New SELC Legal Analysis Challenges Key Assumptions Presented to Charlotte City Council About I-77 Costs and Legal Options

Memo sent to Council September 17 says transportation sales-tax funds can be used for repayment, Charlotte’s potential liability may be dramatically smaller than $69 million, and state law allows Charlotte to help cover other jurisdictions’ costs

CHARLOTTE — Ahead of Charlotte City Council’s scheduled vote tonight on whether to reinstate support for the proposed I-77 South toll-lane project, Sustain Charlotte is sharing a detailed legal memorandum sent to Council members last week that challenges several of the legal and financial assumptions presented to Council at its September 14 meeting.

The September 17 memorandum, attached to this email, was prepared by Megan Kimball, Senior Attorney with the Southern Environmental Law Center, in response to questions raised during Council’s September 14 discussion of the project and the repayment provisions enacted by the General Assembly in Session Law 2026-41. The memorandum addresses four issues: whether revenues from Mecklenburg County’s new transportation sales tax may be used for repayment; the amount Charlotte could actually owe; whether Charlotte may lawfully cover repayment obligations of other CRTPO jurisdictions; and whether NCDOT’s proposed “up to $300 million” in community benefits can actually be enforced.

The memorandum is expressly provided for informational purposes and does not constitute legal advice.

“This memo is important because Council members are being asked to make an enormously consequential decision based in significant part on fears about Charlotte’s financial and legal exposure,” said Shannon Binns, founder and executive director of Sustain Charlotte. “Those fears should be evaluated against all of the available legal analysis and the actual language of the laws involved.”

SELC concludes transportation sales-tax revenues can lawfully be used for repayment

During Council’s September 14 meeting, City Attorney Andrea Leslie-Fite expressed the view that revenues generated through the PAVE Act transportation sales tax could not lawfully be used to satisfy an I-77 repayment obligation.

Kimball reaches the opposite conclusion.

The PAVE Act directs 40 percent of the new sales-tax proceeds to roadway purposes, and its definition of eligible roadway expenditures expressly includes “plans, designs, and related studies.”

Kimball writes that this language logically encompasses preliminary engineering and other preconstruction expenses associated with I-77. The memorandum also identifies a significant piece of legislative history: an earlier proposal specifically prohibited PAVE Act funds from being used to satisfy the I-77 repayment obligation, but that prohibition was removed before the legislation became law. Kimball concludes that Charlotte or another municipality receiving PAVE Act funds could use those proceeds to reimburse NCDOT if repayment is ultimately required, writing: “For these reasons, we respectfully disagree with the City Attorney’s opinion.”

This distinction matters because the possibility of having to divert money from other City priorities or impose additional taxes has been raised during Council’s consideration of the project.

SELC says Charlotte’s actual exposure may be a small fraction of $69 million

The memorandum also questions the approximately $69 million figure that NCDOT has presented as project-development costs potentially subject to repayment.

Kimball notes that I-77 is part of the National Highway System and that preliminary engineering expenditures are generally eligible for at least 90 percent federal reimbursement, potentially more depending on the circumstances. She writes that it is unclear why expenses dating to 2018 would not already have been submitted for federal reimbursement. The memo calls for NCDOT to disclose whether those expenses have already been federally reimbursed — or, if they have not, explain why.

Kimball writes: “…something doesn’t add up, and NCDOT is the only party with full visibility into what actually happened.”

The memorandum estimates that if the $70 million represents federally eligible costs before reimbursement, the State’s net expenditure could be no more than approximately $7 million, and potentially lower.

There is a second major difference in the calculation. The state law says a local government is responsible for costs “in proportion to the weighted voting percentage of the local government” within the MPO. SELC interprets this to mean Charlotte would be responsible for its 31 of 74 CRTPO weighted votes, or 41.89 percent, rather than the entire amount. Under that interpretation, if the State’s net reimbursable cost were between $4 million and $7 million, Kimball calculates Charlotte’s share at approximately:

$1.67 million to $2.93 million.

