Gov. Roy Cooper’s proposed bond issue would provide $800 million for water and sewer systems across North Carolina. State officials say some of that money could be used to consolidate struggling rural systems.

By Greg Barnes

Spending $800 million for water and sewer improvements doesn’t get the same attention as the new schools Gov. Roy Cooper includes in a proposed $3.9 billion bond issue expected to go before voters in November 2020.

But perhaps it should.

According to a 2017 water infrastructure report, in the next 20 years, North Carolina is projected to need between $17 billion and $26 billion to upgrade or replace aging water and sewer systems. The problems are particularly acute in rural towns and cities throughout the state, where the loss of population and industry have caused some local government-owned utilities to operate at a deficit.

For many rural communities, lack of revenue means taking a bubble-gum and baling-wire approach to leaking pipes and failing equipment, fixing holes when they spring up but deferring seriously needed major repairs or replacements.

In the long run, that will cost the utilities even more money, but there is little they can do without an infusion of cash, said Kim Colson, director of the Department of Environmental Quality’s Division of Water Infrastructure.

The state’s aging water and sewer systems could also end up hurting North Carolina’s economy, as well as its rivers, streams and lakes. Millions of gallons of raw sewage have spilled into the state’s surface waters because aging wastewater treatment plants typically cannot handle heavy storms. The spills can contaminate drinking water, as they did during Hurricane Florence, kill fish and shellfish, close beaches and cause algae blooms.

Colson and Jeff Hughes, director of the UNC School of Government’s Environmental Finance Center, acknowledge that the $800 million Cooper proposes for water and sewer systems is only a small fraction of what is needed to fix all of the problems.

But the two officials are cautiously optimistic that the bonds — coupled with numerous other existing sources of federal and state money — could go a long way toward addressing the problems if utilities in neighboring cities and towns are willing and able to consolidate or merge operations.

Consolidation could include large cities, such as Charlotte and Raleigh, taking over the water and sewer service for smaller, independent utilities. Much of that work has already been done, but Colson said further consolidation is possible. For example, Raleigh provides water to Garner, Wake Forest, Rolesville, Knightdale, Wendell and Zebulon. In 1984, the Charlotte-Mecklenburg Utility Department agreed to provide water to six surrounding communities.

Now, state officials are analyzing the possibilities of consolidating water and sewer systems in rural areas, where small towns in close proximity to one another could benefit from economies of scale, reduced costs and rates over time, increased revenues and better water quality.

Hughes said he doesn’t want anyone to think consolidation is “the magic bullet” to solving all of the state’s water and sewer problems. But he and Colson said more communities are beginning to realize that the status-quo is not self-sustaining.

“Towns have local concerns and those issues have to be worked through for any successful partnerships, but more and more they realize that something different has to be done,” Colson said.

Towns in the western part of the state may not be able to consolidate because the mountains would make it difficult, if not impossible, Hughes said. But he thinks there should be ample areas in the rest of the state where consolidation could one day benefit hundreds of thousands of people.

There are nearly 2,000 community water systems in North Carolina, 538 of which are owned by local governments. Of those, 382 local governments own both the water and sewer systems. Rates for customers differ widely between communities.

Colson and Hughes say it’s too early in the evaluation process to pinpoint towns or county water systems that could consolidate.

But one thing is certain, consolidation won’t come cheap, or quickly, if the Yadkin Valley Sewer Authority is any indication.

One area’s consolidation efforts

In 2006, the towns of Elkin, Jonesville and Ronda agreed to consolidate wastewater treatment facilities by forming the Yadkin Valley Sewer Authority. The actual work began in 2010. The three towns, about 45 miles west of Winston-Salem, were overburdened with rising costs and continued failures of their separate sewer systems. The consolidation is unique in that the towns are in three counties: Surry, Yadkin and Wilkes.

Nine years and millions of dollars later, the authority continues to build a new sewer system and repair the old ones. Millions more dollars will be needed to complete the projects.

According to a story in the Elkin Tribune last year, the Yadkin Valley Sewer Authority had spent more than $16 million on 16 sewer projects since its creation. Of that money, more than $15 million came from grants or loans. The remainder, about $1.1 million, came from local matching funds. Residents of the three towns have seen their water rates increase annually as a result, said J.L. Lowe, the authority’s board chairman.

Lowe said he is proud of what the towns have been able to achieve through consolidation.

“It’s been a salvation for us,’’ he said. “We would have survived otherwise but this has helped us get a lot of the stuff we desperately needed to get done.”

Lowe said the work will never be finished, because sewer systems require constant maintenance. But he expects the hard part will be over in about 10 more years. He said the work will curtail sewer system overflows — the unintended release of raw sewage, commonly the result of broken pipes, poor design, extremely heavy rains or blockage caused by grease or debris.

The three towns are near low-lying areas that are prone to flooding, Lowe said. When flooding occurs, wastewater often flows into the Yadkin River. These types of overflows are a major concern for cities and towns throughout the state.

An analysis by N.C. Health News of state DEQ records found that 8,512 sanitary sewer overflows were reported in North Carolina from 2012 to October 2018, spilling 432 million gallons of untreated sewage. Of that, the records show, 332 million gallons reached surface waters.

