A BILL TO BE ENTITLED
AN ACT to establish the north carolina water and wastewater infrastructure authority to administer the state's funding for water and wastewater infrastructure projects, to transfer the construction grants and loans section of the division of water quality and the financial services unit in the public water supply section of the division of environmental health from the department of environment and natural resources to the authority, To provide that the clean water management trust fund shall not fund wastewater projects, to transfer annually the sum of twenty‑five million dollars from the clean water management trust fund to the water infrastructure fund to provide Grant and loan funds for water and wastewater infrastructure projects, to direct the authority and the north carolina rural economic development center to develop a transition plan to move the water and wastewater programs from the north carolina rural economic development center to the authority, and to make conforming statutory changes.
The General Assembly of North Carolina enacts:
SECTION 1.  Chapter 159G of the General Statutes is amended by adding a new Article to read:
"Article 5.
"North Carolina Water and Wastewater Infrastructure Authority.
"§ 159G‑70.  Definitions.
The following definitions apply in this Article:
(1)	Authority. – The North Carolina Water and Wastewater Infrastructure Authority established by G.S. 159G‑71.
(2)	Commission. – State Water Infrastructure Commission.
(3)	Strategic plan. – The statewide strategic plan for the State's water and wastewater infrastructure developed by the State Water Infrastructure Commission.
"§ 159G‑71.  North Carolina Water and Wastewater Infrastructure Authority.
(a)	Established. – The North Carolina Water and Wastewater Infrastructure Authority is established as an independent authority. The Authority is located in the Department of Environment and Natural Resources for administrative purposes.
(b)	Membership. – The Authority shall consist of 12 members to be appointed as follows:
(1)	Four members appointed by the Governor.
(2)	Four members appointed by the President Pro Tempore of the Senate.
(3)	Four members appointed by the Speaker of the House of Representatives.
(c)	Initial Appointments; Term Limits. – To provide for a staggered membership, two of the members initially appointed pursuant to subdivisions (b)(1), (b)(2), and (b)(3) of this section shall serve two‑year terms ending on June 30, 2016. When appointing the initial members, the Governor, President Pro Tempore of the Senate, and Speaker of the House of Representatives shall designate which initial members shall serve two‑year terms and which shall serve four‑year terms.
(d)	Terms. – Except as provided for the initial members under subsection (c) of this section, members shall serve four‑year terms beginning July 1, 2014. No member shall serve more than two full consecutive four‑year terms or a total of 10 years. Members may continue to serve beyond their terms until their successors are duly appointed, but any holdover shall not affect the expiration date of the succeeding term. A member may be removed from the Authority for cause by the official that appointed the member.
(e)	Qualifications. – The office of Authority member is declared to be an office that may be held concurrently with any other executive or appointive office, under the authority of Section 9 of Article VI of the North Carolina Constitution. Persons shall be appointed to the Authority based on their knowledge and expertise of funding and construction of water and wastewater infrastructure.
(f)	Chair. – The Governor shall appoint the initial chair of the Authority. The chair appointed by the Governor shall call the first meeting, at which the members shall elect a chair. The chair shall serve a term of one year. The Authority shall elect a chair annually.
(g)	Meetings. – The Authority shall meet at least four times a year and may meet as often as needed.
(h)	Quorum. – A majority of the membership of the Authority constitutes a quorum for the transaction of business.
(i)	Vacancies. – A vacancy in the Authority or as chair of the Authority resulting from the resignation of a member or otherwise is filled in the same manner in which the original appointment was made. The term of an appointment to fill a vacancy is for the balance of the unexpired term.
(j)	Compensation. – Each member of the Authority shall receive per diem and necessary travel and subsistence expenses in accordance with the provisions of G.S. 138‑5. Per diem, subsistence, and travel expenses of the Authority members shall be paid from funds made available to the Authority through grants, appropriations, or any other sources.
(k)	Meeting Facilities. – The Secretary of Environment and Natural Resources shall provide meeting facilities for the Authority and its staff as requested by the chair.
"§ 159G‑72.  Authority:  purpose; duties.
(a)	Purpose. – The purpose of the Authority is to administer the State's funding for water and wastewater infrastructure projects.(b)	Duties. – The Authority shall have the following duties:
(1)	To award grants and loans for water and wastewater systems and to system operators using a single application and project award process while maintaining distinct funding priorities (i.e. public health, pollution control, economic development).
(2)	To implement and maintain the strategic plan for the State's water and wastewater infrastructure developed by the Commission after that plan is approved by the General Assembly.
(3)	To develop and track performance measures to indicate how the Authority is meeting the goals established by the strategic plan.
(4)	To maintain the baseline inventory of water and wastewater infrastructure in North Carolina developed by the Commission.
(5)	To develop and maintain an integrated database designed to provide ad hoc reporting capabilities based on performance measures identified by the strategic plan.
(6)	To conduct a detailed needs assessment to determine water and wastewater infrastructure funding needs using the information provided by the Commission.
"§ 159G‑73.  Authority: reporting requirement.
