2006 General Assembly adjourns!
Legislative Wrap-Up

The General Assembly adjourned its 2006 Regular Session on Friday morning, July 28.  The session ended sine die when it adjourned shortly after 1:00 a.m.

Over 5,000 bills were introduced during the 2005/2006 legislative biennium—a record number.  As always, the League fought many battles to preserve municipal revenues and authority.  We were successful in avoiding a number of bad bills during the session and were involved in improving many others.

We very much appreciate the hard work of our legislators, and we thank the many members of the General Assembly who supported the municipal position on bills and worked with us in various ways.  We express our thanks as well to the leaders of the two bodies, House Speaker Jim Black and Senate President Pro Tem Marc Basnight, and the members of their staffs, for their many courtesies during the session.

We also appreciate the willingness of other members of the House and Senate leadership to work with us on municipal issues.  It would be impossible to list the many members of the House and Senate that worked with us during the legislative session, but we have attempted below to give recognition to those who sponsored or provided special assistance on major legislation of interest to municipalities.

The following are highlights of the state budget and of actions taken on priority municipal issues by League category.  If you need a copy of these or any other bills, please contact the Legislative Printed Bills Office at 919-733-5648 or the League office.  Remember that bills are readily available on the General Assembly's website at http://www.ncleg.net .  Please contact the League staff if you have any particular questions or concerns regarding any piece of legislation.

Note on Status of Legislation

Throughout this Bulletin , legislation that has become law is delineated with its session law number after the bill title (e.g. SL 2006-1).  Even though these acts have become law, some have delayed effective dates, so always check the legislation itself.  Some of the bills mentioned below have been ratified by the House and Senate but have not yet become law.  Bills are presented to the Governor on the day following ratification for approval or veto.  During the session, if the Governor signs the bill or takes no action on it within 10 days after presentation, the bill becomes law.  After adjournment of the General Assembly session, however, the Governor has 30 days from the date of adjournment to veto ratified legislation, sign it into law, or allow it to become law without his signature.  Note that most local bills are not presented to the Governor for approval and become law upon ratification by the General Assembly.

2006 Budget Overview

The General Assembly approved the state budget modification bill on July 6.  SB 1741 – Modify Appropriations Act of 2005 (SL 2006-66) reduces the state sales tax rate from 4.5 to 4.25 percent effective December 1, 2006 and lowers the highest personal income tax rate from 8.25 to 8 percent effective January 1, 2007.  It caps the variable wholesale component of the gas tax at 12.4 cents per gallon through June 30, 2007.

The budget pumps $27 million into the court system, with funding for improved technology as well as additional judges and staff.  Counties will get $27.4 million in one-time Medicaid relief.  Additional funding is provided for mental health programs and the Governor's educational initiatives.  State employees will receive a 5.5 percent raise, while teachers and community college and university faculty will get 6 percent.

The budget includes more than $500 million in reserves for savings and the state building repair fund.  It also authorizes some $672 million in special indebtedness for capital projects including the expansion of the N.C. Museum of Art, a new public health laboratory, a hospital at Central Prison, replacement of state mental hospitals in Morganton and Goldsboro, and a secondary data recovery center.

ANNEXATION

Local restrictions .   There were no statewide anti-annexation bills introduced this session.  However, two local anti-annexation bills were enacted.   HB 1819 – Lyons Station Annexation (SL 2006-4) provides that as long as state law (G.S. 122C-410) prevents annexation by any municipality of any territory within the Camp Butner reservation without written approval of the Secretary of Health and Human Services, no municipality may annex under G.S. Chapter 160A, Article 4A any part of the Lyons Station Sanitary District.  The prohibition expires on June 30, 2008.  Camp Butner and the Lyons Station Sanitary District are part of a special state tax district established by the General Assembly in 1983.  HB 1852 – Lincoln Annexations (SL 2006-6) prohibits any municipality located outside of Lincoln County from annexing territory within Lincoln County or extendending its extraterritorial jurisdiction into Lincoln County.

Solid Waste Firms. Legislation addressing the broader issue of “displacement” of solid waste collection companies also included several changes to the existing compensation provisions in the annexation statutes.  SB 951 – Public-Private Solid Waste Collection (SL 2006-193) is applicable to city-initiated annexations for which a resolution of intent is adopted on or after January 1, 2007, and to annexations by act of the General Assembly where the local bill is enacted on or after January 1, 2007.  The act increases the economic loss payment to solid waste firms to 15 times the average gross monthly revenue (was 12 times).  Some amendments that should prove beneficial include a requirement that firms must file notice of the provision of solid waste collection service with the city clerk of all cities located in the firm's collection area or within five miles thereof.  Also, economic loss is to be paid in installments rather than in a single lump sum, and remaining payments are forfeited if the firm terminates service to customers in the area prior to the effective date of annexation.  (See Environment below for synopsis of additional provisions of the act.)  We will be sending a separate memo with a more complete analysis of this legislation to the League membership in the near future.

