A BILL TO BE ENTITLED
AN ACT to protect the fiscal health of north carolina's water and sewer systems by granting the local government commission additional authority to oversee the financial MANAGEMENT of water and sewer systems of local governments or other public authorities.
The General Assembly of North Carolina enacts:
SECTION 1.  G.S. 159‑181 is amended by adding a new subsection to read:
"(d)	The Local Government Commission shall have authority to impound the books and records associated with the water or sewer enterprise system of any unit of local government or public authority, assume full control of all its affairs, or take any lesser actions deemed necessary by the Commission when, for three consecutive fiscal years, the audited financial statements of the unit or public authority demonstrate that the unit or public authority meets any one of the following three criteria: (i) the enterprise system experienced negative working capital; (ii) the enterprise system experienced a quick ratio of less than 1.0; or (iii) the unit or public authority experienced a net loss of revenue in the enterprise system using the modified accrual budgetary basis of accounting. Before the Local Government Commission assumes control as described herein, it must find that the impact of items (i) through (iii) threatens the financial stability of the unit of local government or public authority, and that the unit of local government or public authority has failed to make corrective changes in its operation of the enterprise system after having received notice and warning from the Commission. The notice and warning contemplated hereby may occur prior to the expiration of the three-year period. When the Commission takes action under this section, the Commission is vested with such powers of the governing board as the Commission shall deem necessary, which may include all powers of the governing board, as to the operation of the enterprise system, including, but not limited to, setting rates, negotiating contracts, collecting payments that are due, suspending service to nonpaying customers, resolving disputes with third parties, and transferring the ownership of the enterprise system. "Working capital" is defined as current assets, such as cash, inventory, and accounts receivable, less current liabilities, determined in accordance with generally accepted accounting principles. A "quick ratio of less than 1.0" means that the ratio of liquid assets (cash and receivables) to current liabilities is less than 1.0."
SECTION 2.  This act is effective when it becomes law.