As utilities across North Carolina consider new ways of partnering with each other, including full consolidation, many are looking at the Water and Sewer Authority model as a potential governance structure. Local governments devolving water asset ownership and control to an Authority or other regional governance structure are often concerned about maintaining some form of control in input on essential services. Under the Authority model, local governments can continue to participate in governance by appointing members to the Authority board.
State statutes provide local government members with the ability to structure their boards to meet their local needs and conditions. Board structures vary across the state based on number of board seats, number of seats allocated to (appointed by) each member, and voting rights of members. In order to better understand the driving forces behind the existing structures, staff from the Environmental Finance Center at the University of North Carolina at Chapel Hill reviewed bylaws and articles of incorporation for all of the authorities, and additionally carried out informal interviews with individuals familiar with the board structures from many of the authorities.
The research focused on answering the following questions:
- What is the status of existing board representation structure for Authorities across the state relative to the communities they serve?
- What approaches were used to allocate seats on boards?
- Have boards been modified over the years and, if so, why and how?
Existing Board Structures
Across the state, most local government units which receive service from water and sewer Authorities are represented on the boards for such Authorities in one form or another. It should first be noted that the term “represented” is a bit of a term of art, and that perspectives from the different Authority staff or board members tend to vary depending on their own definition of board representation. Specifically, because most of the water and sewer Authority boards include counties as members, which in most cases also encompass much of the service area of the authorities, staff or board members from some of the Authorities expressed the perspective that all the customers within the county boundaries were represented by the county representatives, even if an individual local government within that county did not hold a separate seat on the board.
An example of this can be found in the Cape Fear Public Utility Authority, where the community of Wrightsville Beach receives bulk wastewater services from the Authority but does not have a seat on the board. However, because Wrightsville Beach is located within New Hanover County, the residents of Wrightsville Beach can be considered to be “represented” by the New Hanover County board representatives.
Additionally, you can find small communities within the service area of some Authorities which receive service but which have no individual board representation. For example, in the Tuckaseigee Water and Sewer Authority, the presently unincorporated village of Cashiers receives some services from the Authority, but has no community specific board seat. That being said, Cashiers is located within the county of Jackson, which encompasses the entire service area of the Tuckaseigee WSA and staff from the Authority indicated that the residents have board representation by being residents of the county.
Most communities served by water and sewer Authorities across the state who either contributed retail customers, assets, or both, are currently both customers of the Authorities and hold seats on the respective boards. Additionally, the majority of the communities holding board seats on Authority boards were provided their seats upon the creation of the Authority. There are a few exceptions to this. In the case of the Broad River Water Authority (BRWA), the Authority provides bulk water service to Grassy Pond and Cherokee County, both located in South Carolina, and neither of which have board representation. The contract to provide service to Grassy Pond was a pre-existing contract with Duke Power, which BRWA agreed to continue when it purchased the water system in the late 1990s/early 2000s.
Additionally, Pender County is a unique entity, in that it currently receives services from three different authorities, but only has board representation on one. Specifically, Pender County holds seats on the Lower Cape Fear Water and Sewer Authority (Lower Cape Fear WSA), but does not have seats on the Onslow Water and Sewer Authority (ONWASA), nor on the Cape Fear Public Utility Authority. Finally, Surf City residents receive service from ONWASA, but the city does not hold a seat on the board. In interviews with staff, there was a suggestion that board representation was not essential or even required by Surf City.
Another exception to the most common scenario where communities are both customers and hold board seats is the unique situation found in ONWASA. When ONWASA was formed, the City of Jacksonville was given two seats on the board based on the amount of assets it would be contributing to the Authority (discussed in next section); however, Jacksonville subsequently opted not to turn over their assets, and did not begin receiving water and wastewater services from the Authority. Nevertheless, Jacksonville has always maintained two seats on the board, and is an actively engaged member, while still not a customer of the Authority. This is a unique situation that was not found in the other Authority models.
Criteria for Board Seat Allocation
In speaking with staff or board members from many of the water and sewer Authoritiesacross the state, we did not find a single approach or rationale used to allocate seats. Rather, we found a couple different variations. For the most part, the transfer of assets, the anticipated transfer of assets, or the contribution of retail customers was the justification for the seats that were given to the communities at the time of creation of the authorities. In some cases, the amount of assets contributed was correlated with the number of seats on the board. Such was the case for the Tuckaseigee WSA. The town of Sylva gave their entire system and thus was given three seats on the board, while the other communities contributed less assets and received less seats on the board. Additionally, for ONWASA, the two biggest contributors of infrastructure were to be the County of Onslow and the City of Jacksonville; therefore, those two entities were each given two seats on the board. The other four members were only given one seat, and amongst those, the Town of North Topsail Beach received a seat, even though they did not contribute any assets. Although Jacksonville did not end up turning over its assets, the justification for the seats was rooted in that anticipated contribution.
The correlation between board seat allocation and contribution of assets can also be seen by the South Granville Water and Sewer Authority (SGWASA), which also based its board seats on anticipated contribution of assets, which was why it gave Granville County, Butner, and Creedmoor all two seats on the board, and the tiny town of Stem only one. After creation of the board, Creedmoor did not contribute its assets as expected for seven years, during which the SGWASA board stripped the Creedmoor board members of their voting rights. Such rights were restored in 2015 at the time that Creedmoor finally sold its assets to SGWASA.