ELECTIONS

A number of pieces of legislation affecting elections were enacted this session.  HB 1024 – Runoff Changes (SL 2006-192) makes procedural modifications directly involving cities by revising the municipal election schedule to provide more time for absentee voting and election administration.  Effective January 1, 2007, the act provides that notices of candidacy for municipal elections are to be filed between noon on the first Friday in July and the third Friday in July (was the first Friday in August).  The act also changes the dates for primaries in cities holding partisan elections to the second Tuesday after Labor Day, with any second primary to be held on the fourth Tuesday before the election.  Of further interest to municipalities are the bill's provisions authorizing the State Board of Elections to conduct pilot programs in which the “instant runoff” method of voting would be used in up to 10 cities for the 2007 elections and in up to 10 counties for the 2008 elections.  The instant runoff voting method is a system in which voters rank up to three of the candidates by order of preference, thereby eliminating the need for runoffs.

Several other bills relate to municipal elections through their modifications to rules affecting candidates and campaigns.  HB 2188 – Candidate Challenge Procedure (SL 2006-155) sets forth new procedures for challenging the qualifications of a candidate for office.  The act specifies when and how challenges are to be made, procedures for conduct of the hearing, and the candidate's burden of proof.  New rules relating to campaign contribution reporting thresholds, regulating the use of blank payee checks, and requiring political committee treasurer training are found in HB 1846 – 2006 Campaign Finance Changes (SL 2006-195).   The provisions of HB 1845 – Permitted Use of Campaign Funds (SL 2006-161) restrict the use of contributions made to candidates and campaign funds to those related to the campaign and office-holding duties and prohibit the personal use of contributions.  HB 1847 – Electioneering Communications (SL 2006-182) is designed to strengthen existing provisions regulating political organizations defined under Section 527 of the Internal Revenue Code.  HB 88 – Electoral Fairness Act (SL 2006-234) and HB 128 - Election Changes make a number of changes to the state laws related to political party nominees and ballot eligibility, counting of absentee votes and challenged ballots, corporate contributions, and other matters.

ENVIRONMENT

Most of the action on environmental issues took place in the waning days of the session.  Solid waste issues dominated the agenda.

Drinking Water .  Improvement in public water supply compliance and technical assistance staffing was a priority of the Governor and the Secretary of Environment and Natural Resources this year.  A series of newspaper articles this year highlighted problems with water supply testing in public systems and concluded that the state's water supply division was understaffed and underfunded.  The articles also emphasized the lack of regulatory oversight of private drinking water wells in most parts of the state.  The budget bill, SB 1741 – Modify Appropriations Act of 2005 (SL 2006-66) , increases the annual operating permit fees for community water systems and imposes new fees for construction or alteration of water distribution systems, groundwater systems, and surface water systems.  The operating permit fees had not been increased since they were first implemented in 1992.  At the League's request, the effective date was postponed until January 1, 2007, to avoid unanticipated impact on the current year's budget.  As fees typically come due in the fall, the higher rates should not affect budgets until next fiscal year.  HB 2873 - Safe Drinking Water/Private Wells (SL 2006-202) requires all counties to implement permitting, inspection and testing programs for private drinking water wells.  Permits will be required for construction or repair of a private well or transient water system.  Newly constructed private wells must be tested for certain parameters.

Genetically Modified Crops .  A controversial proposal to preempt local governments from regulating genetically modified plants died in conference.  HB 671 - Plant Regulation Preemption passed the House and Senate in different forms in 2005 and a conference committee was appointed to work out the differences.  The committee failed to issue a conference report prior to the end of the 2006 session.

Interbasin Transfer .  Although it seemed to generate considerable interest from individual cities, SB 1561 - Amend Interbasin Transfer Laws did not emerge from committee and remained in Senate Agriculture and Environment at the end of the session.

Nutrient Offset .   Two bills address an ongoing effort to determine the appropriate fee to cover the costs of mitigation in nutrient sensitive river basins.  SB 1862 - Nutrient Offset Payments (SL 2006-215) sets a temporary nutrient offset payment at $11 per pound of nitrogen and per tenth of a pound of phosphorous.  These rates replace higher fees established by the Environmental Management Commission in January of this year.  The act directs the Environmental Review Commission to study the offset payment program and make recommendations to the 2007 session.  It became effective August 1, 2006 and expires September 1, 2007.  SB 927 – Nutrient Offset Payments (SL 2006-218) specifies that the Department of Environment and Natural Resources is not required to accept phosphorous offset payments for the Tar-Pamlico River Basin if it finds that the payments are not sufficient to cover the full costs of the nutrient reduction measures needed to comply with the nutrient sensitive waters management strategy.

