William C. Coward
COWARD, HICKS & SILER, P.A.
P.O. Box 1918 Cashiers, NC 28717-1918
Is a North Carolina municipal corporation authorized to enter into an escrow agreement with individual property owners to collect and dispose of funds in order to acquire right of way, by condemnation or otherwise, from other property owners?
The Town of Highlands is a municipal corporation. As such it is a creature of the legislature and has only those powers delegated to it by statute or in its charter. A municipal corporation has general corporate powers, including the power to contract and to be contracted with. It may also acquire and hold any real or personal property.
G.S. § 160A-11. “All contracts made by or on behalf of a city shall be in writing.” G.S. § 160A-16. A city may also contract with and appropriate money to any person, association, or corporation, in order to carry out a public purpose that the city is authorized by law to engage in. G.S. § 160A-20.1.
Any power conferred upon a municipal corporation must be exercised for a public purpose. No enterprise may be engaged in solely for the benefit of private interests. Keeter v. Town of Lake Lure, 264 N.C. 252, 264, 141 S.E.2d 634, 643 (1965). All acts of a municipality beyond the scope of the powers granted to it are void. Bagwell v. Town of Brevard, 267 N.C. 604, 608, 148 S.E.2d 635, 637 (1966). A city may exercise sound discretion as to the means by which the purposes of its creation may be accomplished. Cody Realty & Mortgage Co. v. City of Winston-Salem, 216
N.C. 726, 727, 6 S.E.2d 501, 502 (1940). The courts will not interfere with the exercise of discretionary powers unless the action is so clearly unreasonable as to amount to an oppressive and manifest abuse of discretion. Sykes v. Belk, 278 N.C. 106, 122, 179 S.E.2d 439, 449 (1971). It is the policy of the General Assembly that cities should have adequate authority to execute their duties. Accordingly, the powers granted to municipal corporations in Chapter 160A are to be broadly construed to include any additional or supplementary powers that are necessary or expedient to carry them into execution, and that are consistent with state or federal law and the State’s public policy.
G.S. § 160A-4; See Homebuilders Ass’n of Charlotte, Inc. v. City of Charlotte, 336
N.C. 37, 43, 442 S.E.2d 45, 50 (1994)(Charlotte had the authority to charge reasonable user fees to cover the costs of regulatory services provided by the City since the fees were reasonably necessary or expedient to the execution of the City’s express power to regulate the land development activities for which the services are provided); Smith Chapel Baptist Church v. City of Durham, 350 N.C. 805, 517 S.E.2d 874 (1999)(Durham’s stormwater utility ordinance and fees were invalid as a matter of law because they exceeded the authority granted to the City through G.S. §§ 160A-311 and 314).
Article 3A of Chapter 136 of the North Carolina General Statutes addresses streets and highways in and around municipalities. If the governing body of a municipality determines it is in the best interest of its citizens, a municipality may expend its funds to make certain improvements on streets within its corporate limits that are a part of the State highway system. The cost of work financed by a municipality may be assessed against abutting property owners. G.S. § 136-66.1. A municipality is authorized and empowered to acquire land by dedication and acceptance, purchase, or eminent domain. A town can make improvements to portions of the State highway system within the municipal limits. Local funds may be used for that purpose if authorized by a vote of the citizens of the municipality. Improvements are required to be in accordance with DOT standards. G.S. § 136-66.3(c). Municipalities have and may exercise such authority as is necessary to carry out their responsibilities under Article 3A. G.S. § 136-66.4.
Under Article 2A of the Chapter 136, the North Carolina Department of Transportation has authority to develop and maintain a statewide system of roads and highways for which the Board of Transportation formulates general policies and plans.
G.S. § 136-44.1. DOT sets criteria for improving and maintaining secondary roads. Among the policies adopted by DOT are administrative rules for property owner participation in paving. 19A NCAC 2C.0105. DOT has also adopted rules regarding acquisition of right of way for secondary roads. For the addition, improvement or paving of secondary roads, the property owners must donate adequate right of way to DOT. If one or more property owners refuse to dedicate the necessary right of way, DOT may allow the remaining property owners to post a bond to cover condemnation costs. 19A NCAC 2C.0108.
Our research has not revealed a specific authorization to municipal corporations for property owner participation in acquiring right of way or in paving. However, we find no specific statute that prohibits a municipal corporation from entering into an escrow agreement as proposed by the Town of Highlands. In addition, the Supreme Court has held that contribution by property owners whose lands are benefited does not effect the question of whether a taking is for a public purpose. Deese v. Town of Lumberton, 211
N.C. 31, 34, 188 S.E. 857, 859 (1936). In Deese, property owners along one side of a proposed municipal alley agreed to pay the damages assessed in favor of property owners along the other side of the proposed alley. In other words, if public necessity and convenience require improvement of a street, it makes no difference who pays the damages of condemnation.
It is a well-established rule that a municipal corporation, being a political subdivision of the state, can exercise only such powers as are granted in express terms, or those necessary or fairly implied or incident to the powers expressly conferred, or those essential to the declared objects and purposes of the corporation. Stephenson v. City of Raleigh, 232 N.C. 42, 47, 59 S.E.2d 195, 199 (1950). Therefore, the questions are (1) whether the authority to enter the Agreement can be fairly implied or is incident to the powers expressly conferred upon the Town by statute or its charter, and (2) whether the Agreement is against public policy.
A municipal corporation has the express authority to enter into contracts and to hold property. This would include holding funds in an escrow account. A town also has the express power of eminent domain and the authority to make improvements to the State highway system within the municipal limits. The grants of these powers include any additional or supplementary powers that are reasonably necessary or expedient to carry them out. G.S. § 160A-4. It is our opinion that this could include property owner participation in the acquisition of right of way and/or the widening and improving of State secondary roads within a municipality. Deese v. Town of Lumberton, 211 N.C. at 34, 188 S.E. at 859. Since the North Carolina Department of Transportation has such powers, we do not believe that it is against public policy of the State of North Carolina.
We are of the opinion that the proposed escrow Agreement between the Town of Highlands and various property owners to collect and dispose of funds in order to acquire right of way, by condemnation or otherwise, to widen and improve Bowery Road, is not prohibited by North Carolina law or public policy.
Please note that this opinion does not address the specific terms of the Agreement. However, as an aside, we note that in Paragraphs 4 and 9(c) of the Agreement, one of the ways in which the Agreement may be terminated is by a unanimous vote of the Town of Highlands Board of Commissioners. As a general rule, specific statutory authority is required for there to be an exception to the usual requirement that it only takes a majority vote for action by a local governing board. See
G.S. § 160A-75.
Please advise if we can be of any further assistance.
Reginald L. Watkins Senior Deputy Attorney General Civil Division
Robert O. Crawford, III Special Deputy Attorney General Transportation Section