The chair of the Authority shall report each year by January 1 to the Joint Legislative Commission on Governmental Operations, the Environmental Review Commission, the Subcommittees on Natural and Economic Resources of the House of Representatives and Senate Appropriations Committees, and the Fiscal Research Division of the General Assembly regarding the implementation of its duties under G.S. 159G‑72. The report shall include an update on the initial implementation of the strategic plan and, after implementation, upon the progress maintaining the strategic plan. The report shall also include a list of the projects awarded grants or loans, a description of the project, the amount of the grant or loan awarded for the project, the total cost of the project, and shall incorporate any additional information outlined in G.S. 159G‑26(b) that is available and appropriate for inclusion in the report.
"§ 159G‑74.  Authority: Executive Director and staff.
The Authority, as soon as practicable after its organization, shall select and appoint a competent person in accordance with this section as Executive Director of the Authority. The Executive Director shall be charged with the supervision of all activities under the jurisdiction of the Authority and shall serve as the chief administrative officer of the Authority. Subject to the approval of the Authority and the Director of the Budget, the Executive Director may employ such clerical and other assistants as may be deemed necessary.
The person selected as Executive Director shall have had training and experience in funding and construction of water and wastewater infrastructure. The salary of the Executive Director shall be fixed by the Authority, and the Executive Director shall be allowed travel and subsistence expenses in accordance with G.S. 138‑6. The Executive Director's salary and expenses shall be paid from funds made available to the Authority through grants, appropriations, or any other sources. The term of office of the Executive Director shall be at the pleasure of the Authority."§ 159G‑75.  Cooperation among State agencies and other entities funding State strategic water plan.
Any State agency or other entity that receives State or federal funds for the purpose of funding State water or wastewater infrastructure shall cooperate with the Authority in using and disbursing those funds pursuant to the strategic plan. The Department of Commerce shall notify the Authority of grants and loan guarantees that it awards pursuant to G.S. 143B‑431(d) for water and wastewater infrastructure under the Community Development Block Grant program and of funds provided for water and wastewater infrastructure projects from the Industrial Development Fund established in G.S. 143B‑437.01. The Department of Commerce shall provide information regarding those grants, loan guarantees, and projects as requested by the Authority and shall cooperate with the Authority to provide that those funds are used and disbursed pursuant to the strategic plan."
SECTION 2.  G.S. 113A‑252 reads as rewritten:
"§ 113A‑252.  Definitions.
The following definitions apply in this Article:
(1)	Council. – The advisory council for the Clean Water Management Trust Fund.
(2)	Economically distressed local government unit. – An economically distressed county, as defined in G.S. 143B‑437.01, or a local government unit located in that county.
(3)	Fund. – The Clean Water Management Trust Fund created pursuant to this Article.
(4)	Land. – Real property and any interest in, easement in, or restriction on real property.
(4a)	Local government unit. – Defined in G.S. 159G‑20.
(4b)	Stormwater quality project. – Defined in G.S. 159G‑20.
(5)	Trustees. – The trustees of the Clean Water Management Trust Fund.
		"
SECTION 3.  G.S. 113A‑253(c) reads as rewritten:"(c)	Fund Purposes. – Moneys from the Fund are appropriated annually to finance projects to clean up or prevent surface water pollution and for land preservation in accordance with this Article. Revenue in the Fund may be used for any of the following purposes:
(1)	To acquire land for riparian buffers for the purposes of providing environmental protection for surface waters and urban drinking water supplies and establishing a network of riparian greenways for environmental, educational, and recreational uses and to retire debt incurred for this purpose under Article 9 of Chapter 142 of the General Statutes.
(2)	To acquire conservation easements or other interests in real property for the purpose of protecting and conserving surface waters and enhancing drinking water supplies, including the development of water supply reservoirs, and to retire debt incurred for this purpose under Article 9 of Chapter 142 of the General Statutes.
(3)	To coordinate with other public programs involved with lands adjoining water bodies to gain the most public benefit while protecting and improving water quality and to retire debt incurred for this purpose under Article 9 of Chapter 142 of the General Statutes.
(4)	To restore previously degraded lands to reestablish their ability to protect water quality and to retire debt incurred for this purpose under Article 9 of Chapter 142 of the General Statutes.
		(7)	To finance stormwater quality projects.
(8)	To facilitate planning that targets reductions in surface water pollution.
(8a)	To finance innovative efforts, including pilot projects, to improve stormwater management, to reduce pollutants entering the State's waterways, to improve water quality, and to research alternative solutions to the State's water quality problems.
(9)	To fund operating expenses of the Board of Trustees and its staff.
(d)	Limit on Operating and Administrative Expenses. – No more than two percent (2%) of the annual balance of the Fund on 1 July or a total sum of one million two hundred fifty thousand dollars ($1,250,000), whichever is greater, may be used each fiscal year for administrative and operating expenses of the Board of Trustees and its staff."
SECTION 4.  G.S. 113A‑254 reads as rewritten:
"§ 113A‑254.  Grant requirements.
(a)	Eligible Applicants. – Any of the following are eligible to apply for a grant from the Fund for the purpose of protecting and enhancing water quality:
(1)	A State agency.
(2)	A local government unit.
(3)	A nonprofit corporation whose primary purpose is the conservation, preservation, and restoration of our State's environmental and natural resources.
(a1)	Criteria. – The criteria developed by the Trustees under G.S. 113A‑256 apply to grants made under this Article. The common criteria for water projects set in G.S. 159G‑23 and the criteria set out in this section also apply to stormwater quality projects.
