This is Municipal Equation from the North Carolina League of Municipalities. Hey folks, it's Ben Brown from the North Carolina League of Municipalities. And on this episode of Municipal Equation, the podcast about cities and towns in the face of change, we're talking about spending, specifically with the money that's coming down to cities and towns across North Carolina and across the country from the federal legislation known as the American Rescue Plan. All in all, for North Carolina, the federal government, through this legislation, is distributing $1,300,000,000 to North Carolina cities and towns. And this is really important, like a once in a generation opportunity in terms of money like this coming down from the federal government directly to cities and towns. Since March 2020, cities and towns across North Carolina have dealt with a financial crisis caused by no action of their own, but rather by a deadly global pandemic. Health measures, lockdowns, and inability to gather, these consequences of COVID nineteen produced an economic fallout that has impacted all areas of our state. As health precautions and rising unemployment hindered normal economic activity, less money changed hands, impacting local government revenues. This revenue we're talking about is not excess. It's critical and used to provide the key public services that our residents rely on. Public safety, infrastructure, water, and more. As our citizens struggled through the pandemic, our municipalities suffered as a result. And as our municipalities suffered, our citizens were harmed even more. This issue has been the top priority for the League of Municipalities. Led by local leaders across the state, we held regular educational sessions on how to adjust and persevere through the pandemic. Resources and updates were shared with members on a weekly, sometimes daily basis. And with a grassroots effort, we advocated to both state and federal leaders on the need for assistance. Our mayors wrote op eds, our council members contacted policy makers, and our league as a whole made abundantly clear the significant damage that would be done to our citizens and our state if assistance was not provided. Thankfully, our voices were heard. With the passage of the American Rescue Plan on 03/11/2021, direct assistance was programmed for cities and towns for the first time since the onset of COVID nineteen. On this episode, we detail what that means and what this assistive money can be used for, how to spend it. Before we kick it over to our experts, I have to update you on the change in rules that took place while this episode was in production. The US Department of Treasury just issued a final rule that allows a lot more flexibility in project spending with this money, essentially making it all easier to pursue. Treasury has told us that there will be a standard allowance for revenue loss up to $10,000,000. So for most municipalities in North Carolina, that means pretty much the entirety of their ARP distribution can be used under the most flexible spending category, which is revenue loss. And that opens up all kinds of possibilities for how this money can be spent, which translates to more confidence when investing this money in things like infrastructure, which would be ideal. Could you remind us how much money is coming down from this legislation to North Carolina cities and towns? For cities and towns in North Carolina, it's gonna be over $1,300,000,000 This is Chris Nida. He's the director of municipal research and strategic initiatives at the League. The federal ARP legislation was $350,000,000,000

So it's not, an exaggeration to say that this is, you know, as we've been saying it, a once in a generation opportunity when it comes to finances, projects, things that we could get done. How can money like this be spent according to, the guidelines that we have? Yeah. We can talk about this more in a minute. You know, there's there's certain things that,

So there are a lot of ways that cities and towns can spend their allocations from the American Rescue Plan. We at the League of Municipalities offer the recommendation of investments to bring utilities up to where they need to be. It's the opportunity to create legacies of lasting positives within our communities, which is great for the state overall, and there is a special need for it. Here's Scott Mooneyham. He's the director of political communication and coordination

at the league. A few years ago, the state issued a report where they estimated there were, if I remember the figure correctly, $2,627,000,000,000 in water and sewer infrastructure needs out there in the state. I mean, obviously that's a huge figure. Beyond that, what we know based on both the state division of water infrastructure overviews and and based on our own knowledge as as an organization representing cities is that there are a lot of towns out there that are struggling with deferred maintenance needs with their water and sewer system as they've lost population Yeah. As some of them have lost jobs. They've they've been left with water and sewer systems that really do not receive the same amount of revenue, because there's not the same number and size of rate payers.

There are numerous examples of federally supported infrastructure projects yielding transformational changes to our municipalities. Here's an example. The town of Bethel in Pitt County, North Carolina, shout out to mayor Gloria Steen Brown. Since 2017, Bethel has been on a path to get out of the water and sewer business by working on a regionalization project with the larger city of Greenville. So regionalizing their utilities, and it couldn't have happened without significant outside funding. So in 2017, the town gets $50,000 from the state to study the feasibility of regionalization. And then in 2020, the town receives various grants totaling $4,500,000 to begin the actual infrastructure work. And that outside investment is important because it allowed the town to catch up on deferred maintenance and other tasks that would ensure that its partner municipality in Greenville and its ratepayers wouldn't assume that cost. So this is work that includes point repairs of sewer lines, replacement of some water lines, changes intended to reduce water infiltration, and possible relocation of a pump station to a less flood prone area. For Bethel and its residents, the result may not only be a more sustainable system moving forward, but also eventual cheaper water and sewer rates. And this could help attract more residents and businesses in the future.

