institutional models for sharing costs among multiple partners · table 1. cost-sharing initiatives...

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Institutional Models for Sharing Water Resource Protection Costs Among Multiple Parties: An Examination of Existing Programs in the Upper Neuse River Basin of North Carolina

by Jeff Hughes

May 2014

Institutional Models for Sharing Costs among Multiple Partners

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About the Environmental Finance Center The Environmental Finance Center at the University of North Carolina, Chapel Hill is part of a network

of university-based centers that work on environmental issues, including water resources, solid waste

management, energy, and land conservation. The EFC at UNC partners with organizations across the

United States to assist communities, provide training and policy analysis services, and disseminate

tools and research on a variety of environmental finance and policy topics.

The Environmental Finance Center at the University of North Carolina, Chapel Hill is dedicated to

enhancing the ability of governments to provide environmental programs and services in fair, effective,

and financially sustainable ways.

Acknowledgements Written by Jeff Hughes.

This report was a collaborative effort within the EFC and with the Conservation Trust for North Carolina.

This analysis would not have been possible without the expertise of Caitlin Burke. Editorial assistance

was provided by Alexandra Kay.

This report is a product of the Environmental Finance Center at the University of North Carolina, Chapel

Hill. Findings, interpretations, and conclusions included in this report are those of the authors and do

not necessarily reflect the views of EFC funders, the University of North Carolina, the School of

Government, or those who provided review.

We are grateful to the Conservation Trust for North Carolina and the US Endowment for Forestry and

Communities for funding this research.

Cover photo courtesy of R. Dove www.riverlaw.us.

© 2014 Environmental Finance Center

at the University of North Carolina, Chapel Hill

School of Government

Knapp-Sanders Building, CB# 3330

University of North Carolina at Chapel Hill

Chapel Hill, NC 27599-3330

http://efc.sog.unc.edu

All rights reserved

http://efc.sog.unc.edu/


Environmental Finance Center at the University of North Carolina | 2

TA B L E O F C O N T E N T S

BACKGROUND ................................................................................................................. 3

AN EXAMINATION OF EXISTING COST SHARING MODELS IN THE UPPER NEUSE RIVER BASIN ................................................................................... 4

Ease of Creation and Dissolution ......................................................................................... 8

New versus Existing .............................................................................................................. 8

Governmental vs. Non-Profit ............................................................................................... 8

Governance .......................................................................................................................... 9

Revenue Source .................................................................................................................. 10

CONCLUSIONS ............................................................................................................... 11

No shortage of models. ...................................................................................................... 11

Trusted agents with strong leadership are essential. ........................................................ 11

Creating multi-variable cost sharing formulas. .................................................................. 11

Linking model to basic objectives. ..................................................................................... 11

Determining the importance of governance structure. ..................................................... 11

Matching scale to the model. ............................................................................................. 12

APPENDIX 1: LEGAL FRAMEWORK CONTROLLING OPTIONS FOR MULTI-JURISDICTION WATERSHED PROTECTION GOVERNMENTAL INSTITUTIONS ................................................................ 13

Interlocal Governmental Agreements .................................................................................. 13

“Project” managed by a Regional Planning Entity/Council of Government ......................... 14

Governmental Funding for Not-for Profit ............................................................................. 15

Soil and Water Conservation Districts .................................................................................. 17

Water and Sewer Authorities ............................................................................................... 18


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A N E X A M INA T I O N OF EX I S T I NG P R O G R A M S I N T HE UP P ER N E US E R I V E R BA SI N OF N OR T H C A R OL IN A

BACKGROUND

The amount of state funds available for multi-benefit watershed protection (including drinking water and reservoir water quality, water quantity, recreation, etc.) and land conservation initiatives has decreased significantly over the last few years. State funding programs once served as critical sources of cost sharing funds that allowed local organizations to leverage against their own funds. In addition, some of the tax advantages for property owners donating land were reduced with the passage of tax reform legislation in 2013. Land trusts, water utilities, and other water quality organizations that depended on these sources of financing to help support their watershed protection efforts are now looking for alternative sources of funds and new financing models. The loss of the State of NC as a major funding source has reinforced the importance of local partnerships, programs and models that are able to share funds and implement integrated cross-boundary initiatives. Multi-party cost sharing can be challenging, but state law provides communities with a number of robust cost sharing institutional models, many of which have been used within or nearby the Falls Lake Watershed to support existing programs. The Environmental Finance Center (EFC) at the UNC School of Government carried out a series of educational and research activities for the Conservation Trust for North Carolina to assess alternative finance and cost sharing models available to North Carolina communities and watershed organizations to support increased watershed protection and conservation work. As part of the research, the EFC reviewed the underlying legal authority behind the most prevalent and promising multi-jurisdictional models. The EFC identified examples of existing water resource programs that rely on some type of multi-jurisdiction partnership or institutional model within or nearby the Upper Neuse River Basin. Each model was examined to identify key distinguishing factors between the different models. This inventory research was integrated into a series of informal interviews and structured educational events with local water resource leaders, many of who are directly involved with existing multi-jurisdiction water resource efforts. During these events, leaders exchanged views about models and factors critical to each model’s success.



This research was part of a larger project managed by the Conservation Trust for North Carolina and was funded by the US Endowment for Forestry and Communities.

