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Coronavirus pandemic pushes some NC rural water systems to brink. Is bankruptcy next?


Bouncing Back: NC’s economy journey to recovery

This report is brought to you by The North Carolina News Collaborative, a coalition of 22 newspapers across the state. This occasional series, Bouncing Back: North Carolina’s Economic Journey to Recovery, is made possible through a grant from The Pulitzer Center.


The economic crisis is prompting more people in North Carolina to share living quarters. And that overcrowding increases the risk of catching COVID-19 and the challenges of living with it.

Thousands in North Carolina filed bankruptcy in the pandemic despite substantial stimulus, including $1,200 stimulus checks, mortgage forbearance and the PPP.

North Carolina’s eviction moratorium ended in late June and the CDC moratorium began in early September. Thousands of NC tenants were evicted in this two-month gap.

COVID-19 has highlighted the disparities in North Carolina between who does and does not have access to the internet.

Remote learning has magnified the digital divide long plaguing urban neighborhoods in North Carolina. Educators work to close the gap before students fall behind. Many homes do not have internet access.

When Jordan Schindler, founder and CEO of Nufabrx, noticed his textile business slowing down because of the pandemic, his team developed a microbial mask to save jobs and help the community. Then the federal government put in an order.

The coronavirus pandemic has customers behind on their bills, putting some North Carolina municipal utilities at risk of insolvency and bankruptcy.

In North Carolina, childcare is expensive and operates on thin margins. During the coronavirus pandemic, many parents have kept children home due to financial or health concerns, raising questions about funding.

As the state’s economy reopens and many parents return to work, some Charlotteans are struggling to secure child care for their families — a quarter of the city’s child care centers remain closed.

This report is brought to you by The North Carolina News Collaborative, a coalition of 22 newspapers across the state. This occasional series, Bouncing Back: North Carolina’s Economic Journey to Recovery, is made possible through a grant from The Pulitzer Center.

In coastal Tyrrell County, the water flowing through residents’ taps comes at a high price: the county’s solvency.

This spring, Tyrrell County, with the smallest population in the state, came within 24 hours of defaulting on a bond issued to build one of its water plants.

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The state stepped in and helped make the payment, but county leaders don’t know how they will make the next one. The county’s biggest water customer, a state prison, closed last fall.

Tyrrell County is one of dozens of small, rural governments managing utility systems teetering on bankruptcy. The cost of running an aging water system or paying vendors for needed electricity often outstrips the shrinking communities’ ability to pay.

For some, the coronavirus pandemic has pushed them to the brink. Thousands of customers haven’t settled their bills — taking advantage of a four-month reprieve, extended by the governor, forbidding utility providers from shutting off service. Closed businesses, another casualty of the pandemic, also strained the systems.

“This crisis, this pandemic, has created its own set of problems but basically it’s layered those problems on top of some already existing problems for a number of small, rural municipal systems out there,” said Scott Mooneyham, director of political communications and coordination for the N.C. League of Municipalities. “They’ve become overwhelming in some places.”

Tyrrell County Commission Chairman Tommy Everett is blunt about the state of his community: It’s in trouble. About 20% of customers haven’t settled their bills since the start of the pandemic.

The governor’s reprieve for municipal utility customers ended last week, though private utility companies are still blocked from disconnections until September. Local governments will now begin collecting the money owed for months of water or electricity. Officials will see money trickle in over months through payment plans, prolonging the time they will need to float the system.

“And now I have to put those people on a six-month payment plan,” Tyrrell County Manager David Clegg said. “Well, the people I’m buying all the stuff from to run the system, they’re not putting me on a six-month payment plan.”

Robert Willett

Anatomy of a crisis

Roughly 4,000 people live in Tyrrell County, tucked between the mainland and the Outer Banks in the northeastern corner of the state. The population has been aging and shrinking for years.

More troubles arrived in the county last year, months before COVID-19 began ravaging the country.

Last fall, the state closed the Tyrrell Prison Work Farm, a 200-acre facility that housed up to 620 inmates. State officials cited staff shortages.

But with the prison went the water system’s biggest customer. Its monthly bill often topped $25,000 and accounted for about a third of the system’s water consumption.

Clegg said the county got no warning from the state about the shutdown.

The first notification to county leaders came from “shaken citizens” who heard about it from media reports, Clegg said.

“The calls we received from a Department of Public Safety deputy was a call back, not a notification,” he said.

For more than 20 years, the prison has been central to the local economy.

The prison was so key that the county issued $3.5 million in bonds to pay for a new water plant for the prison.

As long as the prison remains closed, Tyrrell County leaders are left with nothing but bad options.

Raising revenue is limited.

A little more than half of the county’s land cannot be taxed because it belongs to either the federal or state government, Clegg said.

The economy is based on farming, fishing and forestry — economic activities that do not tend to produce highly lucrative land values.

Clegg suspects the county will need to raise water rates and is now consulting with the state over how to implement payment plans.

He estimated a potential rate increase of 10%. The average monthly water and sewer bill in Tyrrell County is about $50, according to the School of Government Economic Finance Center at UNC-Chapel Hill.

The unemployment rate in Tyrrell County, meanwhile, spiked to around 14% this spring, according to the N.C. Department of Commerce.

The Rev. Randy Hughes, pastor of the Assembly of Praise, has seen the strains first hand. More than 300 people have come to his church for help with food.

