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City water debt poses threat to entire county

Lincoln County officials plan to have an engineering study examine whether taxpayers are better off buying water from the city of Lincolnton or investing in additional water facilities for the county to meet surges in demand.
County Manager George Wood told county commissioners on Monday that he fully expects continued purchases from the city to be the best option, but he’d like to look at the numbers.
While that’s a reasonable move, any attempt to weigh the county’s options should also involve stepping back and realizing that far more than water is at stake.
The city has a severe water and sewer debt problem. The centralized bureaucracy that rules North Carolina forced Lincolnton to go into debt in order to expand the city’s water and sewer infrastructure in the 1990s. When textile industry demand for water evaporated, the city was stuck with water it couldn’t sell and no good way to cover its debt.
State regulations and bank agreements stipulate that the city can only make water and sewer debt payments from water and sewer revenues. The city has tried raising rates several times in recent years with mixed results. Voters may not be happy about rate hikes and customers have reacted by conserving. The city’s biggest water users include just a handful of companies. To lessen the burden on those companies, the City Council has chosen to impose smaller rate increases for them. But that has made it harder for the city to make much progress toward ensuring the long-term financial stability of its water and sewer fund. Companies have warned that if the city raises their rates much more, they will have to look at other options, such as closing or relocating.
City leaders know they need more big users of water. They’ve even explored creative options like selling excess water capacity to small towns in nearby counties. So far, however, there haven’t been any takers.
With Lincolnton submerged in water debt, the county is in a position to bail them out. Recent negotiations focused on fairly small purchases of water as stopgaps during periods of peak demand. But county leaders have said water usage by industries in their territory is starting to creep up again. That would be great news for the city if these were their customers, but they happen to be county customers. In this situation, the county should examine whether a much greater commitment to purchase city water would be smart, even if the numbers alone don’t add up.
County taxpayers living well outside Lincolnton might well balk at such a suggestion. Why should the county pay to correct mistakes made over the years in the city, where utility rates could have been increased more slowly over a longer period, before things reached a crisis level? They have a point.
However it’s clearly in the best interest of county taxpayers to assist the drowning city.
Imagine two paths the city could take if no major new water customer surfaces:
n No matter what the city does, it may not be able to meet its debt obligations. In this case, the lien-holders step in and take control of their collateral, which is the city’s water and sewer system. Unlike city leaders, bankers don’t answer to voters and may not care whom they stomp on to get their money. If they’re in charge, expect water rates in Lincolnton to go through the roof. The result would be an economic catastrophe for the people and businesses of the county’s only municipality, with a mass exodus of jobs a strong possibility.
n On the other hand, the city could continue to increase utility rates to squeeze every drop of money out of a populace that’s been squeezed too hard by taxes and rates alike. While this might not be as harsh as a banker-controlled system could be, the result would be the same. Industries and jobs would depart for greener pastures and the already parched economy would dry up completely.
What happens to the city’s economy happens to the county’s economy. If a city utilities collapse or city rate hikes end up destroying its remaining industrial base, the county tax base will plummet. If commissioners think they ticked off voters from North Brook to Westport with the last two waves of property revaluations, imagine what will happen if the county’s center suffers an economic meltdown and voters on the perimeter are the only ones whose property values are still going up. A little timely pumping of water now could cool off the situation before it reaches any such critical mass.
While the city remains a long way from these disastrous possibilities, solutions to its water problems have remained elusive. Given the seriousness of the possibilities, county leaders should think about cutting water deals with Lincolnton in terms of long-term self-preservation and not simply getting the best short-term deal or even helping out a neighbor. We’re all in this boat together.

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