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Full text of "State Infrastructure and Local Government Financing Study Commission : report to the 1989 General Assembly of North Carolina 1990 session"

SCR - 181 



STATE INFRASTRUCTURE AND 



LOCAL GOVERNMENT FINANCING 

RECEIVED 



STUDY COMMISSION 




MAY 11 1990 

mWiin'i Of COVESPtMOT 



REPORT TO THE 

1989 GENERAL ASSEMBLY 

OF NORTH CAROLINA 

1990 SESSION 



A LIMITED NUMBER OF COPIES OF THIS REPORT IS AVAILABLE 
FOR DISTRIBUTION THROUGH THE LEGISLATIVE LIBRARY. 



ROOMS 2126, 2226 
STATE LEGISLATIVE BUILDING 
RALEIGH, NORTH CAROLINA 2761 1 
TELEPHONE: (919)733-7778 



OR 



ROOM 500 

LEGISLATIVE OFFICE BUILDING 
RALEIGH, NORTH CAROLINA 2761 I 
TELEPHONE: (919) 733-9390 



TABLE OF CONTENTS 

I. LETTER OF TRANSMITTAL i 

IL COMMISSION MEMBERSHIP ii 

m. COMMITTEE PROCEEDINGS 3 

IV. RECOMMENDED LEGISLATION 30 

A. AN ACT TO ESTABLISH A COMMISSION TO STUDY THE 
PUBLIC CONSTRUCTION PROCESS AND BUILDING CODE 
ENFORCEMENT. 

B. AN ACT CREATING THE NORTH CAROLINA MUNICIPAL 
POOLED CAPITAL PROJECTS FINANCING AGENCY AND 
THE NORTH CAROLINA COUNTY POOLED CAPITAL 
PROJECTS FINANCING AGENCY, SUCH AGENCIES TO 
PROVIDE FINANCING FOR THE ACQUISITION, 
CONSTRUCTION AND INSTALLATION BY 
MUNICIPALITIES AND COUNTIES RESPECTIVELY, OF 
CAPITAL PROJECTS, INCLUDING THE ACQUISITION OF 
EQUIPMENT, AND AMENDING CERTAIN GENERAL LAWS. 

C. AN ACT GIVING COUNTIES THE SAME AUTHORITY THAT 
CITIES HAVE TO DISTRIBUTE NATURAL GAS. 

D. AN ACT TO APPROPRIATE FUNDS FOR THE CLEAN 
WATER REVOLVING LOAN AND GRANT FUND. 

E. AN ACT CLARIFYING THE POWER OF CITIES AND 
COUNTIES TO COLLECT CHARGES FOR THE USE OF 
STORM WATER UTILITIES. 

V. ATTACHMENTS 

A. SENATE BILL 231, PART XI - AUTHORIZING LEGISLATION 

B. LOCAL GOVERNMENT CAPITAL NEEDS SURVEY FORM 

C. WATER AND SEWER ENTITIES 

D. JAIL CONSTRUCTION STANDARDS 



April 19, 1990 



TO THE PRESIDENT PRO TEMPORE OF THE SENATE, THE SPEAKER OF 
THE HOUSE OF REPRESENTATIVES, AND MEMBERS OF THE GENERAL 
ASSEMBLY: 



The STATE INFRASTRUCTURE AND LOCAL GOVERNMENT FINANCING 
STUDY COMMISSION herewith submits its report on State and local infrastructure 
needs and local government financing to the 1989 General Assembly (1990 Session) in 
accordance with Chapter 802, Section 1 1.5 of the 1989 Session Laws. 




Cochairman 




Subject: 
Authority: 



Report by: 

Report to: 

Date: 



STATE INFRASTRUCTURE NEEDS AND FINANCING 
1989 Session Laws, Chapter 802, Part XI, 



STUDY COMMISSION 
SB 231 



(SB 1162-Ba6night; SB 202-Plyler; SJR 938-W.N. Martin; 

SB 1298-Odom; HB 296-Wi6er) 

State Infrastructure Needs and Financing Study Commission 

Speaker; President Pro Tempore 

The Commission may submit an interim report 

on or before the first day of the 1990 Regular 

Session of the 1989 General Assembly. The 

Commission shall submit the final report 

on or before 1/15/91. 

Note: The Legislative Research Commission is also authorized 
to study Revenue Laws (HJR 3-Lilley) and Local Revenue 
Sources Options (SB 1298-Odom). 
(1989 Session Laws, Chapter 802, Sec. 2.1(12), SB 231) 



Members 



President Pro Tempore 's 
Appointments 

Sen. J. Richard Conder 

Co-chairman 

1401 Carolina Drive 

Rockingham, NC 28379 

(919)997-5551 

Sen. Marc Basnight 
P.O. Box 1025 
Manteo, NC 27954 
(919)473-3474 



Mr. Bill Clark 

Bill Clark Construction Company, Inc 

200 E. Arlington Boulevard 

Greenville, NC 27835 

(919)355-2000 



Speaker's 
Appointments 

Rep. John W. 'Bill' Hurley 

Co-chairman 

304 Mason Street 

Fayetteville, NC 28301 

(919)483-6210 

Mr. James Black 
Cousins Real Estate Corp. 
706 Green Valley Road 
Greensboro, NC 27410 
(919)273-8400 

Rep. Joanne W. 'Joni' Bowie 
106 Nut Bush Drive, East 
Greensboro, NC 27410 
(919)294-2587 



Sen. Betsy L. Cochrane 

Box 517 

Advance, NC 27006 

(919)998-8893 

Hon. Otto DeBruhl 
Register of Deeds 
Buncombe County Courthouse 
Asheville, NC 28801-3563 
(704)255-5541 



Mr. Woody Brinson 
P.O. Box 158 
Kenansville, NC 28349 
(919)296-0483 

Rep. Harry C. Grimmer 
4000 High Ridge Road 
Charlotte, NC 28226 
(704)847-8823 



// 



state Infrastructure Needs and Financing Study Comaission 



Members 
-continued- 



President Pro Teapore's 
Appointnents 

Mr. Ray DeBruhl 

Davidson & Jones Corporation 

P.O. Box 19067 

Raleigh, NC 27619 

(919)828-6260 

Mr. Joseph Durham, Director 

Community Development 

P.O. Box 1180 

Rocky Mount, NC 27801 

(919)443-9614 

Sen. T. LaFontine 'Fountain' 
1100 S. Tryon Street 
Charlotte, NC 28203 
(704)372-4800 

Sen. Aaron W. Plyler, Sr. 
2170 Concord Avenue 
Monroe, NC 28110 
(704)289-3541/(704)283-1293 

Mayor Bobby Strickland 
P.O. Box 190 
Salemburg, NC 28385 
(919)525-5650 



Odom 



Speaker's 
Appointments 

Rep. John C. 'Pete' Hasty 
P.O. Box 945 
Maxton, NC 28364 
(919)276-8680 



Mr. James F. Kirkpatrick 
3294 Wynnewood Drive 
Greensboro, NC 27408 
(919)282-3930 



Rep. Bradford V. 'Brad' Ligon 
Route 12, Box 460 
Salisbury, NC 28144 
(704)279-3059 

Mr. John K. Nelms 
126 Pine Cone Drive 
Oxford, NC 27565 
(919)693-7835 

Mr. Bryan South 
P.O. Box 490 
Durham, NC 27702 



Staff: 



Clerk: 



Linwood Jones 
Research Division 
(919)733-2578 

Sabra Faires 

Fiscal Research Division 

(919)733-4910 



Ginny McCann 

Legislative Building, Room 2119 

0: (919)733-5771 

H: (919)872-3620 



COMMITTEE PROCEEDINGS 



Digitized by the Internet Archive 
in 2013 



http://archive.org/details/stateinfrastruct00nort_2 



DECEMBER 8, 1989 



The State Infrastructure and Local Government Financing Study Commission 
conducted its first meeting as an organizational meeting. The Commission's members 
heard presentations from Ms. Sabra Faires, Commission Counsel, and Mr. Linwood 
Jones. Commission Counsel, on the topics that the General Assembly directed the 
Commission to address. These topics are listed in Section - of Senate Bill 23 1 , a copy 
of which is included as Attachment A. The topics focus primarily on infrastructure 
needs, how those needs are currently financed by the federal, State and local 
governrments, and potential local revenue sources that may meet these needs. 

JANUARY 11, 1990 

SUBCOMMITTEE ; The subcommittee appointed at the first meeting to review 
methods tor reducing costs associated with the construction and repair of State and local 
infrastructure held an organizational meeting. Linwood Jones, Commission Counsel, 
briefed the subcommittee on the various infrastructure and local government finance 
topics before the Commission. Mr. Jones presented the following outline to organize the 
topics of discussion: 

I. INFRASTRUCTURE NEEDS 

A. Wastewater Treatment & Water Supply 

1) Current federal/state/local fiscal responsibilities ' 

2) EPA Wastewater Needs Assessment 

3) Estimated Water Supply Needs 

4) Federal and State Revolving Loan Fund 

a) Eligibility and Priorities 

b) Funds available and expected to be available, including 
breakdown of funds for wastewater vs. water supply 

c) Loans, grants (anit. available for each) 

d) Problems with the Fund 

5) Other sources of revenue for water/sewer 

a) Funds generated by earmarked portions of two local option sales 
taxes 

6) How Local Governments Currently Meet These Needs and Problems 
Faced in Meeting These Needs 

B. Solid Waste 

I) Current State/local fiscal responsibilities 



2) DEHNR Landfill Capacity Assessment and Solid Waste Needs 
Assessment (available from OSB services projections) 

3) Solid Waste Infrastructure & Technology Overview (landfills, 
incinerators, composting, recycling, etc.) 

4) Solid Waste Revolving Loan Fund 

a) How it works 

b) Amounts available 

c) Eligibility 

d) Problems 

5) Other Sources of Revenue for Solid Waste 

6) Solid Waste Management Plan 

a) Explanation generally 

b) How it will ^fect infrastructure and capital costs 

C. Jails and Courts 

1) Current State/local fiscal responsibilities 

2) Overview of how criminal laws, sentencing, pretrial detention laws, 
and the 1 80-day misdemeanor rule affect jail populations 

3) Staff survey on Jail & Courthouse Needs 

4) Governor's Crime Commission Report on Jails in Crisis 

5) Methods of Financing Jails 

a) Problems with bond financing 

b) State planning grants 

c) Satellite Jail Fund 

1) Purpose 

2) Eligibility 

3) Funds available 

d) Court facilities fees ~ uses and amounts generated 

D. Public Schools and Community Colleges 

1) Current federal /state/local fiscal responsibilities 

2) Current Needs Assessment for public schools 
I) Amounts available to address needs from: 

a. Public School Building Capital Fund 



b. Critical School Facility Needs Fund 

c. 1/2 cent local option sales taxes (2) 

3) Current Needs Assessment for community colleges 

E. Municipal Streets 

1) State/local fiscal responsibilities 

2) Powell Bill funds 

3) Effect of recently-created $9. 1 billion Highway Trust Fund on urban 
highway and street construction funds 

4) Other methods of financing streets 

F. Airports 

1) Federal/state/local financing & planning relationship 

2) Problems with funding rural and smaller airports 

G. Natural Gas Utilities 

1) Uses of natural gas in North Carolina 

2) Current availability of natural gas in North Carolina 

3) Regulatory restrictions by Utilities Commission 

H. Hospitals 

1) Breakdown of N.C. hospitals by ownership (county, city, hospital 
authority, hospital district, private) 

2) Certificates of Need and related regulatory restraints on hospital 
facility construction 

3) Hospital Needs and Financing Problems 

a. Needs assessment, if available 

b. Effect of indigent patient care on financial resources 

c. Health Care Facilities Finance Act 



I. Stormwater Utilities 



J. Public Health and Social Services 

I) Infrastructure Needs for public health buildings and social services 
buildings 



a) State/local fiscal responsibility 

b) Needs assessmenl (if available from DHR) 

c) Current methods of financing public health and social service 
infrastructure 

2) Public health and social services programs 

a) Federal /State/local fiscal responsibility 

b) County administrative and program costs 



II. LOCAL GOVERNMENT FINANCING 

A. Sources of Revenue Currently Available to Local Governments 

i ) List of sources 

2) Amounts generated from sources 

3) State restrictions on or earmarking of funds from sources 

B. Financing Methods Currently Available to Local Governments 

C. Potential Sources of Local Revenue Not Currently Authorized 
Statewide and New Financing Methods 

1) Payroll taxes, sales taxes on services, land transfer taxes, increased 
motor vehicle fees, etc. 

2) Authorization of menu for revenue sources vs. local and/or piecemeal 
authorization 

D. Recent and Pending Legislation on Local Government Finance 

1) Senate Bill 559 (Municipal Pooled Projects) 

2) Senate Bill 52 1 (Non-voted Local Government Borrowing) 

3) Stormwater utility financing 

E. Effects of elimination of federal revenue-sharing and Tax Reform 
Act of 1986 

F. Targeted fiscal assistance for rural areas 



III. OPERATING AND CAPITAL EXPENSES COSTS: ANALYSIS, 

PLANNING AND 

COST REDUCTION 

A. Capital Management Plans for Lx)cal Governments 

B. Factors Influencing Local Operating and Capital Costs 

1) Building Code and construction process, including permits and reviews 

2) Bidding, advertising laws 



3) Environmental laws, regulations, and reviews 

4) State mandates for services and programs and the effect on program 
and infrastructure costs 



IV. OTHER TOPICS OF INTEREST TO COMMISSION 

A. Taxes Paid to Federal Government vs. Federal Monies Returned 

1) N.C.'s rank among states in return of federal dollars as percentage of 
contribution of federal taxes 

2) Potential ways of increasing N.C.'s share of federal dollars for 
infrastructure and operating costs. 

B. Regionalization and Privatization 

1) Regional approaches to infrastructure planning and construction 

2) Privatization and public/private partnerships 

C. Creation of permanent advisory commission (like ACIR) 

D. State land inventory and State building reviews and permits 
(likely to be addressed by the LRC Committee on State Capital 

Assets) 



After review and discussion of the outline, the subcommittee determined that some 
topics should be given a lower priority in order to provide ample time to study the more 
pressing topics. Since the General Assembly has recently provided major funding for 
schools, streets, and highways, the subcommittee recommended that those topics be 
examined only after completion of the other topics. The subcommittee also 
recommended that any discussion on the funding of Medicaid programs and social 
services infrastructure by counties be reviewed in the fall after completion of the other 
topics. 



8 



COMMISSION: The full Commission met immediately after adjournment of the 
subcommittee meeting. Mr. Jones, Commission Counsel, briefed the Commission on the 
subcommittee's review of the organizational outline. Mr. Jones also explained that he 
and Ms. Faires had prepared a capital needs survey that would be distributed to all cities 
and counties (and in some cases, water and sewer authorities) throughout the State. The 
survey (see Attachment B) sought information for three types of infrastructure: water 
supply, jails, and courthouses. Mr. Jones noted that the staff would like to have 
surveyed local governments on all their infrastructure needs; however, it was felt that the 
local governmental units would be more responsive to a shorter questionnaire, and 
capital needs information on other infrastructure (such as wastewater treatment and solid 
waste) is available from other sources. 

The Commission requested that staff review and monitor the activities of other study 
committees whose work might duplicate or overlap with infrastructure and local 
government finance topics. The Commission also requested that staff conduct another 
survey for the fall meetings to determine projected long-range capital needs (10 years) 
for those units of local government that engage in long-range planning. 

Ms. Sabra Faires, Commission Counsel, briefed the Commission on the types of 
governmental entities authorized to provide water supply and wastewater treatment 
service. Ms. Faires identified the following eight types of entities which provide water 
and/or sewer service in North Carolina: cities, counties, sanitary districts, water and 
sewer authorities, metropolitan water districts, metropolitan sewerage districts, county 
service districts, and county water and sewer districls. A discussion of each entity is 
provided in Attachment C. 



Mr. Bob High, Secretary of the North Carolina Lx)cal Government Commission, then 
gave an overview of the Local Government Commission's role in overseeing the 
fmancing of water and sewer projects by local entities. Mr. High noted that each local 
government entity determines its own method of financing, based on its own 
infrastructure needs. The governmental unit must adhere to the statutory procedures 
provided for the issuance of bonds, including procedures for the Local Government 
Commission's review and approval of bond issuances. Mr. High stated that North 
Carolina and its local governments have very sound bond ratings. 

Ms. Faires, Commission Counsel, then briefed the Commission on the funds 
generated by the earmarked portions of the two 1/2 cents local option sales taxes. The 
two taxes, along with an older 1 % local option sales tax are currently in effect in all 100 
counties. The proceeds from the two 1/2 cents local option sales taxes are allocated 
back to the counties on a per capita basis, multiplied by an adjustment factor that ranges 
from .89 to 1.49. The county commissioners of each county then decide whether the 
municipalities' shares of the proceeds should be allocated on the basis of population or 
property tax values. Portions of the municipalities' shares are earmarked for water and 
sewer capital expenditures: 40 percent for the first five fiscal years of the tax and 30 
percent for the following five fiscal years. At the end of 10 years, the earmarking would 
cease under the current law. Currently, approximately $61 million is earmarked 
annually under these two 1/2 cents local option taxes for water and sewer capital 
expenses. 

Mr. John Blowe, Supervisor of the Grants Management Unit. Construction Grants 
Section, Division of Environmental Management (DEHNR), presented a brief 
background of state and federal involvement in wastewater treatment facilities. The 



10 



federal government began making small grants for wastewater treatment facilities to local 
governments with the passage of P.L. 88-660 in 1956. These grants covered up to 30% 
of the facility costs. Under P.L. 92-500, enacted in 1972, the federal government 
greatly enlarged its grants program to provide federal funding for up to 75% of the costs 
of wastewater treatment facilities, plus an additional 10% for certain types of innovative 
facilities. The State responded by issuing Clean Water Bonds to pay for one-half of the 
remaining 25% nonfederal cost, leaving the local governmental units responsible for 12 
1/2 percent. In 1985, the federal program was reduced to 55% federal participation, 
limited to existing wastewater treatment needs only. The 1987 amendments to the Clean 
Water Act phase out federal grants effective in 1988 and substitute federal seed money to 
capitalize revolving loan funds through 1994. The amount of federal funding authorized 
for FY 1990-91 for wastewater treatment is $44 million, with a 20% match required 
from the State. The authorized amount will drop in the following years to $33 million 
in 1992, $22 million in 1993, and $11 million in 1994. 

