Can a North Carolina county pay to extend water and sewer service to the commercial parts of a private mixed-use development?

Plain-English summary

Guilford County wanted to spend county money to extend water and sewer service to the commercial portion of a mixed-use development project. Most of the new line would run within public rights of way, but some pieces would be on private property under recorded easements. The systems themselves would be operated by Greensboro and High Point under existing interlocal cooperation agreements with the county. The County Attorney asked the AG whether all of that was authorized.

The AG said yes. The analysis ran on two parallel statutory tracks.

The first track was the economic-development statute, G.S. 158-7.1. Subsection (b)(5) explicitly let a county "extend or provide for or assist in the extension of utility services to an industrial facility, whether the utility is publicly or privately owned." The statute did not require the utility to be public, and it did not require the industry to be public. It just had to be a utility extension to an industrial facility.

The second track was the public-enterprise framework. G.S. 153A-275 (counties) and G.S. 160A-312 (cities) allowed local governments to operate water and sewer systems as "public enterprises." The traditional reading of those statutes, going back to Fulghum v. Selma, 283 N.C. 100 (1953), permitted public enterprises to serve private industry, subject to two limitations: (a) service had to be available to similarly situated customers on equal terms, and (b) rates had to be tied to the system's operating and capital costs and depreciation. Spring Hope v. Bissette, 53 N.C. App. 210 (1981), reaffirmed those limits.

A county-paid, county-built, city-operated water and sewer extension to a mixed-use project's commercial component fit comfortably within both tracks. It was a utility extension to an industrial facility under G.S. 158-7.1(b)(5), and the operation by Greensboro and High Point under interlocal cooperation agreements made it a public enterprise under G.S. 153A-275 and G.S. 160A-312.

The AG also addressed the question commissioners always quietly ask in this posture: am I personally on the hook? The answer was no. Miller v. Jones, 224 N.C. 783 (1945), and Horner v. Chamber of Commerce, 231 N.C. 440 (1950), recognized that board members approving bond-fund expenditures for authorized purposes, acting in good faith and within statutory limits, were not personally liable for the effects of their official decisions.

Currency note

This opinion was issued in 1993. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

G.S. 158-7.1 has been amended several times since 1993, and the public-enterprise statutes have been refined in places. The general framework (county utility extension to industry is authorized) remains, but the procedural and substantive limits have changed. Any current question about economic-development utility spending should be checked against the current statutes and recent appellate decisions.

Common questions

Q: Did the property crossing private land create a problem?
A: The AG did not flag it as a barrier. The opinion noted that parts of the system would be constructed on private property under easements from the property owners. That structural posture is normal for utility extensions and did not impair the statutory authority.

Q: Were there constitutional concerns about helping a private developer?
A: The AG referenced a prior office analysis that long-standing common-law principles concerning public utilities did not raise serious constitutional questions about serving private industry. The transactional structure mattered: a county-funded extension operated as a public enterprise was not a giveaway to private industry; it was a utility extension subject to public-enterprise rate and access rules.

Q: What limits did the public-enterprise doctrine impose on rates?
A: Two main limits under Fulghum and Spring Hope: similarly situated customers had to be treated equally, and rates had to reflect operating costs, capital costs, and depreciation. Industrial customers could not get a sweetheart rate untethered from the system's actual cost structure.

Q: Could commissioners be sued personally for approving the expenditure?
A: The AG cited Miller v. Jones and Horner v. Chamber of Commerce for the proposition that good-faith decisions within statutory authority did not expose board members to personal liability. The exposure point is when commissioners act outside statutory authority or in bad faith.

Background and statutory framework

The opinion's combined-authority approach reflected how North Carolina local government statutes typically reinforce each other:

• G.S. 158-7.1 (the economic-development statute). Authorized counties and cities to engage in a range of economic-development activities. Subsection (b)(5) specifically dealt with utility extensions to industrial facilities. Importantly, it did not require the recipient industry or the utility to be publicly owned.
• G.S. 153A-275 (county public enterprises). Authorized counties to acquire, construct, establish, maintain, and operate public enterprises (including water and sewer). The grant ran through Chapter 153A's general county-powers framework.
• G.S. 160A-312 (municipal public enterprises). The parallel city authority. When Greensboro and High Point operated under interlocal cooperation agreements with the county, they were exercising their own G.S. 160A-312 authority on top of the county's G.S. 153A-275 ownership posture.

