A BILL TO BE ENTITLED AN ACT TO PROTECT THE FISCAL HEALTH OF NORTH CAROLINA'S WATER AND SEWER SYSTEMS.
Amends GS 159-181 by adding a new subsection giving the Local Government Commission (Commission) authority to impound the books and records of the water and/or sewer enterprise system of any unit of local government or public authority, assume full control of all its affairs, or take any lesser actions deemed necessary by the Commission when, for three consecutive fiscal years, the audited financial statements show that the unit or public authority meets any one of the following three criteria:
(1) The system experienced negative working capital.
(2) The system experienced a quick ratio of less than 1.0.
(3) The unit or public authority experienced a net loss of revenue in the enterprise system using the modified accrual budgetary basis of accounting.
Before the Commission assumes full control of an enterprise system, it must find that the impact of the three criteria above threatens the financial stability of the unit or public authority and that corrective changes in its operation of the system have not been made after the unit or public authority receives notice and warning from the Commission, which may come before the end of the three-year period. When a Commission takes action pursuant to this authority, it is vested with the powers of the governing board as the Commission deems necessary.
Defines working capital for the purposes of this subsection as current assets, such as cash, inventory, and accounts receivable, less current liabilities, determined by generally accepted accounting principles, and quick ratio of less than 1.0 as meaning the ratio of liquid assets, cash, and receivables to current liabilities is less than 1.0.
Effective July 1, 2013.
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