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In towns like Landis, cutoff prohibition will hurt budgets

By Natalie Anderson
natalie.anderson@salisburypost.com

LANDIS — While Gov. Roy Cooper’s executive order to prohibit utility shut-offs was enacted in an effort to help North Carolinians, the order could have unintended consequences on small towns like Landis and utilities systems across the state.

Executive Order 142, enacted on May 30, prohibited utility shut-offs for 60 additional days. It also prohibited the billing or collection of late fees and penalties from March until the end of the order. It extended repayment plans for at least six months.

While Landis operates its electric service independently, the town purchases water from Kannapolis, and Salisbury handles the sewage. Landis has a service population of a little more than 3,000 people, with 1,551 water connections.

The town’s “cut-off” list, which includes the customers whose utilities would have to be turned off due to non-payment, was around 60-80 people in February and jumped to 444 accounts at the end of April. That results in a current deficit of about $147,000 in the town’s accounts receivable, said Landis Finance Officer Diane Seaford.

Seaford noted this was an issue because the town still has to provide utilities to customers, which means the expense is still there.

And while it could be next year when the town sees those payments come in, Seaford said the town may never recover the total fees accrued from late payments.

She said not paying utilities during this time is expected “if folks know that they don’t have to pay their electric bill.”

“We just have to deal with it,” said Leonard Barefoot, who serves as Landis’ interim town manager.

The financial impact from COVID-19 is why the 2020-21 budget was estimated more conservatively by local governments across the state. For 2020-21, Landis’ water fund totals $1.03 million, which is a 7.55% decrease from the 2019-20 fiscal year. That amounts to a $46,000 decrease in collections on the sale of water as well as the loss of Parkdale Mills, which was the town’s largest and longest standing industrial customer.

The electric fund revenue is also down by 6.25%.

But Seaford added that the town couldn’t have anticipated that the delay of utilities payments could last an entire fiscal year.

Town officials have encouraged citizens to pay what they can because in addition to an established repayment plan, customers will still have their regular monthly fees.

“Their bill can get to where it’s not manageable,” Seaford said.

For other, larger systems, such as Salisbury-Rowan Utilities, the financial impact is minimal. SRU supplies water for Salisbury, Spencer, East Spencer, Granite Quarry, China Grove and Rockwell, which amounts to a service population of around 52,000 people and more than 19,000 water connections, according to the Salisbury 2020-21 approved budget.

The utilities system contributes about $3.52 million, or 13.5%, to Salisbury’s general fund, which helps carry out the city’s administrative costs, according to Shannon Moore, the director of financial services for the city of Salisbury.

But the full impact is unknown and remains to be seen, she said.

As of last week, Salisbury-Rowan Utilities had a cut-off list of 705 residential accounts and 37 nonresidential accounts, which amounts to a deficit of $420,487. The penalty fees accrued throughout April, May and June is now nearly $58,000, but those will never be collected.

Moore said the city started reaching out to customers on the list to begin repayment plans and encourage them to pay what they can.

On June 16, State Treasurer Dale Folwell called on Cooper and Attorney General Josh Stein to grant waivers for Executive Order 142 for cities that operate citizen-owned utilities in an effort to prevent bankruptcy. Landis’ electric service is considered citizen-owned because it uses ElectriCities.

“While the order is meant to help people during the economic hardship caused by COVID-19, citizen-owned utilities across the state have seen precipitous drops in revenue due to lower business usage and non-payment of utility bills,” the treasurer stated in a news release. “This results in the cities being unable to pay for the costs of providing those services.”

Folwell also called on the state’s Local Government Commission to form a working group, which will include the governor, to evaluate and prevent a significant financial impact to utilities systems in cities and towns across the state.

The LGC provides guidance and oversight to more than 1,300 units of local government and has the ability to take over the finances of any governmental unit if it’s necessary to help that unit prevent bankruptcy.

“I think we have done what we can do,” Seaford said, adding that the town does have some reserves.

In Landis’ 2020-21 budget, Barefoot said the town would be receiving a one-time rebate from ElectriCities in the amount of $709,801, which can be used to reduce the town’s debt.

And while Landis can “weather the storm for a little while,” Seaford said, if the prohibition is extended, it will then be up to state government to provide solutions for the unintended consequences of nonpayment.

“For the foreseeable future, we’re OK,” she said. “But at some point, we do have to hold our citizens accountable to pay their dues.”

Contact reporter Natalie Anderson at 704-797-4246.

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