(b)	Matching Requirement. – The Board of Trustees shall establish matching requirements for grants awarded under this Article. This requirement may be satisfied by the donation of land to a public or private nonprofit conservation organization as approved by the Board of Trustees. The Board of Trustees may also waive the requirement to match a grant pursuant to guidelines adopted by the Board of Trustees.
(c)	Restriction. – No grant shall be awarded under this article to satisfy compensatory mitigation requirements under 33 USC § 1344 or G.S. 143‑214.11.
	(e)	Stormwater Limits. – The amount of a grant awarded under this Article for a stormwater quality project may not exceed the construction costs of the project. The total amount of grants awarded under this Article to the same recipient for stormwater quality projects for a fiscal year may not exceed the limit set in G.S. 159G‑36(c)(1) for grants to the same recipient from the Wastewater Reserve.
(f)	Withdrawal. – An award of a grant under this Article is withdrawn if the grant recipient fails to enter into a construction contract for the project within one year after the date of the award, unless the Trustees find that the applicant has good cause for the failure. If the Trustees find good cause for a recipient's failure, the Trustees must set a date by which the recipient must take action or forfeit the grant."
SECTION 5.  The Construction Grants and Loans Section of the Division of Water Quality and the Financial Services Unit in the Public Water Supply Section of the Division of Environmental Health are transferred from the Department of Environment and Natural Resources to the North Carolina Water and Wastewater Infrastructure Authority established in G.S. 159G‑71. This transfer shall have all of the elements of a Type I transfer, as defined in G.S. 143A‑6.
SECTION 6.  The North Carolina Water and Wastewater Infrastructure Authority and the North Carolina Rural Economic Development Center shall cooperatively develop a transition plan to transfer the Clean Water Partners Program and the water and wastewater portion of the Economic Infrastructure Program that is currently operated by the North Carolina Rural Economic Development Center and the unencumbered funds for those programs to the North Carolina Water and Wastewater Infrastructure Authority. The plan shall provide for the transition to be complete by July 1, 2015, and shall also provide for the continued monitoring and funding of projects that have been awarded grants from the North Carolina Rural Economic Development Center before July 1, 2015.
SECTION 7.  G.S. 159G‑20 reads as rewritten:
"§ 159G‑20.  Definitions.
The following definitions apply in this Chapter:
(1)	Asset management plan. – The strategic and systematic application of management practices applied to the infrastructure assets of a local government unit in order to minimize the total costs of acquiring, operating, maintaining, improving, and replacing the assets while at the same time maximizing the efficiency, reliability, and value of the assets.
(1a)	Authority. – North Carolina Water and Wastewater Infrastructure Authority established under G.S. 159G‑71.
(1b)	Construction costs. – The costs of planning, designing, and constructing a project for which a loan or grant is available under this Chapter. The term includes the following:
a.	Excess or reserve capacity costs attributable to no more than 20‑year projected domestic growth plus ten percent (10%) unspecified industrial growth.
b.	Legal, fiscal, administrative, and contingency costs.
c.	The fee imposed under G.S. 159G‑24 to obtain a loan or grant for a project.
d.	A fee payable to the Department for a permit to implement a project for which a loan or grant is obtained.
e.	The cost to acquire real property or an interest in real property.
(2)	CWSRF. – The Clean Water State Revolving Fund established in G.S. 159G‑22 as an account in the Water Infrastructure Fund.
(3)	Department. – The Department of Environment and Natural Resources.
		(5a)	Division of Water Resources. – The Division of Water Resources of the Department of Environment and Natural Resources.
(6)	Drinking Water Reserve. – The Drinking Water Reserve established in G.S. 159G‑22 as an account in the Water Infrastructure Fund.
(7)	DWSRF. – The Drinking Water State Revolving Fund established in G.S. 159G‑22 as an account in the Water Infrastructure Fund.
(8)	Grant. – A sum of money given to an applicant without any obligation on the part of the applicant to repay the sum.
(9)	High‑unit‑cost project. – A project that results in an estimated average household user fee for water and sewer service in the area served by the project in excess of the high‑unit‑cost threshold. The average household user fee is calculated for a continuous 12‑month period.
(10)	High‑unit‑cost threshold. – Either of the following amounts determined on the basis of data from the most recent federal decennial census and updated by the U.S. Department of Housing and Urban Development's annual estimated income adjustment factors:
a.	One and one‑half percent (1.5%) of the median household income in an area that receives both water and sewer service.
b.	Three‑fourths of one percent (3/4%) of the median household income in an area that receives only water service or only sewer service.
(10a)	Investor‑owned drinking water corporation. – A corporation owned by investors and incorporated solely for the purpose of providing drinking water services for profit.
(11)	Loan. – A sum of money loaned to an applicant with an obligation on the part of the applicant to repay the sum.
(12)	Local Government Commission. – The Local Government Commission of the Department of the State Treasurer, established in G.S. 159‑3.
(13)	Local government unit. – Any of the following:
a.	A city as defined in G.S. 160A‑1.
b.	A county.
c.	A consolidated city‑county as defined in G.S. 160B‑2.
d.	A county water and sewer district created pursuant to Article 6 of Chapter 162A of the General Statutes.
e.	A metropolitan sewerage district or a metropolitan water district created pursuant to Article 4 of Chapter 162A of the General Statutes.
f.	A water and sewer authority created under Article 1 of Chapter 162A of the General Statutes.
g.	A sanitary district created pursuant to Part 2 of Article 2 of Chapter 130A of the General Statutes.
h.	A joint agency created pursuant to Part 1 of Article 20 of Chapter 160A of the General Statutes.
i.	A joint agency that was created by agreement between two cities and towns to operate an airport pursuant to G.S. 63‑56 and that provided drinking water and wastewater services off the airport premises before 1 January 1995.
