Working Together: Exploring Interlocal Partnerships for Water and Wastewater in North Carolina

By Kara Millonzi, Robert W. Bradshaw Distinguished Professor of Public Law and Government at the UNC Chapel Hill School of Government

Many local governments in North Carolina own and manage water and wastewater utilities as public enterprises. These services are costly to keep running, and smaller systems often have difficulty setting rates that generate enough revenue to cover both daily expenses and long-term capital needs, particularly when their customer base is declining or shifting. Mid-sized and larger systems also face pressures, including the high price of replacing aging infrastructure and the demands of serving a growing population.

Partnership is one option that can help address some of these issues. Local governments may work together to share staff and equipment, reserve or purchase treatment capacity, or even create new regional entities to deliver services jointly. State law allows for a variety of partnership approaches, but it is not always clear which option will fit best, whether a partnership will actually solve the problem at hand, or how to move from an idea to an agreement. This post provides an overview of the partnership options available, why local governments may want or need to partner, the challenges they face in doing so, and how these issues will be explored further through a new statewide study.

A Spectrum of Options

Counties and municipalities in North Carolina have authority to provide water and wastewater services as public enterprises, as do several types of special-purpose local governments, often referred to as public authorities. State law also allows these units to contract and work together, or to perform work on behalf of each other, as long as each has legal authority to carry out the activity (see G.S. 160A, Art. 20). Within this framework, local governments have flexibility to pursue a wide range of partnership options, from temporary service agreements to permanent transfers of responsibility or the creation of regional entities.

At one end of the spectrum are cooperative and sometimes temporary arrangements. These include sharing staff or specialized equipment, providing mutual aid during emergencies, or contracting with another unit to operate a treatment plant, manage billing, or maintain distribution or collection lines. These agreements can be limited in scope or duration and allow each government to retain ownership of its utility assets.

Further along are agreements to reserve or purchase treatment capacity, or to buy and sell bulk water or wastewater service. Some governments also collaborate on a single capital project, such as a shared pump station or transmission line, in order to reduce costs and expand capacity.

At the other end of the spectrum are more formal and long-term arrangements. In some cases, one local government assumes full operation or even ownership of another government’s utility system through contract or transfer. In other cases, new regional entities are created, such as water and sewer authorities (G.S. 162A, Art. 1), sanitary districts (G.S. 130A, Art. 2, Part 2), metropolitan water districts (G.S. 162A, Art. 4), metropolitan sewerage districts (G.S. 162A, Art. 5), metropolitan water and sewerage districts (G.S. 162A, Art. 6), county water and sewer districts (G.S. 162A, Art. 6A), joint agencies formed under G.S. 160A, Art. 20, and entities created by local act of the General Assembly. These structures assume direct service provision on behalf of participating governments and can deliver real efficiencies, but they also require significant commitments and raise questions about governance and long-term control.

Each option has its own advantages and challenges. Cooperative agreements and mutual aid are flexible and can address immediate needs but may not provide a permanent solution. Transfers of ownership and regional entities can spread costs, expand capacity, and build resilience, but they require trust and a willingness to share or cede decision-making.

Drivers and Concerns

Decisions about regional partnerships are rarely straightforward. Utilities and local officials weigh both the benefits that partnerships can provide and the concerns that may come with them. Based on past experiences, some of the main drivers and concerns look like this:

What pushes partnerships forward:

• Financial stability through shared costs and access to a broader rate base.
• Expanded capacity to meet regulatory requirements, manage growth, or replace aging infrastructure.
• Operational resilience by combining staff, sharing equipment, or providing backup during emergencies.

What holds partnerships back:

• Uncertainty about whether collaboration will actually solve the underlying problems.
• Concerns about ceding authority over rates, growth management, or investment priorities.
• Limited resources to pursue or negotiate agreements, particularly in smaller systems.
• Community hesitation or opposition, often tied to fears of higher costs or a loss of local identity.

These tradeoffs shape whether partnerships move forward, stall, or never get explored at all.

A Statewide Look at Regionalization

The General Assembly recently directed the UNC School of Government’s Environmental Finance Center to lead a statewide study on water and wastewater regionalization. The study has two purposes. First, to catalogue when and how partnerships may be appropriate. Not every challenge requires a merger or new authority, and the study will highlight the range of options that have worked for different communities. Second, to identify the impediments, whether legal, financial, or practical, that prevent local governments from pursuing partnerships even when they might make sense. The study will also consider which of those barriers could be addressed by the legislature or state agencies.

Part of this work will be to confirm whether the drivers and concerns outlined above reflect the reality in communities across the state and to identify others that may not be as well understood. Local officials, utility staff, and residents are in the best position to share what actually matters in practice, and their perspectives will help shape both the findings and any policy recommendations that come out of the study.

How to Participate

We will be holding virtual listening sessions (via Zoom) to gather perspectives and experiences. Each session will focus on a theme that reflects the issues communities regularly face when considering partnership.

Listening Session Topics and Dates:

How to Join
All sessions will be held virtually on Zoom.
Join via Zoom
Meeting ID: 928 6672 1136

Written input is also welcome at any time. You can complete our general input survey or send us an email at regionalizationstudy@sog.unc.edu. Submissions will be posted on the study webpage at NCFinanceConnect.com.

Partnerships come in many forms, from cooperative agreements to permanent transfers of ownership or the creation of new regional entities. This study is an opportunity to gather local perspectives, learn from past experiences, and identify where state policy might help local governments strengthen and sustain their water and wastewater systems.

Note: This blog is cross-posted to Coates’ Canons.