In other cases, upon creation of the Authority, the members received an equal number of seats on the board, regardless of size of community or contribution of assets. For example, in the BRWA, the four communities of Spindale, Rutherfordton, Ruth, and Rutherford, although varying in size and contribution, all hold two seats on the board. That was also the case for New Hanover County and Wilmington, which both share equal seats on the board of the Cape Fear Public Utility Authority. Additionally, Martin County Regional WSA has two community members, Martin County and Williamston, and each holds two seats on the board.
A unique approach for board seat allotment is used by the Neuse Regional Water and Sewer Authority, which has seats based on the number of active metered accounts. Specifically, in its bylaws, the Authority lays out a tiered structure whereby an entity is given one to four board seats depending on how many active customer connections they have. The bylaws also provide that each entity must update the number of accounts each year, so that the bylaws and board make-up can be amended as necessary. This allows for growing jurisdictions to increase their presence on the board, and for shrinking populations to have lesser influence on the board, but this is a unique board allocation found only in the Neuse Regional WSA.
In some cases, it was suggested that political concerns played a role in how the board make-up was allocated. Overall, in all the Authority models looked into, the communities with board seats contributed to the Authorities either through retail customers or transfer of assets, with the exception of the City of Jacksonville discussed above.
Modifications to Board Structure
Our research showed that modifications to originally established board structures have been rare—most Authorities have retained their originally established board structure without modification and staff or board members from existing Authorities communicated that such changes have been unnecessary in most cases due to the strength and stability of the original board models. In fact, we identified only two true modifications. In all other cases, the Authorities have retained their originally established board structure. The first, discussed above, has been the Neuse Regional WSA, which by its very design provides for modification as entities grow or shrink in metered accounts. A review of their bylaws and amendments reflects three amendments to the bylaws which included changes to the communities included as members.
The second modification took place in the Lower Cape Fear Water and Sewer Authority, which is the oldest water and sewer Authority in the state, formed in 1970. Initially, the Lower Cape Fear WSA had 13 members, with four from Brunswick County, two from the City of Wilmington, two from New Hanover County, two from Pender County, two from Columbus County, and one from Bladen County. In 2008, the board was modified to add a fourteenth seat which was assigned to Bladen County, but which provided a seat for a representative from the Smithfield Packing Plant. As communicated by staff from the Lower Cape Fear WSA, the reasoning behind the modification was because the Smithfield Corporation funded a water treatment plant in Bladen County, and requested representation on the board.
Although not a true modification, it should be noted that SGWASA had an interesting modification process to its membership after it was created. At the time SGWASA was incorporated, Granville County was the only incorporated entity. The original articles of incorporation created the Authority under NC Stat. Chapter 162A, Article 1, and provided that the organizing political subdivision was Granville County. However, in the same document, the governing board was established and included board members from Granville County, the unincorporated (at the time) community of Butner, Stem, and Creedmoor, even though the latter three communities had not yet formally joined as members of the Authority under NC Stat. Chapter 162A, Article 4. The Town of Butner was not yet incorporated, and did not formally join the Authority until two years after it was incorporated, along with the Town of Stem which turned over its assets to SGWASA at that time. The City of Creedmoor also did not join the Authority until 2015, at which point it sold its assets to SGWASA. As was mentioned earlier, Creedmoor did hold seats on the board since its incorporation, although its voting rights were suspended from 2008 until 2015 when it finally turned over its assets to SGWASA. The SGWASA model appeared to be the only one in which a board was formed with member seats created before some communities had formally joined.
Although there have been slight changes in the service area of some of the authorities, there have not been any other board make-up modifications according to the documentation reviewed and the interviews conducted.
After reviewing the articles of incorporation and bylaws as well as speaking with staff or board members from a majority of the water and sewer Authorities across the state, it is evident, beyond a few exceptions, that the defining correlation for board seat allocation of Authorities is a community’s willingness to contribute assets or retail customers to the Authority in exchange for board representation. It is also evident that most of the boards have not been modified, nor has there been very much of a variation in representation or service to different communities from the originally established boundaries and governance structure. Most, if not all, of the Authority staff we interviewed identified some potential weaknesses with their respective structures, but overall indicated that the strength and stability of their organizations were such that there had not been a sufficiently compelling need to amend bylaws or make changes to the structure.
The research outlined above was funded by the Water and Sewer Authority of Cabarrus County, and the North Carolina Division of Water Infrastructure.
Erin Riggs is a Project Director at the EFC and conducts applied research surrounding legal, policy, and accounting framework that influences environmental finance issues around the country. She graduated from the University of Florida’s Levin College of Law where she pursued a law degree with a specialization in Environmental and Land Use issues. After law school, Erin worked as the Assistant Executive Director of Waterkeepers Carolina, a statewide organization representing the interests of the Riverkeepers across the state. She then spent three years working in Florida as a staff attorney for state court judges in the areas of both criminal and family law. Erin assists the EFC at UNC in studying the legal, policy, and accounting framework that would influence environmental finance issues around the country.
 The staff from the Onslow Water and Sewer Authority (ONWASA) indicated that they would be starting to provide bulk services to Pender County soon.
 It should be noted that staff from ONWASA indicated that while Jacksonville as a whole does not receive service from ONWASA, the Authority does provide limited water service to some of the subdivisions in Jacksonville, and indicated that they will begin providing more bulk water service to the areas surrounding the city.