When a state transportation project requires the relocation of water or sewer lines, the cost of moving that infrastructure often falls on the local government that owns it. These expenses, known as nonbetterment costs, can be significant, especially for smaller systems with limited budgets. A recent change to G.S. 136-27.1 shifts more of that burden to the North Carolina Department of Transportation (NCDOT) by expanding which local government entities qualify for full reimbursement. See S.L. 2025-65.
NCDOT must pay 100 percent of the nonbetterment costs if three conditions are met. First, the water or sewer line must be located within the existing state transportation project right-of-way. Second, the relocation must be necessary for the project to move forward. Third, the infrastructure must be owned by a qualifying local government entity. The recent change upped the population threshold for eligible municipalities from 10,000 to 20,000. This change is effective retroactive to January 1, 2025.
Nonbetterment costs are the costs of relocating infrastructure without making upgrades. For example, if a six-inch water line must be moved and is replaced with another six-inch line of similar material, the relocation cost is considered nonbetterment. If the local government chooses to upgrade to an eight-inch line or use different materials during the move, it is responsible for the added cost of that improvement.
The law, as amended, applies to the following local government owners[1] (qualifying local government entities):
- Municipalities with a population of 20,000 or fewer customers, based on the most recent census
- Counties that operate rural water systems as a public enterprise
- Sanitary districts
- Water and sewer authorities
- Metropolitan water districts
- Metropolitan sewerage districts
- Metropolitan water and sewerage districts
- County water and sewer districts
- Local boards of education
- Systems originally built by a water and sewer authority, metropolitan water district, metropolitan sewerage district, metropolitan water and sewerage district, or county water and sewer district and later transferred to larger municipalities (populations over 20,000)
Municipalities with populations over 20,000 still receive partial support but are required to contribute a share of the nonbetterment costs. The cost-sharing breakdown is as follows:
- 25 percent for municipalities with populations between 20,001 and 49,999
- 50 percent for populations between 50,000 and 99,999
- 100 percent for populations of 100,000 or more
Effective Date of Amendment
As a reminder, the amendment to G.S. 136-27.1 in S.L. 2025-65 increased the population threshold for qualifying municipalities from 10,000 to 20,000. This change is retroactive to January 1, 2025, and applies to both relocation costs incurred after that date and earlier costs that remained unpaid as of that date by a municipality that now qualifies.
For example, consider a town with 19,000 residents that was notified in December 2024 that a sewer line would need to be relocated for a state-funded road project. The work was completed in February 2025. Although the project began in the prior year, the relocation qualifies for full reimbursement because the work occurred after January 1, 2025.
Now assume instead that the town received an invoice in late 2024 for relocating a utility line located within the right-of-way as part of a required state project. If the invoice was still unpaid as of January 1, 2025, the town is eligible for full reimbursement under the revised law.
[1] The law also applies to private water or sewer utilities serving a population of 20,000 or fewer customers.
