When the City of Jacksonville accepts a $2 million state grant from DENR to build wastewater collection facilities in an annexation area, must the City comply with NC's 10% minority business participation goal under § 143-128.2 even if a sewer system is not literally a 'building project'?
Plain-English summary
The City of Jacksonville got a $2 million grant from the NC Department of Environment and Natural Resources (DENR) to install sewer systems in an involuntary annexation area. The grant came with assurances tied to NC's then-current minority business participation rules under § 143-128. The City's attorney, John Carter, asked the AG whether the new Session Law 2001-496 amendments to Chapter 143 actually applied to sewer construction at all, citing Davidson County v. City of High Point for the proposition that a sewer system is not a "building" under the public-buildings statute. He also pointed to legislative history showing that an earlier draft of § 143-128.2(a) had included a clause expressly defining "building projects" to cover water, sewer, and landscape projects (when buildings are erected or repaired), and that the final version dropped that clause, arguably narrowing the definition.
Senior Deputy AG Reginald Watkins, with Assistant AG Jeffrey Parsons, sidestepped the "building project" definitional fight and resolved the case on grant-acceptance grounds. The DENR grant included Assurance II-D requiring the City to "submit evidence that the requirements for compliance of participation by minority businesses has been accomplished in accordance with G.S. 143-128." Section 160A-17.1(3) authorizes cities to accept state grants and to "agree to and comply with any lawful or reasonable conditions which are imposed upon such grants or loans." By accepting the grant by resolution on June 5, 2001, the City bound itself to the assurance language, which in turn bound it to § 143-128's 10% MBE participation rule. The AG noted that the goal applied unless the City had adopted its own verifiable percentage under § 143-128(f).
The bottom line: the City could not avoid the MBE goal by arguing that sewer construction is not technically a "building project." Its acceptance of the grant carried with it the obligation to apply the goal.
Currency note
This opinion was issued in 2002. 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. Chapter 143, Article 8 has been amended multiple times since 2002, the definition of "building project" has continued to be a moving target, the HUB statutes have evolved, and DENR has been reorganized (it became DEQ in 2015). DENR grant assurance language and the specific MBE/HUB compliance obligations for sewer and water construction may also be different today. Any current grant-funded sewer project should be analyzed under the current statutes and the current grant agreement.
Background and statutory framework
Why the "building project" question mattered. § 143-128.2(a) imposes a verifiable 10% MBE goal on "public or private entit[ies] that receive State appropriations for a building project." If sewer construction does not count as a "building project," the goal might not apply directly. Carter's letter pressed that argument hard, citing Davidson County (1987) for the proposition that a sewer system is not a building.
The legislative-history argument. An earlier draft of § 143-128.2(a) explicitly extended "building projects" to "water, sewer and landscape projects when buildings are erected or repaired." The final ratified version dropped that clause. The City argued this narrowing reflected legislative intent to exclude sewer construction. The AG declined to resolve the argument because the grant-assurance route made it unnecessary.
The grant-acceptance route. § 160A-17.1(3) explicitly contemplates that cities will accept state grants subject to the grants' lawful and reasonable conditions. Once a city accepts, it must comply. The AG used this provision as a clean escape from the definitional debate: regardless of how "building project" is read, the grant assurance independently bound the City to § 143-128's MBE rule for this project.
Grant assurance as bootstrap. This is a recurring federalism and intergovernmental pattern: the funding entity (here, the State acting through DENR) attaches conditions, and the recipient's acceptance turns the conditions into binding obligations. The recipient cannot accept the money and then disclaim the conditions, even if the underlying statute might not otherwise apply.
Advisory letter versus advisory opinion. The AG's closing line notes this was an "advisory letter" that "has not been reviewed and approved in accordance with procedures for issuing an Attorney General's opinion." Advisory letters are less formal than full AG opinions; both are persuasive but neither is binding precedent.
Common questions
Q: Did this opinion settle the 'is sewer construction a building project' question for NC?
A: No, deliberately. The AG explicitly declined to reach the question because the grant-assurance route resolved this case. The definitional question remained open for projects without grant assurances tying compliance to § 143-128.
Q: Could a city accept a state grant and then refuse to comply with the assurance?
A: That would be a breach of the grant agreement. The state could potentially recoup grant funds, withhold future funding, or pursue other contractual remedies. § 160A-17.1(3) treats the acceptance as a contract.
Q: What if the assurance language conflicted with state law?
A: The AG framed § 160A-17.1(3) as binding the city to "lawful or reasonable conditions." A grant assurance that contradicted state law would not be "lawful," and the conflict would have to be analyzed. In this case the assurance just required compliance with another state statute (§ 143-128), so there was no conflict.
Q: How did the involuntary annexation context affect the analysis?
A: The opinion mentions involuntary annexation as background (it explains why DENR was funding the sewer extension) but does not turn on it. The MBE compliance question is the same regardless of why the sewer is being built.
