Using Utility Rates as an Economic Development Incentive Tool

<p>Kara Millonzi is a School of Government faculty member.</p> <p>A county (or municipality) is trying to attract two different commercial entities to locate within the unit. The first is a retail development complex which would be similar in size and function to existing retail development within the unit (ABC Company). The second is a landscaping business with an extensive plant and garden nursery (XYZ Company). There is no similar type of company currently located within the unit. The unit’s governing board is exploring its incentive options to attract either (or both) of the commercial entities. Negotiations with the entities reveal that they are both interested in, among other things, receiving significantly reduced (or even free) water rates, at least for a period of time. This incentive is particularly attractive to the unit’s governing board because the unit would not have to pay for this incentive out of its General Fund. And, the unit’s Water Enterprise Fund currently has a significant surplus so the reduced rates to the two commercial entities would not impact water fees for other customers.</p> <p>Can the local government offer reduced utility rates to these two commercial entities as part of an economic development incentive package? The answer is no. Having said that, the unit may be able to approximate the same result through other means. </p> <p>Utility Rate Classifications</p> <p>North Carolina General Statutes §§ 160A-314 and 153A-277 expressly authorize municipalities and counties, respectively, to charge different rates for different “classes of service,” but the statutes provide little clear guidance on the differentiating factors needed to justify separate [...]</p>