Mr. Blowe explained the revolving loan fund. Three types of assistance — revolving 
loan, emergency loan, and high unit cost grant - are available to eligible governmental 
units. Loans are subject to a 20-year maximum duration and an interest rate of 
approximately one-half the market rate. TTie grants are available to cover the excess 
costs of those counties with high residential water and sewer rates. Mr. Blowe felt that 
$125 to $150 million annually could be put into the revolving fund for wastewater 
treatment infrastructure for the next five years without inflating the cost of construction 
in the marketplace. 

Mr. Wally Venrick, Chief of the Public Water Supply Section of the Environmental 
Health Division, addressed the Committee concerning water supply infrastructure. His 



11 



agency regulates all water supply systems in the State that serve either 15 connections or 
25 or more persons per day. Approximately 1 1 ,000 systems are covered. Congress first 
brought public water supply systems under federal regulation in 1974. However, with 
the exception of Farmers Home Administration funds, there are no federal funds for 
water supply infrastructure as there are for wastewater treatment facilities. The State 
revolving loan fund has approximately $2 million for water supply grants and loans. 

Mr. Matt Bernhardt, Manager of the Town of Troy, addressed the Commission 
concerning small-towns and their experience with infrastructure financing. Many of the 
infrastructure projects recently competed in Troy were built partially with State and/or 
federal funds. Mr. Bernhardt encouraged the Commission to look at increasing the 
funding of the Clean Water Revolving Loan Fund since bond issues, FmHA loans, and 
other revenue sources are inadequate for a small town like Troy. 

Mr. Billy Ray Hall, President of the Rural Economic Development Center, then 
addressed the Commission on the critical relationship between an adequate infrastructure 
and economic development. The inadequacy of basic infrastructure is an impediment to 
growth and may threaten the public's safety and health. 

Mr. Hall identified three areas of wastewater treatment needs: wastewater system 
needs, septic tank needs, and off-system needs (such as outhouses and straight-piping 
into nearby streams). In the wastewater system area, rural needs per person are nearly 
75% greater than urban needs per person. Rural areas are also disproportionately served 
by septic tank systems, with suitable septic tank land becoming more scarce in coastal 
and mountain counties. Mr. Hall also identified approximately 100,000 households in 
North Carolina that are not connected to an approved public sewer or septic tank; these 



12 



households often uses outhouses, divert their wastes through pipes directly into streams, 
or are hooked up to failing septic tank systems. Mr. Hall stressed that all three areas of 
needs must be addressed. 

Mr. Hall pointed out that the federal government is gradually withdrawing its 
financial support for wastewater treatment funding. Only about 25% of the current $1.2 
billion in wastewater system needs can be met by current state and federal resources. 
The revolving loan fund appears to be the primary funding mechanism for the future for 
wastewater and water supply. Mr. Hall noted that there is no federal or State money 
available to address septic-tank related needs, and there is no State and very little federal 
money for the off-system needs. 

Mr. Hall recommended that the Commission re-examine the State/local fiscal 
relationship with respect to infrastructure financing. As more responsibility for 
infrastructure financing is shifted to local governments, rural governments in particular 
are hard-pressed to meet the growing list of needs. Mr. Hall also recommended that the 
State increase funding for the Revolving Loan Fund and give priority for funds to local 
governments with large needs but little ability to pay. Mr. Hall suggested that the 
Commission monitor recent studies on septic tank systems, consider funding a program 
to address off-system wastewater needs, and consider creating a statewide management 
growth plan to identify rural needs. He also identified a number of local policy 
initiatives that are on file with the Commission's minutes in the Legislative Library. 



FEBRUARYS, 1990 



13 



SUBCOMMITTEE; The Subcommittee heard a presentation from one of its members, 
Mr. Ray DeBruhl, on the history of efforts to coordinate the State construction review 
and permit process. Mr. DeBruhl pointed out that the legislature, other state agencies, 
and private groups have been studying the issue of fragmentation in the State 
construction permit process for many years. He added that a Senate bill is pending (SB 
185) that would create a study commission to review the approval process for State 
construction projects, the feasibility of construction permit consolidation, and the 
feasibility of a clearinghouse for approval of such projects. Mr. Debruhl felt that the 
State Infrastructure and Local Government Financing Study Commission would not have 
adequate time to review these issues itself; therefore, a separate study committee would 
be warranted. 

COMMISSION; Mr. Linwood Jones, Commission Counsel, briefed the Commission on 
the activities of other legislative study committees and commissions relating to 
infrastructure and local government financing. Approximately sixteen legislative 
committees and commissions were identified whose fields of study overiap to some 
extent with that of the State Infrastructure Commission. Commission members felt that 
the Commission should focus primarily on wastewater, water supply, solid waste, jails, 
courthouses, and natural gas, and consider other pieces of infrastructure as time permits. 

Senator Plyler and Mr. Ray DeBruhl presented a report from the Subcommittee and 
suggested that the Commission recommend the creation of a study commission to 
examine the issue of the fragmented permit and review system for State construction 
projects and related State construction issues. 



14 



Mr. Bruce Strickland, Director of the Finance Center of the Department of 
Economic and Community Development, presented information to the Commission on 
the role of the Department and the Finance Center in locating industry in North Carolina 
and the Industrial Building Renovation Fund. The purpose of the Industrial Building 
Renovation Fund is to provide an incentive to industries to create jobs in fifty 
economically-depressed counties throughout the State. The amount of funds available 
for a particular renovation project or infrastructure project is determined on the basis of 
$1,200 per job to be created, up to a maximum of $250,000 or the cost of the project 
renovation, whichever is less. The 1989 General Assembly expanded the program to 
provide emergency economic development assistance in any county experiencing a major 
economic dislocation. 

Approximately 37% of the money in the Industrial Building Renovation Fund has 
been granted to local governments to improve their wastewater and water supply 
systems. The improvements generally benefit the industry by providing increased water 
pressure. Mr. Strickland noted that the Fund had also been used on two occasions to 
finance natural gas lines. Another portion of the Program involves loans to companies 
for the renovation of buildings, including reconstruction of roofs and building 
expansions. Mr. Strickland noted, however, that the Fund needs additional monies in 
order to continue past November, 1990. 

Mr. Bob Chandler, Director of the Division of Community Assistance (DECD). 
addressed the Commission on the Community Development Block Grants ("CDBG") 
Program. The CDBG Program is actually two programs: the "entitlement" program for 
larger cities that obtain grant money directly from the federal Department of Housing 
and Urban Development and the "State" program for smaller cities and counties. 



15 



Seventeen cities fall under the entitlement program and receive their funds directly from 
HUD. All counties and cities are eligible to receive funds under the State program, with 
the law requiring at least 60% of the CDBG funds to be spent on projects that primarily 
benefit low and moderate income persons. The remainder must be spent to improve 
blighted areas or to address an urgent need. Mr. Chandler noted that HUD is 
considering raising the 60% minimum to 75%. 

The largest categories of funding are the community revitalization and economic 
development categories, each of which includes many infrastructure projects. Over $63 
million in community revitalization funds has been used since 1982 by participants in the 
State program for infrastructure — mainly water lines, sewer lines, and streets. In 
addition, over $23.5 million has been used in the economic development category 
(consisting of loans to a business for a capital expense or the financing of public 
infrastructure used by the business) for water and sewer system improvements. 

Mr. B.A. Parker, Chief of the Community and Business Programs of the Farmers 
Home Administration, spoke to the Commission about FmHA funding of infrastructure 
in North Carolina. The Community and Business Programs are divided into three 
programs: (i) water/wastewater disposal loans and grants, (ii) community facilities loans, 
and (iii) guaranteed business and industry programs. Water and wastewater disposal 
loans and grants, available to communities under 10,000 in population, have totaled $81 
million in North Carolina during the last three years. Community facilities loans -- 
available for clinics, hospitals, libraries, fire and rescue facilities, schools, and similar 
public service facilities in communities under 20,000 population, have totaled $22 
million in the last three years. The guaranteed business and industry programs have 



16 



guaranteed an average of $10 million in loans each of the last three years to for-profit 
entities in communities under 50,000 in North Carolina for economic development. 

Mr. Parker noted that FmHA favors countywide water and sewer systems, but recent 
environmental and legal concerns about converting farmland to nonfarm use through the 
availability of water and sewer lines has forced the agency to consider funding smaller 
communities with these services. Mr. Parker also noted that legislation is now pending 
in Congress that proposes to split the Community and Business Programs from FmHA, 
change the name of the Programs to the Rural Development Agency, and allow the State 
to prioritize the funding. 

Mr. William Redman, Chairman of the North Carolina Utilities Commission, then 
briefed the State Infrastructure Commission on two topics: the Utilities Commission's 
regulation of private water and sewer operators and the regulation of natural gas in the 
State. The Utilities Commission regulates more than 1 ,000 water and sewer companies, 
with rates generally set higher than public systems. However, many of the private 
companies are undercapitalized. The General Assembly recently increased the bond 
required for a water and sewer franchise, which Mr. Redman felt would help decrease 
the failure rates of the private companies. Mr. Redman also pointed out that systems 
constructed by developers often lead to problems when the developer sells or transfers 
the system to another party to own and operate. The owner/operator is often 
undercapitalized and arguments occur over whether the developer or the operator is 
liable for taxes on the transfer. 

Mr. Redman also briefed the Commission on natural gas infrastructure. Natural gas 
is a 2-tiered system, with the Federal Energy Regulatory Commission regulating the 



17 



interstate pipe lines and wholesale rates and the North Carolina Utilities Commission 
regulating the local distribution companies ("LDC's"). In addition, eight cities have 
their own natural gas systems, none of which are regulated by the Utilities Commission. 
Mr. Redman pointed out that there are currently 38 counties currently not served with 
natural gas. 

North Carolina now receives gas from two interstate pipelines supplies ~ TRANSCO 
and Columbia Gas Pipeline. TRANSCO is by far the major supplier. Both TRANSCO 
and Southern Natural Gas Company are seeking to provide additional natural gas 
supplies to the State. The Utilities Commission has not taken a position on which 
company should provide the additional supplies. 

Mr. Redman noted that the biggest impediment to extending natural gas service to 
the unserved counties is the capital costs of construction of the new lines. The LDC's 
who would extend the lines would not recoup their investment unless there are a 
significant number of users. Mr. Redman felt that it was possible to provide low-interest 
loans to finance the extension of the gas service into the unserved, less-populated 
counties. Similar financing helped secure telephone and electrical service to the less 
populated areas, although these services were usually provided by cooperatives and 
required enormous amounts of capital. 

Mr. Redman discussed House Bill 970. legislation enacted in 1989 that requires the 
LDC's to file with the Utilities Commission their plans for expansion of natural gas 
service into unserved territories. The Utilities Commission and the Public Staff will 
comment on the proposals by May I, 1990 to the General Assembly. The Commission 
and the Public Staff are currently in the process of reviewing the reports on file from the 



18 



four LDC's, In light of the natural gas, water/sewer, telecommunications, and related 
needs of communities in attracting industry, Mr. Redman suggested that the Commission 
consider a revolving infrastructure loan fund to provide low-interest loans for a 
reasonable period of time to help finance infrastructure development. 

Representatives of each of the four natural gas local distribution companies spoke 
briefly on their service areas and their general expansion plans. The companies are 
Piedmont Natural Gas, North Carolina Natural Gas, Public Service Company, and 
Pennsylvania and Southern Gas Company. Details of their comments are on file with 
the Commission's minutes in the Legislative Library. A complete discussion of natural 
gas service was delayed until the fall, pending the reports by the Utilities Commission 
and the Public Staff pursuant to House Bill 970. 

Mr. W.G. PlentI, Director of the Division of Aviation (DOT), briefed the 
Commission on the history of aviation in the State and the programs that exist to assist 
communities with their airports. There are an estimated 400+ airports in North 
Carolina (public and private), 76 of which are public airports (with airline service 
provided at 13 of these public airports). The remainder, excluding military airports, are 
"general aviation" facilities. "General aviation" includes private, corporate, medical, 
and aerial pesticide applicator flights. The State also considers several of the private 
airports an integral part of the State's aviation network. 

Mr. PlentI stated that a community's inaccessability to an airport is a disadvantage in 
economic development. The General Assembly created a State Aid to Airports program 
in the mid-1960's and has continued funding (he Program. The initial funds were 
allocated to airports with no airline service. During (he I970*s, funding was 



19 



substantially increased and eligibility for funds was extended to all publicly-owned 
airports. In 1988, the General Assembly began funding the State Aid program based on 
estimated tax revenues generated by aviation in the State. The revenues generated $5.5 
million during the first year alone. Funds can be used for most facilities serving the 
general public, but not hangars, fuel systems, industrial areas, and related revenue- 
producing infrastructure. The State pays 50% of the nonfederal share of the costs, 
except new airports may qualify for 80% State funding of the nonfederal share for 
selected portions of the initial construction. The increased funding ratio for new airports 
is designed to encourage and assist in the expansion of the State's airport "system." 

The federal government also provides funds for airport infrastructure through the 
Aviation Trust Fund, funded by a combination of passenger ticket taxes and fuel taxes. 
Approximately $1.4 billion is provided nationwide annually through the Aviation Trust 
Fund. Larger airports with airline service receive 75% federal funding while general 
aviation facilities compete for a 90% share of federal funds. Mr. PlentI stated that in 
spite of the larger federal funding ratio for smaller general aviation facilities, the share of 
funds available was very small. 



MARCH 8, 1990 



SUBCOMMITTEE: The Subcommittee approved for recommendation to the full 
Commission Senate Bill 185. Senate Bill 185, introduced in 1989 and currently pending 
in the Senate, would establish a study commission to review the State construction 



20 



process, particularly the fragmented review and permit process for State construction 
projects. Senate Bill 185 is eligible for consideration during the 1990 short session since 
it contains an appropriation. The subcommittee recommended removing the 1989-90 
fiscal year appropriation since that fiscal year had passed; it also recommended changing 
the membership of the commission to be created to four Senators, four Representatives, 
and four members of the public. The Subcommittee also heard from a member of the 
Commission, Mr. Jim Kirkpatrick, about the proposed construction of Randleman Dam. 
Discussions on Randleman Dam and the required environmental surveys, permits, 
hearings, etc. for the Dam were scheduled for the Subcommittee's April meeting. 

COMMISSION: Mr, Ed Regan, Assistant Executive Director of the North Carolina 
Association of County Commissioners, addressed the Commission on solid waste. Solid 
waste is increasingly becoming a capital-intensive service. Landfill space is 
disappearing, and two pending EPA requirements will contribute significantly to landfill 
costs in the future ~ liners and post-closure requirements. New landfill acreage will 
soon have to be lined, equipped with collection and treatment systems, and monitored 
for leaching and runoff. In addition, after closure of the landfill, the responsible local 
government must provide financial responsibility for environmental damage for up to 30 
years after closure. 

Mr. Regan also noted that recent legislative initiatives would also increase solid 
waste costs. The recently-enacted Senate Bill III, the Solid Waste Management Act. 
emphasizes recycling and composting, with a 25% reduction by the year 1993 in the 
amount of solid waste being landfilled. Mr. Regan estimated that the costs of the EPA 
regulations and Senate Bill I 1 Ts requirements would likely lead to landfill development 
costs of about $150,000 per acre (excluding the cost of purchasing the land and post- 



21 



closure costs). Mr. Regan noted that incineration is an even more expensive alternative 
to landfilling, and even incineration leads to air quality problems and residual ashes to 
dispose of. 

Mr. Regan briefed the Commission on Senate Bill 1 15 - legislation enacted during 
the 1989 session which establishes a revolving loan fund to assist counties in funding 
programs required by the Solid Waste Management Act. Senate Bill 1 15 also gives 
counties the unique authority to issue special obligation bonds ~ a type of bond secured 
by revenues from sources other than the project being financed ~ for solid waste 
facilities. 

Mr. Regan also addressed the Commission on the topic of jails. Fifteen counties are 
presently completing an estimated $136 million in jail construction. He identified short- 
term jail needs ~ i.e., during the next five years ~ as approximately $300 million. Mr. 
Regan pointed out that general obligation bond financing of jails is unpopular among 
voters and revenue bond financing is inappropriate since jails generate very little 
revenue. As a result, lease-purchase financing of jails has become a popular option, 
with public hearings and Local Government Commission approval required as safeguards 
against misuse of this type of financing. Mr. Regan recommended that the Commission 
consider authorizing the use of special obligation bonds for jails. 

Mr. Michael Smith, Assistant Director of the Institute of Government, spoke to the 
Commission on the development of the new jail construction standards. Mr. Smith 
served as a consultant to the Task Force that developed and recommended to the Social 
Services Commission the new jail standards. 



22 



Mr. Smith noted that the jail standards had remained unchanged since their adoption 
in 1968. A few years ago, an attempt was made to modify the standards, but the 
proposals were rejected by the Social Services Commission. The Task Force was created 
to reconsider new standards, and after a series of meetings and public hearings, it 
presented a set of new standards to the Social Services Commission. The new standards 
were recently published in the North Carolina Register; unlike most regulations, they 
cannot become effective until approved by the Governor. 

Mr. Smith briefed the Commission on the square footage requirements for cell 
construction, dayroom construction, dormitory construction, and related areas. The new 
and existing construction standards are attached as Attachment D. (Note: The existing 
standards will continue to apply to jails or portions of jails already in existence). 

Mr. Claude Odom, a county commissioner of Hertford County, presented the views 
of a small, rural county on infrastructure financing for solid waste and jails. Mr. Odom 
noted that the per capita income of Hertford County is less than $10,000. The current 
jail is over 100 years old and a new one, costing $2.7 million to construct, is being 
planned. The enormous costs of the jail have forced the county commissioners to raise 
property tax rates in Hertford County to pay for the jail. The County has also agreed to 
build a satellite jail to help alleviate overcrowding. 

Mr. Odom noted that solid waste represented another major cost to the citizens of 
Hertford County. The County is working with five other counties to develop a regional 
landfill because of the costs involved. Solid waste service costs will also increase as a 
result of Senate Bill 111. 