AN EXAMINATION OF EXISTING COST SHARING MODELS IN THE UPPER NEUSE RIVER BASIN

Many mechanisms are available to raise funds for watershed protection involving taxes, fees, private donations, and inter-governmental transfers. An equal number of institutional models are also available for managing and spending these funds for multi-jurisdictional programs: one jurisdiction may be delegated as a lead agency; responsibility may be shared by multiple parties through inter-local agreements; new forms of government (districts, authorities, etc.) may be created, and a range of partnerships involving either existing or newly created non-profits can be used. Sustainable multi-jurisdictional water quality funding programs depend as much on choosing an appropriate institutional model as they do on tapping into a reliable source of revenue. In reality, the two are interconnected – a credible and trustworthy administrative agent can help facilitate increased access to funds. In many ways, the Upper Neuse River Basin has a served as a laboratory for development of different water resource institutional and governance models. Many different cost-sharing models have arisen in this region for a variety of reasons. First and foremost, the watershed protection needs are significant and continue to grow. Land protection, improved wastewater discharge methods, and better land use practices are needed to ensure safe drinking water, healthy ecosystems, and continued economic opportunity for surrounding communities. Water quality degradation has led to the development of multiple regulatory requirements that influence watershed protection priorities. The region has many governmental and non-governmental organizations interested in water quality, giving rise to ample examples of cost sharing. To understand historic cost sharing and partnership programs, we identified approximately 13 different initiatives that relied on some type of cost sharing. Some of these initiatives were very modest in size and involved as few as two parties, while others involved millions of dollars flowing between multiple jurisdictions each year. The list of models studied is presented in Table 1.

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Table 1. Cost-sharing initiatives for watershed protection in the Triangle area.

Model Name

Model Type

Enabling Authority, Key Documents

Description (Excerpted/Summarized from Websites) Website

Southern Granville Water and Sewer Authority

Water and Sewer Authority*

G.S. 162 Article 1, Articles of Incorporation, By-laws, Inter-local agreements

A unit of local government operating a water and sewer system in southern Granville County. SGWASA is statutorily obligated to ensure that water and sewer resources are available and used in the most efficient and effective manner, and is authorized to charge a per gallon fee for water and sewer allocation, consistent with the applicable fiscal year water sewer rate schedule.

http://www.sgwasa.org/

Jordan Lake Partnership

Inter-local Agreement

GS 160-460,461; Ability to enter into inter-local agreements; Memorandum of Understanding/ Agreement

A statutorily authorized (G.S. 160-460,461) inter-local agreement between 12 local governments. The collaborative model focuses on enhancing the sustainability and security of the region's water supply resources through conservation, efficiency, interconnection, and coordination. Projects are funded through a cost-share model comprised of partners' fees.

http://www.jordanlakepartnership.org/

Orange County and Hillsborough Sediment and Erosion Control Partnership

Inter-local Agreement

G.S. 113A-60, inter-local agreement

A statutorily authorized (G.S. 113A-60) inter-local agreement responsible for enforcing the Erosion Control, Stormwater, Neuse and Jordan Lake Riparian Buffer portions of the Orange County Unified Development Ordinance.

http://www.co.orange.nc.us/planning/erosion.asp

Upper Neuse Clean Water Initiative

Local Government and Non-Profit Agreement

501(c ) (3) non-profit Two-party MOA (Raleigh-CTNC); Land-Trust MOA, Annual Appropriation Letter

A non-profit, inter-local agreement between the city of Raleigh and the Conservation Trust for North Carolina. The initiative is comprised of seven land trusts that work to protect nine drinking water reservoirs in the Upper Neuse River Basin.

http://www.ctnc.org/about/







Model Name

Model Type



Durham Soil and Water Conservation District Stormwater Projects

State/Federal/Local Government Partnership/Soil and Water District

GS 139 Governmental subdivision of the state; a public body organized in accordance with the provisions of Chapter 139 of the General Statutes of North Carolina and is subject to the powers and restrictions as set forth in G. S. 139.

A sub-unit of government under Durham County responsible for conserving soil, water, and related natural resources within the district boundary.

http://dconc.gov/index.aspx?page=571&redirect=1

Upper Neuse River Basin Association

Water Resources Non-profit Local Government Association

Inter-local agreement. The Association shall be a nonprofit organization (provisions of 26 U.S.C. (the Internal Revenue Code) Section 501(c)(3) and the regulations thereunder, and (ii) incorporated under the Nonprofit Act.

A non-profit local government association authorized through North Carolina G.S. 77-119. The association is responsible for preserving water quality in the Upper Neuse River Basin through innovative and cost-effective pollution reduction strategies. UNRBA also constitutes a forum to cooperate on water supply issues within the Upper Neuse River Basin.

http://unrba.org/

Clean Water Education Partnership

Regional Council of Government Managed Program

Ability to contract for services

A cooperative effort between 30 local governments to protect North Carolina’s Tar-Pamlico, Neuse, and Cape Fear River Basins from stormwater pollution through public education and outreach.

http://www.nccleanwater.org/

Neuse River Compliance Association

Non-profit

15A NCAC 2B .0233, NC 501 (3) c Formed with the implementation of the Neuse Nutrient Management Strategy

Established with the adoption of the Neuse Nutrient Strategy in 1997, the Neuse River Compliance Association is a trading group tasked with meeting the total nitrogen limits for point source dischargers. The NRCA is a non-partisan, not for profit organization that has been the primary vehicle for point source achievement and nitrogen reductions through its innovative approach allowing the members reduce nitrogen through incentives and trading.

http://lnba.net/




http://unrba.org/



http://lnba.net/


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Model Name

Model Type



Multi-jurisdictional Stormwater Utility Partnership Shared Services

Public Enterprise Inter- local Agreement

GS 153A-278

An inter-local agreement between multiple independent local government stormwater programs to share centralized stormwater management services including a shared stormwater utility director.

