State Water Infrastructure Authority Adopts Distressed Unit Assessment and Identification Criteria

Raleigh

At its November meeting last week, the State Water Infrastructure Authority adopted distressed unit criteria and identified and designated four local government units as distressed, an important first step in allocating $9 million in funding made available through recent Viable Utility Reserve legislation, Session Law 2020-79, signed into law by Governor Roy Cooper July 1, 2020. 

The legislation describes a distressed unit as “a public water system or wastewater system operated by a local government unit exhibiting signs of failure to identify or address those financial or operating needs necessary to enable that system to become or to remain a local government unit 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.” 

In tandem with the Local Government Commission (or LGC) of the N. C. Department of State Treasurer, the Authority developed the criteria and assessment process to identify distressed units, the culmination of a long focus on assisting struggling water and wastewater systems and leading them toward long-term solutions. The Authority’s Statewide Water and Wastewater Infrastructure Master Plan provides three focal areas – organizational, financial, and infrastructure that are necessary for viable utilities. The distressed criteria identify utilities that struggle in these areas and may not be viable. 

The four towns designated as distressed units are Eureka (Wayne County), Bethel (Pitt County), Kingstown (Cleveland County), and the Cliffside Sanitary District (Rutherford County). Each of the towns was allocated grants 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.

Determination of a distressed system consists of four criteria:

  • their fiscal affairs are under the control of the LGC pursuant to its authority, granted by G.S. 159-181.
  • they have not submitted required annual audits to the LGC for the last two fiscal years as required by G.S. 159-34.
  • they have Total Assessment Criteria Scores, which include items from population trends and water system revenue to water rates and debt levels, identifying them as distressed.
  • they are a unit for which other information is available to or known by the Authority or LGC that reflects and is consistent with, but does not expressly appear in, 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 data limitations.

 “Statewide, we have an estimated $17-26 billion dollars in water infrastructure needs and local systems face big challenges in today’s economy,” said Kim Colson, chair of the infrastructure authority and director of the Division of Water Infrastructure. “These strong actions allow for solutions that can be applied right away in the systems that need it most.”

During the November meeting, Deputy Treasurer and LGC Secretary Greg Gaskins, also an Authority member, commented that the state has assumed control of the financial affairs of three local governments, including Eureka and Cliffside Sanitary District. Notably, across the previous seventy years, only two other local governments have required this action.

The Authority is an independent body with primary responsibility for awarding federal and state funding for water infrastructure projects. Other responsibilities include developing a state water infrastructure master plan, recommending ways to maximize the use of available loan and grant funding resources, and examining best and emerging practices. To learn more about the Authority: https://deq.nc.gov/about/divisions/water-infrastructure/state-water-infrastructure-authority.

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