BRUNSWICK COUNTY — One month after the City of Northwest signed off on an agreement to hand its utility system over to Brunswick County, the Town of Navassa is now considering the same.
If approved, Brunswick County would agree to take on current past due debts owed to itself and future debt required to fund Navassa’s assigned portion of expanding the Northeast Wastewater Treatment Plant — a now $10.6 million expense town leaders say its low-income residents couldn’t reasonably be expected to finance.
At the town’s meeting last week, Navassa Town Council unanimously approved requesting conveyance agreement materials from Brunswick County to outline details of what a utility transfer would entail.
Monday, Brunswick Commissioners unanimously approved a request from Brunswick County Public Utilities to provide the materials and continue talks toward merging the two systems.
A portion of Navassa’s customer base — about 60 accounts — is currently serviced by Brunswick Regional Water and Sewer H2GO. The proposed utility transfer would not include conveying those customers, according to Public Utilities Director John Nichols. Navassa serves about 300 utility customers in total, he said at the meeting.
If approved, the proposed transfer could tentatively go into effect March 1, 2020. Brunswick County is set to assume responsibility for Northwest’s system along with its 300 utility accounts, $7 million in assets, and $1.4 million in debt Jan. 1, 2020.
Move toward regionalization
In July, Brunswick County asked its 19 municipalities to consider regionalization to lower operational costs and improve economies of scale. The request came amid a strained utility power struggle in northern Brunswick County, in which three government entities — Leland, Belville, and H2GO — have spent nearly a combined $2 million on legal fees battling for assets in the H2GO lawsuit.
Wholesale water rates are set to rise by 88% in fiscal year 2022 to help the county offset over $160 million in impending debts associated with financing a regional supply expansion project and upgrade and expansion plans at the Northwest Water Treatment Plant. For the county’s eight wholesale providers (including Leland, Southport, Oak Island, etc.), this considerable jump will likely require customer rate increases to manage the cost burden.
Approximately 41,500 county customers will see a monthly bill increase of between $4 and $9, depending on whether Leland and H2GO remain county clients (in short, direct county customers not served by H2GO and Leland would pay a higher rate increase if the two leave the system). However, these September calculations accounted for the potential loss of Leland and H2GO as wholesale clients — a scenario that is not guaranteed.
H2GO’s majority board is now 4-1 in favor of moving ahead with its long-stalled reverse osmosis construction efforts; should the utility successfully complete its partially-constructed plant, it would no longer be reliant on Brunswick County for water, as it would have access to its own raw, aquifer-sourced water.
This summer and fall, Leland announced the plan to hand over its entire utility system, valued at $66 million, to H2GO as part of ongoing settlement discussions. However, movement on this proposal stalled as elections grew closer and settlement negotiations fizzled (H2GO’s now-former Chairman declared the proposed regional solution “dead” in late October).
In recent years, Navassa and Brunswick County have privately disagreed over debts owed to the county related to the 2012 expansion of the Northeast Wastewater Treatment Plant. Though the debate never made its way to a lawsuit, the governments exchanged formal legal letters between 2016 and 2019. In January, Brunswick County turned to the Local Government Commission to weigh in on the apparently past-due debt, which totaled upward of $200,000. By May, the LGC sided with the county, and in August, Navassa made its first big $82,590 payment to reduce the debt. The town was able to pay off the debt after being awarded a North Carolina Office of Resiliency and Recovery grant that included a line item that required the town to use $244,520 to cover its transmission bond debts.
As of this week, according to Brunswick County’s spokesperson, the town owes the county a total of $183,609 in past due debts and future, not-yet billed debt service of $598,834.24. The town has not yet made additional progress paying off its debts since its August payment.
These debts do not include costs associated with current, necessary expansion plans at the Northeast Wastewater Treatment Plant to ensure the county, as the permit holder, operates the plant at a capacity in accordance with state law. In September, the Department of Environmental Quality lifted its three-month-long new line extension moratorium on the plant after the county supplied the permits and paperwork required to expand the plant.
During the current expansion planning process, the Town of Navassa did not return signed interlocal agreements that would have obligated the town to pay $8 million in debt over time, which was then its assigned allocation.
Bids for the project came in higher than budgeted in October. The entire expansion project will cost a total of $51.9 million, first estimated to cost $39.1 million. Navassa’s assigned share increased by $2.6 million to a total of $10.6 million. As planned, Brunswick County would not have been responsible for funding the expansion, as its wastewater flows do not exceed the system’s shared allocation amounts.
Should the utility transfer move ahead, Brunswick County would also reasonably incur improvement costs upon accepting the system associated with bringing it up to its standards. Nichols said there are areas in the town’s system that are sources of inflow and infiltration, an unintended but common wastewater process that can add stress on a system. The county has known and identified these areas for over a decade, Nichols said, but because it isn’t under their ownership, hasn’t invested in making capital improvements to it.
Navassa town leaders requested the county offer a low-income assistance program, should it choose to hand over its utility system.
According to Nichols, Brunswick County Public Utilities currently employs payment assistance programs that spread out certain utility fees over time but does not maintain a monthly bill assistance program.
Nichols told Commissioners the new program, if implemented, would apply to all county customers — not just Navassa residents. The county would create an assistance fund that would be capped at an undetermined amount in order to limit the county’s exposure to the program, he said.
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