23 



Mr. Wally Hill, Budget and Management Director for Wake County, presented the 
views of a larger, urbanized county to the Commission. Mr. Hill noted that Wake 
County had tremendous needs in education; approximately $1 billion would be needed 
by the year 2000 in Wake County alone to finance education infrastructure. He noted 
that Wake County has many years of landfill capacity remaining and that solid waste 
costs for Wake County through the year 2000 are projected at $305 million. Wake 
County is also completing construction on a combined law enforcement center and jail 
that will house 500 - 600 inmates and detainees. Mr. Hill noted that Wake County 
would need additional revenue authority beyond the property tax to finance its services 
and infrastructure in the future. 

Mr. Ellis Hankins, General Counsel for the North Carolina League of Municipalities, 
discussed proposed stonmwater legislation with the Commission. The proposed 
legislation would allow cities and counties to levy "user" fees against owners whose 
properties experience runoff from rainfall. The funds generated could be used to meet 
new EPA regulations regarding inventories and possible acquisition of stormwater 
systems and potential stormwater treatment regulations in the future. Mr. Hankins also 
requested that the Commission re-examine Senate Bill 559, the Municipal Pooled Lx)an 
Fund bill. He noted that he would like to see the bill amended to apply only to water 
and sewer infrastructure projects. 

The chairmen appointed a subcommittee to consider amendments to Senate Bill 559 
and the stormwater legislation. The subcommittee was requested to report back to the 
full Commission at the April meeting with draft legislation. 



24 



APRIL 19, 1990 

SUBCOMMITTEE: The Subcommittee heard testimony from Mr. John Kime of the 
Piedmont Triad Regional Water Authority concerning the development of the Randleman 
Lake Dam project. Originally proposed as a U.S. Army Corps of Engineers project on 
the Deep River, the project has since been dropped by the Corps and picked up by the 
local governmental units in the area as a water supply, recreation and flood control 
project. The Corps spent nearly 20 years and $6. 1 million developing environmental 
and engineering surveys for the project. A reduction in the size of the project after the 
local governments took over from the Corps prompted DEHNR to require new 
environmental assessments. Mr. Kime was concerned that additional environmental, 
archaelogical, and related surveys and the delays caused by those surveys are escalating 
the costs of building the project. Mr. Kime also encouraged the subcommittee to 
consider having a "point" person to coordinate the various project permits required by 
the State. Mr. Ray DeBruhl, subcommittee member, noted that the issue of 
permit/review coordination could be considered by the study commission that would be 
created by Senate Bill 185. 

Mr, Lee Hauser of the Department of Insurance and Mr. Sam Snowden, Chairman 
of the Building Code Council, addressed the Committee concerning the enforcement of 
the Building Code and the qualifications of local building inspectors. Both 
acknowledged that there are some inspectors who interpret the Code differently, but that 
the contractor always has the right to appeal a local inspector's decision to the Building 
Code Council. Mr. Jim Black, subcommittee member, noted that he had on several 
instances encountered problems with local inspectors who disagreed with architects over 
the construction of a portion of a facility. Mr. Black was concerned about the length of 



26 



time involved in appealing a local inspector's decision and the fact that the local 
inspector may resent the appeal and thereafter become difficult to work with. Mr. 
Snowden and Mr. Hauser suggested that perhaps the statute concerning appeals could be 
made clearer so that all parties understand the right of the contractor to appeal a local 
inspector's decision. Representative Bowie also suggested that there may be a need for 
continuing education of local building inspectors beyond the initial certification training 
received under the Code Official Qualifications Board. Mr. DeBruhl requested that the 
Department and the Building Code Council commit to working with the study 
commission to be created by Senate Bill 185 in addressing these problems. 

COMMISSION: The State Infrastructure and Lx)cal Government Financing Commission 
held its final meeting prior to the short session to approve a report and legislation for 
transmittal to the General Assembly. Mr. Linwood Jones, Commission Counsel, briefed 
the Commission on the contents of the report. Mr. Jones then discussed the Proposed 
Committee Substitute for Senate Bill 185, which would create a study commission to 
study the issues of state construction permits, reviews, and procedures. The Proposed 
Committee Substitute changes the membership of the proposed commission to include 4 
public members, deletes the 1989-90 fiscal year appropriation, and makes other 
conforming changes. 

Ms. Sabra Faires, Commission Counsel, then discussed the Proposed Committee 
Substitute for Senate Bill 559 -- the Municipal and County Pooled Projects legislation. 
The Proposed Committee Substitute makes the following changes to the bill: 

(1) Financing is limited to water and wastewater projects; 

(2) The 10-year maximum loan term is deleted (although the Commission voted later 
in the meeting to place a limit on the term of a loan); 

(3) The terms of service of the agencies' members are adjusted; 

(4) The requirement that a non-appropriation clause be placed into the loan 
agreement is deleted; 



27 



(5) Cities and counties are authorized to mortgage property other than that being 
financed to secure the loan; 

(6) The references to G.S. 147-69. 1 (made unnecessary by the amendment of G.S. 
159-30) are deleted; 

(7) An exception is created to the general requirement that intangible tax revenue be 
used in proportion to other tax revenue for intangible tax revenue used to secure 
special obligation bonds issued under the Solid Waste Management Loan 
Program; 

(8) Cities and counties are required to hold a public hearing prior to obtaining a loan 
from the pooled projects agency; and 

(9) Several conforming, technical changes were also made. 

Ms. Faires then discussed a proposed bill entitled AN ACT GIVING COUNTIES 
THE SAME AUTHORITY THAT CITIES HAVE CONCERNING OPERATION OF A 
GAS PRODUCTION AND DISTRIBUTION SYSTEM (Draft #90-LJ-I2). The proposed 
bill would allow counties to operate gas production, storage, transmission, and 
distribution systems and would authorize counties to purchase natural gas and to explore 
for gas reserves with private companies. 



Ms. Faires also discussed a proposed bill entitled AN ACT TO APPROPRIATE 
FUNDS FOR THE CLEAN WATER REVOLVING LOAN AND GRANT FUND (Draft 
ft 90-LJ-Il). The proposed bill appropriates $8.8 million to the Clean Water Revolving 
Loan and Grant Fund to serve as the State's 20% match of federal funds to be received. 

Mr. Ellis Hankins then briefed the Commission on a bill to be entitled AN ACT 
CLARIFYING THE POWER OF CITIES AND COUNTIES TO COLLECT CHARGES 
FOR THE USE OF STORMWATER UTILITIES. This proposed legislation (Draft 
#90-LJ-I4) authorizes cities and counties to fix and enforce rates for stomiwater and 
drainage systems. The rates would apply to property owners whose property sheds or 
drains stormwater into the stormwater and drainage systems. Rates may vary among 
different types of users, type of runoff, watersheds affected, and other pertinent factors. 



28 



The Commission voted to recommend all 5 pieces of legislation to the short session 
of the General Assembly. The Commission also voted to recommend the transmittal of 
these bills with the report, with instructions to the staff to make any typographical 
changes necessary to complete the report. 

Senator Plyler gave the subcommittee's report and noted that the study commission 
to be created by Senate Bill 185 could study the issue of the Building Code and 
Randleman Dam. On the advice of Mr. Jones, Commission Counsel, the Commission 
members amended the Proposed Committee Substitute for Senate Bill 185 to make clear 
that the issue of Building Code enforcement and the qualifications of local inspectors will 
be studied. 



29 



PROPOSED LEGISLATION A 



STATE CONSTRUCTION STUDY 



^0 



GENERAL ASSEMBLY OF NORTH CAROLINA 
SESSION 1989 



SENATE BILL 185* 

PROPOSED COMMITTEE SUBSTITUTE 

PCS-SI85-RNI 



Short Title: State Construction Process Study. (Public) 

Sponsors: Senators Goldston, Ezzell, Hunt of Durham and Plyler. 



Referred to: Rules. 



February 16, 1989 

1 A BILL TO BE ENTITLED 

2 AN ACT TO ESTABLISH A COMMISSION TO STUDY THE PUBLIC 

3 CONSTRUCTION PROCESS AND BUILDING CODE ENFORCEMENT. 

4 Whereas, in June of 1982 the Office of State Budget and 

5 Management developed a report dealing with rules, regulations, and 

6 procedures affecting the capital construction process for construction of North 

7 Carolina State Government buildings; and 

8 Whereas, that report identified some 40 reviews and/or permits that 

9 may be required for State construction projects, spread over 17 State agencies; 

10 and 

11 Whereas, this complex procedural maze is in addition to any 

12 additional requirements imposed by cities, counties, and the federal 

13 government; and 

14 Whereas, there is confusion as to how to proceed, and little 

15 coordination of effort required to complete the process; and 

16 Whereas, it may make sense for one agency to administer all 

17 building code related issues, but that the diversity of rules and their intended 

18 purposes of protection of the public health, public safety, the environment. 



}/ 



GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 1989 

1 natural resources and cultural resources almost precludes consolidation of all 

2 these functions; and 

3 Whereas, from 1957 through 1971 a statutorily established 

4 Interdepartmental Building Regulations Committee provided some 

5 coordination, but this committee has been abolished; and 

6 Whereas, it is just as costly for a project to be delayed during the 

7 design phase as during the construction phase; Now, therefore, 

8 The General Assembly of North Carolina enacts: 

9 Section 1. The State Construction Process Study Commission is 

10 created. The Commission shall consist of 12 members: four Senators 

11 appointed by the President Pro Tempore of the Senate, four Representatives 

12 appointed by the Speaker of the House, and four public members, two each 

1 3 appointed by the President Pro Tempore of the Senate and the Speaker of the 

14 House. 

15 Sec. 2. The President Pro Tempore of the Senate shall designate 

16 one Senator as cochairman and the Speaker of the House shall designate one 

17 Representative as cochairman. 

18 Sec. 3. The Commission shall: 

19 fl) Study the process for State approval of public construction 

20 projects; 

21 (2) Study the feasibility of consolidating some of the permitting 

22 processes required for construction of public projects; 

23 (3) Study the feasibility of a clearinghouse approach for State 

24 approval of construction projects; and 

25 (4) Study the enforcement of the State Building Code and the 

26 Code Officials Qualification Board's certification and training 

27 of local inspectors. 

28 Sec. 4. The Commission shall submit a final report of its findings 

29 and recommendations to the General Assembly on or before the first day of the 

30 1991 Session of the General Assembly by filing the report with the President 

31 of the Senate and the Speaker of the House of Representatives. Upon filing its 

32 final report, the Commission shall terminate. 

3 3 Sec. 5. The Commission, while in the discharge of official duties, 

3 4 may exercise all the powers provided for under the provisions of G.S. 120-19, 

3 5 and G.S. 120-19.1 through G.S. 120-19.4. The Commission may meet at any 



Page 2 Senate Bill 185 

3Z 



GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 1989 

1 time upon the joint call of the cochairmen. The Commission may meet in the 

2 Legislative Building or the Legislative Office Building. 

3 Sec. 6. Members of the General Assembly serving on the 

4 Commission shall be reimbursed for subsistence and travel expenses at the rates 

5 set forth in G.S. 120-3.1. Public members of the Commission shall be 

6 reimbursed for per diem, subsistence, and travel expenses at the rate set forth 

7 in G.S. 138-5. 

8 Sec. 7. The Commission may contract for professional, clerical, or 

9 consultant services as provided by G.S. 120-32.02. The Legislative Services 

10 Commission, through the Legislative Administrative Officer, shall assign 

11 professional staff to assist in the work of the Commission, The House of 

12 Representatives' and the Senate's Supervisor of Clerks shall assign clerical staff 

13 to the Commission, upon the direction of the Legislative Services Commission. 

14 The expenses relating to clerical employees shall be borne by the Commission. 

15 Sec. 8. When a vacancy occurs in the membership of the 

16 Commission the vacancy shall be filled by the same appointing officer who 

17 made the initial appointment. 

18 Sec. 9. All State departments and agencies and local governments 

19 and their subdivisions shall furnish the Commission with any information in 

20 their possession or available to them. 

21 Sec. 10. There is appropriated from the General Fund to the 

22 General Assembly for fiscal year 1990-91 the sum of twenty thousand dollars 

23 ($20,000) for the expenses of the Commission. 

24 Sec. 1 1. This act shall become effective July I, 1990. 



Senate Bill 185 _ ^ Page 3 



^^ 



PROPOSED LEGISLATION B 



MUNICIPAL POOLED PROJECTS FINANCING AGENCY 



39" 



GENERAL ASSEMBLY OF NORTH CAROLINA 

SESSION 1989 

S D 

SENATE BILL 559 
Finance Committee Substitute Adopted witii Amendments 1 & 2 7/5/ 
Proposed House Committee Substitute 
89 



Short Title: Municipal Pooled Projects. (Public) 



Sponsors: 



Referred to: 



March 21, 1989 

1 A BILL TO BE ENTITLED 

2 AN ACT CREATING THE NORTH CAROLINA MUNICIPAL POOLED 

3 CAPITAL PROJECTS FINANCING AGENCY AND THE NORTH 

4 CAROLINA COUNTY POOLED CAPITAL PROJECTS FINANCING 

5 AGENCY TO PROVIDE FINANCING FOR THE ACQUISITION, 

6 CONSTRUCTION, AND INSTALLATION BY MUNICIPALITIES AND 

7 COUNTIES, RESPECTIVELY, OF CAPITAL WATER AND 

8 WASTEWATER PROJECTS, INCLUDING THE ACQUISITION OF 

9 EQUIPMENT, AND AMENDING CERTAIN GENERAL LAWS. 

10 Whereas, the General Assembly finds that in order to promote and 

1 1 preserve their economy and the health, safety, and prosperity of their residents, 

12 cities and counties in North Carolina have a need to acquire, construct, and 

13 install equipment, capital improvements, and property to help meet the water 

14 and wastewater infrastructure requirements of their communities; and. 

15 Whereas, the pooling of the financing needs of several cities and of 

16 several counties and the issuance of bonds by an instrumentality of the State to 

17 finance the cost of water and wastewater projects will reduce the cost of the 

18 financing and will increase the number of financing options available by, 

19 among other things, giving units of government with intermittent financing 

20 needs access to a broader bond market than would otherwise be available to 

21 them, reducing bond issuance and marketing expenses, and giving units the 



9^ 



GKNERAr. ASSEMBLY OF NORTH CAROLINA SESSION 1989 



1 opportunity to obtain credit and liquidity enhancement facilities that might 

2 otherwise he unavailable or more costly, thus reducing interest costs to the 

3 units; and 

4 Whereas, the stringent restrictions of the Internal Revenue Code of 

5 19H6, as amended, have in many instances reduced a unit's flexibility in 

6 financing capital projects and have increased the costs of financing capital 

7 projects; and 

S Whereas, the Internal Revenue Code of 1986, as amended, places 

9 certain restrictions on the investment of the proceeds of bonds issued by states 

10 and their political subdivisions and requires that certain earnings on the 

1 1 proceeds of bonds issued by these entities be rebated to the federal government 

12 in order for interest on the bonds to not be includable in the gross income of 

13 the bond owners for purposes of federal income taxation; and 

14 Whereas, the Tax Reform Act of 1986 and the Technical and 

15 Miscellaneous Revenue Act of 1988 provide certain exceptions from the 

16 Code's restrictions on the investment of bond proceeds for two hundred 

17 million dollars ($200,000,000) of bonds issued for a loan funding program of 

18 the North Carolina League of Municipalities, and the North Carolina 

19 Municipal Pooled Capital Projects Financing Agency intends to issue two 

20 hundred million dollars ($200,000,000) of bonds under this Chapter that will 

21 benefit from the exceptions and thereby benefit the municipalities to which the 

22 Agency makes loans; and 

2^ Whereas, the North Carolina Municipal Pooled Capital Projects 

24 Financing Agency intends to issue bonds under this Chapter that will not 

25 benefit from the exceptions from the Code's restrictions on the investment of 

26 bond proceeds, and none of the bonds issued under this Chapter by the North 

27 Carolina County Pooled Capital Projects Financing Agency will benefit from 

28 the exceptions to the restrictions; and 

29 Whereas, the well-being of residents of cities and counties and the 

30 economic and governmental viability and prosperity of cities and counties in 

31 North Carolina will be served by establishing two instrumentalities of the State 

32 to provide financing through the issuance by the instrumentalities of one or 

33 more issues of bonds to provide funds for cities and counties to acquire water 

34 and wastewater capital projects. Now therefore: 

35 The General Assembly of North Carolina enacts: 

36 Section 1. The General Statutes are amended by adding a new 

37 Chapter to read: 

38 " Chapter 159H. 

39 "North Carolina Municipal and County Pooled 

40 Capital Projects Financing Act. 

41 "§ 159H 1. Short title. 

42 This Chapter is the 'North Carolina Municipal and County Pooled Capital 

43 Projects Financing Act' and may be cited by that name. 

44 '§ 159H-2. Definitions. 



Page 2 Senate Bill 559 



GKNKRAL ASSKMBLY OF NORTH CAROLINA SESSION 1989 



1 The following clefinitie^ns apply in this Chapter. 

2 (JQ •Acquisition.'-- When used to refer to a project, the term 

3 means acquisition, construction, improvement, or 

4 installation; ^acquire,' 'acquiring,' and other cognates of the 

5 word 'acquisition' have the same meaning. 

6 (2} 'Administrative charges.'- Charges made hy the Agency to 

7 a city or a county for providing financing pursuant to this 
S Chapter and may include a charge for financing costs, a 
9 charge for the costs of bond and reserve fund insurance, of 

10 credit and liquidity facilities, and of interest-rate agreements, 

1 1 a charge in respect of nonasset bond and investment income 

12 deficiencies, and a charge for administrative expenses of the 

13 Agency incurred in the exercise of its powers and duties 

14 conferred hy this Chapter. 

15 (3} 'A gency.'" The County Agency or the Municipal Agency, 

16 individually, as well as the County Agency and the 

17 Municipal Agency, collectively. 

18 (4) 'Association of County Commissioners.'— The North 

19 Carolina Association of County Commissioners, a federation 

20 of county governments in the State. 

21 (5) 'Board.'- The board of directors of the Agency or any other 

22 governing body of the Agency succeeding to the principal 

23 functions of the board of directors. 

24 £6} 'Bonds.'— The revenue bonds authorized to be issued by the 

25 Agency under this Chapter: the term does not include a 

26 loan obligation. 

27 (7) 'Citv.'- Defined in G.S. 160A-U2). 

28 (8) 'City Council. - A council as defined in G.S. 160A-1(3). 

29 - {9} 'Cost.'- The capital cost of acquiring a water or wastewater 

30 project, including: 

31 a. The costs of doing any or all of the following found 

32 necessary or convenient by a city or county: 

33 J_, Acquiring, erecting, providing, developing. 

34 furnishing, and equipping. 

