Vol. 007: The Border Tax

Current Conditions

The Triangle operates as one housing market, one labor market, and one commute shed. It does not operate as one infrastructure system. Water allocation is coordinated through the Jordan Lake Partnership. Transit is coordinated through Wake Transit. Utility operations in eastern Wake are coordinated through the Raleigh merger.

But impact fee structures, land use approvals, density decisions, annexation strategy, and engineering standards remain entirely municipal. Each jurisdiction sets its own rules, builds its own capacity, and passes its own costs to its own homebuyers, without accounting for the regional consequences of those decisions. The result is a border tax: a cost premium that exists not because infrastructure is expensive, but because infrastructure stops being coordinated at the town line.

Signals Observed

Signal 1: Where coordination exists, the savings are measurable.

In 2005-2006, the City of Raleigh finalized utility merger agreements with six eastern Wake County towns: Wake Forest, Garner, Knightdale, Rolesville, Wendell, and Zebulon. Before the merger, each town operated or was building toward its own water and sewer system: separate treatment plants, separate staff, separate capital programs, separate rate structures.

After the merger, Raleigh assumed responsibility for a unified system now serving more than 650,000 residents across seven jurisdictions. The estimated savings: $350 million, roughly 8% less than what a fragmented approach would have cost. The towns kept their identities. They kept their zoning authority. What they gave up was the fiction that each municipality could affordably build world-class water and sewer infrastructure on its own.

Signal 2: The current mega-projects are coordinated, but the costs are still landing on households.

Fuquay-Varina, Holly Springs, and Sanford are jointly building a $368 million water infrastructure expansion: expanding the Sanford treatment plant from 12 million gallons per day to 30 million and constructing a 14-mile, 36-inch transmission main crossing roads, a railroad, and the Cape Fear River. Sanford is investing roughly $164 million. Fuquay-Varina: $129 million. Holly Springs: $75 million.

Regional coordination is saving an estimated $30-40 million compared to three separate expansions. But the costs are still substantial. Holly Springs residents saw a 15% utility rate increase in FY2024-25, followed by another 17% increase in FY2025-26. The average residential bill jumped from around $65 to nearly $100 in two years. Regional coordination reduces costs relative to fragmentation. It doesn’t eliminate them.

Meanwhile, Clayton is investing $175 million in the Sam’s Branch Water Reclamation Facility (6 million gallons per day, expandable to 10 million) while absorbing a 10.2% combined water and sewer rate increase driven by wholesale cost increases from Johnston County.

Signal 3: What’s coordinated works. What isn’t coordinated is where projects get stuck.

The gap between what the Triangle coordinates and what it doesn’t is specific and observable.

What’s coordinated: water allocation (Jordan Lake, 13 governments), transportation planning (CAMPO), transit investment (Wake Transit, $2.3B voter-approved), utility operations (Raleigh merger, 650,000+ served), specific capital projects (Fuquay/Holly Springs/Sanford).

What’s not: impact fee structures, land use and density approvals, annexation strategy, school capacity planning, engineering standards.

Each municipality still makes independent decisions about what density to allow, what impact fees to charge, where to extend utilities, and how to share infrastructure burden with neighbors. The infrastructure that’s coordinated works. The infrastructure that isn’t is where the border tax accumulates.

Signal 4: The engineering manual is the border tax you can hold in your hand.

A developer building in the Triangle encounters a different engineering manual at every municipal border. A curb inlet detail approved in Knightdale requires re-engineering for Apex. A storm drain design that meets Garner’s standards needs revision for Raleigh. Each municipality maintains its own specifications, its own review process, its own interpretation of standard civil engineering.

The cost is not dramatic per project. It’s cumulative across hundreds of projects per year, each one paying thousands in re-engineering for details that are functionally identical across jurisdictions. The engineering manual is not a policy document anyone debates at a council meeting. It is a quiet, persistent cost multiplied at every town line.

Forecast

The Triangle will continue to grow as one region and govern infrastructure as fourteen separate municipalities. Where coordination exists (water, transit, specific capital projects) costs will remain manageable relative to fragmented alternatives. Where it doesn’t (fees, land use, engineering) the border tax will compound.

Johnston County is the near-term pressure point. The county grew 34% between 2010 and 2021. In 2021, a pipe break at the Johnston County Water Treatment Plant forced 40,000 customers to limit water use for 48 hours. Twelve municipalities are now studying regional consolidation, a Phase 2 feasibility report was completed in April 2024. Whether that study produces coordination before the next capacity crisis will determine whether Johnston County’s growth is orderly or reactive.

The municipalities that extend coordination beyond water and transit (to fee structures, to land use, to engineering standards) will reduce per-household costs without reducing local control over what gets built. Those that don’t will continue to add the border tax to every home, one re-engineered curb inlet at a time.

Watch Items

• Johnston County regionalization study. Twelve municipalities examining governance models from established regional authorities. A 3-year evaluation timeline suggests decisions by 2027. If consolidation stalls, the next infrastructure failure (not if, when) will force reactive rather than planned coordination.
• CAMPO regional impact fee study. CAMPO’s 2022-2027 Strategic Plan calls for “increased land use and transportation coordination” and includes a sample tactic to “explore policy requiring any development within a specified radius of impact needs additional approvals by regional entities.” If CAMPO commissions a regional fee study, it becomes the first framework for harmonizing the border tax.
• Holly Springs and Fuquay-Varina rate trajectories. Both municipalities project continued utility increases through 2026 and beyond: Holly Springs at 10% water, 30% sewer. If rate increases trigger voter pushback, the political appetite for future regional projects could narrow precisely when more coordination is needed.
• Engineering standard harmonization. Any multi-jurisdictional effort to adopt common engineering details, even for routine items like curb inlets and storm drains, would be a leading indicator that the border tax is being recognized as a cost, not just a procedural inconvenience.

Confidence Level

Medium-High. The Raleigh merger savings, the tri-town project costs, and the Jordan Lake allocation structure are documented in public records. The coordination gap, what’s shared versus what isn’t, is observable from municipal ordinances and CAMPO planning documents. The Johnston County growth data is from Census estimates. The engineering manual observation is practitioner-sourced and difficult to quantify precisely, but consistent across jurisdictions.

Aside: CAMPO’s strategic plan includes a sample tactic for the 3-5 year horizon: “Advocate for statewide land use planning legislation with ‘teeth.'” The regional planning body is already asking for the state intervention that the next issue of this newsletter will examine.

Why This Matters

The border tax matters upstream because it’s invisible in the numbers that drive site selection. A developer comparing impact fees across municipalities is seeing real cost differences, but not the full cost of operating across jurisdictional boundaries. The re-engineering, the duplicated capacity, the uncoordinated fee structures: none of that appears on a fee schedule. It appears in the final price of the home. The Triangle has proven it can coordinate regionally. It does it for water. It does it for transit. The question is whether it will extend that coordination to the infrastructure decisions that actually determine what housing costs, before the state makes the decision for it.