North Carolina counties and municipalities and a handful of other special purpose local governments (collectively, local units) are authorized to engage in certain public enterprise activities. A public enterprise is an activity of a commercial nature. When a local unit owns or operates a public enterprise it acts in a proprietary capacity and has more flexibility to treat the enterprise like a private business venture than a traditional government function. Water and sewer services are common public enterprises. They are funded with user charges and are self-supporting (or predominantly self-supporting). That means that each year the local government generates enough income from the user charges to support the operating and capital expenses of the enterprise. Although a local government operates its public enterprises in many respects like a private commercial entity, it has some unique powers that distinguish it from the private sector. Among these is the authority to mandate connections under certain circumstances. This blog post discusses mandating connections to a local unit’s water and sewer systems, incorporating recent legislative changes. (The post does not address a separate but related issue of when a local unit has authority to serve a particular area at all. There are state and federal law provisions that limit service areas for some units. That will be the subject of another post. For purposes of this post, the authority to mandate connections assumes the local unit has authority to serve the particular area.)

Mandating connections is one tool that a local unit has to recoup its capital investments in community water and sewer systems and manage their capacity. As detailed below, the authority to use this tool varies by type of service and by type of government utility. Some special purpose local government utilities do not have the authority at all, such as county water and sewer districts, and metropolitan water, sewer, and water and sewerage districts. Other local units, including counties, municipalities, sanitary districts, and certain water and sewer authorities, may exercise this authority but only under certain circumstances. (Note that a county water and sewer district that contracts with a county may take advantage of the county’s authority to mandate connections.)

Mandating Water Connections

The following local government entities may mandate water connections if the specified criteria are met:

Counties. A county may require the owner of any property that is developed with one or more residential or commercial units, and that is located within a reasonable distance of water lines owned, leased, or operated by the county to connect, unless the property has a valid well permit. G.S. 153A-284; G.S. 87-97.2.

Municipalities. A municipality may require the owner of property to connect to its water system only if all the following criteria are met:

• • The property is within municipal limits;
  • The property is developed with one or more residential or commercial units;
  • The property is located within a reasonable distance of a water line owned, leased, or operated by the municipality or on behalf of the municipality;
  • The property does not have a valid well permit; and
  • Adequate water pressure can be achieved using the same piping size as the meter provides to the owner’s premises. Adequate water pressure means the average water pressure delivered to all connected customers within a one-quarter mile radius in either direction of the owner’s point of connection. To establish adequacy or inadequacy, property owner shall submit to the city a determination of same prepared by a professional engineer, licensed in accordance with the provisions of Chapter 89C of the General Statutes. G.S. 160A-317; G.S. 87-97.2.

Sanitary Districts. A sanitary district may require the owner of any property that is developed with one or more residential or commercial units, and that is located within a reasonable distance of the water lines owned, leased, or operated by the sanitary district to connect, unless the property has a valid well permit. G.S. 130A-55(16); G.S. 87-97.2. A sanitary district may not exercise this authority, though, if water service is already being provided to the property by another local government utility or a public utility regulated by the State’s Utilities Commission.

Certain Water and Sewer Authorities. A water and sewer authority that includes all or part of a county that has a population of at least 40,000 may require the owner of any property that is developed with one or more residential or commercial units, and that is located within a reasonable distance of the water lines owned, leased, or operated by the authority to connect, unless the property has a valid well permit. G.S. 162A-6(a)(14d); G.S. 87-97.2. A water and sewer authority may not exercise this authority if the water service is already being provided to the property by another local government utility or a public utility regulated by the State’s Utilities Commission.

Mandating Connections & Well Permits

Based on the criteria above, it may seem as though there are no circumstances in which a government can mandate connection to its water system. Among the requirements is that the property already be developed and that it not have a valid well permit. It may be hard to imagine an instance in which a developed property does not have a valid well permit or is not already connected to a water system. There are some situations, however, in which a local unit may deny a drinking water-well permit for property that is improved and then mandate connection once the property is developed.

A local unit must issue a drinking water–well permit if

1. the property is undeveloped or unimproved, even if the property could be served by a government ( municipal, county, sanitary district, or certain water and sewer authority) water system;
2. the property is developed or improved and (a) a government water system has not yet installed water lines directly available to the property or (b) the government water system cannot provide water service to the property at the time the property owner desires service.

But that means that a local unit may deny a drinking water-well permit if the property is developed or even just improved if the government has already installed water lines available to the property or it can extend the lines and provide the service at the time the property owner wants the service.

Further, even if a property owner has a drinking water–well permit, there are a few situations in which a local unit still may mandate connection to the unit’s water system. Under G.S. 87-97.2, a government utility may still require a property for which a permit has been issued to connect to its water system if one or more of the following apply.