35 2^ Reconstructing, remodeling. altering, 

36 renovating. replacing. refurnishing, and 

37 reequipping. 

38 1, Enlarging, expanding, and extending. 

39 4^ Demolishing, relocating, improving, grading. 

40 draining, landscaping, paving, widening, and 

41 resurfacing. 

42 bi The cost of all property, both real and personal and 

43 both improved and unimproved, and of plants, works. 

44 appurtenances, structures, facilities, furnishings. 



Senate Bill 559 Page 3 



10 



GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 1989 



1 machinery, equipment, vehicles, easements, water 

2 rights, air rights, franchises, and licenses used or 

3 usetiil in connecti^)n with the purpose aiithori/ed. 

4 Ci The costs ot demolishing or moving structures trom 

5 land acquired and acquiring land to which the 

6 structures are to he moved. 

7 cL Financing charges, including estimated interest during 

8 the acquisition of a project and tor six months 

9 thereafter. 

e^ The cost of plans, specifications, studies, reports, 

1 1 surveys, and estimates of costs and revenues. 

12 f^ The costs of paying any interim financing, including 

13 principal, interest, and premium, related to the 

14 acquisition of a project. 

15 g^ Administrative and legal expenses and administrative 

16 charges. 

17 Ir, The costs of obtaining bond and reserve fund 

18 insurance and investment contracts, of credit facilities, 

19 liquidity facilities, and interest-rate agreements, and of 

20 establishing and maintaining debt service and other 

21 reserves. 

22 K Any other services, costs, and expenses necessary or 

23 incidental to the purpose authorized. 

24 aO) ^County.'- Defined in G.S. 153A-1(3). 

25 (11) 'County Agency.-- The North Carolina County Pooled 

26 Capital Projects Financing Agency created by this Chapter 

27 or the public body succeeding it in its principal functions or 

28 upon which are conferred by law the rights, powers, and 

29 duties given to the Agency by this Chapter. 

30 (12) 'County Board of Commissioners."'- The governing body of 

31 a county established under G.S. 153A-34. 

32 ( 1 3) 'Credit Facility.'— An agreement entered into with a bank, a 

33 savings and loan as.sociation, or other banking institution, an 

34 insurance company, a reinsurance company, a surety 

35 company, or other insurance institution, a corporation, an 

36 investm e nt banking firm or other investment institution, or 

37 other financial institution providing for prompt payment. 

38 whether at maturity, presentment, or tender for purchase. 

39 redemption, or acceleration, of all or part of the principal or 

40 purchase price, redemption premium, if any, and interest on 

41 the following in consideration of the city or county or the 

42 A gency, as appropriate, agreeing to repay the provider of 

43 the credit facility in accordance with the terms and 

44 provisions of the agreement: 



Page 4 Senate Bill 559 



GKNERAJ. ASSEMBLY OF NORTH CAROLINA SESSION 1989 



1 JL A loan ol'iligation payable on clemaiul or tender hy 

2 the Agency. 

3 bi Bonds or notes payable on demand or tender by the 

4 owner. 

5 The provider of a credit facility may be located either inside 

6 or outside the United States. 

7 (14) 'Interest-rate agreement.'-- An interest-rate protection 
H agreement, inteiest liability swap agreement, interest ceiling 
9 agreement, mteiest rate guaranty, or any other contract, 

10 other than a bond or note, with a third party that provides 

1 1 for a fixed or variable amount of interest expense payable by 

12 the Agency in respect of its l'>onds or notes. 

13 (15) 'League of Municipalities.'- The North Carolina League of 

14 Municipalities, a federation of municipal governments in the 

15 State. 

16 (16) 'Loan obligation.'- A bond, note, contract, loan agreement, 

17 or other written agreement of a city or a county that is 

18 delivered to the Agency and evidences the city's or county's 

19 receipt of loan proceeds from the sale of a portion of the 

20 A gency's bonds or from other available money of the 

21 A gency and sets forth the terms of the city's or county's 

22 a greement to make payments to the Agency in respect of the 

23 loan. 

24 (17) 'Local Government Commission.'- The Local Government 

25 Commission e.stablished by G.S. 159-3 and any successor of 

26 the Commission. 

27 (18) 'Municipal Agency.'- The North Carolina Municipal Pooled 

28 Capital Projects Financing Agency created by this Chapter 

29 ' or the public body succeeding it in its principal functions or 

30 upon which are conferred by law the rights, powers, and 

31 duties given to the Agency by this Chapter. 

32 (19) 'Notes.'" The revenue notes or revenue bond anticipation 

33 notes authorized to be issued by the Agency under this 

34 Chapter: the term does not include a loan obligation. 

35 (20) 'Par Formula.'- A provision or formula to provide for the 

36 adjustment, from time to time, of the interest rate or rates 

37 borne by a loan obligation or a bond or note, including: 

38 a^ A provision providing for adjustment so that the 

39 purcha.se price of the loan obligation or bond or note 

40 in the open market would be as close to par as 

41 possible. 

42 b. A provision providing for adjustment based upon one 

43 or more percentages of a prime rate or base rate. 



Senate Bill 559 Page 5 



GKNKRAI. ASSKMBI.Y OF NORTH CAROLINA SKSSION 1989 



which percentage or percentages may vary or he 
a pplied tor different periods of time. 

Ci For a loan ol>hgation, a provision providing for 

adjustment ["tased upon adjustments of the interest 
rate of the Agency's bonds or notes. 

cL Other provisions consistent with this Chapter that, for 
a loan obligation, do not affect the city's or county's 
ability to pay the principal of and the interest on the 
loan obligation or materially and adversely affect the 
financial position of the city or the county and the 
ability of the city or the county to enter into the loan 
obligation at a reasonable interest cost to the city or 
the county and, for a bond or note, ilo not materially 
and adversely affect the financial position of the 
A gency and the marketing of the bonds or notes at a 
reasonable interest cost to the Agency. 

(21) 'Project.'- A capital project, including equipment, for a 
water supply system, a wastewater collection system, a 
wastewater treatment works, or a combination of these. 

(22) 'Revenues.'-- All moneys received by the Agency, other 
than the proceeds received by the Agency from the sale of 
bonds or notes, in connection with providing financing to 
cities and counties, including: 

a. Payments of the principal of, the premium on, if any, 

and the interest on a loan obligation. 

bi Administrative charges. 

Ci Investment earnings on all revenues, funds, and other 
moneys of the Agency. 

(23) 'State.'- The State of North Carolina. 

(24) 'Wastewater collection system.'- Defined in G.S. 159G-3. 

(25) 'Wastewater treatment works.'- Defined in G.S. 159G-3. 

(26) 'Water supply system.'- Defined m G.S. 159G-3. 
" § 159H-3. Creation and membership of Municipal Agency. 

(a) A body politic and corporate is created to be known as the 'North 
Carolina Municipal Pooled Capital Projects Financing Agency.' It is a public 
a gency and an instrume nt ality of (he State for the i ^erformance of essential 
governmental and publu: functions. 

(b) The Agency is governed by a board of directors that consists of nine 
members. One of the members of the Board shall be the State Treasurer who 
shall serve ex officio. The State Treasurer shall be Chair of the Board. Two 
members shall be appointed by the Governor, three members shall be 
a ppointed by the General Assembly upon the recommendation of the Speaker 
of the House of Representatives in accordance with G.S. 120-121, and three 
members shall be appointed by the General Assembly upon the 



Page 6 Senate Bill 559 



GKNERAL ASSKMBLY OF NORTH CAROLINA SP:SSION 1989 



1 recommendation of the President Pro Tempore of the Senate in accordance 

2 with G.S. 120-121. The ai'ypointments made by the Governor and the 

3 recommendations made by the Speaker and the President Pro Tempore shall 

4 he made from a list of at least three nominees who may or may not be 

5 municipal officials for each position submitted by the League of Municipalities. 

6 The term of the initial appointments by the Governor shall begin on the 

7 date of appointment; one appointment shall expire on June 30, 1991, and one 

8 shall e.xpire on June 30, 1992, as designated by the Governor. The term of the 

9 initial appointments by the General Assembly shall begin on the date of 

10 appointment; one of the three appointments recommended by the Speaker and 

1 1 one of the three recommended by the President Pro Tempore shall expire on 

12 June 30, 1991, one shall expire on June 30, 1992, and one shall expire on June 

13 30, 1993, as designated by the General Assembly. Appointments made to 

14 succeed the initial appointments shall be for two-year terms beginning on July 

15 L 

16 (c) All members of the Board shall remain in office until their successors 

17 are appointed and qualify. A vacancy in an appomtment made by the 
1(S Governor shall be filled by the Governor for the remainder of the unexpired 

19 term. A vacancy in an appointment made by the General A.s.sembly shall be 

20 filled in accordance with G.S. 120-122. A person appointed to fill a vacancy 

21 must qualify in the same manner as a person appointed for a full term. 

22 (d) A member of the Board may be removed from office for misfeasance, 

23 malfeasance, nonfeasance, or improper influence under G.S. 143B- 13(c). 

24 (e) The Board may adopt bylaws governing the call of meetings, quorums, 

25 voting procedures, the keeping of records, and other organizational and 

26 administrative matters. A quorum may not be less than five members. 

27 (f) A vacancy in the membership of the Board does not affect the right of a 

28 quorum to exercise all rights and to perform all duties of the Board and the 

29 A gency. 

30 (g) No part of the revenues or assets of the Agency may inure to the benefit 

31 of or be distributable to its members or officers or other private persons, 

32 except for per diem and allowances. The members of the Board shall receive 

33 no .salary for their services but may receive per diem and allowances in 

34 accordance with G.S. 138-5. 

35 (h) The Agency shall be contained within the Department of State 

36 Treasurer as if it had been transferred to that Department by a Type II transfer 

37 as defined in G.S. l43A-6(b). 

38 "§ 159H-4. Creation and membership of County Agency. 

39 (a) A body politic and corporate is created to be known as the 'North 

40 Carolina County Pooled Capital Projects Financing Agency.' It is a public 

41 agency and an instrumentality of the State for the performance of essential 

42 governmental and public functions. 

43 (b) The Agency is governed by a board of directors that consists of nine 

44 members. One of the members of the Board shall be the State Treasurer who 



Senate Bill 559 Page 7 

¥/ 



GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 1989 



1 sIkiII serve ex otticio. Tlie State Treasurer shall he Chair ol the Board. Two 

2 members shall he appointed hy the Governor, three members shall be 

3 a ppointed by the General Assembly upon the recommendation oi the Speaker 

4 of the House ot Representatives in accordance whh G.S. 120-121, and three 

5 members shall be appointed by the General Assembly upon the 

6 recommendation ol the President Pro Tempore ol" the Senate in accordance 

7 with G.S. 120-121. The appointments made by the Governor and the 
S recommendations made by the Speaker and the President Pro Tempore shall 
9 be made trom a list of at least three nominees who may or may not be county 

10 officials lor each |')osition submitted hy the Association of County 
1 1 Commissioners. 

12 The term of the initial appointments by the Governor shall begin on the date 

13 of appointment; one appointment shall expire on June 30, 1991, and one shall 

14 expire on June 30, 1992, as designated by the Governor. The term of the 

15 initial appointments by the General Assembly shall begin on the date of 

16 appointment: one of the three appointments recommended by the Speaker and 

17 one of the three recommended by the President Pro Tempore shall expire on 
IH June 30, 1991, one shall expire on June 30, 1992, and one shall expire on June 

19 30, 1993, as designated by the General Assembly. Appointments made to 

20 succeed the initial appointments shall be for two-year terms beginning on July 

21 L 

22 (c) All members of the Board shall remain in office until their successors 

23 are appointed and qualify. A vacancy in an appointment made by the 

24 Governor shall be filled by the Governor for the remainder of the unexpired 

25 term. A vacancy in an appointment made by the General Assembly shall be 

26 filled in accordance with G.S. 120-122. A person appointed to fill a vacancy 

27 must qualify in the same manner as a person appointed for a full term. 

28 (d) A member of the Board may be removed from office for misfeasance. 

29 malfeasance, nonfeasance, or improper influence under G.S. 143B- 13(c). 

30 (e) The Board may adopt bylaws governing the call of meetings, quorums, 

31 voting procedures, the keeping of records, and other organizational and 

32 administrative matters. A quorum may not be less than five members. 

33 (f) A vacancy in the membership of the Board does not affect the right of a 

34 quorum to exerci.se all rights and to perform all duties of the Board and the 

35 Agency. 

36 ( g) No part of the reve r, ues or assets of the Agency may inure to the benefit 

37 of or be distributable io its members or officers or other private persons, 

38 except for per diem and allowances. The members of the Board shall receive 

39 no salary for their services but may receive per diem and allowances in 

40 accordance with G.S. 138-5. 

41 (h) The Agency shall be contained within the Department of State 

42 Treasurer as if it had been transferred to that Department by a Type II transfer 

43 as defined in G.S. 143A-6(b). 

44 "§ 159H-5. Genera] powers of Agency. 



Page 8 Senate Bill 559 



GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 1989 



1 An Agency may: 

2 (JQ Make and execute contracts and agiccments necessary or 

3 incidental to the exercise ot its powers and duties under this 

4 Chapter, including agreements in respect ot" loan obhgations, 

5 agreements with issuers of credit facilities, liquidity facilities, 

6 bond insurance policies, and reserve fund insurance policies, 

7 investment contracts, and interest-rate agreements. 

H (2} Contract with a city or county with respect to any of the 

9 matters covered hy this Chapter. 

10 (3} Establish a debt service reserve fund and other reserve funds 

1 1 and borrow money and purchase insurance and investment 

12 contracts to establish, maintain, or increase the funds. 

13 (4} Agree to apftly and assign any money, loan obligations, and 

14 other revenues. 

15 i5)_ Borrow money to carry out and effect its corporate purposes 

16 and issue in evidence thereof bonds, notes, or bond 

17 anticipation notes lor the purpose of providing funds 

18 therefor, including funds for the financing and refinancing of 

19 the cost of projects and the payment or advance on behalf of 

20 a city or a county of the cost of the project. 

21 (6} Apply any payments or prepayments of the principal of or 

22 interest on a loan obligation, to the extent the payment or 

23 prepayment is not necessary to pay debt service on the 

24 Agency's bonds or notes, to the financing of the cost of 

25 projects for cities and counties to the same extent as 

26 provided in G.S. 159H-6. 

27 (7) Fix, revise, charge, apportion, and collect or cause to be 

28 fixed, revised, charged, apportioned, and collected 

29 , administrative charges among cities and counties 

30 participating in a program of the Agency. 

31 (8) Employ an administrator to administer the operations of the 

32 Agency, which in the case of the Municipal Agency may be 

33 the League of Municipalities and in the case of the County 

34 Agency may be the Association of County Commissioners. 

35 insurance consultants, fiscal and financial consultants. 

36 underwriters, attorneys, trustees, remarketing agents, and 

37 other consultants, agents, and employees as may be required 

38 in the judgment of the Agency and may fix and pay their 

39 • compensation from funds available to the Agency for that 

40 purpose. 

41 (9) Conduct or cause to be conducted studies and surveys about 

42 the water and wastewater capital needs of cities and 

43 counties. 



Senate Bill 559 Paee 9 



GENKRAI. ASSKMBLY OF NORTH CAROLINA SESSION 1989 



1 (10) Apply for, acce|)t, receive, agree to, and comply with the 

2 terms and conditions goveining grants, loans, advances, 

3 contributions, gilts, and other aid from any source 

4 whatsoever, including federal and State sources. 

5 (11) Sue and he sued in its own name and plead and be 

6 impleaded. 

7 (12) Adopt an official seal and alter the seal at its pleasure. 

<S ( 1 3) Establish and revise from time to time minimum standards 

9 and criteria for determining the eligibility of cities and 

10 counties to obtcun financing and make loans as provided in 

1 1 this Chapter. 

12 ( 14) Deposit, disburse, and invest, pursuant to the provisions of 

13 this Chapter, the proceeds of any fund established in 

14 accordance with this Chapter and determine the application 

15 of the proceeds of any earnings on the fund. 

16 (13) Do all other things necessary or convenient to carry out the 

17 purposes of this Chapter. 

1 (S "§ 159H-6. Power of Agency to enter into loan obligation. 

19 (a) An Agency may enter into one or more loan obligations with a city or a 

20 county and may acquire a loan obligation from a city or county to finance or 

21 refinance the cost of the acquisition of a project. 

22 (b) A loan obligation entered into by an Agency with a city or a county 

23 shall l>e in writing and shall set forth the terms and conditions agreed to 

24 between the Agency and the city or the county for the Agency's loan to the 

25 city or county, including: 

26 (U The payment provisions and prepayment provisions, if any, 

27 required to: 

28 a^ Enable the Agency to administer its programs. 

29 bi Pay when due the principal of, the premium on, if 

30 any, and the interest on bonds, notes, or other 

31 obligations of the Agency incurred to make the loan 

32 or acquire the loan obligation. 

33 Ci Pay or reimburse the Agency for the city's or county's 

34 administrative charges and the cost of establishing 

35 and maintaining any reserves. 

36 (2} The security for payment by the city or county of the loan 

37 obligr uicn. 

38 (3) Other provisions and covenants the Board requires. 

39 (c) This Chapter does not affect the application of the provisions on 

40 competitive bidding for public contracts in Article 8 of Chapter 143 of the 

41 General Statutes or the application of Article 3 of Chapter 143 of the General 

42 Statutes. 



43 "§ 159H-7. EUgibiJitv for obtaining financing . 



Page 10 ,. Senate Bill 559 



GKNERAI. ASSKMBLY OF NORTH CAROLINA SESSION 1989 



1 (a) In determining the eligibility of a city or county for financing or 

2 refinancing a project with a loan from the Agency, the Agency may consider: 

3 {1} The type and usefid life of and the need for the project. 

4 (2} The amount of financing or the cost of the project sought. 

5 {3} The credit rating, if any, of the city or county. 

6 {4} The future financing and capital needs of the city or county. 

7 {5} The availahility and cost to the city or county of other 
(S methods of financing. 

9 (6} The construction, dishursement, and management 

10 |')rocedures in effect in the city or county. 

1 1 (JX Other factors the Agency considers relevant in deciding 

12 whether to provide the financing. 

13 (h) As a condition of determining eligibility for participation in one or 

14 more financing programs of the Agency, the Agency may establish: 

15 (JJ Construction, disbursement, and accounting procedures and 

16 require a city or county to comply with the procedures. 