Landfills. Responding to concerns about several proposed mega-landfills that would import a great deal of waste from other states, t he General Assembly approved a one-year moratorium on permits to construct new landfills in SB 353 – Landfill Moratorium and Studies (SL 2006-244) .  The moratorium is in effect from August 1, 2006 to August 1, 2007 to allow time to study solid waste disposal issues.  The act includes a series of exceptions to the moratorium, listed below:

- An amendment, modification, or other change to a permit for a landfill issued on or before 1 June 2006.

- A permit for a horizontal or vertical expansion of the landfill permitted on or before 1 June 2006.

- A permit to construct a new landfill within the facility boundary identified in the facility plan of a landfill permitted on or before 1 June 2006.

- A permit to operate a new landfill if a permit to construct the new landfill was issued on or before 1 June 2006.

- A permit for a sanitary landfill used only to dispose of waste generated by a coal-fired generating unit that is owned or operated by an investor-owned utility subject to the requirements of G.S. 143-215.107D.

- A permit for a sanitary landfill determined to be necessary by the Secretary of Environment and Natural Resources in order to respond to an imminent hazard to public health or a natural disaster.

Legislation to specify the information to be included in public notices of proposed sanitary landfills and in landfill franchises granted by local governments was ratified as SB 1564 – Amend Solid Waste Franchise Statutes.  The bill also allows local governments the option of awarding a preliminary landfill franchise.  A proposal to impose a statewide tipping fee of $2 per ton-- HB 2845 - Statewide Solid Waste Tipping Fees-- did not move this session.

Sedimentation.  As a means of encouraging more local governments to accept responsibility for environmental regulatory programs, HB 1413 – Enhance Local Govt. Adm. of Env. Pgrms . authorizes a new limited delegation option for the erosion and sedimentation control program.  Under limited delegation, a local government can accept responsibility only for inspection and collection of fees, while the state Sedimentation Control Commission remains responsible for all other components of the program (such as plan review and enforcement).  The total fee that a local government may set under limited delegation is capped at $100 per acre.  A portion of this (currently $40) is to be remitted to the state, and the remainder used to cover the local costs of inspection and program administration.  A local government with limited delegation does not issue notices of violation—it must refer any potential violations to the state for further inspection and enforcement.  The limited delegation program is optional and does not limit the authority that local governments have to assess fees or issue notices of violation under fully delegated programs.  We appreciate the hard work of Rep. Lucy Allen on this legislation.

Solid Waste Collection .  Legislation was enacted to establish a process that cities and counties must use if they wish to “displace” a private solid waste collection company. SB 951 – Public-Private Solid Waste Collection (SL 2006-193) applies to actions taken on or after January 1, 2007.  Displacement has nothing to do with the process of renewing a contract or franchise or awarding a new contract when an existing one is due to expire.  Local governments are free to change providers when contracts expire without having to meet the new requirements.  However, if a local government wishes to displace a company during a contract or franchise, it must give notice of the first meeting where the governing board will discuss the issue.  If the governing body then decides to displace the company, it must either allow a 15-month grace period (from the publication date of notice of the first meeting) before a new provider can take over or pay the company its gross revenues for six months for the service area affected (calculated from the publication date of notice of first meeting).  Our thanks to Sen. David Hoyle, sponsor of the bill, for working with us to make significant improvements to the final version. 

We will be sending a separate memo with a more complete analysis of this legislation to the League membership in the near future.

Stormwater. An act resolving differences between stormwater legislation enacted in the 2004 session and rules adopted by the Environmental Management Commission in 2005 was ratified as SB 1566 – Stormwater Management 2006 and sent to the Governor.  The bill will add 26 full counties and approximately 100 municipalities not previously designated to Phase II post-construction coverage.  Counties brought under the Phase II rules by the bill include:  Alamance, Brunswick, Cabarrus, Catawba, Chatham, Cumberland, Davie, Durham, Edgecombe, Franklin, Forsyth, Gaston, Guilford, Harnett, Henderson, Hoke, Mecklenburg, Nash, New Hanover, Onslow, Orange, Pitt, Randolph, Union, Wake and Wayne.  Development in the unincorporated areas of these counties--as well as in any municipality in these counties that is not otherwise designated under Phase II—must comply with the post-construction stormwater management requirements.  Additional municipalities covered because they are in one of the 26 counties will not be required to implement their own stormwater program.  DENR will retain responsibility for issuing permits and enforcement unless the local government requests delegation of the program.  The 123 municipalities already designated under Phase II and the 6 designated under Phase I will continue to implement their own programs.

