this letter answers your questions. We apologize for the delay in responding to your request.
signed by:
Grayson G. Kelley
Senior Deputy Attorney General
Thomas J. Ziko
Special Deputy Attorney General