17 (2) Minimum credit ratings or criteria. 

18 (3} The minimum and maximum amount of the cost of a project 

19 tc^ be financed by the Agency. 

20 (4) The maximum term of a loan obligation, not to exceed 30 

21 years for any loan obligation and not to exceed 20 years 

22 unless the Agency finds that a term longer than 20 years but 

23 no more than 30 years is necessary. 

24 (5} Procedures the Agency may use when a city or county 

25 defaults on its obligations under a loan obligation. 

26 {6} Other procedures, conditions, and requirements the Agency 

27 finds necessary or desirable in establishing its programs. 

28 (c) Except to the extent that a city's or county's power is restricted by the 

29 terms of a loan obligation or other agreement l')etween the city or county and 

30 the Agency, this Chapter does not affect the ability of a city or a county to 

31 obtain financing or refinancing or to acquire projects from a source other than 

32 the Agency, to establish or continue its own financing or acquisition program, 

33 or to enter into any other financing program. 

34 "§ 159H-8. Power of cities and counties to enter into loan obligations. 

35 (a) A city or county determined by the Agency to be eligible for a loan 

36 from the Agency may L^orrow money from the Agency for the purpose of 

37 financing or refinancing the cost of acquisition by the city or county of a 

38 project. To borrow money from the Agency, the city or county shall enter into 

39 a loan obligation with the Agency that is approved by the city council or the 

40 county board of commissioners. Before a city or county enters into a loan 

41 obligation with the Agency, the city or county must hold a public hearing on 

42 the proposed obligation. Notice of the public hearing must be published at 

43 least 10 davs before the date set for the hearing. A loan obligation is binding 

44 from the date a city or county enters into the obligation. 



Senate Bill 559 Page 1 1 



GKNKRAL ASSKMBl.Y OF NORIH CAROLINA SESSION 1989 



1 (h) The obligation ot" a city or a county under a loan obligation shall be 

2 payable and otherwise secured as provided in G.S. 159H-9. 

3 (c) In connection with entering into a loan obligation, a city or a county 

4 may enter into a credit facility. The obligation ot a city or a county under a 

5 credit facility to repay any drawing under the facility may be made payable 

6 and otherwise .secured, to the extent applicable, as provided in G.S. 159H-9. 

7 (d) The Agency or a city or a county may propose an amendment to a loan 
(S obligation, including an amendment restructuring or otherwise relating tc^ the 
9 principal repayment schedule and the interest payment schedule set forth in 

10 the loan obligation. A proposed amendment must be: 

1 1 (JQ Consistent with the then existing financial condition of the 

12 city or the county and its ability to meet its obligations 

13 under the loan obligation. 

14 (2} Consistent with the then existing financial condition of the 

15 A gency and the administration of the Agency's duties and 

16 responsibilities. 

17 (e) A loan obligation and an amendment to a loan obligation must be 

18 submitted to the Local Government Commission for approval; a loan 

19 obligation or an amendment to a loan obligation is not effective unless it is 

20 ap|>roved by the Local Government Commission. In determining whether to 

21 approve a loan obligation or an amendment to a loan obligation, the Local 

22 Government Commission may consider the criteria set forth in G.S. 159-52 and 

23 159-86. The Local Government Commission shall approve a loan obligation 

24 or an amendment to a loan obligation if it finds that the loan obligation or 

25 amendment meets those criteria and conforms with the purposes of this 

26 Chapter. After considering a loan obligation or an amendment to a loan 

27 obligation, the Local Government Commission shall enter an order either 

28 approving or disapproving the obligation or amendment. An order of 

29 approval is not an approval of the legality of the obligation or amendment, if 

30 the Local Government Commission enters an order disapproving the 

31 obligation or amendment, the proceedings under this subsection shall be at an 

32 end. 

33 "§ I59H-9. Sources and security for payment of loan obligations. 

34 (a) Identification. The city council or the county board of commissioners, 

35 as appropriate, shall determine the source of funds for and the security for 

36 payment o\ a loan obliga ti on. The obligation of a city or a county with respect 

37 to the sources of funds inuhorized by subsections (c) and (d) of this section and 

38 the interest rate that applies to a loan obligation shall be specifically identified 

39 in the proceedings of the city council or the county board of commissioners 

40 authorizing the city or county to enter into a loan obligation. 

41 (b) Taxing Power. If under Article 4 of G.S. Chapter 159. the Local 

42 Government Bond Act, a bond order authorizing the issuance of bonds that 

43 pledge the faith and credit of a city or a county for the purpose of providing 

44 funds for one or more purpo.ses that constitute a project has taken effect, then. 



Page 12 Senate Bill 559 



GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 1989 



1 in lieu of issuing any bonds authorized but not sold and delivered pursuant to 

2 the order, or any bond anticipation note in anticipation ot the bonds, the city 

3 council or the county l')oard ot" commissioners may enter into a loan obligation 

4 and may pledge the faith and credit ot the city or the county, as appropriate, to 

5 secure its obligation to make the payments required under the loan obligation, 

6 or a under credit facility in support of the loan obligation, if the following 

7 conditions are met: 

8 (JJ The aggregate princi[)al amount due under the loan 

9 obligation does not exceed the aggregate amount of 

10 . ' authorized but unissued iwnds. or of any bond anticipation 

1 1 notes issued in anticipation of the bonds, under the bond 

12 order. 

13 (2} The project to be acquired is a purpose for which proceeds 

14 of the bonds or bond anticipation notes may be expended 

15 under the bond order. 

16 (c) Agreement To Apply Funds. A city or county may agree to apply to 

17 the payment of a loan obligation any available source of funds of the city or 

18 county. To the extent the generation of funds is within the power of the city 

19 or county, the city or county may enter into covenants to take action in order 

20 to generate the funds. An agreement to apply funds or a covenant to take 

21 action to generate funds may not pledge the city's or county's taxing power. 

22 (d) Continuing Contract. A city or county may enter into a loan obligation 

23 that constitutes a continuing contract and provides for the making of payments 

24 in ensuing fiscal years from any available source of funds, including the 

25 proceeds of taxes realized from the exercise of the city's or county's power of 

26 taxation, appropriated by the city or county in its annual budget, if: 

27 (JQ The city council or county board of commissioners 

28 appropriates sufficient funds to pay any amount to be paid 

29 ' under the loan obligation in the fiscal year in which the 

30 contract is entered into and the appropriation is made 

31 before the city or county enters into the loan obligation. 

32 (2) The taxing power of the city or county is not pledged to 

33 secure any payments to be made pursuant to the loan 

34 obligation and the Agency has agreed that it has no right to 

35 re quire the exercise of a city's or a county's power of 

36 taxation to secure a loan obligation. 

37 A loan obligation that constitutes a continuing contract may include a 

38 provision automatically cancelling the loan obligation in the event the city 

39 council or county board of commissioners decides not to appropriate funds to 

40 make payment in an ensuing fiscal year, in which event the obligation of the 

41 city or county to make any future payments in any ensuing fiscal year ends. 

42 No deficiency judgment requiring the exercise of the city's or county's power 

43 of taxation may be entered against the city or county in any action for breach 

44 of a contractual obligation authorized by this subsection. 



Senate Bill 559 ^ Page 13 



Gt:NKKAL ASSKMBLY OF NORTH CAROLINA SESSION 1989 



1 (e) Lien. The sources of payment specitically icientit'icd hy a city or 

2 county and then held or received hy a city or a county, a fiduciary, or the 

3 A gency are immediately subject to the lien of the loan obligation without any 

4 physical delivery of the sources or any further action. The lien is valid against 

5 all parties having claims of any kind in tort, contract, or otherwrse against a 

6 city or county without regard to whether the parties had notice of the lien. 

7 The proceedings, the loan obligation, or any other document or action by 
(S which the lien on a source of payment is created nccO not be filed or recorded 
9 in any manner other than as provided in this Chapter. 

10 (f) Security Interest. A loan obligation secured by a source of funds may 

1 I provide additional security by the granting o[' a security interest in the project 

12 acquired, including land and equipment, oi the granting of a security interest 

13 in real or personal property owned by the city or county. 

14 ( g) Interest Rate. The interest payable by a city or a county to the Agency 
\5 on a loan obligation may be at one or more fixed or variable rates as 
16 determined by the Local Government Commission with the approval of the 
1 7 city council or the county board of commissioners. Approval may be given as 
1(S the city coimcil or the county board of commissioners directs, such as by a 

19 certificate signed by a representative of the city or the county designated by the 

20 city council or the county board of commissioners. 

21 The Agency may determine that it is necessary that certain provisions in the 

22 A gency's bonds or notes be reflected, in similar terms, in loan obligations, so 

23 that if it is necessary to vary the interest rate or call the principal prior to 

24 maturity of certain of the Agency's bonds or notes, the Agency will have the 

25 power to effect a similar variation in interest rate or a similar call prior to 

26 maturity of certain loan obligations. Accordingly, in fixing the details of a loan 

27 obligation, the city council or the county board of commissioners may make a 

28 loan obligation: 

29 (JJ Payable from time to time on demand or tender for 

30 purchase by the Agency provided a credit facility supports 

31 the loan obligation, unless the city council or the county 

32 board of commissioners specifically determines that a credit 

33 facility is not required because the absence of a credit 

34 facility will not affect the city's or the county's ability to 

35 make payment on demand or tender and will not materially 

36 and ad ' ersely affect the financial position of the city or the 

37 cour or the ability of the city or county to enter into the 

38 loan obligation at a reasonable interest cost to the city or the 

39 county. 

40 (2) Additionally supported bv a credit facility. 

41 QX Subject to redemption or a mandatory tender for purchase 

42 by the city or county prior to maturity. 

43 (4} Bear interest at a rate or rates that vary, including variations 

44 permitted pursuant to a par formula. 



Page 14 Senate Bill 559 



GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 1989 



1 (h) Substitution and Acceleration. A loan obligation may not include a 

2 nonsubstitution clause that restricts the right of a city or county to replace or 

3 provide a substitute for a project linanced pursuant to the loan obligation. A 

4 loan obligation may provide tor an acceleration of the repayment schedule 

5 under the obligation. 

6 (i) Default. If a city or county defaults on a loan obligation, the Agency 

7 may apply any reimbursement, distribution, or allotment of State funds to 

8 which the city or county is entitled toward payment of the loan obligation. 

9 "§ 159H-10. Credit of State and local governments not pledged. 

10 Bonds or notes issued by an Agency under this Chapter may not be secured 

1 1 by a pledge of the faith and credit of the State or of any political subdivision of 

12 the State nor be considered to create an indebtedness of the State or of a 

13 political subdivision of the State requiring voter approval. Bonds and notes 

14 issued by an agency shall be payable solely from Agency revenues and other 

15 funds provided for payment of the bonds and notes. Each bond or note issued 

16 under this Chapter by an Agency must state on its face that the Agency is 

17 obligated to pay the bond or note or the interest or the premium on the bond 
IS or note only from Agency revenues and other funds pledged to pay the bond 

19 or note and that neither the faith and credit nor the taxing power of the State 

20 or of any political subdivision o( the State is pledged as security for the 

21 payment of the principal of or the interest or premium on the bond or note. 

22 Expenses incurred by the Agency in carrying out the provisions of this 

23 Chapter shall be payable from revenues and other funds provided pursuant to, 

24 or available for use under, this Chapter. The Agency may not incur a liability 

25 beyond the extent to which moneys have been provided to pay for the liability. 

26 § 159H-1L Bonds and notes. 

27 (a) The Agency may provide for the issuance, at one time or from time to 

28 time, of bonds or notes, including bond anticipation notes and renewal notes, 

29 of the Agency to carry out its corporate purposes. The principal of and 

30 interest on the bonds or notes shall be payable solely from funds provided 

31 under this Chapter for their payment. A bond anticipation note may be made 

32 payable from the proceeds of l->onds or renewal notes or, in the event bond or 

33 renewal note proceeds are not available, from any available Agency revenues 

34 or other funds provided for payment of the note. Bonds and notes may also be 

35 paid from the proceeds of any credit facility. 

36 The bonds and notes of each issue shall be dated and may be made 

37 redeemable prior to maturity at the option of the Agency or otherwise, at a 

38 price or prices, on a date or dates, and upon the terms and conditions 

39 determined bv the Agency. The bonds or notes may also be made payable 

40 from time to time on demand or tender for purchase by the owner upon terms 

41 and conditions determined by the Agency. 

42 Bonds or notes shall bear interest at a rate or rates, including variable rates, 

43 as determined bv the Local Government Commission with the approval of the 

44 Agency. 



Senate Bill 559 Page 15 



GKNKRAL ASSEMBLY OF NORTH CAROLINA SESSION 1989 



1 (h) In fixing the details ol bonds or notes, the Agency may proviJe that the 

2 bonds oi notes may: 

3 (JLi Be payable I'lom time to time on demand or tender for 

4 purchase by the owner of the bond or note [)rovided a credit 

5 facility supports the bond or note, unless the Local 

6 Government Commission specifically determines that a 

7 credit facility is not required because the absence of a credit 

8 facility will not materially and adversely affect the financial 

9 position of the Agency and the marketing of the bonds or 

10 notes at a reasonable interest cost to the Agency. 

1 1 QX Be additionally supported by a credit facility. 

12 Q) Be subject to redemption or a mandatory tender for 

13 purchase prior to matuiity. 

14 {_4) Bear interest at a rate or rates that vary, including variations 

15 permitted pursuant to a par formula. 

16 (5) Be made the subject of a remarketing agreement whereby an 

17 attempt is made to remarket the bonds or notes to new 

18 purchasers prior to their presentment for payment to the 

19 provider of the credit facility or to the State. 

20 (c) Notes shall mature at a time or times determined by the Agency, and 

21 bonds shall mature at a time or times determined by the Agency, not to exceed 

22 40 years. The Agency shall determine the form and manner of execution of 

23 bonds or notes, including any interest coupons to be attached the bonds or 

24 notes, and shall fix the denomination or denominations and the place or places 

25 of payment of principal and interest. Payment may be made at any bank or 

26 trust company inside or outside the United States. 

27 In case an officer whose signature or a facsimile of whose signature appears 

28 on a bond, note, or coupon ceases to be the officer before the bond, note, or 

29 coupon is delivered, the signature or facsimile is nevertheless valid and has the 

30 same effect as if the officer had remained in office until the delivery. A bond. 

31 note, or coupon may bear the signature or facsimile signature of a person who 

32 will be the proper officer to sign the bond, note, or coupon when it is executed 

33 but is not the officer on the date of the bond, note, or coupon. 

34 The Agency may provide for the authentication of bonds or notes by a 

35 trustee or other authenticating agent. Bonds or notes may be issued as 

3 6 certificated or uncertific ■' ted obligations, or both, and in coupon or in 

37 re gistered form, or bot' ' . ..s the Agency determines. The Agency may provide 

38 for the registration of any coupon bonds or notes as to principal alone and also 

39 as to both principal and interest, for the reconversion into coupon bonds or 

40 notes of any bonds or notes registered as to both principal and interest, for the 

41 interchange of registered and coupon bonds or notes, and for a system for 

42 re gistration determined by the Agency. 

43 (d) An Agency may not issue bonds or notes under this Chapter unless the 

44 Local Government Commission approves the issuance of the bonds or notes 



Page 16 Senate Bill 559 



GKNKRAL ASSKMBI.Y OF NORTH CAROLINA SESSION 1989 



1 and, with the approval of the Agency, sells the bonds or notes. The Agency 

2 shall file with the Secretary of the Local Government Commission an 

3 application requesting approval of the issuance of bonds or notes. An 

4 application must contain the information and include the documents 

5 concerning the proposed financing that the Secretary of the Local Government 

6 Commission re(|uires. 

7 In determming whether to approve a proposed bond or note issue, the Local 
(S Government Commission may consider the criteria set forth in G.S. 159-52 and 
9 G.S. 159-(S6 and the effect of the pro{->osed financing upon any scheduled or 

10 proposed sale of obligations by the State, a State agency or department, or a 

1 1 unit of local government in the State. The Local Government Commission 

12 shall approve the issuance of bonds or notes if it finds that the proposed 

13 financing satisfies those criteria and conforms with the purposes of this 

14 Chapter. 

15 The Local Government Commission may sell bonds or notes approved by it 

16 when the Agency makes a written request to the Local Government 

17 Commission to sell the bonds or notes and the Agency approves the sale. The 

18 Local Government Commission may sell bonds or notes in the manner, either 

19 at public or private sale, and for the price or prices it finds to be in the best 

20 interest of the Agency and to conform with the purposes of this Chapter. 

21 (e) The proceeds of bonds or notes may be used only for the purposes for 

22 which the bonds or notes were issued and shall be disbursed in the manner 

23 and under the restrictions, if any, set by the Agency in the resolution 

24 authorizing the issuance of the bonds or notes or in a trust agreement securing 

25 the bonds or notes. 

26 (f) Before preparing definitive bonds, the Agency may issue interim receipts 

27 or temporary bonds, with or without coupons, exchangeable for definitive 

28 bonds when the bonds have been executed and are available for delivery. The 

29 A gency may provide for the replacement of bonds or notes that become torn. 

30 destroyed, or lost. 

31 (g) Approval by an entity is not required for the issuance of bonds or notes 

32 under this Chapter unless this Chapter sets out the requirement. No action not 

33 required by this Chapter, a resolution authorizing the issuance of bonds or 

34 notes under this Chapter, or a trust agreement securing bonds or notes issued 

35 under this Chapter is necessary to issue bonds or notes under this Chapter. 

36 "§ 159H-12. Trust agreement or resolution securing Agency bonds or notes. 

37 (a) The Agency may secure bonds and notes issued under this Chapter by a 

38 trust agreement by and between the Agency and a corporate trustee or by a 

39 resolution providing for the appointment of a corporate trustee. A corporate 

40 tru.stee may be located inside or outside the State and may be a trust company 

41 or a bank that has the powers of a trust company. A bank or trust company 

42 may act as depositary of the proceeds of bonds, notes, revenues, assets, or other 

43 money of the Agency and to furnish indemnifying bonds or pledge securities as 

44 required by the Agency. 



Senate Bill 559 . Page 17 



GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 1989 



1 A trust agreement or resolution may set out the rights and remedies of the 

2 owners oj honds or notes and of any trustee and may restrict the individual 

3 ri ghts of action by an owner. A trust agreement or resolution may contain 

4 other provisions the Agency considers reasonable and proper for the security 

5 of the owners of the bonds or notes. 

