Viable Utilities

What is a Viable System?

A viable system is a utility that functions as a long-term, self-sufficient business enterprise, establishes organizational excellence, and provides appropriate levels of infrastructure maintenance, operation, and reinvestment that allow the utility to provide reliable water services now and in the future.

The Master Plan presents the state's roadmap for viable water and wastewater utilities that safeguard public health, protect the environment, support vibrant communities and encourage economic development.

What is the Viable Utility Program? 

What is the Viable Utility Program? 

The new viable utility program provides funding to build a path toward viable utility systems using long-term solutions for distressed water and wastewater units in North Carolina.

The State Water Infrastructure Authority and the Local Government Commission have developed criteria to determine how local government units should be assessed for need and eligibility under the Viable Utility Reserve. Identified distressed units must:

  • Conduct an asset assessment and rate study
  • Participate in a training and educational program, and
  • Develop an action plan

The criteria were used to evaluate 496 local government units with water and/or sewer systems. This determination is an important first step in a closer evaluation of the utility's status. In addition, it is a factor in the allocation of $9 million in funding made available through Viable Utility Reserve legislation, Session Law 2020-79, signed into law by Governor Roy Cooper in July 2020.

VUR establishing legislation, signed by Governor Cooper in July 2020 (SL2020-79, House Bill 1087)

Initial funding for the Viable Utility Reserve (VUR) is $9 Million

VUR Process Overview- Implementation

The Viable Utility Reserve provides grants to:

  • Physically interconnect and extend public water or wastewater infrastructure to provide regional service.
  • Rehabilitate existing public water or wastewater infrastructure.
  • Decentralize an existing public water system or wastewater system into smaller viable parts.
  • Fund a study of any one or more of the following: rates, asset inventory and assessment, merger, and regionalization options.
  • Fund other options deemed feasible which result in local government units generating sufficient revenues to adequately fund management and operations, personnel, appropriate levels of maintenance, and reinvestment that facilitate the provision of reliable water or wastewater services.
  • Fund emergency grants for operating deficits.

 

 

What are the Assessment and Identification Criteria?

What are the Assessment and Identification Criteria?

The State Water Infrastructure Authority and Local Government Commission adopted the following Identification Criteria to be used to identify distressed units:

1. A unit whose fiscal affairs are under the control of the Commission pursuant to its authority granted by G.S. 159-181 (“under Commission fiscal control”), or

2. A unit that has not submitted its annual audits for the last two (2) fiscal years to the Commission as required by G.S. 159-34, or

3. A unit with a Total Assessment Criteria Score that: a) Equals or exceeds 9 for units providing both drinking water and wastewater services, or b) Equals or exceeds 8 for units providing only one service, either drinking water or wastewater, or

4. A unit for which other information is available to or known by the Authority or Commission that reflects and is consistent with, but does not expressly appear in, the Assessment Criteria to account for situations in which the Assessment Criteria score does not wholly or accurately reflect a system’s level of risk due to the limitations of available data.

Background

Session Law 2020-79 required the State Water Infrastructure Authority and Local Government Commission to develop criteria to assess and review local government units, and to utilize the assessment and review process to identify distressed units.

In Oct. 2020, the staffs of the Division of Water Infrastructure and the Commission presented the Authority and Commission with proposed Assessment Criteria. They then developed criteria for identifying distressed units (Identification Criteria). At their respective Nov. 2020 meetings, the Commission and the Authority adopted the Assessment Criteria and Identification Criteria. At the Authority's Dec. 2020 meeting and the Local Government Commission's Jan. 2021 meeting, a draft list of local government units (LGUs) designated as distressed was reviewed. Approval by both agencies is required. Four LGUs were officially designated as distressed at the respective Nov. 2020 meetings of the Local Government Commission and State Water Infrastructure Authority (see below). Four additional LGUs were approved by the State Water Infrastructure Authority at its Feb. 2021 meeting. 

Designation of Units

The Division of Water Infrastructure, which serves as staff for the State Water Infrastructure Authority, along with the Local Government Commission, compiled data for local government units to begin identifying distressed units. The first four officially designated as distressed are: Bethel (Pitt County), Cliffside Sanitary District (Rutherford County), Eureka (Wayne County), and Kingstown (Cleveland County). Each of these towns was allocated a grant, ranging from $100,000 to $400,000, to be used to assess the condition of their infrastructure, study rates, or look into alternatives that provide a long-term, viable solution.  These towns represent growing economic challenges for rural parts of the state and the struggle to maintain viable water systems.