The bill establishes a lower threshold for triggering stormwater control requirements in areas near shellfishing waters and requires development in coastal areas to have controls capable of managing greater amounts of rainfall.  The bill sets forth the circumstances under which development activities will have a vested right to continue without complying with the post-construction stormwater management practices.  It clarifies that cities have the authority to adopt and enforce ordinances implementing stormwater programs, but that DENR may not require them to implement illicit discharge detection and elimination programs in their extraterritorial jurisdictions. 

We will be sending a separate memo with a more complete analysis of this legislation to the League membership in the near future.

Urban Cost-Share . A new source of funding for nonpoint source water quality improvement projects was approved in HB 2129 - Community Conservation Assistance Program (SL 2006-78) .  The act establishes the Community Conservation Assistance Program to be implemented and supervised by the Soil and Water Conservation Commission.  The purpose of the program is to reduce the input of nonpoint source pollution into the waters of the state.  This would help establish an “urban cost-share” program similar to the existing agriculture cost-share program, with state funding limited to 75% of the average cost for each practice, the applicant responsible for 25% of the cost, and maximum funding of $75,000 per year to each applicant.  The program is to be reviewed by a 15-member Community Conservation Assistance Program Advisory Committee, which includes a representative of the League and the Association of County Commissioners.

FINANCE & TAXATION

The action in the area of Finance and Taxation was not as heavy as in previous sessions, but several bills of importance to local government were acted upon.

Economic Development.  The General Assembly ratified its modifications to the state's economic development tax credits program and sent HB 2170 – Bill Lee Changes to the Governor.  The legislation establishes three basic economic development tax credits (job creation, business property investment, and real property investment in tier one area) and simplifies the qualification criteria.  The state's tier structure would go from five tiers to three, with the county's designation based on unemployment, median household income, percentage in population growth, and per capita adjusted assessed property value. Enhanced credits would be available in economically distressed counties, agrarian zones and urban progress zones.  The urban progress zones replace development zones and focus more narrowly on urban poverty areas.  They must be entirely within the corporate limits of a municipality with a population of at least 10,000 and can comprise no more than 15 percent of the area of the municipality. The bill expands the list of businesses eligible for tax incentives and significantly modifies the wage standard.  The Governor has already signed into law legislation to extend and expand the Job Development Investment Grant program-- HB 2744 – Economic Development Program Modifications (SL 2006-168). 

Infrastructure Bonds. Bond proposals proliferated this session but received little substantive discussion.   HB 1809 - Clean Water Bonds Act of 2006, HB 1924 - Affordable Housing Bonds Act of 2006, HB 2811 - Public School Bond Act of 2006, HB 2827/SB 1907 - Land and Water Conservation Bond Act of 2006, HB 2830/SB 2031 - Public School Facilities Bond Act of 2006, and SB 1281 - Clean Water Bonds Act of 2006 remained in their respective Finance committees at the end of the session.  Concerns about debt affordability seemed to stall any momentum bonds had going in to the session.

Motor Vehicle Taxation System. Thanks to strong efforts by city and county officials, late-session efforts to repeal the combined motor vehicle registration renewal and property tax collection system were not successful and SB 600 - Repeal Combined MV Reg. Renewal & Tax System did not pass.  The combined system, passed in the 2005 session as HB 1779, will allow cities and counties to capture an estimated $80 million per year in taxes that currently go uncollected.  HB 1779 passed the House and Senate unanimously in 2005 and the new system was scheduled to go into effect in 2009.  As a compromise to address concerns about the implementation, SB 1523 – 2006 Technical Corrections Act delays the effective date until July 1, 2010, or when the Division of Motor Vehicles and the Department of Revenue certify that the necessary integrated computer system is operational, whichever comes first.  A troublesome provision was removed from HB 1827 - Gen. Con. Lic. Except/DOT before it passed.  The provision would have required motor vehicles to be appraised at wholesale rather than fair market value.  If enacted, the change would have cost cities and counties approximately $144 million per year in property tax revenues.  Your efforts in contacting House members on these issues made the difference.

Property Taxes .  In the 2005 session, developers sought legislation that would erode the local property tax base by exempting their “inventory.”  Under their proposal, the increase in value attributable to subdividing or improving real property held for resale would be excluded from the ad valorem tax.  Following strong city and county opposition, the legislation failed to advance in 2005.  However, the sponsor had suggested narrowing the exemption, and we remained on alert throughout the short session for its reappearance.  Despite persistent rumors, SB 508 - Exempt Builders' Inventory , did not pop up again.  The topic is included in the list of items that the Legislative Research Commission may choose to study.

