N O R T H C A R O L I N A WA T E R A N D WA S T E WA T E R R E G I O N A L I Z A T I O N S T U D YGovernance Models Review

North Carolina law grants local governments significant flexibility to provide water, wastewater, and other utility services through 11 distinct governance structures. These options balance direct local control against the efficiencies of regionalization. Finding the Right Balance P R I N C E T O N M E R G E R R E G I O N A L I Z AT I O N F E A S I B I L I T Y S T U D Y 2

Comparative Summary GOVERNANCE MODEL POSSESSES TAXING AUTHORITY? GOVERNING BOARD TYPE PRIMARY BENEFIT County Public Enterprise County Commissioners Strong backing via general county funds Municipal Public Enterprise Town Council / Aldermen High alignment with local zoning & growth Sanitary District Directly Elected / Dedicated Single-focus board with separate taxing power County Water & Sewer District County Commissioners Targets taxes precisely to served zones Water & Sewer Authority Appointed by Member Units Completely removes utility from general politics Metropolitan Water Districts Variable Appointed / Mixed Board Maximum regional scaling across county lines Metropolitan Sewer Districts Variable Appointed / Mixed Board Maximum regional scaling across county lines Metropolitan Districts (Water/Sewer/ Combined) Variable Appointed / Mixed Board Maximum regional scaling across county lines Operational Transfer N/A Absorbing Entity's Board Removes capital debt burden from small towns Joint Agency / Interlocal Jointly Appointed Committee Highly flexible; retains local identity Local Act Entity Variable Custom Charter / Appointed Built entirely around local custom requirements 3

C o u n t i e s o p e r a t e u n d e r G . S . C h a p t e r 1 5 3 A , A r t i c l e 1 5 . T h e B o a r d o f C o u n t y C o m m i s s i o n e r s s e r v e s a s t h e g o v e r n i n g b o d y . C o u n t y P u b l i c E n t e r p r i s e e x a m p l e s I n N . C . i n c l u d e : B r u n s w i c k C o u n t y B u r k e C o u n t y W a t e r S y s t e m C a l d w e l l C o u n t y W a t e r S y s t e m s J o h n s t o n C o u n t y P u b l i c U t i l i t i e s U n i o n C o u n t y Pros: Highly direct accountability to voters Strong county-wide financing capacity and backing from general county funds Cons: Commissioners face competing priorities across general government budgets Non-county residents served across lines lack direct voting representation for their utility providers 1. County Public Enterprises 4

C i t i e s a n d t o w n s o p e r a t e u t i l i t i e s u n d e r G . S . C h a p t e r 1 6 0 A , A r t i c l e 1 6 . T h e m u n i c i p a l c o u n c i l o r b o a r d o f a l d e r m e n f u n c t i o n s a s t h e u t i l i t y b o a r d . M u n i c i p a l P u b l i c E n t e r p r i s e s i n N . C . i n c l u d e : C h a r l o t t e W a t e r F a y e t t e v i l l e P u b l i c W o r k s C o m m i s s i o n H e n d e r s o n v i l l e W a t e r & S e w e r R a l e i g h W a t e r S a l i s b u r y - R o w a n U t i l i t i e s Pros: Strong local alignment with urban growth, zoning, and local economic development High responsiveness to localized resident needs Smaller town utilities could merge with a larger utility and not have to focus on utility infrastructure, debt, and billing Cons: Customers outside town limits have no vote in electing the governing body Can result in fragmented infrastructure when multiple adjacent towns build competing systems 2. Municipal Public Enterprises 5

I n d e p e n d e n t p o l i t i c a l s u b d i v i s i o n s e s t a b l i s h e d u n d e r G . S . C h a p t e r 1 3 0 A , A r t i c l e 2 P u b l i c h e a l t h a n d u t i l i t y s e r v i c e s p r o v i d e d t o a r e a s w i t h o u t e s t a b l i s h e d m u n i c i p a l s y s t e m s S a n i t a r y D i s t r i c t s i n N . C . i n c l u d e : F i r s t C r a v e n S a n i t a r y D i s t r i c t F o r k T o w n s h i p S a n i t a r y D i s t r i c t H a n d y S a n i t a r y D i s t r i c t J u n a l u s k a S a n i t a r y D i s t r i c t M a g g i e V a l l e y S a n i t a r y D i s t r i c t O k r a c o k e S a n i t a r y D i s t r i c t R o a n o k e R a p i d s S a n i t a r y D i s t r i c tPros: Possess independent, far-reaching taxing authority and can issue their own revenue bonds Governed by a dedicated board focused solely on utilities Cons: Adds an extra layer of property tax and local government bureaucracy Can overlap or conflict with evolving county or city long- term growth boundaries 3. Sanitary Districts 6