6 A trust agreement or resolution may pledge or assign all or part of the 

7 revenues or assets of the Agency, including loan obligations, agreements or 
S commitments to enter into loan obligations, contracts, agreements, and other 
9 security or investment obligations, fees or charges made or received by the 

10 Agency, moneys received in payment of loans and interest thereon, and other 
I 1 moneys received or to be received by the Agency. Expenses incurred in 

12 carrying out the provisions of a trust agreement or resolution may be treated as 

13 a part of the cost of any project or as an administrative charge and may be 

14 paid from the revenues or assets pledged or assigned to the payment of the 

15 principal of and the interest on bonds and notes or from any other funds 

16 available to the Agency. 

17 (b) Exce[)t as provided in this subsection, all bonds and notes issued under 

18 this Chapter shall be equally and ratably secured by a pledge, charge, and lien 

19 upon the revenues or assets provided in the trust agreement or resolution. 

20 without priority by reason of number or dates of bonds or notes, execution, or 

21 delivery, in accordance with this Chapter and the trust agreement or 

22 resolution. The Agency may provide in the trust agreement or resolution that 

23 bonds or notes issued pursuant to the trust agreement or resolution shall be 

24 subordinated and junior in standing, with respect to the payment of principal 

25 and interest on the bonds or notes and the security for the bonds or notes, to 

26 any other bonds or notes. 

27 (c) The Agency may set the terms and conditions of loan obligations. 
2S including the repayment terms, so as to provide a fund that when combined 

29 with other available funds, such as investment income and the proceeds of 

30 administrative charges, is sufficient to: 

31 {JJ Pay the operating costs of the Agency. 

32 (2} Pay the principal of and the interest on all bonds and notes 

33 as they become due and payable. 

34 (3) Create and maintain any reserves required by the trust 

35 a greement or resolution securing the bonds or notes. 

36 (d) A pledge of any ;t" ets or revenues of the Agency is valid from the time 

37 the pledge is made. A ots or revenues pledged and thereafter received by the 

38 A gency are immediately subject to the lien of the pledge without any physical 

39 delivery or further action. The lien of a pledge is valid against all parties 

40 having claims of any kind in tort, contract, or otherwise against the Agency. 

41 re gardle.ss whether the parties had notice of the lien. The trust agreement or 

42 resolution by which a pledge is created or a loan obligation need not be filed 

43 or recorded except in the records of the Agency. 



Page 18 ^ Senate Bill 559 



GENKRAL ASSEMBLY OF NORTH CAROLINA SESSION 1989 



1 As long as any bonds or ne^tes issiied by the Agency are outstanding and 

2 iinpaicK the State may not limit or alter the right to set the terms and 

3 conditions of loan obligations so as to provide sufficient tunds for the items 

4 hsted in subsection (c) and to to fulfill the terms of any agreements made with 

5 the bondholders or noteholders that were vested in the Agency at the time the 

6 bonds or notes were issued. The State may not impair the rights and remedies 

7 of the bondholders or noteholders until the bonds or notes and all costs and 

8 expenses in connection with any action or proceedings by or on behalf of the 

9 bondholders or noteholders are fully paid, met, and discharged. 

10 "^ 159H-13. Moneys received by Agency to be held in trust. 

1 1 Notwithstanding any other provisions of law, all moneys, except 

12 administrative charges, received by an Agency, including payments made 

13 under a loan obligation, proceeds received from the sale or other disposition of 

14 a loan obligation, and proceeds received from the disposition a project, are 

15 trust funds to be held and applied solely as provided in this Chapter. The 

16 resolution authorizing the issuance of, or a trust agreement securing, bonds or 

17 notes may provide that moneys received by the Agency may be invested 

18 pending disbursement and that an officer with whom, or any bank or trust 

19 company with which, the moneys are deposited shall act as trustee of the 

20 moneys and hold and apply the moneys for the purposes of this Chapter, 

21 subject to the regulations as that this Chapter or the resolution or trust 

22 a greement provide. The moneys may be deposited and invested as provided in 

23 G.S. 159-30 and any deposit or investment authorized by that statute may be 

24 deposited or invested with any bank located inside or outside the State or the 

25 United States whose unsecured obligations are rated in either of the two 

26 highest rating categories by either Moody's Investors Service or Standard & 

27 Poor's Corporation. 

28 "§ 159H-14. Remedies. 

29 An owner of bonds, notes, or coupons issued under this Chapter and the 

30 trustee under a trust agreement securing or resolution authorizing the issuance 

31 of the bonds or notes may, to the extent permitted by the trust agreement or 

32 resolution, may protect and enforce any and all rights under the laws of the 

33 State or under the trust agreement or resolution, or under any other contract 

34 executed by the Agency pursuant to this Chapter and may enforce and compel 

35 the performance of all duties required by this Chapter or by the trust 

36 a greement or resolution by the Agency or by any officer of the Agency. 

37 "§ 159H-15. Status of bonds and notes under Uniform Commercial Code. 

38 Bonds, notes, and interest coupons issued under this Chapter are investment 

39 securities under Article 8 of G.S. Chapter 25, the Uniform Commercial Code. 

40 "§ 159H-16. Bonds and notes eligible for investment. 

41 Bonds and notes issued under this Chapter are securities in which the State, 

42 the political subdivisions of the State, insurance companies, trust companies, 

43 investment companies, banks, savings banks, savings and loan associations, 

44 credit unions, pension or retirement funds, other financial institutions engaged 



Senate Bill 559 Page 19 



GKNERAL ASSEMBLY OF NORTH CAROLINA SESSION 1989 



1 in husincss m the State, executors, administrators, trustees, and other 

2 fiduciaries may piopeiiy and legally invest funds, including capital in their 

3 control or helonging to them. Bonds or notes issued under this Chapter are 

4 securities that may properly and legally he deposited with and received by any 

5 officer or agency of the State or political subdivision of the State for any 

6 purpose for which the deposit of bonds, notes, or obligations of the State or 

7 any political subdivision is authorized by law. 
H § 159H-17. Refunding bonds and notes. 

9 (a) The Agency may issue bonds and notes for the purposes of refunding 

10 any bonds or notes issued pursuant to this Chapter, including the payment of 

1 1 any redemption premium on the bonds or notes and any interest accrued or to 

12 accrue to the date of redemption or maturity of the bonds or notes and, if 

13 considered advisable by the Agency, for any additional corporate purposes of 

14 the Agency. 

15 Refunding bonds or notes may hear interest at rates, including variable rates 
\h as authoii/ed in G.S. 159H-11, lower, the same as, or higher than and have 
17 maturities shorter than, the same as, or longer than the bonds or notes being 
IX refunded. The proceeds of refunding bonds or notes may be applied: 

1'^ iXX To the payment and retirement of the bonds or notes being 

20 refunded by direct application to their payment and 

21 retirement. 

22 (2) To the payment and retirement of the bonds or notes being 

23 refunded by the deposit in trust of the proceeds. 

24 {3} To the payment of any expenses incurred in connection the 

25 refunding. 

26 (4) For any other uses not inconsistent with the refunding. 

27 (b) Any money so held in trust may be invested in: 

28 {d} Direct obligations of the United States. 

29 £2) Obligations the principal of and the interest on which are 

30 guaranteed by the United States. 

31 (3} Evidences of ownershi|) of a proportionate interest in 

32 specified obligations described in (b)(1) and (b)(2) that are 

33 held in the capacity of custodian by a bank or trust company 

34 or ganized and existing under the laws of the United States. 

35 (4) Obligations of the State or political subdivisions of the 

36 State . k :al governments thereof, provision for the payment 

37 of t' principal of and interest on which obligations shall 

38 have been made by deposit with a trustee or escrow agent of 

39 obligations described in subdivisions (1), (2), or (3) aliove, 

40 the maturing principal of and interest on which, when due 

41 and payable, shall provide sufficient money with any other 

42 money held in trust for such purpose to pay the principal of, 

43 premium, if any, and interest on such obligations of the 

44 State or local governments thereof, and which are rated in 



Page 20 , Senate Bill 559 



GENfl<:RAI. ASSKMBLY OF NORTH CAROI.INA SESSION 1989 



1 the highest category by Stanclaid & Poor's Corporation and 

2 Moody's Investors Service , 

3 (5) ObUgations of the State or local governments thereof, the 

4 principal of and interest on which, when due and payable, 

5 have been insured by a bond insurance company which is 

6 rated in the highest category l^y Standard & Poor's 

7 Corporation and Moody's Investors Service, 

8 (6) Full faith and credit obligations of the State or local 

9 governments thereof which are rated in the highest category 

10 by Standard & Poor's Corporation and Moody's Investors 

1 1 - Service, and 

12 (7} Any obligations or investments in which the State Treasurer 

13 is authorized, at the time of such investment, to invest funds 

14 of the State. 

15 The proceedings providing lor the issuance of any such refunding bonds or 

16 notes may limit the investments in which the proceeds of a particular 

17 refunding issue may be invested. 

18 Nothing in this section shall be construed as a limitation (i) on the duration 

19 of any deposit in trust for the retirement of bonds or notes being refunded but 

20 which shall not have matured and which shall not be then redeemable or, if 

21 then redeemable, shall not have been called for redemption or (ii) on the 

22 power to issue bonds or notes for the combined purpose of refunding bonds or 

23 notes and providing moneys for any corporate purpose as provided in this 

24 Chapter. 

25 "§ 159H-18. Annual audit. 

26 The Agency shall cause an audit of its books and accounts relating to its 

27 activities under this Chapter to be made at least once in each year by an 

28 independent certified public accountant or by the State Auditor. The cost of 

29 the audit may be paid from any available administrative charges or other 

30 available moneys of the Agency. 

31 "§ 159H-I9. Officers not Uablc. 

32 No member or officer of the Agency may be subject to any personal liability 

33 or accountability by reason of his execution of any bonds or notes or the 

34 issuance of bonds or notes. 

35 "§ 159H-20. Tax exemption. 

36 All of the bonds and notes authorized by this Chapter, any coupons related 

37 to the bonds and notes, and the transfer of the bonds, notes, and coupons, 

38 including any profit made on the transfer, are exempt from all State, county, 

39 and municipal taxation or assessment, direct or indirect, general or special. 

40 whether imposed for the purpose of general revenue or otherwise, excluding 

41 inheritance and gift taxes, and the interest on the bonds and notes shall not be 

42 subject to taxation as to income, nor shall the bonds, notes, and coupons be 

43 subject to taxation when constituting a part of the surplus of any bank, trust 

44 company, or other corporation. 



Senate Bill 559 Page 21 



GKNKRAL ASSKIVtBLY OF NORTH CAROLINA SESSION 1989 



1 !> 159H-21. Connict of interest. 

2 It" any member, ot'ticer or employee of the Agency shall he interested either 

3 dneccly or indirectly, or shall he an olTicer or employee ot" or have an 

4 ownership interest in any tirm or corj^oration. not including cities or counties 

5 interested directly or indirectly, in any contract with the Agency, such interest 

6 shall he disclosed to the Agency and shall he set forth in the minutes ot the 

7 Agency, and the member, officer or employee having such interest therein 
(S shall not participate on behalf of the Agency in the authorization of any such 
9 contract. Other provisions of law notwithstanding, failure to take any or all 

10 actions necessary to carry out the purposes of this section shall not affect the 
1 I validity of any bonds, notes or loan obligations issued pursuant to the 

12 provisions of this Chapter. 

13 "^ 159H-22. Alternative method. 

14 The foregoing sections of this Chapter shall be deemed to provide an 
1.5 additional and alternative method for the doing of the things authorized 

16 thereby and shall be regarded as supplemental and additional to powers 

17 conferred by other laws, and shall not be regarded as in derogation of any 

15 powers now existing. 

19 § 159H-23. Liberal construction. 

20 This Chapter, being necessary for the health and welfare of the people of 

21 the State, shall be liberally construed to effect its purposes. 

22 "§ 159H-24. Inconsistent laws inapplicable. 

23 To the extent this Chapter is inconsistent with part or all of any general or 

24 special laws, this Chapter controls." 

25 Sec. 2. G.S. 159- 148(b) reads as rewritten: 

26 "(b) This Article shall not apply to: 

27 (1) Contracts between a unit of local government and the State 

28 of North Carolina or the United States of America (or any 

29 agency of either) entered into as a condition to the making 

30 of grants or loans to the unit of local government. 

31 (2) Contracts for the purchase, lease, or lease with option to 

32 purchase o{ motor vehicles or voting machines. 

33 (3) Loan agreements entered into by a unit of local government 

34 pursuant to the North Carolina Solid Waste Management 

35 Loan Program, Chapter 1591 of the General Statutes. 

36 (4) Loa n o bligations entered into by a city or a county pursuant 

37 to t; North Carolina Munici[xd and County Poc^led Capital 

38 Projects Financing Act, Chapter 159H of the General 

39 Statutes. " 

40 Sec. 3. G.S. 105-2 13(a) reads as rewritten: 

41 "(a) The Secretary of Revenue shall keep a separate record by counties of the 

42 taxes collected under the provisions of this Article and shall, as soon as 

43 practicable after the close of each fiscal year, certify to the State Disbursing 

44 Officer and to the Slate Treasurer the amount of such taxes to be distributed 



Page 22 , Senate Bill 559 



GKNKRAL ASSEMBLY OF NORTH CAROLINA SESSION 1989 



1 to each county and municipality in the State. The State Disbursing OHicer 

2 shall thereupon issue a warrant on the State Treasurer to each county and 

3 municipality in the amount so certified. 

4 In determining the amount to be distributed, the Secretary shall deduct from 

5 the net amount of taxes collected under this Article, which is the total amount 

6 collected less refunds, the cost to the State for the preceding fiscal year to; 

7 (1) Collect and administer the taxes levied under this Article; 

8 (2) Perform the duties imposed upon the Department of 

9 Revenue by Article 15 of this Chapter; 

10 (3) Operate the Property Tax Commission; and 

11 (4) Operate a training program in property tax appraisal and 

12 assessment administration by the Institute of Government. 

13 The Secretary shall allocate the net amount of taxes collected under this 

14 Article, less the deductions enumerated above, to the counties according to the 

15 county in which the taxes were collected. The Secretary shall then increase the 

16 amount allocable to each county by a sum equal to forty percent (40%) of the 

17 amount of tax on accounts receivable allocated to the county on the basis of 

18 collections. The amounts so allocated to each county shall in turn be divided 

19 between the county and all municipalities therein in proportion to the total 

20 amount of ad valorem taxes levied by each during the fiscal year preceding 

21 such distribution. For the purpose of computing the distribution of the 

22 intangibles tax to any county and the municipalities located therein for any 

23 year with respect to which the property valuation of a public service company 

24 is the subject of an appeal pursuant to the provisions of the Machinery Act, or 

25 to applicable provisions of federal law, and the Department of Revenue is 

26 restrained by operation of law or by a court of competent jurisdiction from 

27 certifying such valuation to the county and municipalities therein, the 

28 Department shall use the last property valuation of such public service 

29 company which has been so certified in order to determine the ad valorem tax 

30 levies applicable to such public service company in the county and the 

31 municipalities therein. 

32 It shall be the duty of the chairman of the board of county commissioners 

33 of each county and the mayor of each municipality therein to report to the 

34 Secretary of Revenue such information as he may request for his guidance in 

35 making said allotments. In the event any county or municipality fails to make 

36 such report within the time prescribed, the Secretary of Revenue may 

37 disregard such defaulting unit in making said allotments. The amounts so 

38 allocated to each county and municipality shall be distributed and used by said 

39 county or municipality in proportion to other property tax levies made for the 

40 various funds and activities of the taxing unit receiving said allotment; 

41 provided, however, that a county or municipality may, without regard to any 

42 requirement as to proportionality, use amounts so allocated and amounts 

43 allocated under G.S. 105-213.1 and distributed to the county or municipality to 

44 secure its obligation under a loan agreement entered tfrte- into, or a special 



Senate Bill 559 Page 23 

^7 



GENERAL ASSEMBLY OF NORTH CAROLINA SESSION 1989 



1 ohligation hoiul or note issiiccl, pLusuant to the North Carolina Solid Waste 

2 Management Loan Program, Chapter 1591 of the General Statute :^ . Statutes or 

3 to secure its obligation under a loan obligation entered into pursuant to the 

4 North Carolina Municipal and County Pooled Capital Projects Financing Act, 

5 Chapter 159H ot the General Statutes. " 

6 Sec. 4. G.S. 1 SOB- 1(d)(1) reads as rewritten: 

7 "(d)(1) The following are s|-)ecifically exempted from the 

8 provisions of this Chapter: 

9 a. The Administrative Rules Review Commission; 
10 b. The Employment Security Commission; 

li c. The Industrial Commission; 

12 d. The Occupational Safety and Health Review Board in 

13 all actions that do not involve agricultural employers; 

14 tmti 

15 e. The Utilities Commission. Commission; and 

16 f. The North Carolina Municipal Pooled Capital 

17 Projects Financing Agency and the North Carolina 

18 County Pooled Capital Projects Financing Agency ." 

19 Sec. 5. G.S. 120-123 is amended by adding two new subdivisions 

20 to read: 

21 " (58) The North Carolina Municipal Pooled Capital Projects 

22 Financing A gency, as established by G.S. 159H-3. 

23 (59) The North Carolina County Pooled Capital Projects 

24 Financing Agency, as established by G.S. 159H-4. " 

25 Sec. 6. The provisions of this act are severable. If a provision of 

26 this act or the application of a provision of this act is held invalid, the 

27 invalidity does not affect other provisions that can be given effect without the 

28 invalid provision or application. 

29 Sec. 7. This act does not obligate the General Assembly to 

30 appropriate funds to implement its provisions. 

31 Sec. 8. This act is effective upon ratification. 



Page 24 Senate Bill 559 



Explanation of Proposal 3 

The proposed Committee Substitute for the Municipal Pooled Financing bill 
makes the following changes: 

1 . It limits financing under the bill to water and wastewater projects. Water 
and wastewater projects are defined to have the same meanings that are used in 
the Clean Water Revolving Loan and Grant Fund. 

2. It changes the maximum allowable term of a loan from 10 years to 30 
years and restricts the maximum term to 20 years absent compelling reasons. 

3. It adjusts the initial terms of members of the Municipal Agency and the 
County Agency to reflect the passage of time since the bill was drafted. 

