Amends GS 160A-312 (city authority to operate public enterprises) and GS 153A-275 (county authority to operate public enterprises) to add a new subsection (d) to each statute, requiring cities and counties to account for a public enterprise in a separate fund and prohibit the transfer of any money from that separate fund to any other fund except as provided in new subsection (d) or Article 3 of GS Chapter 159. Permits obligations of the public enterprise to be paid out of the separate fund. Lists permitted transfers out of the separate fund, if applicable, as follows: (1) for a capitol project fund established for the construction or replacement of assets for that public enterprise; (2) to repay the city or county for any monies loaned to the public enterprise; (3) to a fund within the city or county to cover the public enterprise's portion of any costs shared across city or county funds, including salaries and benefits of shared personnel; or (4) for debt service related to the public enterprise. Adds new subsection (e) to each statute, defining outside the corporate limits to include any area outside the principal municipal corporate limits without regard to the county. 

Amends GS 160A-314(a) (city authority to fix and enforce rates) and GS 153A-277(a) (county authority to fix and enforce rates), providing that different schedules for rents, rates, fees, charges, and penalties can be adopted for services provided outside of the city or county only if approved by the Local Government Commission after a public hearing. Adds that cities and counties must use revenues derived from rates, fees, charging, and penalties for the purpose of paying the expenses of maintaining, operating, and expanding the public enterprise including debt payments and capital reserves. 

Amends GS 159-13(b)(14), deleting the provision prohibiting an appropriation to be made from a utility or public service enterprise fund to any other fund than the appropriate debt service fund unless the total of all other appropriations in the fund equal or exceed the amount that will be required during the fiscal year, as shown by the budget ordinance, to meet operating expenses, capital outlay, and debt service on outstanding utility or enterprise bonds or notes. Now provides that, except as provided in GS 153A-277, GS 160A-312, or subdivision (14) of GS 159-13(b), no appropriation can be made from a utility or public service enterprise fund to any other fund than the appropriate debt service fund.

States that the General Assembly finds that the ability of a city or county to efficiently and effectively provide public enterprise services, particularly water and sewer services, is challenged by that local government opting to use revenues of the public enterprise for purposes other than (1) paying the costs of operating the public enterprise, (2) making debt service payments, (3) investing in improvements to the infrastructure of that public enterprise, and (4) reimbursing the unit of local government for actual direct services provided to the public enterprise. States that the General Assembly further finds that any excess net revenues should be used to lower rates, advance fund debt service, and fund infrastructure improvements of that public enterprise. 

Directs the Legislative Research Commission to study and make recommendations on four specified issues, including fee and charge setting by units of local government in the operation of a water or sewer system including collection rates of those fees and charges. Requires the Legislative Research Commission to consult with the Local Government Commission, the UNC School of Government, the Department of Environmental Quality, the NC League of Municipalities, the NC County Commissioners Association, and others in making the study. Directs the Legislative Research Commission to make an interim report to the 2017 Regular Session of the General Assembly prior to its reconvening in 2018, and to make a final report to the 2019 Regular Session of the General Assembly.

Effective July 1, 2017.