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National Association of Counties
Washington, D.C.

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 Some counties pay to fix unfinished subdivisions

By Charles Taylor
SENIOR STAFF WRITER

Silt runoff from an unfinished subdivision in Henderson County, N.C. is clogging streams. In Paulding County, Ga., commissioners have formed a task force to deal with 174 residential developments with incomplete infrastructure.

When the housing bubble burst four years ago, it left behind a host of problems that counties across the nation still are dealing deal with. Some call them “zombie” subdivisions, and residents of these partially completed developments are becoming increasingly vocal about unpaved roads, missing sidewalks and street lights, and overgrown lots.

Compounding the problem, some of the builders have gone belly up, or performance bonds that guaranteed infrastructure completion have expired or changed hands several times, making them difficult to track down.

Counties are pursuing varied strategies to fix the problems — taking legal action, of course — but also assuming financial responsibility to finish roads, curbs and gutters.

“We’re coming up with a game plan for where we know we’re not going to have money. And that’s where it gets a little touchy,” said Todd Pownall, a Paulding County commissioner. “Of course, the people in the developments want things done, and the people that aren’t in the development say why are you using tax dollars to finish this project? But that’s a legitimate question.”

Even when bond money can be recovered to make improvements, governments often are questioned about why they’re doing work in uninhabited subdivisions, when an occupied development may be lacking infrastructure. Pownall explained that when bond money is recovered for a specific project, it must be spent on that neighborhood, whether anyone lives there or not.

 
Photo by Ron MacArthur/Cape Gazette

A top coat of asphalt is needed to make this Sussex County, Del. street flush with a protruding manhole cover. Scenes like this play out in unfinished subdivisions nationwide
 

In those counties that are taking responsibility, officials say it’s a case of protecting the value of investments already made in their communities until the housing market recovers — and protecting residents.

Earlier this year, the Metro Council of Nashville and Davidson County, Tenn. passed an ordinance to spend public funds to finish incomplete infrastructure that poses a “public health or safety concern in its present condition.” Paulding County, near Atlanta, once was one of the nation’s fastest growing counties, and it’s considering following suit. It has formed an infrastructure task force to assess needs in unfinished subdivisions and to consider paying for improvements using county funds.

Robert Duvall, a Metro Council member, said he had seven bankrupt subdivisions — the most in Davidson County — in his district.

“The recent legislation has allowed us to enter into an agreement with a developer or a builder whereby if they would come in and agree to pick up a portion of the infrastructure cost, then we would agree to pick up a portion of the infrastructure cost,” he said. “The people in the community would get their street lights; the people in the community would get the topping coat on their pavement; we would accept the streets as a metropolitan street, and Metro would be responsible for future maintenance.”

Pownall is in the real estate business and has seen the problems “in the trenches.”

“Some have said we’re finishing the incomplete developments; we’re trying not to look at it like that,” he said. “We may get to a point where we do that. What we’re doing is coming up with plans and cost factors....” He said in developments where there’s no bond money to do the work, the county is considering advancing the cost of the improvements and recovering it in the future through a per-lot assessment when building permits are issued.

All three counties have had some success in calling in bonds and lines of credit to finish the work. Sometimes it required arm-twisting, dogged pursuit and litigation.

Henderson County officials aren’t considering using public money, but the problems there are indicative of what other counties face. They are working to stabilize a development called Seven Falls, which required a $6 million improvement guarantee from a developer that had sought bankruptcy and splintered into several disparate entities and limited liability companies.

“When the deadline passed for those improvements to be done and they weren’t done, we called the bond, and now we are in the process of litigating to try to get that bond money,” said Sarah Zambon, senior deputy county attorney.

“For Henderson County, for local government, for the commissioners, it created a fairly large administrative burden in terms of chasing down the bond money.”

In addition to homes, Seven Falls was designed to be western North Carolina’s “only private golf and river club” bordered by the French Broad River in the Blue Ridge Mountains near Hendersonville and Asheville, according to one “luxury” real estate website.

Seven Falls provides an example of how unfinished infrastructure can affect more than residents and owners, it can also have negative offsite impacts to the environment.

Since June 2010, Seven Falls LLC has been fined more than $1,000 per day because of soil erosion problems. Tim Fox was the county’s erosion control technician until a few months ago, when he took a job with the state. On a scale of 1 to 10, he rated Seven Falls’ erosion problems a 10. He was called upon to testify on the county’s behalf in the developer’s bankruptcy case, which the court dismissed.

“I testified that Seven Falls was an environmental disaster, and I still stand behind that,” he said.

Soil from unpaved roads is being washed away by runoff causing “severe gullying and accelerated erosion.” Fox said headwaters are the life’s blood of the streams — and ultimately rivers — they feed. “A lot of the headwaters streams have been impacted, which affects everything below it.” He estimates “miles of streams” have been adversely affected.

Beyond the environment, Seven Falls’ and other zombie subdivisions’ problems — and Henderson County’s efforts to address them — illustrate another role of government in situations such as these, Zambon said.

“It’s a consumer protection issue also, because there are honest people who bought property out there who are subject to the developer’s promises who now have lots that they can’t access because there are no finished roads,” she said, “and the roads that there are, none of them were paved. So even the roads that were graded are falling apart.”

 

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