Citations
Statutes:
- N.C.G.S. § 143-128 (public contract methods; 2001 version)
- N.C.G.S. § 143-128(f) (verifiable MBE percentage goal)
- N.C.G.S. § 143-128.2(a) (10% MBE goal for state-funded building projects)
- N.C.G.S. § 160A-17.1 (city acceptance of state grants)
- N.C.G.S. § 160A-17.1(3) (compliance with lawful and reasonable conditions)
- N.C.G.S. § 160A-311 (definition of public enterprise system)
- S.L. 2001-496 (Senate Bill 914)
Cases:
- Davidson County v. City of High Point, 85 N.C. App. 26, 354 S.E.2d 280, modified and affirmed, 321 N.C. 252, 362 S.E.2d 553 (1987) (sewer system not a "building")
Source
- Landing page: https://ncdoj.gov/opinions/city-of-jacksonville-wastewater-collection-facilitys-construction/
Original opinion text
Re: Request for Attorney General's Opinion
Dear Mr. Carter:
On May 9, 2002, you submitted a request for an Attorney General's opinion to James C. Gulick, Esq., Senior Deputy Attorney General, setting forth the following question:
Whether a municipality's construction of improvements for its public enterprise system constitute[s] "building projects" for purposes of being subject to the requirements of N.C. Session Law 2001-496?
As a matter of background, we understand from your letter that the City of Jacksonville was awarded a grant from the North Carolina Department of Environment and Natural Resources, ("DENR"), to install sewer systems in an involuntary annexation area. You further note that DENR has taken the position that the provisions of N.C. Session Law 2001-496 apply to the construction of sewer systems as well as public buildings. You cite G.S. § 160A-311 and Davidson County v. City of High Point, 85 N.C.App. 26, 354 S.E.2d 280, modified and affirmed, 321 N.C. 252, 362 S.E.2d 553 (1987), for the proposition that a sewer system is not a building, and, thus, a sewer system is not within the definition of "public buildings" or "building projects" regulated by the provisions contained in N.C. Session Law 2001-496.
In further support of this position, you cite legislative history to show that in an earlier legislative committee conference report, the phrase "building projects" was defined in G.S. § 143-128.2(a) "to include water, sewer and landscape projects when buildings are erected or repaired . . . ." The subsequent and final ratified version of that statutory provision does not include the above-quoted language defining building projects. From that history, you argue that the construction of sewer systems were not to be covered under the minority contractor provisions established in G.S. § 143-128.2.
Upon further analysis of the circumstances surrounding your question, we do not believe that it is necessary for us to reach the question of what constitutes a "building project" as set forth in N.C. Session Law 2001-496. We have learned that the City of Jacksonville's proposed sewer construction is subject to the terms of a grant from DENR. Pursuant to G.S. § 160A-17.1, a city or county is authorized to accept grants from the State:
"for constructing, expanding, maintaining and operating any project or facility, or performing any function, which such city or county may be authorized by general law or local act to provide or perform."
"In order to exercise the authority granted by this section, the governing body being city or county, may:
(3) agree to and comply with any lawful or reasonable conditions which are imposed upon such grants or loans; (emphasis added) . . . ."
G.S. § 160A-17.1(3).
The $2 million waste water collection facilities grant provided by the State on April 24, 2001 was accepted by the City of Jacksonville by Resolution dated June 5, 2001. The Grant is subject to certain assurances that are made by the Grant recipient. (See Grant, Section II – Assurances). Section II-D states:
"The applicant hereby gives assurances to the Environmental Management Commission that:
D. The applicant shall submit evidence that the requirements for compliance of participation by minority businesses has been accomplished in accordance with G.S. 143-128."
As recognized in G.S. § 160A-17.1(3), the governing body of a city may agree to comply with any lawful and reasonable conditions imposed by a grant. By accepting the State grant for the construction of waste water collection facilities in June 2001, the City clearly agreed to comply with then existing minority business participation requirements prescribed by G.S. § 143-128 (2001). G.S. § 143-128 (2001) contains a verifiable ten percent (10%) goal for participation by minority businesses in the total value of work for each building project. This goal applies to construction projects funded by the grant unless the City has adopted a verifiable percentage goal for participation by minority businesses in accordance with G.S. § 143-128(f) (2001).
Under G.S. § 160A-17.1, the governing body of a city is specifically authorized to accept a State grant for constructing "any project." Accordingly, it is appropriate to interpret the provisions of G.S. § 143-128 (2001) as applying to the construction of the waste water collection facilities which are subject to this grant from DENR.
This is an advisory letter. It has not been reviewed and approved in accordance with procedures for issuing an Attorney General's opinion.
Very truly yours,
ROY COOPER
Attorney General
Reginald Watkins
Senior Deputy Attorney General
Jeffrey B. Parsons
Assistant Attorney General
cc: James C. Gulick
Roy A. Giles, Jr.