NA

Triangle Area Water Supply Monitoring Project

Regional Council of Government Managed Program through Federal and Inter Local Agreement

A long term agreement between several local governments and the federal government aimed at systematically evaluating the quality of several water-supply sources in North Carolina. The project provides long-term water quality data for six area water-supply reservoirs and their tributaries.

TJCOG http://nc.water.usgs.gov/triangle/

Upper Cape Fear River Basin Association

Non-profit Board of delegates and an executive committee

A non-profit organization providing a cost-sharing framework to allow local governments and stakeholders to work together on local and regional water resources planning, management and protection issues of mutual concern.

http://www.nwpcog.org/index.aspx?page=245

Urban Water Consortium

Inter-local Agreement and contract with non-profit university

Operating procedures

An inter-local agreement partnership between local utilities to provide a program of research and development and technology transfer on water resource issues shared by urban areas across the state.

http://www.ncsu.edu/wrri/code/partnerships/uwc.htm

Ellerbe Creek Watershed Association Durham Community Stormwater Projects

Delegated service to Non-profit

Service Provider Model 501(c)(3) non-profit

A non-profit group involving stakeholders, Durham County, and executive private sponsors. The organization raises awareness of Ellerbe Creek and works to protect and restore the area's ecology.

http://www.ellerbecreek.org

http://www.ellerbecreek.org/

http://www.ellerbecreek.org/

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There is no single model for cost sharing that is ideal for all situations. Alternative institutional models offer many combinations of finance and governance attributes. Some may be more or less appropriate in different situations and with different sets of partners. The analysis of the variation in these different models highlighted some of the critical differences in attributes and authority that should be considered when evaluating cost sharing options for specific circumstances.

Ease of Creation and Dissolution

What steps need to be followed to create the model? Can the model be executed through simple agreements? Does the model require a lengthy approval process? Anyone considering establishing a cost sharing system will want to consider the effort required to create it and the ability to have an exit strategy if needed. Looking at the models within the study area, some of them are clearly designed for the long term; however, many are structured such that members willing to discontinue participation can do so easily. This easy-out option may make sense for models designed for discrete projects, but could be quite detrimental for an ambitious multi-year initiative that involves multi-year funding commitments. In most cases, the governmental models involving interlocal government agreements or new governmental units (authorities, districts) provide opportunities for longer-term commitments.

New versus Existing

Some of the models were created specifically to carry out new water resource initiatives and others relied on established organizations picking up new responsibilities. At the governmental level, some models, such as the Jordan Lake Water Partnership, did not create any legal entities, but instead relied on existing organizations to carry out their mission. In this case, the City of Durham acts as a fiscal agent and other local governments sign agreements to fund initiatives. Compare this with the Southern Granville Water and Sewer Authority that was created specifically to provide water and wastewater services indefinitely. Establishing new entities, whether a non-profit association like the Upper Neuse River Basin Association or and authority like SGWASA, may convey a greater sense of shared commitment and determination than simply signing on to existing organizations. In many cases though, an existing unit of government may not be willing to give up its autonomy or control, which may be necessary in order to establish a new entity.

Governmental vs. Non-Profit

When cost-sharing, organizations must decide whether to rely on a governmental unit or a non-profit organization as the key administrative unit. Both models operate successfully in the Upper Neuse River Basin. The Upper Neuse Clean Water Initiative (UNCWI) consists of a partnership between the City of Raleigh and multiple land trusts, with fund management responsibility largely falling to the lead non-profit partner, the Conservation Trust for North Carolina (CTNC). The funding for this initiative stems from a combination of sources including the NC state government and the City of Raleigh Public Utilities Department. The non-profit face of UNCWI has served the program well, in part due to non-profit organizations’ capacity for outreach and property owner interactions to support land conservation and acquisition efforts. A partnership between Ellerbe Creek Watershed Association and the City of Durham has some similarities to UNCWI. It involves a local government partnering with and funding a non-profit organization to carry out watershed work (specifically, sub-basin targeted-household best management practices). Like UNCWI, this type of partnership is best run by a non-profit, given that some of the work is being done outside of the


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lead government’s jurisdiction. A non-profit representative working on a non-profit branded community watershed protection effort may have better success working directly with a property owner, particularly one living in another jurisdiction, than a governmental representative carrying out similar tasks, given some property owners’ perceptions about government. Other advantages of non-profits observed during the research included their ability to carry out streamlined procurement procedures and collect private donations from individuals who are less likely to donate to a unit of government. The non-profit model has been used widely when the number of participating local governments is quite large and there is a significant potential for disagreement among partners. For example the Upper Neuse River Basin Association brings together a large number of local governments—some of which have differing views about strategies—to work on planning, research, and educational activities. One of the major weaknesses of the non-governmental model is its inability to generate revenue from direct taxation or mandatory user fees. Governments in North Carolina can appropriate funds to non-profit organizations, but non-profits cannot develop stand-alone taxes or fees. The water partnership models studied that involve the delivery of essential services, such as the Southern Granville Water and Sewer Authority or the interlocal agreement between stormwater programs, act as pure governmental entities that rely on mandatory (and occasionally unwanted) user fees. Local government models may also lead to increased access to capital, which, depending on the type of water initiative, may be essential. Southern Granville Water and Sewer Authority, with its high wastewater capital needs, depends on its access to tax-exempt low cost capital to fulfill its watershed protection objectives.