(14)	Nonprofit water corporation. – A nonprofit corporation that is incorporated under Chapter 55A of the General Statutes solely for the purpose of providing drinking water or wastewater services and is an eligible applicant for a federal loan or grant from the Rural Utility Services Division, U.S. Department of Agriculture.
(15)	Public water system. – Defined in G.S. 130A‑313.
(16)	Reserved.
(17)	Reserved.
	(19)	State. – The State of North Carolina.
(20)	Stormwater quality project. – A project whose primary purpose is to prevent or remove pollution from stormwater rather than collect, store, or convey stormwater for drainage or flood control purposes.
(21)	Targeted interest rate project. – Either of the following types of projects:
a.	A high‑unit‑cost project that is awarded a loan.
b.	A project that is awarded a loan from the CWSRF or the DWSRF and is in a category for which federal law encourages a special focus.
(22)	Treasurer. – The Treasurer of the State elected pursuant to Article III, Section 7, of the Constitution.
(23)	Wastewater collection system. – A unified system of pipes, conduits, pumping stations, force mains, and appurtenances for collecting and transmitting water‑carried human wastes and other wastewater from residences, industrial establishments, or any other buildings.
(24)	Wastewater Reserve. – The Wastewater Reserve established in G.S. 159G‑22 as an account in the Water Infrastructure Fund.
(25)	Wastewater system. – A wastewater collection system, wastewater treatment works, stormwater quality project, or nonpoint source pollution project.
(26)	Wastewater treatment works. – The various facilities and devices used in the treatment of sewage, industrial waste, or other wastes of a liquid nature, including the necessary interceptor sewers, outfall sewers, nutrient removal equipment, pumping equipment, power and other equipment, and their appurtenances.
(27)	Water Infrastructure Fund. – The fund established in G.S. 159G‑22."
SECTION 8.  G.S. 159G‑21 reads as rewritten:
"§ 159G‑21.  Revenue for water projects.
This Chapter governs the use of the following revenue:
(1)	Revenue appropriated to the Department for the Authority to use to match federal funds received for loans and grants for wastewater and drinking water projects and revenue received by the Authority from the repayment of loans made with the use of the federal funds.
(2)	Revenue appropriated to the Department for the Authority to use to provide a source of State funds to make loans and grants for wastewater and drinking water projects and revenue received by the Authority from the repayment of loans made with the use of these funds."
SECTION 9.  G.S. 159G‑22 reads as rewritten:
"§ 159G‑22.  Water Infrastructure Fund.
(a)	Fund Established. – The Water Infrastructure Fund is established as a special revenue fund. The Fund is comprised of the accounts set out in this section. The Fund provides revenue through its accounts for loans and grants as provided in this Chapter to meet the water infrastructure needs of the State. The Treasurer is responsible for distributing and investing all revenue received by the Fund. Interest and other investment income earned by the Fund accrues to it and must be allocated to the account to which the income is attributable. Accounts to which federal funds are credited must be kept separate from accounts that do not receive federal funds. A payment of the principal of or interest on a loan made from an account of the Fund must be credited to the account from which the loan was made.
(b)	CWSRF. – The Clean Water State Revolving Fund is established as an account within the Water Infrastructure Fund. The account receives federal funds for wastewater projects and the State funds required to match the federal funds. The account is established under and must be managed in accordance with Title VI of the Federal Water Quality Act of 1987, Pub. L. 100‑4, to achieve the purposes of that act and the Federal Water Pollution Control Act of 1972, 33 U.S.C. §§ 1251 through 1387. The account must comply with these federal acts and the federal regulations adopted to implement the acts. Revenue credited to the account is available in perpetuity and must be used only to provide construction loans and other assistance allowed under federal law. Grants are available from this account only to the extent allowed under federal law.
(c)	DWSRF. – The Drinking Water State Revolving Fund is established as an account within the Water Infrastructure Fund. The account receives federal funds for public water systems and the State funds required to match the federal funds. The account is established under and must be managed in accordance with section 130 of Title 1 of the federal Safe Drinking Water Act of 1996 as amended, 42 U.S.C. § 300J‑12, to achieve the purposes of that act. The account must comply with that act and the federal regulations adopted to implement the act. Revenue credited to the account is available in perpetuity and must be used only to provide construction loans and other assistance allowed under federal law. Grants are available from this account only to the extent allowed under federal law.
(d)	Wastewater Reserve. – The Wastewater Reserve is established as an account within the Water Infrastructure Fund. The account is established to receive State funds that are to be used for loans and grants for wastewater systems. Revenue credited to the Reserve is neither received from the federal government nor provided as a match for federal funds.
(e)	Wastewater Accounts. – The Authority is directed to establish accounts within the Wastewater Reserve to administer loans and grants for wastewater collection systems, wastewater treatment works, stormwater quality projects, and nonpoint source pollution projects. The wastewater accounts must include an account for each type of loan or grant set out in G.S. 159G‑33.
