House approves budget plan

The House approved a $20.3 billion state budget plan this week that extends temporary taxes for two more years, provides a 4.25 percent pay raise for state employees, $100 million in one-time Medicaid relief for counties, and more than $400 million to be spent on state capital projects through issuance of certificates of participation.

HB 1473 – 2007 Appropriations Act passed second reading in the House on Thursday and third reading in the early morning hours on Friday. The budget would extend for two more years the one-quarter percent state sales tax that was to expire this year and would keep the income tax rate at 8 percent on those North Carolinians with the highest incomes.

The budget would increase teacher and community college instructor pay by an average of 5 percent, while giving most other state employees a 4.25 percent pay hike. It provides a 2.2 percent cost of living increase for retirees in the Local Governmental Employees’ Retirement System.

The plan adds $315 million to the state's Rainy Day Fund, bringing the reserve to more than $900 million. About $170 million would be spent on new university and state building projects, while another $449 million financed by certificates of participation would go to state capital projects.

In provisions that affect cities and towns, the budget would raise wastewater permit fees by 20 percent effective July 1, 2007. This would include NPDES permits, stormwater and wastewater discharge general permits, sewer system extension permits, water quality certifications and others. We had asked for a delayed implementation of these increases to give local governments adequate time to budget for the increased costs but the bill does not do so.

We note that the House version of the budget allocates $100 million for the Clean Water Management Trust Fund, which is considered full funding for this program. The budget includes matching funds to obtain federal monies for the clean water and drinking water revolving funds. Funds of $4.1 million would be allocated for the flood plain mapping program.


The proposal would fund 3 new district court judges, 6 magistrates, 30 additional assistant district attorneys and 58 new deputy court clerk positions. It would provide $4.8 million for street gang violence prevention grants, contingent upon passage of street gang legislation. The bill states the intent of the General Assembly to phase out transfers from the Highway Fund and Highway Trust Fund to the state’s general fund and other state agencies over a five-year period.

The House version of the budget will now go to the Senate for consideration.

More than 500 municipal officials attend Town Hall Day

More than 500 municipal officials attended Town Hall Day activities to advocate for the needs of their municipal residents. Priorities for the day included talking with legislators about critical local infrastructure needs and protecting municipal authority.

The N.C. Association of Realtors®, which has launched a major campaign against using a land transfer tax to fund infrastructure needs, placed a full-page ad in the News & Observer (probably costing more than $10,000), aimed at the municipal officials attending Town Hall Day. They are also running radio and television ads. Officials walking from legislative briefings at the Quorum Center to the Legislative Building were greeted by “yard” signs along the sidewalk denouncing the land transfer tax.

On another issue, annexation opponents timed an anti-annexation rally to coincide with Town Hall Day and drew about 200 protesters, according to news reports. The opponents marched in front of the League’s offices while municipal officials were onsite for lunch.

We want to thank those municipal officials who took time to come to Raleigh and talk with their representatives and senators. We always hear how effective this event is, and we very much appreciate your efforts.

Land transfer tax with a municipal share introduced

Rep. Jennifer Weiss this week introduced HB 1982 – Local Option Land Transfer Tax, which would allow counties to levy a one percent local transfer tax, subject to voter approval. Each county that levies the tax must share proceeds with municipalities in that county on a per capita basis, and proceeds may be used only for public infrastructure needs. If a county does not levy a transfer tax by July 1, 2008, a municipality with a population of 5,000 or more can levy the transfer tax with voter approval.

The League and the Association of County Commissioners worked with Rep. Weiss on this bill. Our thanks to Rep. Weiss and to co-sponsors Reps. Deborah Ross, Verla Insko, Paul Luebke, and Pricey Harrison. These legislators deserve our appreciation for their willingness to act in spite of the NCAR’s big-money campaign.

Vote on police bill of rights delayed

The “police officers’ bill of rights,” HB 980 - Law Enforcement Officer Discipline had been scheduled for a House vote this week, but action was delayed by debate on the budget. It has been rescheduled for Monday, May 14.

The League opposes this bill as unnecessary and an unwarranted intrusion on a municipal employer’s authority to make basic personnel decisions.