Governance

The models studied for this research represented the full spectrum of governance systems. In some cases, revenue and expenditure decisions were governed by a formal board with the number of voting members allocated based on factors such as population, service area, or investment. Some programs run by non-profits are only a small part of a non-profit‘s operations. For example, the Triangle J Council of Governments manages a number of interesting watershed protection efforts, but is not primarily a water resource organization. Some of these efforts are included in their overall services, but others, such as the Water Quality Monitoring Project and Clean Water Education Project, are run as add-on services with separate governance and revenue generation systems. Non-profits such as the Upper Neuse River Basin Association, which were created specifically to carry out multi-jurisdictional watershed efforts, tended to have voting boards made up of contributing members, each with one vote, regardless of their size. These boards often strived for a consensus-based decision process. In some cases, decision-making authority was linked to contributed funds, while other models had an intentional disconnect between participant financial contributions and their relative governance control. Some models relied on local governments that had enough trust in their delegated administrative entity that funds were disbursed and left to the non-profit to spend, sometimes in accordance with a broader governance framework. In other cases, approving major expenditures remained with the supporting members. For example, the Upper Neuse River Basin Association expanded their work and budget in 2013 and many of their local government members took the review of expenditures (in the form of a local budget increase request) back to their own governing boards. The end result was that local government boards retained strong oversight of the expenditures. Obviously, this type of governance structure depends



on the scale of funding. In general, most of the models examined had a governance system that provided an opportunity for basic consensus building, communication, and transparency, but was not designed (or deployed) for the “in-the-weeds” (often contentious) program-level decision-making that has become common place for many governments.

Revenue Source

When considering cost-sharing models, a common first step is to ask where the necessary revenues will originate and what options exist for generating revenue. Does the entity have direct taxation powers? What types of fees or charges can it feasibly assess? Some of the models studied depend on revenues from one or two organizations while others involved recurring payments from over a dozen entities. None of the organizations we looked at employed direct taxation to fund their efforts. In North Carolina, only a few entities, including cities, counties and soil and water districts, have the ability to generate dedicated or earmarked watershed revenues from taxes. Soil and water districts have the ability to implement a watershed improvement tax within their district, but it has not been used in the Falls Lake area or very many, if any, other areas across the state. Most of the models analyzed involved units of government funding other entities through budget appropriations. In the case of UNCWI, the funds that the City of Raleigh contributes are derived from a volumetric (based on drinking water) watershed protection fee paid by its customers. In another example, Durham funded its contribution to the Upper Neuse River Basin Association with both water utility revenue and stormwater utility revenue, yet in neither case does the customer see a separate bill or line item for the expense. Allocating revenue needs among partners is as much an art as an accounting practice. Several of the river basin associations have adopted formulas that depend on multiple variables so that one single factor does not dominate how much a community pays. This approach makes sense given that watershed protection provides different types of benefits. For example, some benefits can be linked directly to amount of water extracted, while other benefits make more sense when viewed in terms of number of citizens or in–watershed land area. One of the most interesting attributes of some of the models was the ability to incorporate incentives for performance into the fabric of the institutional model. In other words, the model was designed to provide overall watershed benefits, but also to encourage specific behavior of partnering entities. This incentive structure was one of the key design aspects of the Neuse Compliance Association (NCA), a non-profit member association recognized under North Carolina’s nutrient regulatory framework as a tool for promoting collective nutrient reduction progress. Like other non-profits, the NCA depends on recurring membership dues to fund its activities; however, the association also includes an ability to assess penalties to individual members that fail to meet performance standards. This formalized and monetized form of peer pressure for rewarding good behavior or penalizing poor performance could conceivably be adapted into any association or partnership that involves recurring payments.


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CONCLUSIONS

No shortage of models. Many clear options exist for sharing resources to support watershed protection efforts. This is beneficial as funding for many water resource efforts shifts towards a greater reliance on local sources and less on centralized state and federal funding sources. Many of the models operating in the Upper Neuse River Basin have existing authority that has yet to be exercised that could be incorporated into more ambitious future efforts as needs arise. For example, many models provide for additional revenue raising instruments including property assessments, which are taxes that have yet to be widely used in North Carolina but have been successfully deployed in other areas of the country. It is likely that one of the existing model structures could be used or at least adapted to meet most types of watershed protection project needs. Trusted agents with strong leadership are essential. Any model or entity that lacks credibility will have a difficult time navigating the challenges of working with multiple public entities on high profile, sensitive, and passion-evoking issues. Established organizations with a history of strong leadership often provide this sense of credibility and accountability. As an alternative, a “start-up” organization may be able to engender widespread support if its leaders have a history and track record among partnering local governments. It is highly unlikely that an organization with significant “baggage” in terms of past relationships with local governments or specific leaders will be able to garner the support necessary to carry out an ambitious program. Creating multi-variable cost sharing formulas. When multiple parties are involved, there will be numerous options for deciding how to share contributions/payments. Given the complexity of tracking the benefits of watershed protection, many organizations have developed cost allocation formulas that take into consideration multiple factors including population, permitted water intake levels, discharge levels, etc. Relying on a formula that focuses on a single metric can create friction if contributors do not think that metric (e.g. population) accounts for the benefits they (or others) receive. Linking model to basic objectives. Many of the models that were examined have overlapping attributes that would make them appropriate for a variety of situations; however, certain attributes are not appropriate for all programs. For example, if the objective of the model is to generate revenue from private donations and direct household outreach, having a non-profit organization play a leadership role probably makes the most sense. Likewise, if fulfilling the program’s watershed protection goals involves taking on a significant amount of debt, then one of the governmental options would be more appropriate because their ability to take on debt. Determining the importance of governance structure. The governance structure is particularly important when the funds will be used for a range of activities on which contributors may have differing opinions. However, if there is clear consensus on how the funds will be spent, the governance structure may be less important. Watershed protection seems to be an area where differing views about what will have the most impact is the norm, so in most cases having a governance structure where contributors feel their voice is heard and they have some influence will be essential. If a contributor sees that their funds are leveraged against many other funding sources, their need to control specific activities may also be lessened. On the other hand, a more directed governance structure may be warranted when there is minimal leveraging and only a few partners involved, as contributors will want to have greater influence in how decisions are made.



