Clare v. Hudson
No. 2009-158, 6/16/2010
Municipalities have many tools to obtain funding for the off-site improvements required by a proposed development, either by impact fees (assessed through a local ordinance adopted under RSA 674:21, V) or off-site exactions (assessed as a condition of subdivision or site plan approval under authority found in RSA 674:21, V(j)). In either case, the municipality has a responsibility to spend the money only for the specified purpose and to account properly for it.
As a condition of subdivision approval in August 2000, the developer was required to pay the town $81,705 for improvements to an intersection. It appears this was an off-site improvement fee (i.e., not assessed under an impact fee ordinance), although the town referred to it as a "performance bond." The money was placed in a separate account. In 2005 the town paid a contractor $1,500 from the account for tests to determine subsurface conditions at the intersection. The town also approved work to improve sight distance at the intersection, including smoothing out a knob and raising the road at a low point, to be paid from that account. In August 2007, a contractor was paid $89,153.95 (the balance of the account plus accrued interest) for improvements to the road and intersection. The developer claimed the work was "general road maintenance" rather than improvements, and demanded a refund of the money. The town refused.
The developer filed suit, claiming the fund had been expended for a purpose other than the capital improvements for which it was collected. The town admitted its accounting was not clear at the time but produced evidence that showed the contractor had been paid $21,440 to reclaim, fine grade, compact and pave a 650-foot section of one road and 25 feet of the other road near the intersection. The contractor was paid another $53,997.05 for reclaiming and repaving an additional 1,700 feet of road which the town considered to be "included with the intent of this project…."
The Court examined the town's confusing records and determined it was entitled to retain the amounts actually paid to the contractor for work in the vicinity of the intersection, totaling $75,437.05. The balance, $13,716.90, was found to have been unreasonably paid to the contractor due to the "lack of adequate accounting," and the town was required to refund it to the developer.
The lesson from this case is the importance of clear accounting for any funds paid by a developer to a municipality for impact fees or off-site exactions. A municipality that can demonstrate through proper records that funds were spent for the purpose for which they were collected is less likely to be required to return those funds after a lengthy (and expensive) court proceeding.
Please be advised that the foregoing case summary is based upon a Supreme Court slip opinion. Slip opinions are subject to change following motions for rehearing and/or motions for reconsideration. The Court may also modify the opinion without motion. The final version of the Court’s opinion is that which appears in the New Hampshire Reports.< Back to Court Update Home