Proposal on nonresidential buildings advances

One of the League’s advocacy agenda items moved ahead this week. SB 556 – Nonresidential Building Code passed second reading in the Senate and is scheduled for a third reading vote next Tuesday. The bill would allow municipalities to adopt and enforce ordinances relating to nonresidential buildings that fail to meet minimum standards of maintenance, sanitation and safety established by the governing body.

One of the League’s priorities this session is to obtain additional authority to regulate unsafe and dilapidated buildings, and we strongly support this bill.

OPEB bill moves

A bill with positive implications for local governments advanced this week. SB 580 – State Treasurer/Local OPEB Investments (Sen. Dan Clodfelter) cleared Senate Finance and will go to the Senate floor early next week. The bill establishes the Local Government Other Post-Employment Benefits Fund as a trust fund in the Office of the State Treasurer, and authorizes local governments to contribute to the fund. The Treasurer will be able to make investments that are likely to allow a greater rate of return than would be achieved by local investment. The accumulated contributions are to be used to provide other post-employment benefits to former employees of participating local governments and beneficiaries of former employees who are entitled to other employment benefits. The bill also authorizes local governments to establish other irrevocable trusts to fund post-employment benefits.

The League strongly supports this bill. Standards for local government accounting and financial reporting require that cities accrue the liability for post-employment benefits such as health insurance and life insurance costs. Cities must show the present value of these future benefits for current employees on their balance sheets. The accrued liabilities can be quite large, and local governments need additional options for investments if they choose to pre-fund the benefits.

Cell tower preemption experiencing static

SB 831 – Wireless Telecommunications Facilities ran into some resistance in the Senate Commerce Committee this week. During discussion on Tuesday, committee members raised many of the concerns that local governments have expressed about the bill as written. In its present form, SB 831 would severely restrict the ability of cities and counties to regulate the size, location and design of cell towers, including in residential districts.

The League opposes the bill as currently written.

No vote was taken, and we encourage you to continue talking with your senators, especially those on Senate Commerce:

Chair: Sen. R. C. Soles.
Vice Chairs: Sens. David Hoyle and Tony Rand
Members: Sens. Tom Apodaca, Doug Berger, Phil Berger, Harris Blake, Julia Boseman, Walter Dalton, Katie Dorsett, Tony Foriest, James Forrester, Linda Garrou, Eddie Goodall, Steve Goss, Malcolm Graham, Kay Hagan, Neal Hunt, Jim Jacumin, John Kerr, Vernon Malone, Floyd McKissick, Martin Nesbitt, Robert Pittenger, William Purcell, Larry Shaw, and Richard Stevens.

Housing inspections discussed

A proposal by the Apartment Association of North Carolina to restrict the ability of local governments to inspect for housing code violations surfaced this week. SB 1507 – Housing Conditions/Inspections would require cities to show probable cause before they could inspect for unsafe, unsanitary or otherwise hazardous conditions. The bill was taken up in Senate Commerce. Committee members raised a number of questions about the bill but time ran out before any action was taken.

The League opposes the bill as currently written. It would significantly erode local ability to protect the citizens by investigating dangerous structures and dwellings that are unfit for human habitation. Please let your members of Senate Commerce know of your concerns (see list above).

Union bills update

A bill to repeal the prohibition on public employee collective bargaining was heard this week. HB 1583 – Restore Contract Rights to State/Local was discussed in House Judiciary II but no vote was taken. Meanwhile SB 1271 – Firefighter/EMS Payroll Deductions passed the Senate this week. It would require cities and counties to make payroll deductions for police, firefighter or EMS workers’ union dues.

Our members support equitable treatment of municipal employees but we oppose bills that would, in effect, force collective bargaining on municipal governments.

Annexation services proposal introduced

Reps. Nelson Dollar, Louis Pate and Larry Brown introduced HB 1958 – No Taxes Until Annexation Services Provided this week. The bill would prohibit an annexing municipality from collecting ad valorem taxes until it begins to provide water, sewer, police, fire, and solid waste services. It would further require that any water or sewer assessment be held in abeyance until the water or sewer system is available for connection to the assessed property.

Crossover extended

The House and Senate agreed to extend the crossover deadline by one week to May 24. That is the date by which bills (other than those that impact the state budget or involve a tax or fee) must pass one chamber in order to remain eligible for further consideration.