(f)	Drinking Water Reserve. – The Drinking Water Reserve is established as an account within the Water Infrastructure Fund. The account is established to receive State funds that are to be used for loans and grants for public water systems. Revenue credited to the Reserve is neither received from the federal government nor provided as a match for federal funds.
(g)	Drinking Water Accounts. – The Authority is directed to establish accounts within the Drinking Water Reserve to administer loans and grants for public water systems. The drinking water accounts must include an account for each type of loan or grant set out in G.S. 159G‑34."
SECTION 10.  G.S. 159G‑23 reads as rewritten:
"§ 159G‑23.  Common criteria for loan or grant from Wastewater Reserve or Drinking Water Reserve.
The criteria in this section apply to a loan or grant from the Wastewater Reserve or the Drinking Water Reserve. The Authority shall establish a system of assigning points to applications based on the following criteria:
(1)	Public necessity. – An applicant must explain how the project promotes public health and protects the environment. A project that improves a system that is not in compliance with permit requirements or is under orders from the Department, enables a moratorium to be lifted, or replaces failing septic tanks with a wastewater collection system has priority.
(2)	Effect on impaired waters. – A project that improves designated impaired waters of the State has priority.
(3)	Efficiency. – A project that achieves efficiencies in meeting the State's water infrastructure needs or reduces vulnerability to drought consistent with Part 2A of Article 21 and Article 38 of Chapter 143 of the General Statutes by one of the following methods has priority:
a.	The combination of two or more wastewater or public water systems into a regional wastewater or public water system by merger, consolidation, or another means.
b.	Conservation or reuse of water, including bulk water reuse facilities and waterlines to supply reuse water for irrigation and other approved uses.
c.	Construction of an interconnection between water systems intended for use in drought or other water shortage emergency.
d.	Repair or replacement of leaking waterlines to improve water conservation and efficiency or to prevent contamination.
e.	Replacement of meters and installation of new metering systems.
(4)	Comprehensive land‑use plan. – A project that is located in a city or county that has adopted or has taken significant steps to adopt a comprehensive land‑use plan under Article 18 of Chapter 153A of the General Statutes or Article 19 of Chapter 160A of the General Statutes has priority over a project located in a city or county that has not adopted a plan or has not taken steps to do so. The existence of a plan has more priority than steps taken to adopt a plan, such as adoption of a zoning ordinance. A plan that exceeds the minimum State standards for protection of water resources has more priority than one that does not. A project is considered to be located in a city or county if it is located in whole or in part in that unit. A land‑use plan is not considered a comprehensive land‑use plan unless it has provisions that protect existing water uses and ensure compliance with water quality standards and classifications in all waters of the State affected by the plan.
(5)	Flood hazard ordinance. – A project that is located in a city or county that has adopted a flood hazard prevention ordinance under G.S. 143‑215.54A has priority over a project located in a city or county that has not adopted an ordinance. A plan that exceeds the minimum standards under G.S. 143‑215.54A for a flood hazard prevention ordinance has more priority than one that does not. A project is considered to be located in a city or county if it is located in whole or in part in that unit. If no part of the service area of a project is located within the 100‑year floodplain, the project has the same priority under this subdivision as if it were located in a city or county that has adopted a flood hazard prevention ordinance. The most recent maps prepared pursuant to the National Flood Insurance Program or approved by the Department determine whether an area is within the 100‑year floodplain.
(6)	Sound management. – A project submitted by a local government unit that has demonstrated a willingness and ability to meet its responsibilities through sound fiscal policies and efficient operation and management has priority.
(6a)	Asset management plan. – A project submitted by a local government unit with more than 1,000 service connections that has developed and is implementing an asset management plan has priority over a project submitted by a local government unit with more than 1,000 service connections that has not developed or is not implementing an asset management plan.
(7)	Capital improvement plan. – A project that implements the applicant's capital improvement plan for the wastewater system or public water system it manages has priority over a project that does not implement a capital improvement plan. To receive priority, a capital improvement plan must set out the applicant's expected water infrastructure needs for at least 10 years.
(8)	Coastal habitat protection. – A project that implements a recommendation of a Coastal Habitat Protection Plan adopted by the Environmental Management Commission, the Coastal Resources Commission, and the Marine Fisheries Commission pursuant to G.S. 143B‑279.8 has priority over other projects that affect counties subject to that Plan.
(9)	High‑unit‑cost threshold. – A high‑unit‑cost project has priority over projects that are not high‑unit‑cost projects. The priority given to a high‑unit‑cost project shall be set using a sliding scale based on the amount by which the applicant exceeds the high‑unit‑cost threshold.
(10)	Regionalization. – A project to provide for the planning of regional public water and wastewater systems, to provide for the orderly coordination of local actions relating to public water and wastewater systems, or to help realize economies of scale in regional public water and wastewater systems through consolidation, management, merger, or interconnection of public water and wastewater systems has priority. If an applicant demonstrates that it is not feasible for the project to include regionalization, the funding agency shall assign the project the same priority as a project that includes regionalization.
(11)	State water supply plan. – A project that addresses a potential conflict between local plans or implements a measure in which local water supply plans could be better coordinated, as identified in the State water supply plan pursuant to G.S. 143‑355(m), has priority.