Matching scale to the model. Another basic finding is that scale does matter when selecting different models. Some watershed protection efforts involve hundreds of dollars, while others involve millions of dollars. Some models can easily be scaled up as programs grow, while other models are more appropriate for smaller efforts, as they have limited scalability. For example, a local government may be willing to be a fiscal agent for a particular watershed protection study or an event that benefits multiple jurisdictions, but is unlikely to be able to play that role in a comprehensive program that involves studies and events over a period of years that are outside the jurisdiction’s boundaries.


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APPENDIX 1: LEGAL FRAMEWORK CONTROLLING OPTIONS FOR MULTI-JURISDICTION WATERSHED PROTECTION GOVERNMENTAL INSTITUTIONS

Under NC law, NC local governments and other parties with an interest in watershed protection have multiple options for pooling community financial resources and jointly funding watershed protection and restoration efforts under one or more governmental units. The major governmental entities able to pool resources are described below.

Interlocal Governmental Agreements

In many situations, the most appropriate vehicle for regional coordination on watershed protection depends on the use of interlocal agreements to structure partnerships. Local governments are authorized under N.C. Gen. Stat. Chapter 160A (“Cities and Towns”), Article 20 (“Interlocal Cooperation”), Section 461 to enter into agreements “in order to execute any undertaking” with other local governments – including those outside the state of North Carolina.

§160A-461. Interlocal cooperation authorized. Any unit of local government in this State and any one or more other units of local government in this State or any other state (to the extent permitted by the laws of the other state) may enter into contracts or agreements with each other in order to execute any undertaking. (1971, c. 698, s. 1.)

N.C. Gen. Stat. §160A-460 defines an “undertaking” as “the joint exercise by two or more units of local government, or the contractual exercise by one unit for one or more other units, of any power, function, public enterprise, right, privilege, or immunity of local government.” In addition to environmental issues, local governments in North Carolina have entered into interlocal agreements on annexation, parks and recreation, and transportation. N.C. Gen. Stat. §160A-462 through N.C. Gen. Stat. §160A-466 provides further guidance on the development of a “joint agency” created by two or more local units of government would function, specifically:

1. Power conferred on such an agency; §160A-462. Joint agencies.

a) Units agreeing to an undertaking may establish a joint agency charged with any or all of the responsibility for the undertaking. The units may confer on the joint agency any power, duty, right, or function needed for the execution of the undertaking, except that legal title to all real property necessary to the undertaking shall be held by the participating units individually, or jointly as tenants in common, in such manner and proportion as they may determine.

b) The participating units may appropriate funds to the joint agency on the basis of an annual budget recommended by the agency and submitted to the governing board of each unit for approval.

2. Necessary content of enabling agreement;

§160A-464. Provisions of the agreement. (1) The purpose or purposes of the contract or agreement; (2) The duration of the agreement; (3) If a joint agency is established, its composition, organization, and nature, together with the

powers conferred on it;



(4) The manner of appointing the personnel necessary to the execution of the undertaking; (5) The method of financing the undertaking, including the apportionment of costs and revenues; (6) The formula for ownership of real property involved in the undertaking, and procedures for

the disposition of such property when the contract or agreement expires or is terminated; (7) Methods for amending the contract or agreement; (8) Methods for terminating the contract or agreement; (9) Any other necessary or proper matter. (1971, c. 698, s. 1.)

3. The financing of a joint agency’s activities.

§160A-466. Revenue and expenditures for joint undertakings. When two or more units of local government are engaged in a joint undertaking, they may enter into agreements regarding financing, expenditures, and revenues related to the joint undertaking. Funds collected by any participating unit of government may be transferred to and expended by any other unit of government in a manner consistent with the agreement. An agreement regarding expenses and revenues may be of reasonable duration not to exceed 99 years. (2003-417, s. 1.)

Note that N.C. Gen. Stat. §160A-462 gives local governments the ability to grant “any power” to a joint agency except legal title. This prohibition would require negotiation between participating governments if land acquisition or new capital facility development were pursued by the joint agency. Capital assets including land must be “held by the participating units individually, or jointly as tenants in common, in such manner and proportion as they may determine.”