The Authority considered 111 additional local government units for the designation at its April 14 meeting. Towns had been given an opportunity to share information that might affect their assessment. Designations are based on distressed unit criteria approved by the Authority at its November meeting and developed in collaboration with the Local Government Commission.

After considering the additional information from the utilities on the list of potentially distressed utilities, the following determination was made:

  • 87 local government units were identifies as distressed.
  • 18 were placed on hold pending additional evaluation.
  • three were removed from the list when it was determined the LGU no longer owned their utility.
  • three received a reduced score, removing them from distressed designation.

(The Authority designated 8 units as distressed at previous meetings.)

 

 

 

 

Benefits of the Viable Utility Program

Benefits of the Viable Utility Program

There are many challenges for water utilities across the state, such as declining population, loss of larger water customers, recruiting and retaining staff, and increasing costs for replacement of aging infrastructure.  The Viable Utility Program provides a process to address these challenges.

The state’s master plan provides a vision of utility viability to address the state’s water infrastructure needs.  How do utilities develop a business plan that addresses the numerous challenges they face and, at the same time, maintain viability?

  • The Viable Utility statutes (SL2020-79, House Bill 1087) provide a broad framework and process for ensuring the utility has a long-term financial plan that ensures viability.
  • May provide a better understanding of the true cost of providing water services with board members and customers.
  • Provides a mechanism for discussion of these issues with the utility’s board.
  • Many resource agencies are focused on assisting utilities as they face their challenges, including those utilities designated as distressed.  

 
  • In water infrastructure planning, it’s important to first know what you have along with the condition and location of what you have. With so much water infrastructure buried underground, it can be difficult to know which capital projects to prioritize.

  • Asset Assessment can help with getting the process started.

  • Aging infrastructure costs more and more each year- projects are more expensive to do in the future- it’s better to address them now.

  • Consistently, across the nation, the number one issue in water infrastructure is replacing infrastructure. The second issue is determining how to pay for this.

Once a local government unit (LGU) is designated as distressed, the division can leverage various funding programs to fit the individual LGU need.

Many kinds of assistance may be available to designated units

  • Rate Study

  • Merger /Regionalization options: Merger / Regionalization Feasibility Grants

  • Interconnection

  • Decentralization

  • Rehabilitation or replacement

  • Emergency operating funds (ONLY if the Local Government Commission has assumed financial control of the LGU)

Designation as distressed can facilitate development and implementation of action plans

  • Education and training for local leadership so they have information to share with citizens on the true cost of services they provide.

  • Long-term planning ensures viability.

  • Helps utilities break the cycle of relying on grants to alleviate difficult, acute or emergency infrastructure situations

Units Designated Under Identification Criteria

Units Designated Under Identification Criteria

The first four units officially designated as distressed by the State Water Infrastructure Authority and the Local Government Commission (in November 2020) were: Bethel (Pitt County), Cliffside Sanitary District (Rutherford County), Eureka (Wayne County), and Kingstown (Cleveland County).

Four additional units were designated at the Authority's Feb. 2021 meeting.

The Authority considered 111 additional local government units for the designation at its April 14 meeting. 

 After considering the additional information from the utilities on the list of potentially distressed utilities, the following determination was made:

  • 87 local government units were identifies as distressed.
  • 18 were placed on hold pending additional evaluation.
  • three were removed from the list when it was determined the LGU no longer owned their utility.
  • three received a reduced score, removing them from distressed designation.

 

Division of Water Infrastructure Funding Programs

Division of Water Infrastructure Funding Programs

In addition to funding through the new Viable Utility Reserve, the Division offers a variety of funding programs and leverages them to find the best possible funding scenario to meet the needs of individual units. The programs are described at the link below.

Water and Wastewater Needs in North Carolina 

Water and Wastewater Needs in North Carolina 

The capital cost of water and wastewater infrastructure needs in the state ranges from $17 to $26 billion over the next 20 years- more likely at the higher end of the range.

  • Water Infrastructure needs = $10 to $15 billion

  • Wastewater Infrastructure needs = $7 to $11 billion

(These are capital costs only- the costs of operations, maintenance and on-going renewal/replacement are not included.)

Even if enough funds were available to address all of today's capital needs, funding by itself does not safeguard long-term viability. Comprehensive management of a water utility's infrastructure, organization, and finances is needed.

Viable Utility-related News (articles, recent webinars, and television content)

Viable Utility-related News (articles, recent webinars, and television content)

 

Viable Utility-related Press Releases