Several acts make procedural changes regarding property tax collection.  HB 2097 – Property Tax Changes (SL 2006-30) makes various clarifying changes to the statutes.  Among other things, it adds a provision to specify that when the municipal governing body delivers a tax receipt to a tax collector for any assessment that has been or is subsequently appealed to the Property Tax Commission, the tax collector may not seek collection of taxes or enforcement of a tax lien resulting from the assessment until the appeal has been finally adjudicated.  However, the tax collector may send an initial bill or notice.  SB 1451 - Delinquent Property Tax Inventory/Study (SL 2006-106) codifies property tax proration by specifying that unless otherwise provided in the contract, taxes on real property being sold are to be prorated between the buyer and seller on a calendar-year basis.  It also makes some changes to the notice requirements for delinquent taxes and tax sales.

Rental Vehicle Tax. HB 1963 – Revenue Laws Tech. & Motor Fuel Tax Changes (SL 2006-162) contains a provision allowing a county that is authorized to impose the local government public transportation sales and use tax (Mecklenburg County) to be a regional transit authority that may impose a vehicle rental tax.  Proceeds of the tax must be transferred to the largest city in the county operating a public transportation system and used for public transportation purposes.

GENERAL GOVERNMENT

Eminent Domain. In the aftermath of the Kelo v. New London case (in which the U.S. Supreme Court upheld a Connecticut city's ability to take residential property and transfer it to a private developer for economic revitalization), state legislatures nationwide grappled with restrictions on authority to condemn land for economic development purposes.  North Carolina's eminent domain statutes (G.S. Chapter 40A) do not allow local governments to use eminent domain for economic development in the manner it was used in Kelo and the legislation that passed this session seeks to clarify that point.  HB 1965 – Eminent Domain Restrictions (SL 2006-224) limits eminent domain to the uses specified in G.S. 40A-3.  Local acts granting the authority to exercise the power of eminent domain for a use or purpose other than those granted in G.S. 40A-3 are not effective for that use or purpose.  Late in the session the act was amended to include a prohibition on the use of eminent domain under the urban redevelopment law to acquire non-blighted parcels.  The act becomes effective August 15, 2006 (in accordance with SB 1523 – 2006 Technical Corrections Act ) .  S everal bills calling for an amendment to the state constitution to restrict eminent domain were introduced, and HB 2213 - Eminent Domain Constitutional Amendment was heard in committee, but it did not advance.

Liability. A bill originally seeking to restore the protection of the public duty doctrine to local building inspections was substantially revised in committee and threatened at one point to become a vehicle for abolishing governmental immunity.  SB 1143 - Protect Building Inspectors remained in House Commerce at the end of the session.

Public Records. Legislation added local governments and state agencies to the entities required to notify victims of a security breach that involves their personal information.  HB 1248 – Amend Identity theft Protection Act of 2005 (SL 2006-173) provides that if an agency of the state or its political subdivisions, or any agent or employee of a government agency, experiences a security breach (as defined in G.S. Chapter 75, Article 2A) the agency must comply with the requirements of G.S. 75-65 by providing notice to the affected person.  Businesses are already required to do so.  The act also clarifies that identifying information is confidential and not a public record, but that a record with identifying information removed or redacted is a public record if it would otherwise be a public record but for the identifying information.  It provides that such records are subject to a public records request and must be provided with the identifying information redacted.  The act becomes effective October 1, 2006.

State Government Ethics. The General Assembly spent a great deal of time on ethics reform this session, resulting in the passage of HB 1842 – State Government Ethics Act (SL 2006-201). The act sets standards for state officials in the legislative, executive, and judicial branches of government and places additional restrictions on lobbyists.  Among other things, it requires state officials to file more comprehensive economic disclosure statements, more clearly defines various conflicts of interest, and prohibits the acceptance of gifts from lobbyists (with certain exceptions).  The act also requires more frequent and more extensive reporting of lobbying expenditures.  It prohibits lobbyists from contributing to candidates running for the General Assembly or Council of State and prohibits them from bundling and delivering others' contributions.  A lobbyist may not be appointed to a state board that regulates a person the lobbyist represents.  The act creates a bipartisan State Ethics Commission to oversee standards in all three branches of government, undertake investigations, and render advisory opinions.  We would like to acknowledge the hard work of Rep. Joe Hackney and Sen. Dan Clodfelter for their efforts on this legislation.

PERSONNEL

Employee Immigration Status.   A number of bills were introduced this session seeking to require the state as well as local governments to verify the immigration status of employees.  A provision that was ultimately ratified as part of SB 1523 – 2006 Technical Corrections Act requires state agencies, universities, community colleges and local education agencies to verify employee legal status in accordance with the Basic Pilot Program administered by the U.S. Department of Homeland Security.  Local governments were not included in the requirement, but that does not mean they will not be added in the future, resulting in an unfunded mandate.