“Some of the people that’s coming to get the food have been known by our church members a long time, and they say, ‘You know, times must really be tough for them to be coming because pride would have kept them away in the past so they must really need it,’” Hughes said.

Jordan Sexton a Tyrrell County Water/Sewer Department employee works to find the cause of a water leak at a home on Folly Landing Road on Thursday, July 23, 2020. Robert Willett

Different communities, similar problems

By June, Elizabeth City officials had grown impatient with the governor’s reprieve to utility customers.

City leaders announced they would defy the governor’s order forbidding disconnections and late fees.

The city in northeastern North Carolina applied for a waiver from the governor’s order, asking to put customers on payment plans before the moratorium on disconnections ended. City leaders said the power to shut off utilities is necessary.

“Unfortunately, disconnection is a tool we have to use to have our customers pay their bills,” Elizabeth City Mayor Bettie Parker wrote in a letter to state Attorney General Josh Stein, asking for leniency to begin collecting on unpaid bills.

Had relief not been granted, the city would have had its own unpaid bill. City Manager Richard Olson said the city would have not been able to pay its electrical supplier in August without the payments from customers.

Elizabeth City has lost roughly $2 million in total utility revenue. More than 2,700 customers, about one in five, have not paid their bills since the pandemic began, Parker wrote in the letter to Stein.

Stein eventually granted the waiver and approved alternative payment plans for overdue customers whose hardship relates to COVID-19.

Jamita Howard, 30, is months behind on her electric bill in Elizabeth City. The bills started piling up after she had to quit her job at a nursing home to tend to her six children when schools closed.

“This is a bill I absolutely worry about paying,” Howard said. “I can’t go without lights.”

She is nervous the city will take a heavier hand with her now that the governor’s reprieve has lapsed. She said her outstanding tab is more than $1,600.

“Unless you’ve experienced something like this, you just can’t know. On the outside, I try to put on a brave face for my kids,“ she said.

Other towns in the state say businesses, not residents, are hurting their revenues. The pandemic shuttered many businesses, greatly reducing the amount of water being used.

In the city of Brevard, a tourist town of about 8,000 an hour south of Asheville, water sales dropped about 20% since the pandemic. City Manager Jim Fatland blames the drop on hospitality businesses closing.

If the problem persists, Fatland said, the city’s water system is facing a shortfall of $1.2 million.

The drop is ill-timed. The community is on the hook for its annual debt payment of nearly $1.5 million in May for more than $20 million worth of loans needed to upgrade its water and sewer system.

Fatland said he sent a letter to the state treasurer’s office asking for the state to defer principal payments on the town’s debt for at least a year.

Uncertain present, uncertain future

Towns got into the business of water and sewer in the 1970s when sanitation became a public health crisis. In those years, federal and state governments doled out billions to help build the infrastructure, Kim Colson, director of the Division of Water Infrastructure for the state Department of Environmental Quality, told a group at the North Carolina Rural Center this spring.

The systems were designed to stand on their own. Customers pay for what they use, with enough left over to cover repairs.

But the design has not withstood the tests of time and the changing economies of rural North Carolina, Colson said. The aging systems need costly repairs, and government grants are now mostly loans. Across the state, the customer bases have declined as residents migrate to cities and large businesses close.

“A lot of our communities are kind of in that downward spiral because of these water infrastructure issues,” Colson said.

The Department of Environmental Quality had more than $800 million in requests this spring for loans to repair local water systems, Colson said. Many of the towns are so small they can’t raise rates enough to cover the annual loan payments.

The state treasurer’s office keeps a list of towns, counties and utility districts that are in financial distress. In the last two years, 152 made the list. Of them, 36 have high risk of solvency issues because of their water and sewer systems.

State Treasurer Dale Folwell said rural areas in North Carolina are particularly vulnerable.

“The larger communities … they got more property tax base. They got more sales tax base. They’ve got more of all the bases necessary to put it all together to run their budgets,” Folwell said.

If it must, the treasurer’s office steps in to rescue a town’s public water system.

In June, legislators approved $9 million to help failing local water systems with repairs and to help if the state must step in.

Mooneyham said the legislation provided “a framework to at least begin to address this problem,” but described the appropriated amount as a “drop in the bucket.”

Leaders in Tyrrell County said they will need more of the state’s help to withstand its crisis.

“Well, I think the state needs to be writing a check to the counties to make sure that their utilities systems are operating because, if not, you’re going to have a worse public health crisis on top of a pandemic,” Clegg said.

There’s also the question of what, if any, additional relief the federal government will make available to local governments.

The CARES Act — the coronavirus relief package passed by Congress in March — did supply some funding for local governments, but the money came with significant restrictions.

Local governments were prohibited from using that money to replace lost revenue, Mooneyham said.

For Clegg, the bottom line is he needs more money and more flexibility to use it.

As discussions in Washington continue over another possible relief package, he said being able to use funding to make up for lost revenue is a must.

Clegg is eager for another form of relief as well: the reopening of the prison.

Its fate, however, remains uncertain, said John Bull, a communications officer with the Department of Public Safety.

Will the prison reopen? If it does, how many prisoners will be housed there?

At the moment, those questions — like so many others in Tyrrell County — remain unanswered.

Mandy Locke, manager of Bouncing Back, contributed to this report.

Kevin Griffin is a reporter with The Hickory Daily Record and can be reached at

This story was originally published August 07, 2020 8:00 AM.

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