4. It deletes the requirement that a loan obligation contain a non- 
appropriation clause and gives the Agency the discretion to require a non- 
appropriation clause. 

5. It allows a city or county to give a security interest in property that is not 
acquired or constructed with funds loaned by the Agency. 

6. It deletes references to G.S. 147-69. 1 made unnecessary by the amendment 
of G.S. 159-30 in the 1989 Session. 

7. It creates an exception to the general requirement that intangible tax 
revenue be used in proportion to other tax revenue for intangible tax revenue 
used to secure special obligation bonds issued under the Solid Waste 
Management Loan Program. 

8. It requires a city or county to hold a public hearing before obtaining a loan 
from the Agency. 

9. It makes various stylistic changes to make the bill easier to read and 
eliminate redundancies. 



^f 



PROPOSED LEGISLATION C 



COUNTY DISTRIBUTION OF NATURAL GAS 



/^ 



GENERAL ASSEMBLY OF NORTH CAROLrNA 

SESSION 1989 

D 

Infrastructure Study Commission Proposal 2: 90-LJ-I2 
THIS IS A DRAFT 



Short Title: County May Distribute Natural Gas. (Public) 

Sponsors: Infrastructure Study Commission 

Referred to: 



1 A BILL TO BE ENTITLED 

2 AN ACT GIVING COUNTIES THE SAME AUTHORITY THAT CITIES 

3 HAVE CONCERNING OPERATION OF A GAS PRODUCTION AND 

4 DISTRIBUTION SYSTEM. 

5 The General Assembly of North Carolina enacts: 

6 Section 1. G.S. 153A-274 reads as rewritten: 

7 "§ 153A-274. Public enterprise defined. 

8 As used in this Article, "public enterprise" includes: 

9 (1) Water supply and distribution systems, systems. 

10 (2) Sewage collection anti disposal systems of all types, 

11 including septic tank systems or other on-site collection or 

12 disposal facilities or systems, systems. 

13 (3) Solid waste collection and disposal systems and facilities, 

14 facilities. 

15 (4) Airports, Airports. 

16 (5) Off-street parking facilities, facilities. 

17 (6) Public transportation systems, systems. 

18 (7) Structural and natural stormwater and drainage systems of 

19 all types. 



^/ 



GKNKRAL ASSKMBI.Y OF NORTH CAROLINA SESSION 1989 



1 tS} Gus procliiction, storage, transmission, and distribution 

2 systems, including activities related to exploring for natural 

3 gas, whether inside or outside the State, and the purchase or 

4 lease of natural gas fields, natural gas reserves, and natural 

5 gas supplies. 

6 Sec. 2. G.S. 1 53A-275 reads as rewritten: 

7 "§ 153A-275. Authority to operate public entcrprLses. 

8 A county may acquire, lease as lessor or lessee, construct, establish, enlarge, 

9 improve, extend, maintain, own, operate, and contract for the operation of 

10 public enterprises in order to furnish services to the county and its citizens. A 

1 1 county may ac(|uire. construct, establish, enlarge, improve, maintain, own, and 

12 operate outside its borders any public enterprise. 

13 A county may by ordinance or resolution adopt adequate and reasonable 

14 rules aiul regulations to protect and regulate a public enterprise belonging to 

15 or operated by it. 

16 A county may operate the part of a gas system that involves activities related 

17 to exploring for natural gas or the purcha.se or lease of natural gas fields, 

18 natural gas reserves, or natural gas supplies in a partnership or a joint venture 

19 with a natural gas utility or a private enterprise. " 

20 Sec. 3. This act is effective upon ratification. 



Page 2 90-LJ-(2 



PROPOSED LEGISLATION D 



CLEAN WATER FUND APPROPRIATION 



^3 



GENERAI. ASSEMBLY OF NORTH CAROLINA 

SESSION 1989 

D 

Infrastructure Study Commission Proposal 1: 90-LJ-Il 
THIS IS A DRAFT 



Short Title: Clean Water Funds. (Public) 



Sponsors: Infrastructure Study Commission 



Referred to: 



1 A BILL TO BE ENTITLED 

2 AN ACT TO APPROPRIATE FUNDS FOR THE CLEAN WATER 

3 REVOLVING LOAN AND GRANT FUND. 

4 The General Assembly of North Carolina enacts: 

5 Section 1. There is appropriated from the General Fund to the 

6 Office of State Budget and Management the sum of eight million eight 

7 hundred thousand dollars ($8,800,000) for the 1990-91 fiscal year to be placed 

8 in the Clean Water Revolving Loan and Grant Fund and administered in 

9 accordance with G.S. Chapter 159G. 

10 Sec. 2. This act shall become effective July 1, 1990. 



4y- 



PROPOSED LEGISLATION E 



STORMWATER UTILITIES USER FEES 



^/ 



GENERA!. ASSKMKI.Y OF NORTH CAROLINA 

SESSION 1989 

D 

[nfrastiLicture Stutly Commission Proposal 4: 90-LJ-I4 
THIS IS A DRAFF 



Short Title: Clarify Power To Collect Stormwater Charge. (Public) 



Sponsors: Infrastructure Study Commission. 



Referred to: 



1 A BILL TO BE ENTITLED 

2 AN ACT CLARIFYING THE POWER OF CITIES AND COUNTIES TO 

3 COLLECT CHARGES FOR THE USE OF STORMWATER UTILITIES. 

4 The General Assembly of North Carolina enacts: 

5 Section 1. Article 16 of G.S. Chapter 160A is amended by adding a 

6 new section to read: 

7 " § 160A-314.1. Authority to fix and enforce rates for stormwater and drainage 

8 systems. 

9 (a) A city may establish and revise from time to time schedules of rates. 

10 fees, charges, and penalties for the acquisition, construction, operation, and 

1 1 maintenance of stormwater and drainage systems to serve real property. The 

12 incidence of stormwater run-off from property is considered use by the owner 

13 of the property of a stormwater and drainage system. Schedules of rates, fees. 

14 charges, and penalties may vary according to whether the property served is 

15 residential, commercial, or industrial property, the property's use, the size of 

16 the property, the area of impervious surfaces on the property, the quantity and 

17 quality of run-off from the property, the characteristics of the watershed into 

18 which stormwater from the property drains, and other factors that affect the 

19 stormwater and drainage system. Rates, fees, and charges imposed under this 

20 section may not exceed the city's cost of providing a stormwater and drainag e 

21 system. 

22 (b) Rates, fees, charges, and penalties for stormwater and drainage systems 

23 are joint and several legal obligations of the owner and of the property served 

24 and the tenants, if any. The amount imposed may be billed on the property 



U 



GENERAL ASSEIVfBLY OF NOKTH CAROLINA SESSION 1989 



1 tax bill, on the hill for water, sewer, or other enterprisory services, or 

2 separately, it the charges are hilled with those lor other services by the city, or 

3 by the [)rovicler ot those services under contract, the council may provide by 

4 ordinance the order in which partial payments are to be applied among the 

5 various services, to the extent allowed by bond covenants. 

6 Charges imposed under this section may be collected by the methods 

7 allowed tor collection ot" special assessments, other than by installments, and 
S shall bear interest at the same rate as a special assessment under Article 10 of 
9 this Chapter. The charges imposed become a lien when the city files a notice 

10 of lien in the office of the clerk of superior court. A notice of lien may not be 

1 1 filed until, the owner of the property has been given adequate notice and an 

12 opportunity to be heard as provided by ordinance. A lien under this section is 

13 next in priority after a special assessment lien. 

14 (c) G.S. 160A-314 does not apply to stormwater and drainage systems. This 

15 section does not repeal any [)art of a local act that is inconsistent with the 

16 section. " 

17 Sec. 2. Article 15 of G.S. Chapter 153A is amended by adding a 

18 new section to read: 

19 " >^ 153A-277.1. Authority to fix and enforce rates for stormwater and drainag e 

20 systems. 

21 (a) A county may establish and revise from time to time schedules of rates, 

22 fees, charges, and penalties for the acquisition, construction, operation, and 

23 maintenance of stormwater and drainage systems to serve real property. The 

24 incidence of stormwater run-off from property is considered use by the owner 

25 of the property of a stormwater and drainage system. Schedules of rates, fees, 

26 charges, and penalties may vary according to whether the property served is 

27 residential, commercial, or industrial property, the property's use, the size of 

28 the property, the area of impervious surfaces on the property, the quantity and 

29 quality of run-off from the property, the characteristics of the watershed into 

30 which stormwater from the property drains, and other factors that affect the 

31 stormwater and drainage system. Rates, fees, and charges imposed under this 

32 section may not exceed the county's cost of providing a stormwater and 

33 drainage system. 

34 (b) Rates, fees, charges, and penalties for stormwater and drainage systems 

35 are joint and several legal obligations of the owner of the property served and 

36 the tenants, if any. The char ges may be billed on the property tax bill, on the 

37 bill for water, sewer, or other enterprisory services, or separately. If the 

38 charges are billed with those for other services by the county, or by the 

39 provider of those services under contract, the board of commi.ssioners may 

40 provide by ordinance the order in which partial payments are to be applied 

41 among the various services, to the extent allowed by bond covenants. 

42 Charges impo.sed under this section may be collected by the methods 

43 allowed for collection of special assessments, other than by installments, and 

44 shall bear interest at the same rate as a special assessment under Article 9 of 



Page 2 ^ 90-LJ-I4 



GENKRAI. ASSEMBLY OF NORTH CAROLINA SESSION 1989 



1 this Chapter. The charges imposed hecome a lien when the county files a 

2 notice of lien in the office of the clerk oj superior court. A notice of lien may 

3 not be filed until the owner of the property has heen given adequate notice 

4 and an opportunity to be heard as provided by ordinance. A lien under this 

5 section is next in priority after a special assessment lien. 

6 (c) G.S. 153A-277 does not apply to stc:)rmwater and dramage systems. This 

7 section does not repeal any part of a local act that is inconsistent with the 

8 section. " 

9 Sec. 3. This act is effective u[K)n ratification. 



90-LJ-I4 Page 3 



ATTACHMENT A 



SENATE BILL 231, PART XI 



4? 



PART XI. STATE INFRASTRUCTURE AND LOCAL OUVtKiNjvini> i i^^^^^ 

STUDY COMMISSION 

Sec. ILL The Stale Infrastructure Needs and Financing Study 
Commission is created. The Commission shall: 

(1) Undertake a comprehensive review and analysis of the impact 
upon community service facilities of any neu development, 
construction, or installation that requires an\ permit, certification, 
or other governmental or quasi-governmental action allowing real 
property development and thai generates or tends to generate the 
need for new, expanded, or improved community service 
facilities. For purposes of this study, the term "community 
service facilities" means public facilities or improvements 
provided or established by a local government, including those 
provided or established by a local government jointly with other 
units of government or government agencies, whether local. State, 
or federal. The term includes utility facilities, transportation 
facilities, parks and recreation facilities, drainage and waier 
quality facilities, streets and sidewalks, open spaces, emergency 
and public safety facilities, sewer treatment facilities, and waste 
disposal facilities, but does not include public educational 
facilities such as schools, technical institutions, community 
colleges, and similar facilities; I 

(2) Undertake a comprehensive review and analysis of the various 
methods by which local governments both within North Carolina 
and within other states, as deemed appropriate by the 
Commission, fund the costs of expanded, new, or improved 
community service facilities; 

(3) Determine the most equitable and appropriate means for local 
governments to obtain funds to provide the new, expanded, or 
improved community service facilities needed because of the real 
properly development described in subdivision (1). The 
Commission shall, in making this determination, consider and 
analyze all practical, legal funding means which are, or which 
constitutionally could be, available to local governments; 

(4) Study State financial support of local government functions, 
including the following: 

a. A review of the extent to which the State provides financial 
support to or for the benefit of local governments; 

b. A review of the history of State policies that have influenced 
the State's support of local governments; 

c. Identification of local functions that should be subsidized by 
the State and determination of the extent of State support 
that would be appropriate; 

d. Recommendation of a viable, reasonable, and balanced State 
policy on Slate support of local government functions for 
the remainder of this ceniur>'; and 

e. Recommendations for further consideration by other 
commissions regarding sources of revenue and methods of 
generating revenue to meet the State's obligations for State 
funding or joint State-local funding of local government 
functions; 

(5) Study the need for additional local government revenue sources 
to supplement the propeny tax, local sales and use taxes, and 
other existing revenue sources; 

(6) Review recent changes in federal and State law that have reduced 
financial assistance to local governments, created needs for 
increased expenditures, and restricted the propeny tax base; 



nate Bill 231 ^^ 19 



as follows: 



(7) Undertake a comprehensive review of Siaie and local functional 
and funding responsibilities for services provided by State and 
local government units in North Carolina; 

(8) Make a comprehensive review of sources of funding local 
government units in North Carolina; 

(9) Study the system under which local units are dependent on the 
Slate for authorization of changes in local revenue sources; 

(10) Analyze the impact of federal legislation since 1981 and potential 
federal legislation on the fiscal outlook of the State and local 
government units; 

(11) Analyze the methods and formulas used in providing State 
financial assistance to local government units, including 
reimbursement for local tax changes; 

(12) Analyze the relationship between the State and local budget 
cycles; 

(13) Review the process by which local fiscal impact information is 
presented during the State budget process; and 

(14) Discuss the merits of establishing a permanent advisory 
commission comprised of State and local elected officials and 
private citizens that would continually review State and local 
fiscal relationships. 

Sec. 11.2. The Commission shall consist of 20 members to be appointed 



(1) Five members of the Senate appointed by the President Pro 
Tempore of the Senate, one of whom shall be designated cochair; 

(2) Five public members appointed by the President Pro Tempore of 
the Senate, one of whom shall be an elected city government 
official, one of whom shall be from the land use planning 
department or agency of a city, and two of whom shall be persons 
who are involved with or have had extensive experience in land 
development; 

(3) Five members of the House of Representatives appointed by the 
Speaker of the House of Representatives, one of whom shall be 
designated cochair; and 

(4) Five public members appointed by the Speaker of the House of 
Representatives, one of whom shall be an elected county 
government official, one of whom shall be from the land use 
planning department or agency of a county, and two of whom 
shall be persons who are involved with or who have had 
extensive experience m land development. 

Sec. 11.3. Members appointed to the Commission shall serve until the 
Commission makes its final report. Vacancies on the Commission shall be filled in 
the same manner as the original appointments were made. 

Sec. 11.4. Upon request of the Commission or its staff, all State 
departments and agencies and all local government departments and agencies shall 
furnish to the Commission or its staff any information in their possession or available 
to them. 

Sec. 11.5. The Commission may submit an interim repon of its findings 
and recommendations and the status of its review and analyses to the General 
Assembly on or before the first day of the 1990 Regular Session of the 1989 General 
Assembly. The Commission shall submit the final report of its findings and 
recommendations to the General Assembly on or before January 15, 1991. All 
reports shall be submitted by filing the report with the Speaker of the House of 



20 7/ Senate Bill 231 



Representatives and the President Pro Tempore of the Senate. The Commission shall 
terminate upon filing its final report. 

Sec. 11.6. The Commission shall meet upon the call of the cochairs. 

Sec. 11.7. Upon approval of the Legislative Services Commission, the 
Legislative Services Officer shall assign professional and clerical staff to assist in the 
work of the Commission. Clerical staff shall be furnished to the Commission through 
the Offices of House and Senate Supervisors of Clerks. The expenses of employment 
of the clerical staff shall be borne by the Commission. The Commission may meet in 
the Legislative Building or the Legislative Office Building upon the approval of the 
Legislative Services Commission. 

Sec. 11.8. Members of the Commission shall be paid per diem, 
subsistence, and travel allowances as follows: 

(1) Commission members who are also members of the General 
Assembly, at the rate established in G.S. 120-3.1. 

(2) Commission members who are officials or employees of the Slate 
or local government agencies, at the rate established in G.S. 
138-6. 

(3) All other Commission members at the rate established in G.S. 
138-5. 

Sec. 11.9. There is allocated from the funds appropriated to the General 
Assembly to the State Infrastructure and Local Government Needs Study 
Commission for its work the sum of 530,000 for the 1989-90 fiscal year and the sum 
of 525,000 for the 1990-91 fiscal year. 



U 



ATTACHMENT B 



LOCAL GOVERNMENT CAPITAL NEEDS SURVEY FORM 



7^ 



LOCAL GOVERNMENT CAPITAL NEEDS SURVEY 



L DRINKING WATER SUPPLY 

(1) What is the estimated cost for your unit of local government to bring its drinking 
water supply facilities into compliance with the 1986 amendments to the Safe 
Drinking Water Act? 

(2) What is the estimated cost of any planned expansion of your unit of local 
government's drinking water supply treatment facility and distribution system 
within the next 20 years? 

(3) What is the estimated cost of necessary improvements to your unit of local 
govenrment's drinking water supply facilities within the next 20 years due to 
deterioration and other similar factors? 



II. JAILS 

(4) During calendar year 1989, how many months was your unit of local government's 
jail filled over capacity? 

CONVENTIONAL JAIL ANNEX/SATELLITE JAIL 

less than 3 months 

3 - 6 months 

7 - 9 months 

10-12 months 

(5) What is the estimated cost of your unit of local government's need, if any, to 
construct or renovate its jail, based on the current jail standards? Indicate whether 
any needed jail construction or renovation includes construction or renovation of a 
courthouse, law enforcement center, or similar public safety facility that is or will 
be housed in the same structure as the jail? 

(6) What is the estimated cost of your unit of local government's projected capital 
needs for jails within the next 20 years? 

III. COURTHOUSES 

(7) What is the estimated cost of your unit of local government's immediate capital 
needs for courthouse facilities, excluding jails? 



THIS SURVEY WAS MAILED TO ALL COUNTIES AND MUNICIPALITIES 
IN FEBRUARY, 1989. RESULTS WILL BE PUBLISHED IN THE FINAL 
REPORT OF THE STATE INFRASTRUCTURE COMMISSION TO THE 1991 
GENERAL ASSEMBLY. 



99' 



ATTACHMENT C 



WATER AND SEWER ENTITIES 



7j^ 



^ttd^tfyU^y^i, 3(/^ 



GOVERNMENTAL UNITS AUTHORIZED TO PROVIDE WATER OR SEWER SERVICE 

1. City. G.S. 160A-311 through 160A-323. 

Water supply and distribution systems and sewage collection 
and disposal systems are two of the public enterprises in 
which cities may engage. A city is not required to provide 
water or sewer service, however. A city may finance water 
or sewer services by taxes, general obligation bonds, 
revenue bonds, fees, and assessments. 