“Project” managed by a Regional Planning Entity/Council of Government

In §160A-475, North Carolina’s 17 regional councils of government are given the ability: (1) To apply for, accept, receive, and dispense funds and grants made available to it by the State of

North Carolina or any agency thereof, the United States of America or any agency thereof, any unit of local government (whether or not a member of the council), and any private or civic agency.

(2) … (3) To contract with consultants. (4) To contract with the State of North Carolina, any other state, the United States of America, or any

agency thereof, for services. (5) To study regional governmental problems, including matters affecting health, safety, welfare,

education, recreation, economic conditions, regional planning, and regional development. (6) To promote cooperative arrangements and coordinated action among its member governments. (7) To make recommendations for review and action to its member governments and other public

agencies which perform functions within the region in which its member governments are located. a. For the purpose of meeting the regional council's office space and program needs, to acquire

real property by purchase, gift, or otherwise, and to improve that property. The regional council may pledge real property as security for indebtedness used to finance acquisition of that property or for improvements to that real property, subject to approval by the Local Government Commission as required under G.S. 159-153. A regional council may not exercise the power of eminent domain.

(8) Any other powers that are exercised or capable of exercise by its member governments and desirable for dealing with problems of mutual concern to the extent such powers are specifically delegated to it from time to time by resolution of the governing board of each of its member governments which are affected thereby, provided, that no regional council of governments shall


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have the authority to construct or purchase buildings, or acquire title to real property, except for the purposes permitted under subdivision (7a) of this section or in order to exercise the authority granted by Chapter 260 of the Session Laws of 1979. (1971, c. 698, s. 1; 1975, c. 517, ss. 1, 2; 1979, c. 902; 2005-290, s. 1; 2006-211, s. 1.)

[emphasis added] These statutory powers – including the ability to enter into contracts with consultants and dispense funds received from local, state and federal sources and the charge to study regional matters - make the Councils of Government (COG) an already established vehicle for interlocal cooperation. However, COGs are prohibited in subdivision 7a from acquiring real property other than that necessary for “the regional council’s office space and program needs.” As described in subdivision 8, member governments can give greater agency to a Council beyond the enumerated, more passive powers to “study,” “promote” and “make recommendations.” A COG – empowered through resolutions by its membership – could create a sub-organization to coordinate watershed protection efforts for a defined spatial area with specified funding. Funding for a regional/COG-led effort could come from charges from “affected” governments who pass resolution to participate in watershed protection efforts (N.C. Gen. Stat. §160A-475.8). Not all member governments must pass resolutions – only those choosing to participate. Additional local government revenues for such efforts could be generated by increased utility fees for watershed protection (N.C. Gen. Stat. §162A-92). Examples of COG / Regional Planning The involvement of the Triangle J Council of Governments, http://www.tjcog.dst.nc.us/ in the:

Triangle Area Water Supply Monitoring Project (http://nc.water.usgs.gov/projects/triangle/index.html)

Clean Water Partnership (http://www.nccwep.org/)

Governmental Funding for Not -for Profit

Local governments also may enter into contracts with not-for profits corporations that may provide a spectrum of services. Such an organization could be a vehicle for watershed protection efforts because of its ability to enter into contracts with government and private entities and hold legal title.

“Non-profit corporations play an increasingly greater role in the lives of all North Carolina residents. Many necessary public services that might have been undertaken by local, county or state governments in past years – or never undertaken at all – are now provided by non-profit entities. Non-profit corporations have become an important force in shaping public policy at all levels of government in North Carolina on issues such as the environment, business regulation and social services.”

-p. ii, Secretary of State Ellen Marshall in “Incorporating Your Nonprofit in North Carolina.” Retrieved from: http://www.secretary.state.nc.us/corporations/

Chapter 55A (“North Carolina Nonprofit Corporation Act”) of the North Carolina General Statutes governs the creation of a non-profit organization and its powers and conduct. http://www.ncga.state.nc.us/gascripts/Statutes/StatutesTOC.pl?Chapter=0055A

http://www.tjcog.dst.nc.us/

http://nc.water.usgs.gov/projects/triangle/index.html

http://www.nccwep.org/

http://www.secretary.state.nc.us/corporations/

http://www.ncga.state.nc.us/gascripts/Statutes/StatutesTOC.pl?Chapter=0055A



§55A-3-02. General powers. (a) Unless its articles of incorporation or this Chapter provides otherwise, every corporation has perpetual

duration and succession in its corporate name and has the same powers as an individual to do all things necessary or convenient to carry out its affairs, including without limitation, power:…

(4) To purchase, receive, lease, or otherwise acquire, and own, hold, improve, use, and otherwise deal with, real or personal property, or any legal or equitable interest in property, wherever located;

(5) To sell, convey, mortgage, pledge, lease, exchange, and otherwise dispose of all or any part of its property;

(6) To purchase, receive, subscribe for, or otherwise acquire; own, hold, vote, use, sell, mortgage, lend, pledge, or otherwise dispose of; and deal in and with shares or other interests in, or obligations of, any other entity;

(7) To make contracts and guarantees, incur liabilities, borrow money, issue its notes, bonds, and other obligations, and secure any of its obligations by mortgage or pledge of any of its property, franchises, or income;

(8) To lend money, invest and reinvest its funds, and receive and hold real and personal property as security for repayment, except as limited by G.S. 55A-8-32;

