House committee substitute deletes the content of the 1st edition and now provides the following.

Part I

Section 1

Makes the following changes to GS Chapter 159G, Water Infrastructure.

Amends GS 159G-20 to define distressed unit, operating deficit, and Viable Utility Reserve. Modifies the term local government unit to also include a metropolitan water and sewerage district. Makes organizational changes and updates GS Chapter 162A Article and GS Chapter 160A references.

Amends GS 159G-22 to establish the Viable Utility Reserve (Reserve) account within the Water Infrastructure Fund to receive appropriated State funds. Specifies that credited revenue to the account is neither received from the federal government nor provided as a match for federal funds. Directs the Department of Environmental Quality (DEQ) to establish accounts within the Reserve to administer grants for public water systems or wastewater systems owned by local government units. 

Amends GS 159G-30 to include the administration of grants made from the Reserve, through the Division of Water Infrastructure (Division), in DEQ's responsibilities. Makes clarifying and technical changes.

Amends GS 159G-31 to establish that a local government unit, as now defined, is eligible to apply for a grant from the Reserve. Also authorizes the Local Government Commission (Commission) to submit an application on behalf of a distressed unit for an emergency grant to cover operating deficits of the unit's public water system or wastewater system; deems such applications approved by the Commission upon submission.

Amends GS 159G-32 to specify six authorized uses for grants from the Reserve, including rehabilitating existing public water or wastewater infrastructure, decentralizing an existing public water or wastewater system, funding a study of rates, asset inventory and assessment, merger and regionalization options, and providing emergency grants for operating deficits.

Enacts GS 159G-34.5, detailing four types of authorized Reserve grants: (1) an asset assessment and rate study grant, (2) a merger/regionalization feasibility grant, (3) a project grant, and (4) emergency grant for operating deficit. Conditions the emergency grant category upon the Commission exercising control over the affairs of the unit's public water system or wastewater system or the unit or authority that owns or operates the system pursuant to specified state law. Authorizes Reserve grants to be awarded to a regional council or government or a regional planning commission if DEQ and the Local Government Commission determine it is in the best interest of the local government unit. Requires separate accounts in the Reserve for each type of grant.

Amends GS 159G-35 to require the Local Government Commission and the State Water Infrastructure Authority (Authority) to jointly develop evaluation criteria to review grant applications and award grants from the Reserve as provided in GS 159G-39, as amended. Makes clarifying changes.

Amends GS 159G-36 to prohibit the amount of a Reserve grant from exceeding the construction costs of a project. Specifies that grant availability is limited to the extent that other funding sources are not reasonably available to the applicant. Caps grants from the Reserve to any single local government unit at $15 million, and at $30 million where two or more governmental units are merging into a single utility, except emergency grants are capped at $750,000 per local government unit with a duration limit of three consecutive fiscal year.

Expands the application provisions set forth in GS 159G-37 concerning loans and grants from other Reserves under the Chapter to include applications for grants from the Reserve.

Amends GS 159G-39 to require the Local Government Commission to approve the grant award and terms before a grant can be awarded. Deems any emergency grant application submitted by the Commission on behalf of a distressed unit to be approved by the Commission. Authorizes DEQ and the Local Government Commission to impose specific performance measures or conditions on a Reserve grant, in their discretion.

Enacts GS 159G-45 to require the Authority and the Local Government Commission to develop criteria for assessment and review of local government units to identify distressed units, defined as a public water or wastewater system exhibiting signs of failure to identify or address those financial or operating needs necessary to enable that system to become or to remain a local government unit generating sufficient revenues to adequately fund management and operations, personnel, appropriate levels of maintenance, and reinvestment that facilitate the provision of reliable water or wastewater services. Details five components which the criteria should address, including whether the public water or wastewater system has an established, operational, and adequately funded program for its repair, maintenance, and management. Requires distressed units to take certain actions, as described, including developing an action plan for short- and long-term infrastructure repair, maintenance and management, continuing education of the governing board and system operating staff, and long-term financial management. Also requires distressed units to conduct an asset assessment and rate study, and participate in a training and educational program. Provides that once the requirements are met, the local government unit is no longer identified as a distressed unit for the remainder of that assessment and review cycle. Requires the assessment and review cycle of local government units to be no less than every two years, with frequency to be established by the Authority and the Local Government Commission.

