Aging Sewer System Imperils North Carolina Town’s Finances

Shrinking and storm-damaged town struggles to shoulder the costly burden of clean water.

Even before the storms, decline was evident. About half the storefronts on Main Street were occupied before Hurricane Matthew, local leaders said. Photo © Brett Walton/Circle of Blue

By Brett Walton, Circle of Blue

FAIR BLUFF, North Carolina — Even before hurricanes drowned its commercial district twice in three years, this tiny town in the state’s southern swamplands had trouble paying its bills.

Fair Bluff, a crossroads community on the Lumber River some 75 miles from the Atlantic coast, was in a bind. It didn’t make a losing bet on an outlandish tourist attraction or an ill-fated business park. It wasn’t done in by potholes or embezzlement. What caused the town to overdraw its bank account was its rickety sewer system.

Riddled with cracks, Fair Bluff’s aging sewer pipes were a sieve, allowing water to seep in from underground. More than a nuisance, the inflow to the pipes was an unwanted intrusion. It was a large, unnecessary expense since the town had to pay to treat it. At the same time, Fair Bluff’s population was slowly shrinking, leaving fewer people to cover monthly bills that grew in tandem with the age of its assets. Costs soon exceeded revenues.

“Every year we were running a deficit in the sewer part: deficit, deficit, deficit, deficit,” Al Leonard, the part-time town manager, told Circle of Blue. “And that’s what put the town in financial peril.”

Then the storms hit and turned a mounting problem into a crisis. In October 2016, Hurricane Matthew pushed the Lumber River over its banks and flooded Main Street with four feet of water. At least 71 homes and an apartment complex were ruined. It was the largest flood in the historical record — a distinction it would not hold for long. History repeated last September when Hurricane Florence, which broke rainfall records across the Carolinas, flooded the same properties again. The water on Main Street rose a few inches higher than during Matthew. The only business to have reopened in the flood zone is the U.S. Post Office.

The damage accelerated a residential exodus that was already in motion. Fair Bluff’s population peaked two decades ago at just under 1,200. After that, the decline was slow and steady, due in large part to economic and technological changes — industrial mechanization, shuttered factories and processing plants, the appeal of metropolitan areas, the rise of e-commerce — that are suffocating America’s rural communities. Right before the floods, about 900 people called Fair Bluff home. Today, after displacement from the storms, about 600 remain, Leonard reckons.

In a dynamic era of more powerful storms and withering droughts, rural communities are on the front lines of newly hazardous terrain. During California’s historic five-year drought that ended in 2017, thousands of rural wells went dry. Today in the Mississippi River basin breached levees have flooded small towns in Arkansas, Iowa, Missouri, Nebraska, and Oklahoma. At the same time, many rural communities are in the throes of a disruptive demographic transition. People are aging, populations are contracting, and the burden of maintaining roads, sewage facilities, and drinking water treatment plants that were designed for more inhabitants is falling to a smaller number of people.

The twin disasters in Fair Bluff are the latest page in this story of rural tumult. The floods left the town, its sewer system, and its residents with a losing equation, said Kim Colson, director of the North Carolina Division of Water Infrastructure.

“The aging infrastructure leads to additional expenses, the loss of customers lead to reduced revenue,” Colson told Circle of Blue. “It’s really a double impact on the town.”

Disaster Aid Comes Through

Other North Carolina towns are feeling that pinch, too. Rural, economically distressed communities have some of the highest water and sewer rates in the state, Colson has found. Those towns could choose — and many do — to delay needed repairs and maintenance. But waiting comes with the risk that the system breaks down, thus increasing future costs.

Fair Bluff had its own sewage treatment facility, one that it built in 1997 with a 40-year U.S. Department of Agriculture loan. But the facility was being repeatedly fined by state regulators for exceeding pollution limits, said Billy Hammond, the town’s mayor. Fair Bluff faced a choice: invest in expensive upgrades to the sewage plant, or close it and send its waste to nearby Fairmont for treatment. In 2008, Fair Bluff chose to join with Fairmont and three other communities in a regional wastewater treatment partnership. A series of state and federal grants paid to connect the systems.