The case-law backstop confirmed the substantive scope:

• Fulghum v. Selma, 283 N.C. 100 (1953). Set the framework: public-enterprise water and sewer service could be extended to private customers, including industry, subject to equal-treatment and cost-based-rate limits.
• Spring Hope v. Bissette, 53 N.C. App. 210 (1981), aff'd 305 N.C. 248 (1982). Reaffirmed the Fulghum framework in the modern era.
• Miller v. Jones, 224 N.C. 783 (1945) and Horner v. Chamber of Commerce, 231 N.C. 440 (1950). Protected good-faith commissioner decisions from personal liability when those decisions stayed within statutory authority.

The opinion was administered by the Administrative Division/Services to State Agencies Section, reflecting the cross-departmental nature of state-level review for local-government economic-development questions.

Citations

• N.C.G.S. § 158-7.1 (county and city economic-development authority)
• N.C.G.S. § 158-7.1(b)(5) (utility extension to industrial facility)
• N.C.G.S. § 153A-275 (county public enterprises)
• N.C.G.S. § 160A-312 (municipal public enterprises)
• Fulghum v. Selma, 283 N.C. 100, 76 S.E.2d 368 (1953) (public-enterprise extension to industry; equal treatment and cost-based rates)
• Spring Hope v. Bissette, 53 N.C. App. 210, 280 S.E.2d 490 (1981), aff'd 305 N.C. 248, 287 S.E.2d 851 (1982) (reaffirming Fulghum)
• Miller v. Jones, 224 N.C. 783, 32 S.E.2d 594 (1945) (good-faith commissioner liability protection)
• Horner v. Chamber of Commerce, 231 N.C. 440, 57 S.E.2d 789 (1950) (same)

Source

• Landing page: https://ncdoj.gov/opinions/proposed-expenditure-of-county-funds-for-water-and-sewer-extension-to-industry/

Original opinion text

September 22, 1993

Mr. Jonathan V. Maxwell
Guilford County Attorney
1 West Market Street
P. O. Box 3427
Greensboro, North Carolina 27402

Re: G.S. 158-7.1 and G.S. 153A-275 Advisory Opinion to Guilford County Attorney on Proposed Expenditure of County Funds for Water and Sewer Extension to Industry. Administrative Division/Services to State Agencies Section

Dear Mr. Maxwell:

In your letter of September 10, 1993 you inquire whether the county's expenditure of public funds for extension of water and sewer to serve commercial parts of a mixed use development project is authorized by G.S. 158-7.1 or other statute. The greater part of the system would be located within public rights of way. Some parts of the system would be constructed on private property with easements from the property owners. The systems would be operated by the cities of Greensboro and High Point under existing interlocal cooperation agreements with the county.

In a recent examination by this Office of the provisions of G.S. 158-7.1 (copy attached) we advised:

Under long standing common law principles concerning public utilities…… the provision of water and sewer to private industry does not appear to raise any serious constitutional questions.

Existing N.C.G.S. Section 158-7.1(b)(5) provides that "[a] county or city may extend or may provide for or assist in the extension of utility services to an industrial facility, whether the utility is publicly or privately owned." In the municipal and county context, the term "utility" commonly refers to "public enterprises." Under current law cities and counties have authority to operate water and sewer systems as "public enterprises." N.C.G.S. Section 153A-275, 160A-312. This authority has traditionally been interpreted to authorize provision of water and sewer service to private industry. The principle limitations are (a) that service be provided on an equal basis to customers of essentially the same character and service; and (b) that rates must be related to the system's operating and capital cost and depreciation. Fulghum v. Selma, 283 N.C. 100, 76 S.E.2d 368 (1953); Spring Hope v. Bissette, 53 N.C. App. 210, 280 S.E.2d 490 (1981), aff'd 305 N.C. 248, 287 S.E.2d 851 (1982).

It appears that the water and sewer operations, described here to be paid for and constructed by the county and operated in conjunction with Greensboro and High Point, are "public enterprises" and, as such, are legally authorized by G.S. 153A-275 as well as G.S. 158-7.1.

Board members who approve the expenditure of bond funds for such an authorized purpose, when acting in good faith and in a manner consistent with statutory directions and statutory limitations, are not personally liable for the effects of their official decisions. Miller v. Jones, 224 N.C. 783, 787, 32 S.E.2d 594, 597 (1945); compare, Horner v. Chamber of Commerce, 231 N.C. 440, 57 S.E.2d 789 (1950).

If further assistance is required, please let us know.

Ann Reed
Senior Deputy Attorney General

Douglas A. Johnston
Assistant Attorney General