1. “The private drinking water well serving the property has failed and cannot be repaired.” The statute does not specify who determines whether or not the well can be repaired. It is up to the government utility to establish a process for verifying the functionality of each private drinking well;
2. “The property is located in an area where the drinking water removed by the private drinking water well is contaminated or likely to become contaminated due to nearby contamination.” This determination is made or confirmed by the local health department; or
3. Operation of the government utility “is being assisted by” the LGC. The statute does not define the circumstances under which the LGC would be deemed to be assisting the government utility. Arguably, all local governments and public authorities are assisted to some extent by the LGC, inasmuch as the LGC monitors the fiscal health of each unit by reviewing its annual audit. But to read “assisted by” this broadly would cause the exception to swallow the rule. It is likely, therefore, that the legislature intended the phrase to mean something more.

It is possible that for purposes of this statute, “assisted by” means that the LGC has issued debt on behalf of the government utility. When a local government or public authority borrows money through general obligation bonds, revenue bonds, special obligation bonds, or project-development bonds, it is the LGC that actually issues the bonds. Even this interpretation of “assisted by” seems broader than what the legislature likely intended, though.

In an extreme case, the LGC has the authority to impound the books and records associated with a government utility, assume full control of all its affairs, or take any other actions deemed necessary by the LGC to deal with a government utility that is in financial trouble. Thus, “assisted by” could refer only to situations in which the LGC takes action under this statute or when it compels a government utility to make its debt-service payments pursuant to G.S. Chapter 159, Section 36. That seems too restrictive of an interpretation, though. If the legislature intended this result, it could simply have stated that the exception applies only when the LGC takes action under G.S. 159-181or 159-36. By instead using the phrase “assisted by,” it appears that the legislature intended for the exception to apply to a broader set of circumstances.

In fact, viewing the exception in the context of the whole statute, it is likely that the legislature intended it to apply when a government utility is in financial trouble, or on the verge of financial trouble, such that prohibiting the utility from mandating connections might affect the utility’s continued viability. Thus, I think the most likely interpretation of “assisted by” is that the LGC has placed the unit on its Unit Assistance List.

Continued Use of Well for Nonpotable Purposes Even if Connected to Government Utility

When developed property is connected to a government utility’s water system (whether mandated or not), the property owner may continue to use any private water well located on the property for nonpotable purposes as long as the water well is not interconnected to the government utility’s water line. (Nonpotable water is used for purposes other than drinking, such as irrigation.) The local unit may not require the owner of any such water well to abandon, cap, or otherwise compromise the integrity of the water well.

Mandating Sewer Connections

The following local government entities may mandate sewer connections if the specified criteria are met:

Counties. A county may require the owner of any property that is developed with one or more residential or commercial units, and that is located within a reasonable distance of sewer lines owned, leased, or operated by the county to connect, only if the county has (or will have) adequate capacity to transport and treat proposed new wastewater from the property at the time of connection. G.S. 153A-284.

Municipalities. A municipality may require the owner of property to connect to its sewer system only if all the following criteria are met:

• • The property is within municipal limits;
  • The property is developed with one or more residential or commercial units;
  • The property is located within a reasonable distance of a sewer line owned, leased, or operated by city or on behalf of the municipality;
  • The municipality has (will have) adequate capacity to transport and treat proposed new wastewater from the premises at the time of connection; and
  • The costs of connection (including underground piping and connections to the local unit) do not exceed the costs of installing an on-site sewer system. Comparative costs must be done by: (1) a licensed soil scientist, as defined in G.S.89F-3, (ii) an on-site wastewater contractor certified under Article 5 of Chapter 90A of the General Statutes, or (iii) a plumbing contractor licensed under Article 2 of Chapter 87 of the General Statutes. (It is unclear whether the municipality or property owner pays for the cost comparison.) G.S. 160A-317.

Sanitary Districts. A sanitary district may require the owner of any property that is developed with one or more residential or commercial units, and that is located within a reasonable distance of the sewer lines owned, leased, or operated by the sanitary district to connect. G.S. 130A-55(16); G.S. 87-97.2. A sanitary district may not exercise this authority, though, if sewer service is already being provided to the property by another local government utility or a public utility regulated by the State’s Utilities Commission.

Certain Water and Sewer Authorities. A water and sewer authority that includes all or part of a county that has a population of at least 40,000 may require the owner of any property that is developed with one or more residential or commercial units, and that is located within a reasonable distance of the sewer lines owned, leased, or operated by the authority to connect. G.S. 162A-6(a)(14d); G.S. 87-97.2. A water and sewer authority may not exercise this authority if the sewer service is already being provided to the property by another local government utility or a public utility regulated by the State’s Utilities Commission.