Even if the entire $70 million were legitimately unreimbursed, that interpretation would put Charlotte’s proportional share at approximately $29.3 million, not $69 million.

The attachment to the memorandum provides the calculation for every CRTPO jurisdiction and shows Charlotte’s 31 weighted votes as approximately 42 percent of the regional total.

SELC concludes Charlotte can lawfully cover smaller jurisdictions’ repayment obligations

Kimball also disagrees with the suggestion that Charlotte would be legally prohibited from helping smaller CRTPO jurisdictions cover their repayment obligations. Her analysis cites the North Carolina Constitution’s public-purpose doctrine, North Carolina Supreme Court precedent, and state interlocal-cooperation statutes. Because Charlotte previously determined that rescinding support for the project served a City policy objective, the memo reasons that helping remove the financial obstacle preventing other jurisdictions from joining a CRTPO majority would serve a direct Charlotte public purpose rather than constitute a gift to another jurisdiction.

The memo further identifies North Carolina’s interlocal cooperation statutes as a mechanism through which Charlotte and participating jurisdictions could formalize such an arrangement.

The memo raises unresolved questions about the promised $300 million in community benefits

The memorandum also examines NCDOT’s statements that the P3 project could produce “up to $300 million” in community investments. Kimball recounts the experience of Durham’s historic Hayti neighborhood and Asheville’s Burton Street community as examples in which transportation-related community commitments were narrowed, delayed, or remained incomplete. Most significantly, Kimball reports that in a January 2026 meeting with NCDOT Secretary Daniel Johnson and his general counsel, she directly asked whether community benefits could be made a mandatory requirement in the I-77 South P3 request for proposals.

She says she was told they could not.

The memo asks NCDOT to explain before reliance is placed on the $300 million figure what legal mechanism would make those commitments enforceable against the eventual private developer and where the money would come from.

Charlotte has challenged state authority in court before

Concerns have also been raised publicly about the consequences of Charlotte challenging the State of North Carolina in court. Charlotte has done so before.

In 2013, the City of Charlotte sued the State of North Carolina after the General Assembly enacted legislation changing control of Charlotte Douglas International Airport. The City obtained judicial relief preventing the state-created airport commission from taking operational control, and Charlotte ultimately retained control of the airport. A later federal court characterized the litigation as the City of Charlotte’s “successful challenge to Session Law 2013-358.”

Charlotte has also used the courts to challenge decisions of state agencies. In 2013, Charlotte-Mecklenburg Utilities, a department of the City of Charlotte, appealed an order of the North Carolina Utilities Commission, challenging the state commission’s decision.

Those cases demonstrate that litigation between Charlotte and state government is not without precedent when the City believes important municipal interests or legal authority are at stake.

“The question of whether a particular lawsuit should be filed and whether it would succeed depends on its specific facts and legal claims,” Binns said. “But Charlotte’s own history makes one point clear: the City has previously used the courts to test state action and to assert what it believed were the City’s legal rights. In the airport case, it did so successfully.”

Council should have the full legal and financial picture before tonight’s vote

Sustain Charlotte is making the September 17 SELC memorandum public so Council members, other CRTPO jurisdictions, reporters and residents can review the analysis before tonight’s City Council vote and CRTPO’s September 23 meeting.

“The stakes of this decision are enormous and will affect our community for generations,” Binns said. “Before Council reverses its May decision based on fears about financial penalties, lawsuits or retaliation from Raleigh, Council members deserve complete and accurate information about what Charlotte could actually owe, what resources are legally available to pay it, and what legal options the City has.”

About Sustain Charlotte

Sustain Charlotte is a nonprofit organization working to create a more equitable, connected, and healthy community by inspiring responsible growth and transportation choices. Since 2010, Sustain Charlotte has worked with residents, neighborhoods, businesses, and government leaders to advance transportation and land-use solutions to ensure the Charlotte region’s growth benefits all.