News: CJ Exclusives

Local governments still paying the price for ‘tax relief’ from governor’s orders

Elizabeth City could go broke in August if Gov. Roy Cooper doesn’t lift restrictions on utility payments. 

The city isn’t alone. When the COVID-19 pandemic shut down the economy, Cooper banned utility providers from disconnecting or fining non-paying customers. His two executive orders shield people from losing water, electricity, natural gas, sanitation, or wastewater services through the end of July. 

The orders have cost local governments dearly. In North Carolina, 13.7% of customers aren’t paying their utility bills. Utility providers are waiting on $252 million in delinquent payments, and 884,088 reported households became eligible for disconnection in April and May

In Lenoir County, La Grange sued Cooper to overturn the restrictions, saying it couldn’t afford to repay its debt without collecting utility payments. In Pasquotank County, Elizabeth City applied for a waiver from the executive orders, warning it risked imminent bankruptcy.

“It’s a rainy day in Elizabeth City, what can I say,” Richard Olson, Elizabeth city manager, told Carolina Journal. “We’ll be broke. That’s the only way of saying it.”

Elizabeth City already struggled against urban flight, a dwindling population, and high poverty rates. A fourth of its residents live beneath the poverty line. 

The city relied on disconnection as a “tool” to collect utility payments. The city usually sends 2,200 electricity disconnection notices a month, but only 50 of those customers stay disconnected for more than two days, Olson said. 

Now 30% of customers have stopped paying their utility bills. In 120 days, Elizabeth City will be out of money, and in violation of state law. Without a waiver, its customers face a 10% to 46% hike in electric rates, Olson said. 

“The unintentional consequences are setting those people up for failure,” Olson said. “These individuals were paycheck to paycheck, and they can’t afford another $24 or $30 a month. And they’re going to have that.”

In Randolph County, roughly half of Liberty’s utility customers are delinquent. The town is waiting on $90,000. Its leaders hope to collect that money, but they worry payments will never come, Liberty Town Manager William Doerfer told CJ.

“We’re between a rock and a hard place with this executive order,” Doerfer said. “We’ve got some money in the bank, but I don’t know how long that will last.”

If payments don’t materialize, the town’s utility infrastructure will take a financial hit. Liberty already violates its legal wastewater capacity, after Hurricane Florence and rainstorms drove the town to process several times its legal limit of waste water. 

“I’m concerned that the long-term effect will be maintenance,” Doerfer said. “We’re already in big trouble as far as our wastewater capacity goes, and … the things that get cut are capital expenditures and maintenance.”

The city of Asheboro largely escaped such debilitating shortfalls. But town leaders worry about the long-term economic devastation dealt to residents. Even before the pandemic froze elective surgeries, the local hospital filed for bankruptcy. A third of the town’s workforce is in manufacturing, John Ogburn, Asheboro city manager, told CJ

“I don’t know if a lot of these folks can make it,” Ogburn said. “That’s a big hit. Add then the social cost of having no health care, and losing all of our white collar employees, that adds up pretty quick.”

Like Ogburn, Clayton Town Manager Adam Lindsay worries customers won’t be able to dig themselves out of their utility debt. The Johnston County town is waiting to collect $350,000. If delinquent payments continue, prices will rise, Lindsay told CJ

“The great unknown is will customers be able to pay? That’s our biggest fear as this drags on,” Lindsay said. “If you’re talking about four or five months, that’s a much harder bill to make up.”

In Brunswick County, Shallotte budgeted for a 40% drop in utility revenues over four months. But the town’s utility infrastructure will escape financial damage, Isaac Norris, Shallotte finance officer, told CJ.

The town of Eden plans to keep its rates level after tallying $144,245 in delinquent utility payments, but the city has lost its leverage to collect revenue, Terry Shelton, Eden city manager, told CJ

“It’s pretty significant in the overall picture of our financial situation,” Shelton said. “I don’t know how much longer the situation will last. There’s so many uncertainties.”

State Treasurer Dale Folwell asked Cooper to grant waivers for citizen-owned utilities and to join a Local Government Commission working group to address the problem. 

The state flagged more than 150 local governments for the risk of insolvency before the pandemic. Folwell says the shutdowns could force the state to take over the finances of dozens or even hundreds of troubled entities. 

“It has the potential of a chain reaction,” Folwell said. “If these public utilities run out of money, it will start impacting the city’s budget. And the city has nowhere else to go but to raise property taxes on property taxpayers who right now can least afford it.”