Minimum Wage.   The state minimum wage increases from $5.15 to $6.15 per hour under HB 2174 – Raise Minimum Wage (SL 2006-114 ).  The increase is effective January 1, 2007.

PUBLIC SAFETY

Court Funding.   The budget bill, SB 1741 – Modify Appropriations Act of 2005 (SL 2006-66), appropriates $27 million into the court system, with funding for improved technology as well as 17 more district court judges, 90 assistant district attorneys and 75 deputy clerks. 

Immigration Enforcement.   A provision of SB 1523 – 2006 Technical Corrections Act allows any state or local law enforcement agency to authorize its law enforcement officers to also perform the functions of an immigration officer under 8 U.S.C. § 1357(g) if the agency has a Memorandum of Agreement or Memorandum of Understanding for that purpose with a federal agency.  State and local law enforcement officers acting under this provision are authorized to hold any office or position with the applicable federal agency required to perform the described functions.  The section is effective January 1, 2006, and any actions taken between that date and the date the section becomes law that would have been proper if the section had been in effect are validated .

Sex Offenders.   HB 1896 - Protect Children/Sex Offender Law Changes makes various amendments to strengthen the sex offender and public protection registration programs.  It implements a satellite-based monitoring system for violent and recidivist sex offenders.  It also prohibits registered sex offenders from knowingly residing within 1,000 feet of property on which a school or child care facility is located and from working at any place where a minor is present and the offender's duties or activities would include instruction, supervision or care of a minor.

Video Poker. Video poker is on its way out under the provisions of SB 912 - Phase Out Video Poker/Except By Compact (SL 2006-6).  Effective October 1, 2006, the act limits the number of existing video poker machines at one location to two (currently three).  Effective March 1, 2007, the limit will be one.  Effective July 1, 2007, possession or operation of video gaming machines will be prohibited in North Carolina, except on Indian lands held in trust by the U.S. for federally-recognized Indian tribes if under an approved Tribal-State Gaming Compact.

RETIREMENT

Although bills to grant special, enhanced retirement benefits to individual classes of local government employees remained eligible in the 2006 session, none of the proposals advanced.  HB 142/SB 149 - Law Officer's 25-Year Retirement, HB 709/SB 648 - 25-Year Retirement For First Responders , and HB 763/SB 710 - Fire and Rescue Workers' Retirement remained in committee at the end of the session.

Local Government Retirement Board.   The League successfully sought legislation to increase local representation on the Local Governmental Employees' Retirement System (LGERS) Board of Trustees.  The Board previously consisted of the seven members of the Board of Trustees of the Teachers and State Employees' Retirement System, plus three local government officials designated by the Governor.  HB 1237 – Change Local Governmental Retirement Board (SL 2006-64) adds four more local government representatives.  The local government representation on the board will now consist of a mayor or member of the governing body of a municipality participating in LGERS, a county commissioner of a county participating in LGERS, a law enforcement officer employed by an employer participating in LGERS, a manager of a county participating in LGERS; a manager of a municipality participating LGERS, an active Fair Labor Standards Act nonexempt, local government employee and a retired FSLA nonexempt local government employee.

LEO Creditable Service.   Police officers were authorized to purchase credit in the Local Governmental Employees' Retirement System (LGERS) for time when they are receiving worker's compensation benefits under certain circumstances.  HB 447 – LEO Creditable Service/Workers' Compensation (SL 2006-29) provides that creditable service for law enforcement officers in LGERS includes periods of employer-approved leaves of absence when in receipt of workers' compensation benefits due to serious bodily injury incurred in the line of duty as a result of an intentional or unlawful act of another.  The employer that granted the leave of absence is to pay the employer percentage rate of contribution, and the employee's contribution is reduced by the amount paid by the employer.  The act allows, but does not require, the employer to pay all or part of the employee cost of the service credit purchased.  The act became effective August 1, 2006 and apples to members who return to service from an approved leave of absence on or after that date.  Our thanks to Rep. Rick Glazier for working with us to craft an acceptable version of this legislation.

Local Retirement COLA .   The budget bill does not set the retirement cost of living adjustment for the Local Governmental Employees' Retirement System as it has in years past.  The General Assembly left that decision up to the LGERS Board of Trustees as provided in state law.  The Trustees set the COLA for existing retirees at 2.8%.