Effective October 1, 2020.

Section 2

Enacts Article 10, Dissolution and Merger of Units, to GS Chapter 162A. Defines unit as the same entities created under GS Chapter 162A that are included in the term local government unit under GS Chapter 159G, as amended. Details information which must be provided to the Environmental Management Commission (Commission) prior to any action under the Article to merge or dissolve any unit. Requires the Commission to provide a copy of the submitted information to DEQ and the Local Government Commission upon receipt of a request to dissolve or merge. Specifies notice requirements for district boards of affected units and any other governing boards affected upon confirmation of the time and place for a public hearing on dissolution or merger. 

Authorizes a unit to merge with any other unit, county, city, consolidated city-county, sanitary district, or  joint agency, as described, (1)  if the merger is a condition of receiving a grant from the Reserve or (2) upon approval of the Commission, in consultation with DEQ and the Local Government Commission. Provides for the the transfer of assets, liabilities, and obligations by resolution of the Commission, as specified, and details dissolving a unit upon satisfaction of certain criteria. 

Authorizes a unit to be dissolved (1) if the merger is a condition of receiving a grant from the Reserve or (2) in order to merge with another unit, county, city, consolidated city-county, sanitary district, or joint agency, as described, and establish a new entity upon approval of the Commission, in consultation with DEQ and the Local Government Commission. Provides for the the transfer of assets, liabilities, and obligations by resolution of the Commission, as specified, and dissolving a unit.

Establishes the effective date for merger or dissolution upon the adoption of a resolution by the Commission to be fixed as of June 30 following the adoption or the second June 30 following the adoption of the resolution. Details the effect of a merger or dissolution upon adoption of a resolution by the Commission and authorizes all governing boards and district boards to take actions and execute the documents necessary to effectuate the described provisions. 

Effective October 1, 2020.

Section 3

Enacts Part 5, Water and Wastewater Systems, to Article 20, GS Chapter 160A. Sets forth defined terms. Authorizes interlocal cooperation between local government units for any purpose. Makes the joint exercise of powers provisions of Part 1 of Article 20 apply when two or more local government units agree to contract for one or more undertaking under new Part 5. 

Effective October 1, 2020.

Section 4

Directs DEQ to study the statutes and rules governing subbasin transfers. Details requirements of the study, including whether the costs of complying with specific statutory requirements are worth the benefits of the requirements. Requires DEQ to submit a report to the Commission by January 15, 2021.

Section 5

Directs the Department of State Treasurer to study the feasibility of authorizing historical charts for local government units that have become or may become defunct. Details requirements of the study, including the consequences of such charters. Requires the Department of State Treasurer to report to the General Assembly by January 15, 2021.

Section 6

Repeals Section 14 (Water/Wastewater Public Enterprise Reform) of SB 553 (Regulatory Reform Act of 2019) if that act becomes law.

Part II

Section 7

Directs the Department of Commerce to transfer, by August 15, 2020, $9 million in nonrecurring funds from the One North Carolina Fund to the Water Infrastructure Fund for 2020-21. Appropriates the transferred funds to the Viable Utility Reserve to implement the award of grants pursuant to GS 159G-32, as amended.

Part III

Section 8

Reenacts and incorporates by reference the State Budget Act, GS Chapter 143C. 

Section 9

Provides for the continued validity of 2019 legislation expressly appropriating funds to a State entity covered by the act unless expressly repealed or amended.

Section 10

Provides for Parts II and III of the act to become effective July 1, 2020.

Changes the act't titles.