… (18) To engage in any lawful activity that will aid governmental policy; Chapter 153A governs counties and Chapter 160A governs cities and towns and stipulates the condition under which local governments may enter into contracts with non-governmental entities. §153A-13 allows counties to enter into continuing contracts and §153A-449 allows counties to contract with “any person association, or corporation, in order to carry out any public purpose that the county is authorized by law to engage in.” N.C. Gen. Stat. §160A-17A (“Continuing contracts”) and N.C. Gen. Stat. §160A-20.1 (“Contracts with private entities”) respectively give the same powers to cities and towns. Suggested reading from the UNC-Chapel Hill School of Government: Bluestein, F.S. & A.R. Brown-Graham. 2001. Local Government Contracts with Nonprofit Organizations:

Questions and Answers. Popular Government. Retrieved from http://www.sog.unc.edu/pubs/electronicversions/pg/pgfal01/article5.pdf

Pg 32: What authority do local governments have to contract with nonprofit organizations, and what are the limitations on the exercise of that authority?

For North Carolina local governments, the authority to contract is directly related to the basic authority to spend money. A local government may contract for any purpose for which it may spend money. The three key legal limitations on the expenditure of funds by a local government are that (1) the expenditure be for a public purpose; (2) the activity supported be one in which the local government has statutory authority to engage; and (3) the expenditure not be inconsistent with the laws or the constitution of the state or federal government.

Pg 35: Contracts for services. As noted, a grant or an appropriation may take the form of a contract. In addition, local governments may contract for services with nonprofit organizations in the same way that they contract with other private entities to provide specific services, such as transportation or day care. These contracts may be made through the unit’s regular contracting process, rather than through a competitive budgeting or grants process, and will have the same terms and conditions as those regularly imposed on the unit’s service providers.

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Funding for a not-for-profit corporation-led effort would come from contracts between the local governments and the not-for-profit. Additional local government revenues could be generated by increased utility fees for the purpose of watershed protection (N.C. Gen. Stat. §162A-92). Additionally, a not-for-profit could have more success than other models examined in securing donations from the public. Other resources:

Corporations Division. North Carolina Department of the Secretary of State. Retrieved from http://www.secretary.state.nc.us/corporations/

Incorporating Your Nonprofit in North Carolina. North Carolina Department of the Secretary of State. Retrieved from http://www.secretary.state.nc.us/corporations/

Gulati-Partee, G. 2001. A Primer on Nonprofit Organizations. Popular Government. Retrieved from http://www.sog.unc.edu/pubs/electronicversions/pg/pgsum01/article3.pdf

Soil and Water Conservation Districts

As outlined by the Soil Conservation Districts Law (N.C. Gen. Stat. Chapter 139), Soil and Water Conservation Districts (SWCD) are state-funded entities consisting of elected and appointed members charged with maintaining the health of North Carolina land through technical, financial and education programs. Local District Information: http://www.enr.state.nc.us/DSWC/pages/local_district.html Chapter 139, Section 8 delineates the powers of the state’s SWCD including:

Entering into agreements with other governmental and non-governmental entities (3) To cooperate, or enter into agreements with, and within the limits or appropriations duly made available to it by law, to furnish financial or other aid to, any agency, governmental or otherwise, or any occupiers of land within the district, in the carrying on of erosion control and prevention operations and works of improvement for flood prevention or the conservation, utilization, and disposal of water and development of water resources within the district, subject to such conditions as the supervisors may deem necessary...

Acquire real property (4) To obtain options upon and to acquire by purchase, exchange, lease, gift, grant, bequest, devise, or otherwise, any property, real or personal, or rights or interests therein; to maintain, administer, and improve any properties acquired, to receive income from such properties and to expend such income in carrying out the purposes and provisions of this Chapter; and to sell, lease, or otherwise dispose of its property or interests therein in furtherance of the purposes and the provisions of this Chapter.

Build and maintain watershed improvement structures (6) To construct, improve, operate, and maintain such structures, works and projects as may be necessary or convenient for the performance of any of the operations authorized in this Chapter, including watershed improvement structures, works, and projects...

http://www.ncga.state.nc.us/EnactedLegislation/Statutes/HTML/BySection/Chapter_139/GS_139-8.html To finance these efforts, county commissioners may call for a referendum on the levying of a “Watershed Improvement Tax” §139-39. Alternative method of financing watershed improvement programs by special county tax.

The board of county commissioners in any county is authorized to call a special election to determine whether it be the will of the qualified voters of the county that they levy and cause to be collected



http://www.sog.unc.edu/pubs/electronicversions/pg/pgsum01/article3.pdf

http://www.enr.state.nc.us/DSWC/pages/local_district.html

http://www.ncga.state.nc.us/EnactedLegislation/Statutes/HTML/BySection/Chapter_139/GS_139-8.html



annually, at the same time and in the same manner as the general county taxes are levied and collected, a special tax at a rate not to exceed twenty-five cents (25¢) on each one hundred dollars ($100) valuation of property in said county, to be known as a "Watershed Improvement Tax," the funds therefrom, if the levy be authorized by the voters of said county, to be used for the prevention of flood water and sediment damages, and for furthering the conservation, utilization and disposal of water and the development of water resources. (1959, c. 781, s. 10; 1967, c. 987, s. 8.)

Further financing for watershed projects can come from contributions from counties and municipalities. §139-48. Participation by cities, counties, industries and others.

(a) Any industry, or private water user, … may participate in watershed improvement works or projects upon mutually agreeable terms relating to such matters as the construction, financing, maintenance and operation thereof.