S p e c i a l - p u r p o s e t a x d i s t r i c t s c r e a t e d u n d e r G . S . C h a p t e r 1 6 2 A , A r t i c l e 6 C r e a t e d b y c o u n t y c o m m i s s i o n e r s t o s e r v e s p e c i f i c , d e f i n e d g e o g r a p h i c s e g m e n t s o f a c o u n t y O n e e x a m p l e i s P e n d e r C o u n t y W a t e r a n d S e w e r D i s t r i c t , w h i c h c o n s i s t s o f : M a p l e H i l l W a t e r & S e w e r D i s t r i c t C e n t r a l P e n d e r W a t e r & S e w e r D i s t r i c t R o c k y P o i n t / T o p s a i l W a t e r & S e w e r D i s t r i c t C o l u m b i a U n i o n W a t e r & S e w e r D i s t r i c t M o o r e ’ s C r e e k W a t e r & S e w e r D i s t r i c t S c o t t s H i l l W a t e r & S e w e r D i s t r i c tPros: Allows targeted infrastructure financing via property taxes strictly levied within the district boundary rather than burdening the entire county Cons: Governed by the county commissioners rather than an independent utility-specific board, which limits operational separation from broader county politics 4. County Water & Sewer Districts 7

C r e a t e d b y o n e o r m o r e l o c a l g o v e r n m e n t s u n d e r G . S . C h a p t e r 1 6 2 A , A r t i c l e 1 I n d e p e n d e n t , c o r p o r a t e p o l i t i c a l b o d i e s O r a n g e W a t e r & S e w e r A u t h . O n s l o w W a t e r & S e w e r A u t h . W a t e r & S e w e r A u t h . o f C a b a r r u s C o . S o u t h G r a n v i l l e W a t e r & S e w e r A u t h . N e u s e R e g i o n a l W a t e r & S e w e r A u t h . C a p e F e a r P u b l i c U t i l i t y A u t h . L o w e r C a p e F e a r W a t e r & S e w e r A u t h . B r o a d R i v e r W a t e r A u t h . P i e d m o n t T r i a d R e g i o n a l W a t e r A u t h . Ya d k i n V a l l e y S e w e r A u t h . W a t e r & S e w e r A u t h o r i t i e s i n N . C . i n c l u d e :Pros: Governed by an appointed board dedicated exclusively to running the utility Completely shields utility assets and operations from municipal or county general fund politics Cons: Completely dependent on rate revenues and revenue bonds because they do not possess taxing authority Board members are appointed rather than directly elected by customers 5. Water & Sewer Authorities 8

R e g i o n a l e n t i t i e s a u t h o r i z e d u n d e r G . S . C h a p t e r 1 6 2 A , A r t i c l e 4 D e s i g n e d t o m a n a g e d r i n k i n g w a t e r s y s t e m s a c r o s s m u l t i p l e l o c a l j u r i s d i c t i o n s S e a g r o v e U l a h M e t r o W a t e r D i s t r i c t i s a n e x a m p l e o f a m e t r o p o l i t a n w a t e r d i s t r i c t s i n N . C . ; i t w a s f o r m e d i n 1 9 8 7 w i t h a s s i s t a n c e f r o m t h e c o u n t y .Pros: Allows independent financial and structural optimization over an entire natural watershed or regional customer base. 6. Metropolitan Water Districts Cons: Structurally rigid setup requirements Limited strictly to water utility operations, which restricts full consolidation with wastewater assets 9

S p e c i a l r e g i o n a l p o l i t i c a l s u b d i v i s i o n s c r e a t e d u n d e r G . S . C h a p t e r 1 6 2 A , A r t i c l e 5 Ta s k e d e x p l i c i t l y w i t h h a n d l i n g w a s t e w a t e r c o l l e c t i o n a n d t r e a t m e n t M e t r o p o l i t a n S e w e r a g e D i s t r i c t s i n N . C . i n c l u d e : M e t r o p o l i t a n S e w e r a g e D i s t r i c t o f B u n c o m b e C o u n t y C o n t e n t n e a M e t r o p o l i t a n S e w e r a g e D i s t r i c tPros: Highly effective at resolving environmental compliance issues across multiple city and county lines via centralized wastewater treatment plants Cons: Restricted by general statute from managing drinking water distribution under this specific article Duplicates administrative overhead for dual-service regions. 7. Metropolitan Sewerage Districts 10