2. County. 153A-274 through 153A-288. 

Water supply and distribution systems and sewage collection 
and disposal systems are two of the public enterprises in 
which counties may engage. A county is not required to 
provide water or sewer service, however. A county may 
finance water or sewer services by taxes, general obligation 
bonds, revenue bonds, fees, and assessments. 

3. Sanitary district. G.S. 130A-47 through 130A-85. 

A sanitary district may establish a water supply and 
distribution system, a sewage collection disposal system, or 
both. Creation of a sanitary district is initiated by 
petition of the property owners in the proposed district. 
If, after a public hearing, the board of county 
commissioners in which part or all of the proposed district 
is located decide that creation of the district is 
appropriate, the Commission for Health Services adopts a 
resolution creating the district. The district is governed 
by an elected 3-member or 5-member board. The district can 
meet its financial needs by levying taxes, issuing general 
obligation bonds, issuing revenue bonds, and assessing 
benefitted property. A sanitary district can cross county 
boundaries. 

There are approximately 32 sanitary districts, but not all 
of these are organized to provide water or sewer service. 



7^ 



4. Water and Sewer Authority. G.S. 162A-1 through 162A-19. 

A water and sewer authority can provide both water and sewer 
service. It is created by resolution of two or more 
political subdivisions after a public hearing. It is 
governed by an appointed board. It cannot levy taxes or 
issue general obligation bonds, but it can issue revenue 
bonds, charge fees, and assess benefitted property. An 
example is the Orange Water and Sewer Authority. 

5. Metropolitan Water District. G.S. 162A-31 through 162A-58. 
A metropolitan water district is initiated by petition to 
the board of county commissioners. Any two political 
subdivisions in a county or a political subdivision and an 
unincorporated area can petition for the creation of a 
metropolitan water district. The district is created by 
resolution of the Commission for Health Services after a 
public hearing. A district can levy taxes, issue general 
obligation bonds, issue revenue bonds, and charge fees. It 
is governed by an appointed board. It can provide both 
water and sewer service. 

There is 1 metropolitan water district in Harnett County. 

6. Metropolitan Sewerage District. G.S. 162A-64 through 162A- 
82. 

This district is similar to a metropolitan water district, 
except it is limited to sewer services and can span county 
lines. Also, it is created by resolution of the 
Environmental Management Commission rather than the 
Commission for Health Services. 

7. County service district. G.S. 153A-300 through 153A-310. 
Water supply and distribution systems and sewage disposal 
systems are two of the purposes for which a county can 
create a service district. The district is governed by the 



79 



board of commissioners of the county and is not a separate 
unit of government. The county can levy additional taxes in 
the service district to finance the increased level of 
service in the district. 

County Water and Sewer District. G.S. 162A-86 through 162A- 
92. 

A county water and sewer district is created by the board of 
county commissioners after a public hearing. It is a 
separate unit of government from the county but is governed 
by the board of county commissioners. The district can levy 
taxeS/ issue general obligation bonds, issue revenue bonds, 
and make assessments. 



fB' 



ATTACHMENT D 



JAIL CONSTRUCTION STANDARDS FOR NEW JAILS 



yf 



• % 



D 



10 NCAC 3J .3400-. 3426 are proposed to be adopted as follows: 

SECTION .3400 - STANDARDS FOR 
NEW JAIL DESIGN AND CONSTRUCTION 

.3401 APPLICABILITY - CONSTRUCTION 

(a) North Carolina State Building Code - Jails must meet the requirements 
of the North Carolina State Building Code in effect at the time of 
construction, additions, alterations or repairs (as defined by the Code). 

(b) New Jails - The construction standards established in Section .3400 
shall apply to all jail construction for which the final working drawings 
have been approved by the Branch after the effective date of this rule. 

(c) Existing Jails - Existing jails for which final working drawings have 
been approved prior to the effective date of these rules shall continue to 
be governed by the existing construction standards which are now in Section 
.3700 and the same standards shall apply to new jails which have had final 
working drawings approved by the Branch prior to the effective date of this 
rule. Existing jails or new jails which have had final working drawings 
approved by the Branch prior to the effective date of this rule may use the 
standards found in Section .3400 in lieu of those in .3700 if they choose. 

(d) Additions - The construction standards established in Section .3400 
shall apply to any construction that adds square footage to the building and 
for which the final working drawings are approved after the effective date 
of this rule. 

(e) Alterations or Repairs - When alterations or repairs are made to an 
existing jail building which effect its structural strength, exits, fire 
hazards, electrical systems, mechanical systems, or sanitary conditions, 
such alterations or repairs shall comply with the standards for new 
construction established in Section .3400. Unaltered portions of the 
building shall only be required to comply with the new construction 
standards indicated in Section .3400 under the circumstances specified in 
(f)-(h) below. 

(f ) Eixtensive Annual Alterations or Repairs - If, within any twelve month 
period, alterations or repairs costing in excess of fifty per cent (50%) of 
the then physical valxie of the building are made to an existing jail, such 
jail shall conform to the construction standards for new jails established 
in Section .3400. 

(g) Reconstruction After Damage - If an existing jail is damaged by fire 
or otherwise In excess of fifty per cent (50%) of the then physical value of 
the building at the time of damage, the jail shall be reconstructed in 
conformance with the construction standards for new jails established in 
Section .3400. 

(h) Physical Value - For the purpose of this rule, the physical value of 
the jail building shall be determined by the local building inspection 
department. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 

.3402 CONSULTATION AND TECHNICAL ASSISTANCE 

Consultation and technical assistance in planning a new jeiil shall be 
available through the Branch. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 



.3403 COMPLIANCE REVIEW AND APPROVAL 

(a) The governing body shall submit copies of the following to the 
Branch before it begins construction of a new jail and before it makes 
additions or alterations to an existing jail as defined by the North 
Carolina State Building Code: 

(1) three sets of schematic drawings and outline specifications; 

(2) three sets of preliminary working drawings or design development 
drawings and outline specifications; 

(3) three sets of completed final working drawings and specifications. 

(b) Upon receipt of the drawings and specifications at each stage, the 
Branch shall send one set each to the following for their review and 
approval: the Department of Insurance to insure compliance with the North 
Carolina State Building Code, and the Division of Environmental Health in 
the Department of Environment, Health and Natural Resources to insure 
compliance with the rules governing sanitation as codified in 10 N.C.A.C. 
lOA, Section .0100 and which are hereby adopted by reference pursuant to 
G.S. 150B-14(c). The Branch shall keep one set for its own review and 
approval to insure compliance with the minimum standards for the operation 
and construction of jails as contained in this Subchapter. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 

.3404 SPECIFIC CONSTRUCTION REQUIREMENTS 

(a) Jails that restrain inmates under lock and key within a building 
shall meet the requirements of the North Carolina State Building Code for 
"Institutional Occupancy - Restrained" and the additional security 
requirements imposed by Section .3420. 

(b) Jails that do not restrain inmates within a building by lock and key 
shall meet the requirements of the North Carolina State Building Code for 
"Residential Occupancy". 

(c) The construction materials in all jails shall be sufficient to 
provide the degree of security required for the area in which they are used. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 

.3405 CENTRAL CONTROL STATION 
In jails that have a central control station, the station shall: 

(1) be strategically located and equipped to regulate and monitor the 
movement of inmates and officers; 

(2) have a security vestibule at its entrance; 

(3) have direct two-way voice communication with all confinement units; 

(4) have direct two-way voice communication with all officers as needed 
to maintain safety aisd security; 

(5) be equipped with a release mechanism to open all confinement unit 
doors In an emergency; 

(6) have a toilet and sink. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 



-at* ^/ 



.3406 ELEVATORS 

Elevators that open into the jail shall be secure and shall be under the 
control and observation of officers. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 

.3407 INMATE PROCESSING AREA 

Each jail that performs a booking and release function shall have an 
inmate processing area that includes the following: 

(1) a separate inmate entrance; 

(2) a holding area with seating and access to a commode, lavatory, 
drinking fountain, and a shower; 

(3) a booking area that includes space for photographing and 
fingerprinting inmates and a telephone for making local and long-distance 
calls; and 

(4) a sobriety testing area. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 

.3408 VISITATION AREAS 

(a) Each jail shall provide an area for visitation. 

(b) If provided, noncontact visitation areas shall: 

(1) provide seating for the inmate and visitors; 

(2) provide a view panel with minimum dimensions of I'x 1' between 
the inmate and visitors; 

(3) provide a telephone communication system or equivalent audio link 
between the inmate and visitors; 

(4) permit visual £ind audible observation by officers; and 

(5) prevent the passage of contraband. 

(c) If provided, contact visitation areas shall: 

(1) provide seating for the inmate and visitors; and 

(2) permit visual and audible observation by officers. 

(d) Confidential attorney visitation areas shall: 

(1) permit contact between the Inmate and attorney; 

(2) be separate and distinct from the general visitation area; 

(3) provide seating and a writing table for the inmate and attorney; 

(4) permit only visual monitoring by the officers; 

(5) provide a way for the attorney to contact officers if needed; and 

(6) provide a minimum of 30 footcandles of artificial light. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 

.3409 MEDICAL AREA 
(a) Each jail shall have a medical area that provides the following: 

(1) a door that may be locked; 

(2) locked storage for equipment, supplies, medications and medical 
records; 

(3) an examination table and a handicapped-accessible sink, toilet and 
shower; 

(4) a work station for the doctor and nurse; 

(5) a telephone; and 



(6) direct voice contact with officers, 
(b) If a county or a region has more than one jail, it shall be required 
to provide only one medical area if that area meets the medical needs of the 
inmates in all of the jails. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 

.3410 OTHER AREAS 

(a) Each jail that does not contract for meals shall have a kitchen. If 
a county or a regional jail has more than one jail, it shall be required to 
provide only one kitchen if it meets the needs of the inmates in all of the 
jails. 

(b) Each jail that does not contract for laundry services shall have a 
laundry. If a county or a regional jail has more than one jail, it shall be 
required to provide only one laundry if it meets the needs of the inmates in 
all of the jaOs. 

(c) Each jail shall have an area specifically designated for physical 
exercise. 

(d) Each jail shall provide areas with shelves that meet its storage 
needs. Each jail shall provide a separate area for the secure storage of 
inmate personal property. 

(e) Each jail shall have a cleaning area that is equipped with a sink and 
that provides for the storage of cleaning supplies and equipment. 

(f) Each jail shall provide lockers for those inmates who are placed on 
work release. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 

.3411 ADMINISTRATIVE FACILITIES 

Each jail shall provide space at some location for the following 
administrative activities: 

(1) Secretarial support 

(2) Record storage 

(3) Training materials and resources 

(4) Mailboxes and bulletin boards for officers 

(5) In-service training 

(6) Office space for Jail supervisors 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 

.3412 FLOORS, CEILINGS, AND WALLS 

(a) All floors in c afinement units shall be sloped toward drains located 
outside of the ceL areas, and the drains shall be tamper-resistant if 
necessary for security. 

(b) All ceilings, walls, and floors in confinement units shall have a 
finished surface that is easily cleaned, nontoxic, and predominantly of 
light colors. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 



-a*- 



^^ 



.3413 SHOWERS AND PLUMBING FIXTURES 

(a) Each jail shall provide at least one shower for every eight inmates. 

(b) Showers shall have drains that prevent water from draining outside 
the shower, and the shower fixtures and drains shall be tamper- resistant if 
necessary for security. 

(c) Plumbing fixtures shall be made of stainless steel or other materials 
as necessary for security. 

(d) Drinking fountains shall be equipped with mouth guards. 

(e) All privacy partitions in showers and bathrooms shall be high enough 
to allow limited privacy for the inmates while still allowing adequate 
supervision by officers. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 



.3414 WINDOWS AND GLAZING 

(a) Windows and window framing, including glazing, shall be made of 
materials necessary to provide the degree of security required for the area 
in which they are used. 

(b) Glazing shall be diffused or obscured if it affords a view into 
confinement units from outside the jail. 

(c) View panels shall be made of materials necessary to provide the 
degree of security required for the area in which they are used, and those 
used for confinement units shall have a minimum area of 180 square inches 
and permit observation of the entire unit. 



History Note: 



Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 



.3415 DOORS, BUNKS AND LOCKS 

(a) Doors, locks and detention hardware shall be made of materials 
necessary to provide the degree of security required for the area in which 
they are used. 

(b) Doors to all confinement units shall have view panels. 

(c) Doors shall operate independently of each other, and the cell doors 
in a cellblock shall be capable of simultaneous release dtiring an emergency. 

(d) Doors and locks that are electronically controlled shall be equipped 
with manual override. 

(e) Food passes. If used, shall have large enough openings to permit the 
passage of a food tray. 

(f) Bunks shall have dimensions necessary to accommodate a standard 
detention mattress and they shall be securely anchored at least 15 inches 
above the floor. When one bimk is placed above another, the lower bunk 
shall be approximately 15 inches and the upper bunk approximately 50 inches 
above the floor. 

(g) Doors, locks, detention hardware and bunks shall be designed to 
inhibit their use for an attempted suicide. 



History Note: 



Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 



-a4^ 



^/ 



.3416 SAFETY EQUIPMENT 

In each jail the safety equipment, including" intercoms, fire 
exting"uishers, smoke detectors, and sprinkler heads, shall be 
tamper- resistant if necessary for security. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 

.3417 MECHANICAL SYSTEMS 

(a) Each jail shall have heating, ventilation, and air conditioning 
systems that are capable of maintaining temperatures in confinement units at 
a minimum of 68 deg^rees Fahrenheit during the heating season and a 
maximum of 85 degrees Fahrenheit during the cooling season. 

(b) The master controls for the system shall be located outside the 
confinement units and shall be accessible to officers during an emergency. 

(c) The ducts for the systems shall be designed to prevent the escape of 
inmates and the passage of contraband, and they shall be designed to inhibit 
their use for attempted suicide. 

(d) The ventilation system shall provide a minimum of ten cubic feet per 
minute of fresh or purified air for each inmate. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. Jime 1, 1990. 

.3418 PLUMBING SYSTEMS 

(a) Each jail shall have a plumbing system that complies with the 
Commission for Health Services Rule 10 N.C.A.C. lOA and the North 
Carolina State Plumbing Code, both of which are hereby adopted by 
reference pursuant to G.S. 150B-14(c). 

(b) Each jail shall have a hot water supply for lavatories and showers 
designed to meet the usual needs of the number of inmates confined in the 
Jail. 

(c) The master control valves for the plumbing system shall be located 
outside the confinement units and shall be accessible to officers during an 
emergency. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 

.3419 ELECTRICAL SYSTEMS 

(a) Each jail shall have an electrical system that provides artificial 
lighting in the confinement units of at least 30 footcandles and that can be 
reduced during sleepl;,; hours. 

(b) Artificial ligh.aig in the corridors shall be at least 20 footcandles. 

(c) Lighting fixtures shall be made of materials necessary to provide the 
degree of security required for the area in which they are used. 

(d) Each jail shall provide electrical and antenna or cable connections 
for a television in its dayroom areas. 

(e) The master controls and circuit breakers shall be located outside the 
confinement units and shall be accessible to officers during an emergency. 

(f) Each jail shall have an auxiliary emergency power supply for each 
electrical system. 



-*fr^ 



^^ 



History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 

.3420 ADDITIONAL SECURITY REQUIREMENTS FOR "INSTITUTIONAL 
OCCUPANCY - RESTRAINED" JAILS 

Each jail that is required to meet the "Institutional Occupancy - 
Restrained" requirements of the North CaroHna State Building Code shall 
also meet the following security requirements: 

(1) Each jail shaU have a separate entrance for inmates, and all 
entrances to the jail shall be controlled and visually and audibly monitored. 

(2) Each jail shall have security perimeter walls that are provided with 
a security vestibule, saUy port, security window, security door, or other 
security device at each wall opening". 

(3) Clothing or towel hooks shall not be used. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 

.3421 CONFINEMENT UNITS 

The governing body shall decide what confinement unit or combination of 
confinement xmits it will include in its jail: single segregation cells, 
single cells, multiple occupancy cells, or dormitories. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. Jxme 1, 1990. 

.3422 STANDARDS FOR SINGLE SEGREGATION CELLS 
Each single cell used for segregation shall have: 

(1) a shower or access to a shower; 

(2) a telephone jack or other telephone arrangement provided within the 
cell; 

(3) a food pass; 

(4) a minimum floor space of 70 square feet, a minimum floor dimension of 
7 feet, a toilet, a sink, a drinking fountain and a security mirror. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 

.3423 STANDARDS FOR SINGLE CELLS 
Each single cell shall have: 

(1) a minimum floor space of 50 square feet; 

(2) a minimum floor dimension of 7 feet; 

(3) a toilet, a sink, a drinking fountain and a security mirror; and 

(4) access to a dayroom. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 

.3424 STANDARDS FOR MULTIPLE OCCUPANCY CELLS 

Each multiple occupancy cell shall house no more than four inmates and 
shall have: 

(1) a minimum floor space of 50 square feet for the first inmate and 35 
square feet of floor space for each additional inmate; 

(2) a minimum floor dimension of 7 feet; 



(3) a toDet, a sink, a drinking" fountain and a security mirror; and 

(4) access to a dayroom. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 

.3425 STANDARDS FOR DAYROOMS 
Each dayroom shall have: 

(1) a security vestibule at its entrance; 

(2) a minimum floor space of 105 square feet or 35 square feet per 
inmate, whichever is greater; 

(3) sufficient seating and tables for each inmate; 

(4) a telephone jack or other telephone arrangement provided within the 
dayroom, and; 

(5) a way for officers to observe the entire area from the entrance. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 

.3426 STANDARDS FOR DORMITORIES 
Each dormitory shall house no more than 40 inmates and shall have: 

(1) a minimum floor space of seventy (70) square feet per inmate 
including both the sleeping and dayroom area; 

(2) one shower per 8 inmates, one toilet per 6 inmates, one sink per 6 
inmates, one water fountain and a security mirror; 

(3) a telephone jack or other telephone arrangement provided within the 
dormitory; 

(4) space designed to allow a variety of activities; 

(5) sufficient seating and tables for all inmates; and 

(6) a way for officers to observe the entire area from the entrance. 

History Note: Statutory Authority G.S. 153A-221; 
Eff. June 1, 1990. 



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