(12)	Water conservation measures for drought. – A project that includes adoption of water conservation measures by a local government unit that are more stringent than the minimum water conservation measures required pursuant to G.S. 143‑355.2 has priority.
(13)	Low‑income residents. – A project that is located in an area annexed by a municipality under Article 4A of Chapter 160A of the General Statutes in order to provide water or sewer services to low‑income residents has priority. For purposes of this section, low‑income residents are those with a family income that is eighty percent (80%) or less of median family income."
SECTION 11.  G.S. 159G‑24(b) reads as rewritten:
"(b)	Departmental Receipt. – The fee on a loan from the Water Infrastructure Fund is a departmental receipt and must be applied to the Authority's and the Local Government Commission's costs in administering loans from these Reserves. The Authority and the Local Government Commission must determine how to allocate the fee receipts between their agencies. The fee on a grant from the Water Infrastructure Fund is a departmental receipt of the Authority and must be applied to the Authority's costs in administering grants from these Reserves."
SECTION 12.  G.S. 159G‑25 reads as rewritten:
"§ 159G‑25.  Expenditure for emergency corrective action at a wastewater treatment works.
(a)	The Authority may use revenue in any account of the Wastewater Reserve to provide funds for emergency corrective action at a wastewater treatment works under the circumstances set out in this section. The amount expended in a fiscal year for corrective action under this section may not exceed two hundred thousand dollars ($200,000). An expenditure for emergency corrective action is authorized only under the following circumstances:
(1)	A person holding a wastewater discharge or nondischarge permit issued under Article 21 of Chapter 143 of the General Statutes is violating the terms of the permit.
(2)	The wastewater treatment works operated under the permit has a design flow capacity of no more than 100,000 gallons a day.
(3)	The Authority has given the permit holder written notice of the violation.
(4)	The permit holder refuses to take the action required to comply with the permit.
(5)	The inaction by the permit holder poses a threat to public health.
(6)	The Authority has informed the permit holder in writing that the Authority plans to take emergency corrective action and then bring a civil action against the permit holder to recover the cost of the emergency corrective action.
(b)	The Authority may bring a civil action against the holder of the permit for the wastewater treatment works to recover the amount expended from the Wastewater Reserve for the emergency corrective action. The amount recovered in a civil action must be credited to the account in the Wastewater Reserve from which the funds were expended."
SECTION 13.  G.S. 159G‑26(a) reads as rewritten:
"(a)	Requirement. – The Authority must publish a report each year on the accounts in the Water Infrastructure Fund that are administered by the Authority. The report must be published by 1 November of each year and cover the preceding fiscal year. The Authority must make the report available to the public and must give a copy of the report to the Environmental Review Commission and the Fiscal Research Division of the General Assembly."
SECTION 14.  G.S. 159G‑30 reads as rewritten:
"§ 159G‑30.  Authority's responsibility.
The Authority, through the Division of Water Quality and the Division of Water Resources, administers loans and grants made from the CWSRF, the DWSRF, the Wastewater Reserve, and the Drinking Water Reserve."
SECTION 15.  G.S. 159G‑32 reads as rewritten:
"§ 159G‑32.  Projects eligible for loan or grant.
(a)	CWSRF and DWSRF. – Federal law determines whether a project is eligible for a loan or grant from the CWSRF and the DWSRF. A project must meet the eligibility requirements set under federal law.
(b)	Wastewater Reserve. – The Authority is authorized to make loans and grants from the Wastewater Reserve for the following types of projects:
(1)	Wastewater collection system.
(2)	Wastewater treatment works.
(3)	Stormwater quality project.
(4)	Nonpoint source pollution project.
(c)	Drinking Water Reserve. – The Authority is authorized to make loans and grants from the Drinking Water Reserve for public water system projects."
SECTION 16.  G.S. 159G‑33 reads as rewritten:
"§ 159G‑33.  Loans and grants available from Wastewater Reserve.
(a)	Types. – The Authority is authorized to make the types of loans and grants listed in this subsection from the Wastewater Reserve. Each type of loan or grant must be administered through a separate account within the Wastewater Reserve.
(1)	General. – A loan or grant is available for a project authorized in G.S. 159G‑32(b).
(2)	High‑unit‑cost grant. – A high‑unit‑cost grant is available for the portion of the construction costs of a wastewater collection system project or a wastewater treatment works project that results in an estimated average household user fee for water and sewer service in the area served by the project that exceeds the high‑unit‑cost threshold.
(3)	Technical assistance grant. – A technical assistance grant is available to determine the best way to correct the deficiencies in a wastewater collection system or wastewater treatment works that either is not in compliance with its permit limits or, as identified in the most recent inspection report by the Authority under G.S. 143‑215.3, is experiencing operational problems and is at risk of violating its permit limits.
(4)	Emergency loan. – An emergency loan is available in the event the Secretary certifies that a serious public health hazard related to the inadequacy of an existing wastewater collection system or wastewater treatment works is present or imminent in a community.
(b)	Interaccount Transfer. – The chair of the Authority may use revenue in any account in the Wastewater Reserve to provide funds for an emergency loan."
SECTION 17.  G.S. 159G‑34 reads as rewritten:
"§ 159G‑34.  Loans and grants available from Drinking Water Reserve.
(a)	Types. – The Authority is authorized to make the types of loans and grants listed in this section from the Drinking Water Reserve. Each type of loan or grant must be administered through a separate account within the Drinking Water Reserve.