(b) Any county or municipality may contribute funds toward the construction, maintenance and operation of watershed improvement works or projects, to the extent that such works or projects:

(1) Provide a source of county or municipal water supply; or protect an existing source of such supply, enhance its quality or increase its dependable capacity or quantity; or

(2) Protect against or alleviate the effects of flood-water or sediment damages affecting, or provide drainage benefits for, county or municipally owned property or the property of county or municipal inhabitants located outside the boundaries of such works or projects but within the respective boundaries of such county or municipality.

Each county and city may fund appropriations for the purposes of this section by levy of property taxes pursuant to G.S. 153A-149 and G.S. 160A-209 and by the allocation of other revenues whose use is not otherwise restricted by law. (1959, c. 781, s. 8; 1973, c. 803, s. 33; 1993, c. 391, ss. 22, 32.) Funding for a SWCD led effort would come from contracts between the local governments and the District. Additional local government revenues for such efforts could be generated by increased utility fees for the purpose of watershed protection (N.C. Gen. Stat. §162A-92). Additionally, the SWCD could request county commissioners hold a vote on a watershed improvement tax.

Water and Sewer Authorities

As outlined by the North Carolina Water and Sewer Authorities Act (N.C. Gen. Stat. 162A), water and sewer authorities are local government agents with vested legislative powers. The authority is designed to provide for public health and welfare through the construction and maintenance of sewer infrastructure, facilities, and systems. Local water and sewer systems information can be found at: http://owasa.org/.

Chapter 162A-3 permits any single county or the governing bodies of two or more counties, cities, towns, or other political subdivision to organize an authority by resolution. §162A-6 delineates the powers of the water and sewer authorities, including:

The authority to acquire, lease, and construct any water systems. (5) To acquire, lease as lessee or lessor, construct, reconstruct, improve, extend, enlarge, equip, repair, maintain and operate any water system or part thereof or any sewer system or part thereof or any combination thereof within or without the participating political subdivisions or any thereof.

Water systems include: (12) The term "water system" shall mean and include all plants, systems, facilities or properties used or useful or having the present capacity for future use in connection with the supply or

http://owasa.org/


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distribution of water or the control and drainage of stormwater runoff and any integral part thereof, including but not limited to water supply systems, water distribution systems, stormwater management programs designed to protect water quality by controlling the level of pollutants in, and the quantity and flow of, stormwater and structural and natural stormwater and drainage systems of all types, sources of water supply including lakes, reservoirs and wells, intakes, mains, laterals, aqueducts, pumping stations, standpipes, filtration plants, purification plants, hydrants, meters, valves, and all necessary appurtenances and equipment and all properties, rights, easements and franchises relating thereto and deemed necessary or convenient by the authority for the operation thereof.

In order to cover the water and sewer authority’s operating costs (including debt service), an authority may obligate payments for water delivered or made available by the authority. Specific financing authorities include:

Issuing revenue refunding bonds (7) To issue revenue refunding bonds of the authority as hereinafter provided.

Collecting rates, fees, and service charges (9) To fix and revise from time to time and to collect rates, fees and other charges for the use of or for the services

Budgeting for and allocating costs among participating political subdivisions: (b) … Such payments may be designed to cover the authority's operating costs (including debt service and related amounts) by allocating those costs among the participating political subdivisions and by requiring these subdivisions to pay additional amounts to make up for the nonpayment of defaulting subdivisions. The participating political subdivisions may agree to budget for and appropriate such payments….The participating political subdivisions may agree to make such payments from limited or specified sources.

To carry out these duties, water and sewer authorities are permitted to enter into trust agreements and contracts and employ any agent deemed necessary to carry out the agreement. All expenses are paid solely from funds made available under N.C. Gen. Stat. 162A.

(11) To make and enter into all contracts and agreements necessary or incidental to the performance of its duties and the execution of its powers under this Article, including a trust agreement or trust agreements securing any revenue bonds issued hereunder…

§162A-6 stipulates that water and sewer authorities have the power to make special assessments and adopt ordinances to carry out obligations.

(14a) To make special assessments against benefited property within the area served or to be served by the authority for the purpose of constructing, reconstructing, extending, or otherwise improving water systems or sanitary collection, treatment, and sewage disposal systems, in the same manner that a county may make special assessments under authority of Chapter 153A (14c) To adopt ordinances to regulate and control the discharge of sewage or stormwater into any sewerage system owned or operated by the authority, to adopt ordinances concerning stormwater management programs designed to protect water quality by controlling the level of pollutants in and the quantity and flow of stormwater, and to adopt ordinances to regulate and control structural and natural stormwater and drainage systems of all types.



Water and sewer authorizes have the power to compel private property owners to connect with waterlines, and the power to acquire property through eminent domain and wetlands mitigation.

Compel and charge property owners to connect with waterlines. (14d) To require the owners of developed property on which there are situated one or more residential dwelling units or commercial establishments located within the jurisdiction of the authority and within a reasonable distance of any waterline or sewer collection line owned, leased as lessee, or operated by the authority to connect the property with the waterline, sewer connection line, or both and fix charges for the connections. (3) To establish drainage programs and programs to prevent obstructions to the natural flow of streams, creeks and natural water channels or to improve drainage facilities. The authority contained in this subdivision is in addition to any authority contained in Chapter 156 of the General Statutes. (4) To acquire property for wetlands mitigation.