So about $26,000,000,000 needed to adequately upgrade water and sewer systems in North Carolina over twenty years, and that's according to a 2017 study by the state of North Carolina. It's a big deal when you consider that just 8% of local water and sewer needs are met through outside funding sources. Meanwhile, 89% of the state's population is served by the local government run water systems in North Carolina. Scott Mooneyham earlier mentioned distressed utilities that may not have the same resources in terms of ratepayers. You know, small towns sometimes lose population, and there's a history of that here. When we, for example, think of the small towns whose primary employers in, say, manufacturing shut down and went overseas, that's something a lot of towns have had to deal with. Lawmakers here in 2020 set up something called the Viable Utility Fund, meant to identify distressed systems, which some of these towns in these scenarios have found themselves in, and work towards solutions that could be sustained over time. But the money programmed for the Fund, of course, doesn't measure to the overall need. And the State's primary programs to provide funding for local water and sewer system investments, being the Clean Water State Revolving Fund and the Drinking Water State Revolving Fund, primarily rely on zero interest loans to our municipalities

Given a lot of the infrastructure needs in North Carolina, it it's really clear that with this kind of one time money that is coming, really there's likely to be a once in a generation opportunity. There is the opportunity to create some transformational investments for communities. I think it's, again, it's important to recognize that this may represent a once in a generation opportunity that people think about how they might spend this monies in the most creative ways that generate economic opportunities for decades ahead, that improve quality of life for decades ahead. And so because we know there are these infrastructure challenges out there related to water and sewer systems, related to creating resiliency in communities when we've had, you know, all these storms. And at the same time that we've seen, you know, thirty, forty years of decline in in rural manufacturing, which has created problems economically. So in that regard, how do you then get the best bang for the buck while maybe infrastructure investment might not be appropriate for every community, it's certainly a way to accomplish that goal

if you can, again, figure out creative ways to do that. Scott Mooneyham points out that since the passage of the federal American Rescue Plan money, there's been the big federal infrastructure bill as well that's also passed. And that brings more money, but a lot of it will be based on competitive grant programs. It's also worth noting that the state received American Rescue Plan money, and some of it is going into programs that will flow to cities and towns. But again, some of it will be on a competitive basis.

So in that regard, are there ways that communities can look to leverage that initial direct American Rescue Plan Act appropriation to their city or town to leverage it in a way that they can utilize it with these other either these other monies that are gonna come directly to them or through state programs to them or through a competitive process. And then I think the other creative part of that is to look at, are there opportunities to pool money? Yeah. Again, going back to that term I use creative, are there creative ways that people can use that money to leverage it in those ways in a in a broader fashion or pull people in, you know, like local governments in together to figure out ways to really, you know, I mean, the bottom line is really figure out ways to improve the quality of life for the residents.

Please check out our special report on this very topic. It's called the American Rescue Plan and Local Infrastructure, how federal ARP dollars can address local water, sewer, and other infrastructure needs. That's the title of the report. It's easy to find. Just go to our special website, arp.nclm.0rg, and click on the resources and updates drop down menu. You'll see it there. On the same website, arp.nclm.0rg, you can also find updates, and there's a blog. There's answers to frequently asked questions, and so on. We hope this helps your municipality navigate the American Rescue Plan and wise ways to spend your distribution. The report also has case studies for examples. Thanks Thanks for listening to Municipal Equation. This is the podcast of the North Carolina League of Municipalities online at nclm.org. We are a member driven organization representing the interests of cities and towns in the state. Through their collective efforts, League member cities and towns better serve their residents and improve quality of life. For more than one hundred years, the League has been one voice for cities and towns working for a better North Carolina. We'll be back with more episodes of Municipal Equation. Stay tuned. And if you have an idea you'd like to suggest, maybe there's an interesting project coming out of your town. Tell me about it. Send an email to bbrown@nclm.org. And that will go directly to me. Again, bbrown@nclm.org. And thank you again for listening. This is Ben Brown.