(1)	General. – A loan or grant is available for a project for a public water system.
(2)	High‑unit‑cost grant. – A grant is available for the portion of the construction costs of a public water system project that results in an estimated average household user fee for water and sewer service in the area served by the project that exceeds the high‑unit‑cost threshold.
(3)	Technical assistance grant. – A technical assistance grant is available to determine the best way to correct the deficiencies in a public water system that does not comply with State law or the rules adopted to implement that law.
(4)	Emergency loan. – An emergency loan is available to an applicant in the event the Secretary certifies that either a serious public health hazard or a drought emergency related to the water supply system is present or imminent in a community.
(b)	Interaccount Transfer. – The chair of the Authority may use revenue in any account in the Drinking Water Reserve to provide funds for an emergency loan."
SECTION 18.  G.S. 159G‑35 reads as rewritten:
"§ 159G‑35.  Criteria for loans and grants.
(a)	CWSRF and DWSRF. – Federal law determines the criteria for awarding a loan or grant from the CWSRF or the DWSRF. An award of a loan or grant from one of these accounts must meet the criteria set under federal law. The Authority is directed to establish through negotiation with the United States Environmental Protection Agency the criteria for evaluating applications for loans and grants from the CWSRF and the DWSRF and the priority assigned to the criteria. The Authority must incorporate the negotiated criteria and priorities in the Capitalization Grant Operating Agreement between the Authority and the United States Environmental Protection Agency. The criteria and priorities incorporated in the Agreement apply to a loan or grant from the CWSRF or the DWSRF. The common criteria in G.S. 159G‑23 do not apply to a loan or grant from the CWSRF or the DWSRF.
(b)	Reserves. – The common criteria in G.S. 159G‑23 apply to a loan or grant from the Wastewater Reserve or the Drinking Water Reserve. The Authority may establish by rule other criteria that apply to a loan or grant from the Wastewater Reserve or the Drinking Water Reserve."
SECTION 19.  G.S. 159G‑37 reads as rewritten:
"§ 159G‑37.  Application to CWSRF, Wastewater Reserve, DWSRF, and Drinking Water Reserve.
An application for a loan or grant from the CWSRF or the Wastewater Reserve must be filed with the Authority. An application for a loan or grant from the DWSRF or the Drinking Water Reserve must be filed with the Authority. An application must be submitted on a form prescribed by the Authority and must contain the information required by the Authority. An applicant must submit to the Authority any additional information requested by the Authority to enable the Authority to make a determination on the application. An application that does not contain information required on the application or requested by the Authority is incomplete and is not eligible for consideration. An applicant may submit an application in as many categories as it is eligible for consideration under this Article."
SECTION 20.  G.S. 159G‑38 reads as rewritten:
"§ 159G‑38.  Environmental assessment and public hearing.
(a)	Required Information. – An application submitted under this Article for a loan or grant for a project must state whether the project requires an environmental assessment. If the application indicates that an environmental assessment is not required, it must identify the exclusion in the North Carolina Environmental Policy Act, Article 1 of Chapter 113A of the General Statutes, that applies to the project. If the application does not identify an exclusion in the North Carolina Environmental Policy Act, it must include an environmental assessment of the project's probable impacts on the environment.
(b)	Authority Review. – If, after reviewing an application, the Authority determines that a project requires an environmental assessment, the assessment must be submitted before the Authority continues its review of the application. If, after reviewing an environmental assessment, the Authority concludes that an environmental impact statement is required, the Authority may not continue its review of the application until a final environmental impact statement has been completed and approved as provided in the North Carolina Environmental Policy Act.
(c)	Hearing. – The Authority may hold a public hearing on an application for a loan or grant under this Article if it determines that holding a hearing will serve the public interest. An individual who is a resident of any county in which a proposed project is located may submit a written request for a public hearing. The request must set forth each objection to the proposed project or other reason for requesting a hearing and must include the name and address of the individual making the request. The Authority may consider all written objections to the proposed project, any statement submitted with the hearing request, and any significant adverse effects the proposed project may have on the environment. The Authority's decision on whether to hold a hearing is conclusive. The Authority must keep all written requests for a hearing on an application as part of the records pertaining to the application."
SECTION 21.  G.S. 159G‑39 reads as rewritten:
"§ 159G‑39.  Review of applications and award of loan or grant.
(a)	Point Assignment. – The Authority must review all applications filed for a loan or grant under this Article for an application period. The Authority must rank each application in accordance with the points assigned to the evaluation criteria. The Authority must make a written determination of an application's rank and attach the determination to the application. The Authority's determination of rank is conclusive.
(b)	Initial Consideration. – The Authority may consider an application for an emergency loan from the Wastewater Reserve or the Drinking Water Reserve at any time. The Authority must consider all other loan applications and all grant applications filed during an application period at the same time in order to rank the applications.
(c)	Reconsideration. – When an application's rank is too low to receive an award of a loan or grant for an application period, the Authority must include the application with those considered for the next application period. If the application's rank is again too low to receive an award, the application is not eligible for consideration in a subsequent application period. An applicant whose application does not receive an award after review in two application periods may file a new application.