TRANSPORTATION

Contracts To Expedite TIP Projects. Under HB 1399 – Various Transportation/M.V. Law Changes (SL 2006-135) the Department of Transportation can enter into agreements with units of local government to expedite projects currently programmed in the Transportation Improvement Plan.  The agreements may authorize units of local government to construct projects scheduled in the TIP more than two years from the date of the agreement, with the local government funding 100% of the project at current prices.  In a future year, when the project is funded from state and federal sources, the local government is to be reimbursed an appropriate share of the funds, at the future programmed project funding amount. 

Secondary Roads . DOT's Division Engineers will have increased discretion to make more unpaved roads eligible for paving with secondary road funds.  Under HB 1825 - DOT Secondary Road Formula Change , engineers can include roads with rights-of-way less than 60 feet, provided that the safety of the public is not compromised and the minimum accepted design practice is satisfied.  Effective July 1, 2007, the act revises the secondary road formula to include the state's paved mileage when comparing the total state-maintained secondary road miles within a county to the total miles in the state.  It also requires DOT to set aside $5 million annually through FY 2009-10 for the paving of secondary roads previously determined to be ineligible.

Toll Roads. Among other things, SB 1381 - Repeal Toll Bridge Authority (SL 2006-228) authorizes the N.C. Turnpike Authority to convert a segment of Interstate 540 under construction in Wake and Durham Counties to a toll route.  The act requires the approval of the Metropolitan Planning Organization or Rural Planning Organization of the area in which a segment is located before it can be converted to a toll route.  It lists other potential toll projects as the Triangle Parkway, Gaston East-West Connector, Monroe Connector, Cape Fear Skyway, and a bridge of more than two miles in length going from the mainland to a peninsula bordering the State of Virginia.  HB 749 – DOT Agreement/No Sticker Fee (SL 2006-230) authorizes DOT to enter into partnership agreements with the Turnpike Authority, private entities, and authorized political subdivisions to finance, by tolls and other methods, the cost of constructing and maintaining roads and bridges.

UTILITIES

Video Franchising .  A nationwide push by the telephone industry yielded legislation in a number of states and in Congress to do away with local government franchising of video programming.  Telephone companies seek to expand their business by offering the video programming services traditionally provided by cable companies, and they view local franchise requirements as an impediment to their entry into the market.

Here in North Carolina, the initiative took the form of HB 2047 – Video Service Competition Act (SL 2006-151) .  The act preempts city and county authority to grant or renew a cable franchise as of January 1, 2007 and replaces it with state franchising authority.  Local governments will share portions of three state taxes to replace lost revenue from the local cable franchise fee.  Shared revenues include percentages of the telecommunications sales tax; the cable/video services sales tax; and the satellite sales tax.  Projections indicate that local governments will be kept whole and may show a net gain in revenue under this plan. 

The act expressly states that there are no build-out requirements for providers with a state franchise.  A cable provider can opt out of its existing local franchise agreement when a provider with a state-issued franchise makes service available to one household in the cable company's existing franchise area.

Cities retain their authority to regulate public rights of way under G.S. 160A.  To the extent that municipalities are authorized to charge a fee for activities conducted in the right-of-way, the fee must apply uniformly and on a competitively neutral and nondiscriminatory basis to all comparable activities by similarly situated users of the right-of-way.  Customer service complaints are to be directed to the Attorney General's office. 

The act provides for public, educational and governmental (PEG) channels as follows:  Cities with a population of at least 50,000 would have a minimum of three initial PEG channels (those under 50,000 a minimum of two initial PEG channels), plus channels in excess of the minimum that are activated as of July 1, 2006 under the terms of an existing franchise agreement.  A city that does not have seven PEGs is eligible for an additional PEG if it meets specified programming requirements.  Providers under the state franchise must provide free basic cable service upon request to a public building located within 125 feet of the cable system.  Any city or county that used part of its franchise tax revenue in fiscal year 2005-06 for the operation and support of PEG channels or a publicly owned and operated television station must use the funds distributed to it under the act to continue that same level of support for PEGs and public TV.

We will be sending a separate memo with a more complete analysis of this legislation to the League membership in the near future.

NEW TOWNS

The General Assembly passed only one new incorporation bill this session.  The incorporation of the Town of Midway in Davidson County became effective June 30, 2006.

STUDIES

The General Assembly adopted an omnibus bill to authorize the study of various topics between sessions.  HB 1723 – The Studies Act of 2006  authorizes the Legislative Research Commission (LRC) to study the following issues of interest to municipalities:  worker's compensation issues; public building contract laws; unfit dwellings; exempt builders' inventories from property tax; tax policy changes; annexation; impact of ethics legislation on local elected officials; tax reevaluation; homestead exemption; impact of regulation on the cost of housing; Local Governmental Employees Retirement System; red light camera clear proceeds; and adequate public facilities ordinances.

