North Carolina Department of Justice
North Carolina Department of Justice
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April 22, 1977 Motor Vehicles; Mass Transportation System Operated By Choanoke Area Development Association (CADA) For Certain Cities, Towns and Counties



Requested By: Town of Winton, Hertford County, Bertie County and Choanoke Area Development Association (CADA)


Question: Can the counties of Halifax, Northampton, Hertford, and Bertie and the incorporated cities and towns therein jointly or through CADA, a non-profit corporation, develop and operate a mass transportation system within those cities, towns and counties to provide to the general public transporation for compensation and be free from regulation by the North Carolina Utilties Commission?


Conclusion: While the cities, towns and CADA could establish a mass transportation system of limited geographic scope to provide to the general public transportation for compensation without regulation from the North Carolina Utilities Commission, the counties cannot establish such system without regulation by the Utilities Commission. As a consequence, a four-county transportation area cannot be developed by the cities and towns therein.


For a number of years, the cities, towns and counties, through CADA, have operated a transportation system under a number of agency contracts such as those with the Bertie County Social Services and Ahoskie Vocational Rehabilitation by which the primary function of CADA is to transport disadvantaged persons to medical facilities. In the year 1975, CADA vehicles operated approximately 584,000 vehicle miles at a cost of $171,000. Currently CADA anticipates considerable expansion of its services including provision for regular route service to the public for compensation.

Municipalities and counties have express statutory authority to operate public enterprises (See

G.S. 160A-312; G.S. 153A-275) and a mass transporation system is deemed to be a public enterprise (See e G.S. 160A-311(5); G.S. 153A-274(6)). G.S. 62-3(23)(a)(3) includes within the definition of public utility the bus transportation of persons or property for the public for compensation and G.S. 62-2 places regulatory authority over such public utilities in the Utilities Commission, with various exclusions and exemptions. G.S. 62-3(19) defines a municipality as a city, town or village and G.S. 62-3(d) excludes municipal-owned operations from the definition of a public utility. The public utilities of municipalities are then excluded from regulation by the Utilities Commission. Municipalities are even authorized to act jointly, and with counties, as a unit and to operate through an agency. (See G.S. 160A-460 to 464). However, a municipality can operate a public enterprise outside its limits only within reasonable limits. (G.S. 160A-312) We note that the Utilities Commission regards that reasonable limit of operation as being three (3) miles outside the geographic boundaries for a municipality having population between 2,500 and 25,000. (See N.C.U.C. Rule R2-28(b)(3)(a)). While we do not pass upon the reasonableness of the Utilities Commission rule, we do believe that the rule expresses a view that the Legislature did not intend a four-county area to be within a reasonable limit for a simple small city or town. We are, then, forced to conclude that the four county area is outside the geographic limit of reasonableness for a municipality operated transportation system.

Without the joinder of the four counties in the unit of operation, we opine that CADA cannot operate a four county area mass transportation system for the public for compensation under the current statutory authority even with submission to the Utilities Commission for regulation. Of course, if the counties are excluded from regulation by the Utilities Commission, the counties and CADA could operate within the four-county area without submission to the regulatory power of the Utilities Commission since the counties do currently participate in CADA operation. Thus, the ultimate resolution of this matter depends upon whether counties are excluded or exempted from regulation by the Utilities Commission in the operation of a public enterprise utility.

Counties do not have statutory exclusion from regulation by the Utilities Commission under G.S. 62-3(d) as do municipalities because a county is not considered a municipality under G.S. 62-3(19). Historically a county has not been considered a municipality; and there seems to be no avenue open by which a county, by judicial construction, could be considered to be a municipality. (See Martin v. Commissioners of Wake, 208 N.C. 354, 365 (135). There could be an exclusion if a county were not a "person" under G.S. 62-3(23)(a). "Person" is defined by G.S. 62-3(21) as a corporation, individual, copartnership, company, association, or combination of individual or organizations doing business as a unit. Several counties acting jointly are an association or a combination of organizations doing business as a unit so as to fit within the statutory definition of a person. As a "person" a county thereupon falls into the definition of a public utility under G.S. 62-3(23)(a). Thus, it appears that counties not only do not have a statutory or judicially construed exclusion from regulation as a public utility but are specifically included within the statutory framework as a public utility to be regulated.

Exemption from regulation by the Utilities Commission is governed by G.S. 62-260. The statute denys exemption to a public utility transporting passengers or property by motor vehicle for compensation. Since the counties propose to transport passengers by bus for compensation, exemption is not available under this statute.

One other statutory concept must be treated, G.S. 160A-460 through 464 defines a "unit" as a county, city or agency of local government and specifically authorizes joint undertakings by such units in the exercise of powers. While this statutory grant might constitute an authority giving to counties the same status as municipalities respecting the operation of public enterprises, G.S. 160A-465 states that as to those undertakings subject to approval of a department or agency of the state, the mentioned statutory powers are not granted. In consequence, those statutes are not available as a grant of authority to a county in the operation of a public utility private enterprise.

In summary, while the cities and towns may operate a mass transportation system for the public for compensation without regulation by the Utilities Commission, counties do not currently enjoy that same exclusion nor is there any exemption from such regulation. Moreover, while the cities and towns may operate a joint undertaking, the four-county area is outside the reasonable geographic limitation of their authority.

Rufus L. Edmisten Attorney General

Richard L. Griffin Associate Attorney