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Daily Journal

On Trust Fund, Go Regional

Dec. 11th, 2006
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RALEIGH – North Carolina’s Clean Water Management Trust Fund was a good idea at its creation 10 years ago. For the most part, it remains a good idea – spending tens of millions of tax dollars a year on a legitimate state function, protecting water quality, by buying land from property owners rather than just confiscating it or regulating it into worthlessness.

Unfortunately, like so many similar initiatives, it has proved to be less praiseworthy in practice than in theory. Spending tax money to purchase wetlands or reduce runoff may constitute environmental protection, but it also constitutes payouts to landowners. Those who get the money, or live near those who get, will be happy. Those who don’t, or don’t, won’t. They’ll pressure the board managing the funds to spread some their way. Politics will intrude, and sometimes trump good policy.

Furthermore, while the original idea may have been to bank sensitive land so it wouldn’t be developed, the trust fund also makes grants to local water and sewer authorities to make system improvements. This is not as good an idea. While faulty systems do affect communities downstream, bailing them out with funds collected from taxpayer statewide reduces the incentive to keep water and sewer facilities in good working order and to charge accurate prices for water and sewer service. Keep the price artificially low creates incentives for still more development, and more demand for water and sewer.

According to an excellent report in The Fayetteville Observer, politics appears not only to have intruded in the operation of the Clean Water Management Trust Fund but also to have contributed to the departure of Bill Holman, until recently the executive director of the fund. Holman doesn’t seem to have been willing to play ball with the appropriate politicians.

The Observer cited the case of Brunswick County. The governor lives there (well, when he’s not visiting Raleigh). Other politically connected people live there. Lots and lots of folks are moving there each year from across the country, putting a strain on the local infrastructure. But many of these newcomers are also relatively affluent. Shouldn’t they pay appropriate taxes, fees, and charges to maintain an adequate water and sewer system? Instead, Brunswick is the largest recipient of trust fund money, $28 million over the past 10 years.

Back in October, The Charlotte Observer reported another troubling case in which the Easley administration allegedly put pressure on the trust fund board to approve a land purchase in Caldwell and Wilkes counties. Associates of the property owners turned out to be significant, and in some cases surprising, donors to Easley’s political campaign.

Lawmakers and local officials in other parts of the state, annoyed by the flow of funds to some counties, may be tempted to seek changes in the trust-fund board to ensure that their communities are next in line to get a “fair share” of the proceeds. That’s not the right solution. It will turn distribution of the funds even more into a pork-barrel process driven by legislative seniority and partisanship. Besides, the fact of the matter is that water-quality problems are not evenly distributed across North Carolina. The current statewide approach doesn’t just invite political meddling – it also has the effect of taxing some parts of the state to subsidize development in other parts of the state with less capacity to handle the resulting environmental stresses.

Policymakers should consider breaking up the statewide trust fund into regional funds, based around river basins, each with its own board and deriving its revenue from taxes levied within each region. Water-quality concerns, rather than politics or economic development, should still be the criteria for making expenditures. But a regional approach has the added advantages of bringing decisions closer to the affect communities and reducing the subsidy of development in sensitive areas.

There’s been lots of talk lately about how North Carolina’s communities should think and act more regionally when addressing common problems that spill over their borders. Water quality would be a good place to start.

Hood is president of the John Locke Foundation.