The bill also established several new study committees and commissions including:  Study Commission on State Construction Inspections; Study Commission on Economic Development Infrastructure; Waterfront Access Study Committee; Government Performance Audit; Joint Legislative Commission on Expanding Rail Service, and the State and Local Fiscal Modernization Study Commission.

It also authorizes: the Joint Legislative Health Care Oversight Committee to study the issue of smoking in public places; the Joint Legislative Transportation Oversight Committee to study the issues of nonbetterments and the feasibility of a dedicated source of funding for public transit; the Joint Legislative Utility Review Committee to study mechanisms for increased accountability for the collection and spending of 911 charges by local governments and whether to adopt a statewide uniform 911 charge; the Revenue Laws Study Committee to study the valuation of partially improved, undeveloped lots in subdivisions and housing authority tax exemption issues; the Environmental Review Commission to study the issues of mercury reduction and education, abandoned mobile homes, and merging the Clean Water Management Trust Fund with the Ecological Enhancement Program; and the Joint Legislative Growth Strategies Oversight Committee to study the issues of extraterritorial operations of municipal public enterprises.  It directs DENR to study inherently dangerous animals, costs and benefits of reducing emissions of oxides of nitrogen, particulate matter, and greenhouse gases from motor vehicles, and the causes of flooding in certain areas (Canton and surrounding areas) and determine preventative and mitigation measures.

Study provisions are also contained in other legislation.  SB 1442 – Rutherford Subdiv. Repeal/Red Light Camera Study (SL 2006-189) authorizes the Legislative Research Commission to study the impact of various decisions of the North Carolina courts on the definition of “clear proceeds” as it relates to the funding and operation of traffic control photographic systems by cities and towns in the state.  SB 1122 – Land and Water Conservation Study (SL 2006-223) creates the Land and Water Conservation Study Commission to identify and evaluate the existing sources of state funding for (1) the public acquisition of land to prevent pollution and protect water quality, among other purposes, (2) historic preservation, and (3) economic and community development tied to land and water conservation and historic preservation.  SB 1591   Extend Climate Change Commission (SL 2006-73) extends the date for the Legislative Commission on Global Climate Change to report to the General Assembly to April 15, 2008. 

SB 1451 - Delinquent Property Tax Inventory/Study (SL 2006-106) directs the Revenue Laws Study Committee to study and recommend any changes to the special class of property taxed on the basis of the value of the property at its present use.  The study is to include an evaluation of the following expanding the present-use value system to include wildlife land and other conservation land and adding more specific land resource management criteria to the sound management programs required for lands enrolled in the present-use value system.

The League will monitor these studies, provide information, and participate in shaping their recommendations as appropriate.

Looking Ahead to 2007

The 2007 Session of the General Assembly will convene at 12:00 noon on Wednesday, January 24, 2007.

Final Thoughts

The League staff expresses our appreciation to League President A. Everette Clark, Mayor of Marion, for his leadership and assistance during this session.

We also thank the other League officers and members of the Board of Directors, and the chairs and members of the standing legislative action committees and technical advisory committees.  These municipal officials provided inspiring leadership and took an active hand in the League's legislative efforts.  The sound policies they develop and adopt are the foundation of the organization's success.  And our very special thanks to all municipal officials across the state that supported the League's efforts during this session to obtain our main legislative goals and to defend the interests of municipalities.  Once again you heeded our call for your active involvement and, as always, that made all the difference.

Our Digest of Municipal Law will be in two parts again this year.  We have compiled summaries of important local government cases decided by the state and federal courts in the past year, arranged by subject matter topics.  This Digest of Municipal Law, Part I: Case Law will be sent to city attorneys, managers and others during the month of August.

We will follow up with our Digest of Municipal Law, Part II: Legislation, to be distributed in the fall.  We hope these publications will be useful and that you will retain them for quick future reference.  But please examine the actual language of enacted bills or court opinions, consult your attorney, or call us before acting on any information contained in these publications.  Effective dates are important, and many of the bills reported herein have been ratified but not yet signed by the Governor.  (See Note on Status of Legislation at the beginning of this Bulletin .)  League staff will be happy to try to answer any questions you may have and we look forward to hearing from you.

Ellis Hankins, League Executive Director, also thanks Andy Romanet, Kim Hibbard, John Phelps, Beau Mills, Charles Archer, Anita Watkins, Lee Mandell, Gregg Schwitzgebel and Margot Christensen for their professional and effective representation of your interests and their good work in keeping you and your legislators informed about our municipal issues and needs.  They worked tirelessly on your behalf during this session.  Thanks also to the many other League staff members who had a hand in assisting with various aspects of our legislative efforts this session.