Back to April 2011 home page

REGIONALREPORT Eastern

Cities: Switch off our debt for power plants 

It’s tough to recruit and retain businesses when your electricity costs are a third higher than the state average, so it’s no wonder that some leaders of 32 Eastern North Carolina municipalities are willing to try what amounts to a Hail Mary pass to reduce them. But many, even within their own camp, say they don’t have a prayer of getting Duke Energy Corp. and Progress Energy Inc. to swallow $2.4 billion in debt their cities and towns incurred 30 years ago, when they bought shares of power plants in an effort to obtain cheap electricity.

The initial reaction from Charlotte-based Duke, which is seeking regulatory approval for its acquisition of Raleigh-based Progress, wasn’t favorable. “When we purchased Progress, it was a $26 billion transaction that included assuming about $12 billion of Progress debt,” spokesman Tom Williams says. “It did not include acquiring debt that Duke or Progress didn’t incur from the municipalities.”

Their problem goes back to 1981, when the 32 cities and towns, acting as the North Carolina Eastern Municipal Power Agency, bought shares in three nuclear and two coal-burning plants from Progress’ forerunner. But the deal backfired when their share of the plants’ costs soared in the decade following the 1979 accident at the Three Mile Island nuclear plant in Pennsylvania. The bonds won’t be paid off till 2026. “I’ve seen citizens paying as high as $750 a month,” says Roger McLean, mayor of Elizabeth City, which owes about $93 million. “It affects our ability to grow as a town and to maintain jobs.”

He’s one of about 20 mayors lobbying Duke and Progress to take on the debt as part of the merger. But they face an uphill fight. “The Municipal Power Agency serves 500,000 people, and the merged Duke and Progress will serve 7 million,” says a city manager who asked not to be named because his mayor is involved in the lobbying effort. “You’re not going to tell me the legislature or the State Utilities Commission is going to say, ‘You 7 million people have got to bail out the 500,000 others.’”

Plus, he adds, Duke and Progress can’t just forgive the debt, because they don’t hold it. Institutional bond agencies do. He also says that some of the municipalities dug their debt holes deeper by shunting proceeds from electricity sales to their general funds. That was a politically popular means of holding down property taxes, but it has slowed payback of the bonds.

If the mayors fail to persuade Duke Energy and lawmakers to bail out their towns, what’s next? Some municipal administrators say they want to get out of the power business by getting Duke to buy their infrastructure. Otherwise, they’ll be paying off bonds for 15 more year

 

ROCKY MOUNTQVC shopping channel plans to spend $71 million to expand its distribution center here by fall 2012. The West Chester, Pa.-based company plans to add 200 full-time jobs, giving it more than 740, and 300 part-time ones, giving it nearly 1,300.

WILMINGTONPharmaceutical Product Development is looking for a CEO to replace David Grange, who retires May 18. Grange, 63, will act as a consultant for the contract-research organization for the rest of the year.

CLINTON
Dodger planned to close two small apparel plants here by the end of March, eliminating more than 83 jobs. The Eldora, Iowa-based company cited operating losses.

FAYETTEVILLE — Bookings are down and revenue has been flat, but the cost of salaries and benefits for employees of the Crown Center entertainment complex has increased 71% since 2002. Cumberland County commissioners say they plan to study the complex’s finances.

WILMINGTON
— A study commissioned by the N.C. State Ports Authority says ports here and in Morehead City contribute $7.5 billion to the state’s economy, affecting 65,000 jobs in North Carolina. It also found that the ports generate nearly $500 million for state and local tax coffers.

 
GREENVILLEDSM, the Dutch parent of DSM Pharmaceuticals, says it plans to change its focus from chemicals to life and material sciences. Local executives say the approach will help the company grow here — where it employs 1,250 making drugs and high-performance materials — and internationally.

Sanderson Farms will wait till next year before deciding whether to build a second chicken-processing plant in North Carolina. It wants to further evaluate chicken-feed prices and the poultry market. The Laurel, Miss.-based company is considering sites in Wayne and Nash counties for a plant that would employ about 1,100. A Nash County site has met fierce resistance from nearby residents. The company opened a plant, feed mill and hatchery last year in Kinston. It employs about 500, and that number will rise to 1,500 next year.