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Shutdown holding up Edenton water upgrades

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Anne-Marie Knighton

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By Miles Layton
Chowan Herald

Thursday, January 10, 2019

EDENTON — The partial shutdown of the federal government is holding up Edenton’s efforts to finance the improvements needed to get the town’s drinking water back in compliance with state law.

The N.C. Local Government Commission on Tuesday approved Edenton’s application for a $2.6 million U.S. Department of Agriculture loan. That loan, combined with a $1.1 million USDA grant the town was awarded, will pay for $3.7 million in upgrades and renovations to the town’s two water treatment plants.

The water plant improvements are needed, town officials say, to lift a water quality advisory imposed on Edenton’s drinking water by the N.C. Department of Environmental Quality. The town was issued the advisory because its drinking water contains elevated levels of trialomethanes, or THMs, a chemical by-product that forms when chlorine is used to disinfect drinking water. Exposure to THMs has been linked to increased risk for several forms of cancer. 

To speed up the water system project, PNC Bank has approved $2.6 million in interim financing for Edenton. The loan is for one year at an interest rate of around 4.5 percent. In January of 2020, the town will issue a water and sewer system revenue bond to the USDA, the proceeds of which will pay off the PNC loan.

Problem is, PNC needs a letter from the USDA agreeing to retire the project’s debt, but because of the federal government shutdown, no one from the USDA is available to write the letter.

Connor Crews, of McQuireWoods, the town’s bond counsel, has advised Edenton officials that PNC won't close on the loan until it gets USDA’s letter. What that means essentially is that the project will remain in limbo until the shutdown ends.

“We're in a holding pattern until the shutdown is resolved,” Town Manager Anne-Marie Knighton said.

Moreover, there's a possibility that Edenton’s borrowing costs may also be affected by the shutdown. Because interest rates may change while the USDA is closed, Edenton officials are facing the possibility that rates may range higher than 4.5 percent to the maximum 5 percent that the Local Government Commission will accept.

Despite agreeing to allow Edenton to pursue the USDA loan, members of the Local Government Commission had some criticism Tuesday for how the town handles it finances.

Knighton, who attended the meeting, said LGC members were referring to Edenton’s most recent audit report that listed several material weaknesses in the town’s accounting practices and internal fiscal controls. One finding from the audit, for example, was that purchase orders weren’t always prepared before purchases were made but instead prepared afterward.

“State Auditor (Beth Wood) said, ‘I'm tired of municipalities coming up here asking for approval of loans and begging forgiveness,’” Knighton said. “She asked some pretty tough questions about what we were doing — which we had outlined in our letter to the commission.”

Knighton said Wood “reluctantly” voted yes to allow Edenton to pursue the USDA grant, but state Treasurer Dale Folwell voted against it.

Knighton said Folwell told her after Tuesday’s meeting that his vote wasn’t targeted at Edenton. “(He said) there was a lot of pent-up emotion in the room that was not aimed at Edenton, but that they (LGC members) were trying to send a message to local governments that they need to take seriously the (commission’s) pre-audit and internal control requirements,” she said.

Knighton said she told Folwell that town officials didn’t take the criticism personally. “We understand and ... were appreciative of all their efforts and concerns,” she said.

Also on Tuesday, Edenton Town Council awarded a construction contract to Enviro-Tech, the Currituck County-based contractor expected to renovate the town’s Beaver Hill water treatment plant. Pending the outcome of the shutdown, town officials anticipate Enviro-Tech’s work taking six months to complete and the new plant being in service by the end of June.

Edenton is expected to continue to be in violation of the state standard for THMs until upgrades to the Beaver Hill plant are completed. Town officials expect the plant will then be capable of producing water that is compliant with the state’s standard for THMs.

Edenton has been exceeding the total THMs maximum contaminant level since 2015, when state rules changed. The town has been notifying water customers of the violations as well as its plan to bring the water system back into compliance.

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