Hurricanes Florence and Matthew further highlighted the need for aging water and sewer systems to be able to access funding for repairs and possible consolidation. According to a published report, 37 water and sewer systems in areas hit hard by Hurricane Florence are going to need significant help dealing with the damage. The proposed $800 million bond issue could also be used to make those systems more resilient to flooding.

The problems are expected to get worse, especially along the coast, according to a 2018 report co-authored by Larry Cahoon, a Wilmington biology professor.

Sewer overflows and other problems associated with aging systems “are sufficiently significant and widespread to challenge the ability of coastal communities to mitigate them,” the report says. “Climate change will add to the magnitude of this challenge, as heavier rainfall events, potentially more extreme seasonality, and rising sea levels will increase environmental impacts on wastewater collection system performance.”

On March 19, Cooper announced a new round of funding — $127 million for 96 water and sewer improvement projects across the state. The money, in the form of grants and loans, comes from the usual funding sources.

“Clean water is critical for our health and our economy,” Cooper said in a news release announcing the funding. “These funds will help communities improve their water and sewer systems to ensure clean drinking water, support good jobs, and be better able to withstand future storms.”

Cooper also used the news release to trumpet the proposed $3.9 billion bond issue for schools and water and sewer projects and his proposed budget, which includes $6.3 million for water testing and analysis for GenX and other perfluorinated compounds

Voters approved smaller bond issue in 2016

This is not the first time voters have been asked to approve a bond issue that includes money for water and sewer systems. Three years ago, they overwhelmingly approved a Connect NC bond package put forth by former Republican Gov. Pat McCrory that earmarked $309 million for water and sewer projects. Most of that money has now been allocated in the form of grants and loans.

Colson, whose DEQ division is responsible for overseeing where the money goes, said the division received requests totaling about $500 million for the remaining $100 million in bonds, the last of which were allocated in July.

“So even after Connect NC, we are still turning people away from our funding program,” Colson said. “There is definitely a huge need right now.”

The town of Eden, along the Dan River near the Virginia border, was among the many communities that benefited from the Connect NC bond money.

Hampered by a loss of industries and dwindling revenues, problems with Eden’s sewer system became so bad that in 2012 the U.S. Environmental Protection Agency issued a consent order against the city to stop all sanitary sewer overflows.

Eden now expects to spend more than $33 million to fix its system, with all but about $1.5 million coming from Connect NC loans and grants. Eden has been raising water and sewer rates to pay its share. The city expects to finish the projects by April 2022, the deadline in the EPA’s consent order.

Opposition to bonds growing

If approved by voters, Hughes said he expects the 2020 bond issue — dubbed Invest NC — will focus a large amount of the money toward consolidating water and sewer services in neighboring communities.

At least one region of the state is already considering consolidation. Durham, Pittsboro, Chatham County and the Orange Water and Sewer Authority have for years been discussing building a water treatment plant on Jordan Lake that would consolidate their drinking water supplies and ensure enough safe water for everyone. The discussions are part of Jordan Lake Regional Water Supply Partnership, which involves 13 municipalities and utilities. The partnership was formed in 2009.

For other utilities, the answer may lie in selling their investments to private companies. Last summer, the General Assembly approved a law that will allow companies to pay a fair market value for municipal water and wastewater systems.

The law is similar to those in nine other states, eight of which have seen private companies buy systems from local governments, Ruffin Poole, a corporate manager of Aqua North Carolina, said at a Water Resources Research Institute conference last week at N.C. State University.

Bonds could face challenge

Under Hughes’ direction, the Environmental Finance Center and U.S. Water Alliance teamed up to take a nationwide look at the pros and cons of consolidation. Their findings were just released in a report titled: “Strengthening Utilities Through Consolidation: The Financial Impact.”

The report stressed that consolidation is not meant for everyone and is only one key to fixing the problems, but it pointed to efforts in eight communities where it has been successful. One of those communities is Raleigh, which began in 2000 to consolidate six smaller cities into its water and sewer systems.

“The communities that consolidated with Raleigh realized cost savings, lower rates, and increased water security,” according to the report. “The larger community gained regional support for future water and sewer permitting activities and reduced competition for limited new water resources.”

But not everyone is sold on the idea of another bond issue, and opposition has already begun by Republican members of the state Senate who prefer a pay-as-you-go approach to funding new schools through the State Capital and Infrastructure Fund.

Besides the $800 million for water and sewer improvements, the proposed bond issue includes $2 billion for K-12 public schools statewide to help meet the need for at least $8 billion in new construction and renovations. Community colleges and schools in the UNC system would get $500 million for new buildings and renovations.

Time will tell whether the bond issue makes it before voters. Environmentalists say time is running out on fixing water and sewer infrastructure, in North Carolina and throughout the country.

The nation’s aging water systems have become so deteriorated that in 2017 the American Society of Civil Engineers gave them a “D” grade. America’s wastewater infrastructure isn’t much better, getting a “D+.”

North Carolina fared a little better, getting a “C” for drinking water infrastructure and a “C+” for wastewater in 2013, the last year individual states were graded by the society.