The Town of Spring Hope was authorized to establish and revise rates for water and sewer services under the following statutory language:
A city may establish and revise from time to time schedules of rents, rates, fees, charges, and penalties for the use of or the services furnished by any public enterprise. Schedules of rents, rates, fees, charges, and penalties may vary according to classes of service, and different schedules may be adopted for services provided outside the corporate limits of the city.
G.S. 160A-314(a). This rate-making function is a proprietary rather than a governmental one, limited only by statute or contractual *251agreement. Aviation, Inc. v. Airport Authority, 288 N.C. 98, 215 S.E. 2d 552 (1975). See also Sides v. Hospital, 287 N.C. 14, 213 S.E. 2d 297 (1975); Woodie v. North Wilkesboro, 159 N.C. 353, 74 S.E. 924 (1912). Appellant does not allege any contractual limitations on the Town’s authority to raise sewer rates, but argues that the rate increase in instant case exceeds the authority granted the Town under the above-quoted statute.
In its opinion below, the Court of Appeals noted:
The great weight of authority is to the effect that in the setting of such rates and charges, a municipal body may include not only operating expenses and depreciation, but also capital cost associated with actual or anticipated growth or improvement of the facilities required for the furnishing of such services. See generally Annot., 61 A.L.R. 3d 1236 (1975); 12 McQuillin, Municipal Corporations, § 35.37c., at 488 (3d Ed. 1970); C. Rhyne, Municipal Law § 23-7, 500-501 (1957); 3 Yokley, Municipal Corporations § 503, at 214-19 (1958).
Spring Hope v. Bissette, 53 N.C. App. at 213, 280 S.E. 2d at 492-93. It is in light of this general authority that we proceed to consider whether our statute authorized the Town to charge an increased sewer rate based upon the expense of replacing an outmoded component of that system prior to the time the new component began operation.
Appellant argues that G.S. 160A-314(a) does not authorize the Town of Spring Hope to increase its charge for sewer services to reflect the cost of the new waste water treatment plant until such time as the new plant begins operation. Appellant relies on the language of the statute which speaks only of “services furnished” and does not specify that a municipality can charge for services “to be furnished.” Cf. G.S. 162A-9. The dissent in the Court of Appeals adopts this position.
While we agree that under this statute a municipality may not charge for services “to be furnished,” we fail to see how that proposition governs this case. Appellant was charged for sewer service, a service he received during the period for which he was billed and now refuses to pay. Construction of the new water treatment plant was not intended to, nor did it result in, providing a new or a higher level of service to the sewer system’s *252customers. When the new plant went into operation, the customers received nothing they had not theretofore received; thus, the increase in the rate did not reflect any services yet to be furnished, but merely the same service which had previously been furnished, ie., the efficient removal of waste water. The increase in the rate, far from being a charge for a new service not yet provided by the Town, represented the cost of a necessary improvement to the already existing sewer system without which the Town could not continue to provide sewer service.
The Town of Spring Hope acted well within its statutory authority when it increased water and sewer charges to pay for the new waste treatment facility. The Town was not required by the language of G.S. 160A-314(a) to wait until the plant began operations to institute such increases.
Neither were the increases unreasonable. Raising the rates was necessary to service the debt created by the bonds the Town issued to finance construction of the plant. Without the new facility the Town would not have been allowed to continue to discharge its waste into Hendricks Creek and, without this outlet for waste water, the Town would have been unable to continue to provide sewer service. Obviously the temporary permit was granted upon the Town’s assurances that the treatment facilities were being upgraded. Without this temporary permit, the Town would not have been able to provide to appellant the full benefit of sewer service, which he admits he received.
The Town’s action in raising the rates was of necessity, and we agree with the Court of Appeals that appellant has made “no showing of arbitrary action in the case now before us . . . .” Town of Spring Hope v. Bissette, 53 N.C. App. at 213, 280 S.E. 2d at 493.
The decision of the Court of Appeals is
Affirmed.