Town staff recommends modest SDF increase; council asks legal review before any large jump

Town staff on Dec. 19 presented a statutorily required update to Surf City’s system development fees (SDFs), urging a cautious approach to new charges that shift the cost of capacity expansion to new development.

David Price summarized the required methodologies under state law (buy-in, incremental, combined) and said the consultant used a combined method. “Our current fees are $3,000 for water, $9,200 for sewer,” Price told the council. Using projects the town expects to complete in the next five years, staff recommended setting SDFs near $4,000 for water and $16,000 for sewer rather than the consultant’s theoretical maximums.

Why it matters: SDFs affect the up-front cost of new housing and commercial development and determine whether existing ratepayers subsidize capacity expansion. The town must follow Chapter 162A statutory criteria and conduct a public hearing before adoption.

Council discussion centered on the tradeoff between charging the statutory maximum (to avoid cross-subsidizing existing customers) and the risk that raising fees above the actual capital program could create obligations for refunds or legal exposure if projects change.

“Staff is recommending only consider the projects that we know we’re gonna get done in the next five years,” Price said, explaining the staff-preferred, lower-fee option. Some council members argued for maximizing the allowable fee; others cautioned that doing so could prompt refund claims if planned projects were not completed.

Next steps: Council asked staff to obtain a legal analysis of refund/clawback risk, summarize public comments (the public comment period closed Dec. 23) and return with a recommendation at the Feb. 2 meeting for a public hearing and possible adoption.