Though regionalization brings economies of scale, banding together with neighboring towns comes with its own risks, says Jeff Hughes, director of the University of North Carolina’s Environmental Finance Center. When five struggling communities unite, instead of forming one financially healthy “mega-entity,” they might end up pulling each other down, he told Circle of Blue.

Fair Bluff’s arrangement worked for a time. But the porous sewer pipes continued to be a drag on the budget. Plus, the town still had to pay off the debt for a wastewater plant that it wasn’t using. After the hurricanes, the financial problems came to a head. The twice-flooded town needed help, lots of help.

Fair Bluff’s struggles after Hurricane Matthew attracted the attention of Colson and his colleagues. Along with the Department of State Treasurer and the UNC Environmental Finance Center, they conducted a detailed assessment of the sewer infrastructure in the five towns in the regional partnership. They found that 46 percent of the assets needed to be replaced within the next five years.

Its population down by a third, Fair Bluff was in no condition to finance significant repair projects. The town is relying on the generosity of others to keep from collapsing. Last year the town completed a $3 million sewer line replacement that was funded with a U.S. Department of Housing and Urban Development grant. Next year it will begin work on another $2 million sewer replacement project, also funded by a federal grant. Both projects will reduce infiltration to the system. The town also received a $900,000 state grant for a new drinking water well and just over $1 million to replace sewer pumps. And the state gave Fair Bluff a grant to pay off the remaining debt on the mothballed wastewater plant.

Leonard, who assists five communities in Columbus County with town management, is extremely grateful for the intervention. He says that Fair Bluff cannot rebuild on its own.

“I’ve said in every meeting I’ve been in and I’ve said to every citizen, maybe to my peril, the recovery in Fair Bluff will go as far as someone else’s money will take us,” Leonard said.

Because rainfall is variable, it’s impossible to estimate accurately the reduction in infiltration into the sewer system, Leonard explained. But the value of the sturdier pipes that were installed last year is already reflected in significantly lower sewer payments to Fairmont. The monthly bill has dropped between $5,000 and $10,000, Leonard said.

It’s a blessing for Fair Bluff’s remaining residents, some of whom are still living with relatives while awaiting federal funds to repair homes damaged nearly three years ago during Hurricane Matthew. The town’s median household income is $27,898. Many households are even lower on the economic ladder. One in five households makes less than $10,000 a year.

If Fair Bluff had to pay for the projects on its own, residential sewer bills would have been “extraordinarily high” and a burden, Colson said.

“Affordability is a big question right now with respect to water bills across the county,” Colson added. “If your sewer bill needs to be $120 a month and that’s just sewer, it’s getting into an area where it’s just not competitive. Then even more people leave the town, which faces a more significant revenue crisis and that’s not sustainable.”

A Canary on the Coastal Plain?

Colson worries about the future of the state’s small systems. Fair Bluff, instead of being an exception, might turn out to be one of many.

“We do have a number of systems across the state that have stagnant growth, limited customer bases, limited revenue,” Colson reflected. “They really struggle.”

Colson looks at the Fair Bluff initiative as a harbinger and a test case for other small North Carolina towns. Plotting a path forward for these communities is part of the State Water Infrastructure Authority’s master plan, which was published in 2017.

The plan has three interconnected areas of emphasis: infrastructure, finance, and management. The goal is to foster viable utilities that can raise sufficient revenue to maintain, operate, and invest in their water and sewer systems.

Regionalization is one option for communities that cannot survive on their own, Colson said. There are other options, too. In extreme cases, towns might have to undergo a dramatic makeover: close down central wastewater treatment plants and their large network of pipes and shift to smaller treatment units, like septic tanks, at either the household or neighborhood scale.

Decentralization has not happened yet in North Carolina, Colson said. But it’s early days, relatively speaking. The state is just beginning to map out systems of concern.

Reporting for this article was made possible by a travel grant from the Institute for Journalism and Natural Resources.