AN ACT to revise system development fees.

The General Assembly of North Carolina enacts:

SECTION 1.(a)  G.S. 162A‑205(7) reads as rewritten:
"(7)	Covers a planning horizon of not less than five years nor more than 20 years."
SECTION 1.(b)  This section becomes effective October 1, 2018, and applies to system development fees established or updated on or after that date.
SECTION 2.(a)  G.S. 162A‑211 reads as rewritten:
"§ 162A‑211.  Use and administration of revenue.
(a)	Revenue from system development fees calculated using the incremental cost method or marginal cost method, exclusively or as part of the combined cost method, shall be expended only to pay:
(1)	Costs of constructing capital improvements including, and limited to, any of the following:
a.	Construction contract prices.
b.	Surveying and engineering fees.
c.	Land acquisition cost.
d.	Principal and interest on bonds, notes, or other obligations issued by or on behalf of the local governmental unit to finance any costs for an item listed in sub‑subdivisions a. through c. of this subdivision.
(2)	Professional fees incurred by the local governmental unit for preparation of the system development fee analysis.
(3)	If no capital improvements are planned for construction within five years or the foregoing costs are otherwise paid or provided for, then principal and interest on bonds, notes, or other obligations issued by or on behalf of a local governmental unit to finance the construction or acquisition of existing capital improvements.
(b)	Revenue from system development fees calculated using the buy‑in method may be expended for previously completed capital improvements for which capacity exists and for capital rehabilitation projects. The basis for the buy‑in calculation for previously completed capital improvements shall be determined by using a generally accepted method of valuing the actual or replacement costs of the capital improvement for which the buy‑in fee is being collected less depreciation, debt credits, grants, and other generally accepted valuation adjustments.
(c)	A local governmental unit may pledge a system development fee as security for the payment of debt service on a bond, note, or other obligation subject to compliance with this section.
(d)	Except as otherwise provided in subsection (e) of this section, system development fee revenues shall be accounted for by means of a capital reserve fund established pursuant to Part 2 of Article 3 of Chapter 159 of the General Statutes and limited as to expenditure of funds in accordance with this section.
(e)	If and to the extent that revenues derived from system development fees are pledged to secure revenue bonds or notes issued by a local government unit under the provisions of Article 5 of Chapter 159 of the General Statutes, such revenues may be deposited in such funds, accounts or subaccounts, and applied in such manner, as set forth in the bond order, resolution, trust agreement or similar instrument authorizing and securing such bonds or notes until all such revenue bonds or notes are no longer outstanding."
SECTION 2.(b)  This section becomes effective July 1, 2018, and applies to system development fees pledged on or after that date.
SECTION 3.(a)  G.S. 162A‑213 reads as rewritten:
"§ 162A‑213.  Time for collection of system development fees.
(a)	Land Subdivision. – For new development involving the subdivision of land, the system development fee shall be collected by a local governmental unit at the later of either of the following:
a.	The time of plat recordation.
b.	When water or sewer service is committed by the local governmental unit.
(b)	Other New Development. – For all other new development, the local governmental unit shall collect the system development fee at the earlier of either of the following:
a.	The time of application for connection of the individual unit of development to the service or facilities.
b.	When water or sewer service is committed by the local governmental unit."
SECTION 3.(b)  This section becomes effective July 1, 2018, and applies to system development fees collected on or after that date.
SECTION 4.  The Environmental Management Commission shall update the gallons per day usage under Administrative Rules 15A NCAC 02T .0114 and 15A NCAC 18C .0409 to reflect how new construction uses less water and sewer than under the current rule. The amended rules shall take effect on or before January 1, 2020.
SECTION 5.  Except as otherwise provided, this act is effective when it becomes law.
In the General Assembly read three times and ratified this the 14th day of June, 2018.

	s/	 Philip E. Berger
	 President Pro Tempore of the Senate

	s/	 Tim Moore
	 Speaker of the House of Representatives

	_____________________________________
		 Roy Cooper
	 Governor

Approved __________.m. this ______________ day of ___________________, 2018