Local Government Commission Identifies Four Entities as Distressed Government Units Designation Due to Failing Infrastructure, Finances; Puts Them in Position to Seek Viable Utility Reserve Funds

(Raleigh, N.C.) – State Treasurer Dale R. Folwell, CPA, announced today that four local governments have been designated as distressed units that could qualify for funding to develop long-term solutions for their water and wastewater systems.

Local Government Commission (LGC)  members voted at their November meeting to identify the towns of Eureka (Wayne County), Bethel (Pitt County) and Kingstown (Cleveland County), and the Cliffside Sanitary District (Rutherford County) as distressed units. They are the first in the state to receive that classification under new criteria developed to implement Viable Utility Reserve legislation introduced in Session Law 2020-79.

The LGC, chaired by Treasurer Folwell and staffed by Department of State Treasurer (DST) personnel, and the State Water Infrastructure Authority (SWIA), an independent body with staff provided by the N.C. Department of Environmental Quality, jointly developed the criteria and assessment process to identify distressed units. SWIA members adopted the distressed unit criteria and approved the four designees at a meeting on Wednesday.

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.”

Units identified as distressed are required to undertake a number of measures to assess and remedy the deficiencies within their utility system. The Viable Utility Reserve fund has been appropriated $9 million that may be allocated to local governments to fulfill these requirements, including to conduct rate studies, asset inventories and assessments. Grants may also be awarded to study potential mergers and regionalization of services. LGC approval is necessary for any awards of Viable Utility Reserve grants..

Treasurer Folwell said the four local government units were carefully selected to pursue the initial round of funding. He said the LGC was created to work cooperatively with local governments to overcome financial and infrastructure challenges, and the Viable Utility Reserve is an important new tool in that effort.

“These are not the only local government units that are experiencing serious problems with their water and wastewater systems and finances,” Treasurer Folwell said. “This action allows us to assess their condition and make decisions on what needs to be done in the best interest of taxpayers, ratepayers, business and industry, as well as the local governments themselves.”

“It will be a challenging process, but I think it’s a real attempt to work on these problems and solve them,” said Deputy Treasurer Greg Gaskins. “They are not all equally going to end up with some kind of magic answer” because circumstances vary in each government unit.

At the November LGC meeting, Treasurer Folwell paid tribute to Gaskins, who also is the LGC Secretary; Dora Fazzini, director of the N.C. Capital Facilities Finance Agency; and Biff McGilvray, a financial analyst in the State and Local Government Finance Division, all of whom are retiring from DST.

“I would like to thank all of them for the tremendous value they brought to the LGC over the years with their decades of combined experience,” Treasurer Folwell said.