A c o m b i n e d r e g i o n a l s t r u c t u r e a u t h o r i z e d u n d e r G . S . C h a p t e r 1 6 2 A , A r t i c l e 5 A A l l o w s u n i f i e d r e g i o n a l o v e r s i g h t o f b o t h w a t e r a n d w a s t e w a t e r s y s t e m s C u r r e n t l y , t h e r e a r e n o M e t r o p o l i t a n W a t e r & S e w e r a g e D i s t r i c t s i n N . C . T h e s e d i s t r i c t s r e q u i r e : N o s t a t e - l e v e l a p p r o v a l T w o o r m o r e p o l i t i c a l s u b d i v i s i o n s t o f o r m a s p e c i a l p u r p o s e l o c a l g o v e r n m e n t a n d p u b l i c a u t h o r i t y Cons: Highly complex legal procedures required to establish or merge assets into this structure Localized councils lose direct control over utility-driven economic development. Pros: Achieves economies of scale and uniform rate modeling across multiple jurisdictions Strips out the administrative duplication of separate water and sewer entities 8. Metropolitan Water & Sewerage Districts 11

A p e r m a n e n t s t r u c t u r a l a d j u s t m e n t A m u n i c i p a l i t y o r d i s t r i c t s e l l s , d e e d s , o r l e g a l l y t r a n s f e r s i t s u t i l i t y a s s e t s t o a l a r g e r r e g i o n a l p r o v i d e r ( s u c h a s a n a d j a c e n t c o u n t y o r l a r g e r c i t y ) Te m p o r a r y O w n e r s h i p T r a n s f e r : T h e p a r t n e r s h i p b e t w e e n C h a r l o t t e W a t e r a n d U n i o n C o u n t y W a t e r ( f o r m e r l y U n i o n C o u n t y P u b l i c W o r k s ) e n a b l e d U n i o n C o u n t y W a t e r t o a d d r e s s a g i n g i n f r a s t r u c t u r e a n d b u d g e t l i m i t a t i o n s . L e a r n m o r e b y v i s i t i n g t h e E PA s n a p s h o t .herehereSCANSCANPros: Immediately relieves financially distressed towns of expensive regulatory, capital infrastructure, and debt burdens Cons: The transferring town permanently yields local governance authority and loses an asset that could otherwise dictate its growth patterns 9. Ownership or Operational Transfer to Another Local Government12

C o n t r a c t u a l a r r a n g e m e n t s m a d e u n d e r G . S . C h a p t e r 1 6 0 A , A r t i c l e 2 0 M u l t i p l e g o v e r n m e n t s f o r m j o i n t o p e r a t i o n a l b o a r d s t o r u n s h a r e d t r e a t m e n t p l a n t s w h i l e r e t a i n i n g s e p a r a t e d i s t r i b u t i o n n e t w o r k s W i n s t o n - S a l e m / F o r s y t h C o u n t y U t i l i t y C o m m i s s i o n i s a n e x a m p l e o f a n i n t e r l o c a l u n d e r t a k i n g . C r e a t e d b y a n a g r e e m e n t c i t y a n d c o u n t y i n 1 9 7 6 P r o v i d e s o p e r a t i o n a l a n d f i n a n c i a l e f f i c i e n c y S o l i d w a s t e d i s p o s a l a d d e d i n 1 9 9 0Pros: Extremely flexible; allows participants to capture massive wholesale or treatment efficiencies without legally dissolving their individual utility departments Cons: Highly reliant on the continuous consensus of all participating councils Interlocal agreements can suffer from gridlock if political dynamics shift during renegotiations 10. Joint Agencies & Interlocal Undertakings 13

U n i q u e u t i l i t y b o a r d s c r e a t e d t h r o u g h c u s t o m c h a r t e r s P a s s e d d i r e c t l y b y t h e N . C . G e n e r a l A s s e m b l y U t i l i t i e s c r e a t e d b y l o c a l a c t i n N . C . i n c l u d e : F a y e t t e v i l l e P u b l i c W o r k s C o m m i s s i o n ( P W C ) E l e c t r i c , w a t e r, a n d w a s t e w a t e r G r e e n v i l l e U t i l i t i e s C o m m i s s i o n ( G U C ) : E l e c t r i c , w a t e r, s e w e r, a n d n a t u r a l g a s Pros: Completely tailored to the idiosyncratic regional geography, historic debt agreements, and unique administrative needs of a specific community Cons: Any significant structural modification, board expansion, or policy pivot requires changing state law via legislative action Can become politicized at the state level 11. Utilities Created by Local Act 14

F E A S I B I L I T Y S T U D YP R I N C E T O N M E R G E R R E G IONALIZATIO N