(d)	Notification of Decision. – When the Authority determines that an application's rank makes it eligible for an award of a loan or grant, the Authority must send the applicant a letter of intent to award the loan or grant. The notice must set out any conditions the applicant must meet to receive an award of a loan or grant. When the applicant satisfies the conditions set out in the letter of intent, the Authority must send the applicant an offer to award a loan or grant. The applicant must give the Authority written notice of whether it accepts or rejects the offer. A loan or grant is considered awarded when an offer to award the loan or grant is issued."
SECTION 22.  G.S. 159G‑40 reads as rewritten:
"§ 159G‑40.  Terms of loan and execution of loan documents.
(a)	Approval by Local Government Commission. – The Authority may not award a loan under this Article unless the Local Government Commission approves the award of the loan and the terms of the loan. The terms of a loan awarded from the CWSRF and the DWSRF must be consistent with federal law. In reviewing a proposed loan to a local government unit, the Local Government Commission must consider the loan as if it were a bond proposal and review the proposed loan in accordance with the factors set out in G.S. 159‑52 for review of a proposed bond issue. The Local Government Commission must review a proposed loan to a nonprofit water corporation and to an investor‑owned drinking water corporation in accordance with the factors set out in G.S. 159‑153.
(b)	Interest Rate and Maturity. – The interest rate payable on and the maximum maturity of a loan are subject to the following limitations:
(1)	Interest rate. – The interest rate for a loan may not exceed the lesser of four percent (4%) or one half the prevailing national market rate for tax‑exempt general obligation debt of similar maturities derived from a published indicator. When recommended by the Authority, the Local Government Commission may set an interest rate for a loan for a targeted interest rate project at a rate that is lower than the standard rate to achieve the purpose of the target.
(2)	Maturity. – The maximum maturity for a loan for a project that is not a high‑unit‑cost project may not exceed 20 years or the project's expected life, whichever is shorter. The maximum maturity for a loan for a high‑unit‑cost project is 30 years or the project's expected life, whichever is shorter.
(c)	Security for Loan. – A local government unit may pledge any of the following, alone or in combination, as security for an obligation to repay the principal of and interest on a loan awarded under this Article:
(1)	User fee revenues derived from operation of the wastewater system or public water system that benefits from the project for which the loan is awarded.
(2)	A mortgage, deed of trust, security interest, or similar lien on part or all of the real and personal property comprising the wastewater system or public water system that benefits from the project for which the loan is awarded.
(3)	Its full faith and credit if it meets the requirements of Article 4 of Chapter 159 of the General Statutes.
(4)	Nontax revenue not included in subdivision (1) of this subsection.
(d)	Debt Instrument. – A local government unit, a nonprofit water corporation, and an investor‑owned drinking water corporation may execute a debt instrument payable to the State to evidence an obligation to repay the principal of and interest on a loan awarded under this Article. The Treasurer, with the assistance of the Local Government Commission, must develop debt instruments for use by local government units, nonprofit water corporations, and investor‑owned drinking water corporations under this section. The Local Government Commission must develop procedures for loan recipients to deliver debt instruments to the State without public bidding."
SECTION 23.  G.S. 159G‑41 reads as rewritten:
"§ 159G‑41.  Withdrawal of loan or grant.
A letter of intent to offer an award for a loan or grant for a project is withdrawn if the applicant fails to enter into a construction contract for the project within two years after the date of the letter, unless the Authority finds that the applicant has good cause for the failure. An award for a loan or grant for a project is withdrawn if the applicant fails to enter into a construction contract for the project within one year after the date of the award, unless the Authority finds that the applicant has good cause for the failure. If the Authority finds good cause for an applicant's failure, the Authority must set a date by which the applicant must take action or forfeit the loan or grant."
SECTION 24.  G.S. 159G‑42 reads as rewritten:
"§ 159G‑42.  Disbursement of loan or grant.
The Authority must disburse the proceeds of a loan or grant to a recipient in a series of payments based on the progress of the project for which the loan or grant was awarded. To obtain a payment, a loan or grant recipient must submit a request for payment to the Authority and document the expenditures for which the payment is requested."
SECTION 25.  G.S. 159G‑43 reads as rewritten:
"§ 159G‑43.  Inspection of project.
(a)	Authority. – The Authority may inspect a project for which it awards a loan or grant under this Article to determine the progress made on the project and whether the construction of the project is consistent with the project described in the loan or grant application. The inspection may be performed by personnel of the Authority or by a professional engineer licensed under Chapter 89C of the General Statutes.
(b)	Disqualification. – An individual may not perform an inspection of a project under this section if the individual meets any of the following criteria:
(1)	Is an officer or employee of the local government unit, nonprofit water corporation, or investor‑owned drinking water corporation that received the loan or grant award for the project.
(2)	Is an owner, officer, employee, or agent of a contractor or subcontractor engaged in the construction of the project for which the loan or grant was made."
SECTION 26.  G.S. 159G‑44 reads as rewritten:
"§ 159G‑44.  Rules.
The Authority may adopt rules to implement this Chapter. Chapter 150B of the General Statutes, the Administrative Procedure Act, governs the adoption of rules by the Authority. A rule adopted to administer a loan or grant from the CWSRF or the DWSRF must be consistent with federal law. The Authority must give a copy of the rules adopted to implement this Article without charge to a person who requests a copy."
SECTION 27.  Article 4 of Chapter 159G of the General Statutes is repealed.
SECTION 28.  This act becomes effective July 1, 2014.