No budget deal yet - continuing resolution passed

The House and Senate have approved a continuing resolution to fund state government, giving themselves more time to reach agreement on a budget plan that may include Medicaid fiscal relief for the counties. HB 2044 – 2007 Continuing Budget Authority, adopted in the early hours of Friday morning, funds state government through July 31, mostly at current spending levels. It also keeps in place through July 31 the one-quarter cent state sales tax that was due to expire July 1. Governor Mike Easley must sign the continuing resolution, which keeps spending at current levels, before July1.

Still no agreement on budget and tax plan
House and Senate conferees perhaps got closer but failed to reach agreement this week on a two-year budget package. The disagreements have centered on a Medicaid relief package and on whether to keep two “temporary” taxes in place – the one-quarter cent state sales tax (now due to expire August 1) and highest income tax bracket (due to expire January 1, 2008).

It is our understanding that the most recent proposal under discussion would keep the one-quarter cent state sales tax in place and have the state assume the local share of Medicaid expenses. The state, in turn, would take over two one-quarter cent local option sales taxes. Counties would be given the option of levying, subject to voter approval, either a new local option sales tax or a new land transfer tax. The proceeds of either tax would be shared with cities and towns. Municipalities also would be held harmless, with growth, for any losses from the state’s assumption of the two one-quarter cent local option taxes. No agreement has yet been reached on this proposal.

We first want to thank legislators for acknowledging that cities and towns need the growth that the local option sales taxes provide. Earlier versions of a plan would not have provided growth. We appreciate Sen. Linda Garrou and others who worked with us to restore the growth, and we appreciate the efforts of everyone who contacted their legislators on this issue. Your calls made a difference.

However, there is still work to be done before an agreement between the House and Senate can be reached. Please read below for what you can do to assist.

Talk about revenues
A key item in the budget negotiations is whether to include authorization for a new local option land transfer tax and/or a new local option sales tax, subject to voter approval. While we must retain our existing revenues--the equivalent of the local option sales taxes with growth--we also need additional, new sources to pay for needed infrastructure investments--the water, sewer, stormwater, transportation and other capital projects that are required as we grow and as our present facilities must be replaced. Land transfer tax and sales tax authority are a means to fund these critical infrastructure investments and help keep the pressure off property tax rates.

We are all familiar with the sales tax but some may not be as familiar with the real estate transfer tax. This is a tax that the General Assembly has previously authorized for seven counties, and we believe that a revenue source based on growth is reasonable. The costs of city and county infrastructure must come from somewhere and citizens would rather pay a small percentage upon the sale of property rather than increased property taxes on an annual basis.

We are urging legislators to adopt a balanced budget package that provides for financial relief for counties from Medicaid expenses, keeps municipal revenues in place with growth, and provides much needed new revenue sources to address the significant investments that must be made in roads, school construction, water and sewer facilities, land and water conservation and affordable housing. Authority for a long-term revenue source for infrastructure needs should be part of an overall plan to address the state’s infrastructure needs that also includes bonds for schools, roads, water and sewer, open space and affordable housing. Our state’s population is exploding and our citizens deserve clean water, adequate school facilities, less traffic congestion, open spaces and affordable housing. We can’t achieve these things if we wait. Failing to act means falling further behind.

Please contact your representatives and senators and ask them to allow residents the authority to approve either a small increase in the local sales tax or a modest local land transfer tax to fund infrastructure needs.

Gang legislation
Both the House are Senate are currently considering street gang legislation, but legislators need to hear from your local officials about the importance of combating the growing gang problem. This is not just a big-city issue, and we have heard from many of you that small towns are also being affected. HB 274 – Street Gang Prevention Act is under discussion in a subcommittee of House Judiciary III, while SB 1358 – Street Gang Prevention Act has been heard in Senate Judiciary I and could come up for a vote next week. This is a priority issue on the League’s advocacy agenda and that of the Metropolitan Coalition. The Metropolitan Coalition is holding two press events on Monday, July 2 (one in Salisbury and one in Greensboro) to highlight the growing presence of gangs in North Carolina’s rural and urban areas and to urge passage of legislation to help fight gangs. Contact Meenal Khajuria for more information about these events at mkhajuria@nclm.org or (919) 715-3911.

Retainage restrictions
SB 1245 – Retainage Payments/Construction Contracts, currently referred to the House Commerce Committee, was unexpectedly calendared for consideration in committee this week. However, the bill was not heard and a future date for the committee’s review has not been determined. The bill as passed by the Senate attempts to eliminate or reduce the amount of money local governments can set aside from the payment schedule on construction contracts. These reserves provide assurance that a construction contract will be satisfactorily completed. The bill as written would eliminate retainage on contracts less than $300,000; on contracts above that amount it would specify no more than 5 percent retainage, and no retainage after the project is 50 percent complete. It would require total release of retainage within 45 days of the receipt of a certificate of substantial completion, certificate of occupancy, or beneficial occupancy, unless work remains uncompleted.

League staff members are continuing to negotiate with industry representatives and several proposals have been circulated. While some modification to the current laws may be appropriate, the bill continues to contain objectionable provisions. Please call your House members to voice your concerns with this bill.

No competition bill
Please keep up the good work in opposition to the “No Competition Bill,” also known as HB 1587 – Local Government Fair Competition Act. The bill would sharply limit local governments' ability to create their own telecommunications networks and would prevent them from partnering with private telecom providers to establish broadband service. The bill is heavily backed by the telecommunications industry and is intended to discourage competition from local government in the provision of communications services. However, it is clear that the industry does not intend to provide service in certain areas and will not commit to serve entire communities. Local governments should have the ability to provide citizens with access to high-speed broadband service for the future economic development of our state. Rural and distressed urban areas should not be left behind.

The bill is currently in House Finance. Please let us know if we may include your municipality on a list in opposition to this bill to be presented to members of the House. Contact Anita Watkins at awatkins@nclm.org.

Smoking restrictions
Legislation to prohibit smoking in buildings owned or leased by the state passed the General Assembly this week and has been sent to the Governor for his signature. HB 24 – Smoking in State Govt. Buildings/Prohibition also alleviates restrictions on local authority that are currently in state statute. Under the act, local governments will be able to declare buildings they own or lease and public transportation vehicles “smoke-free.” The League supported removal of the local preemption and we are pleased to see progress on the issue in this legislation.

Renewable energy
The Senate gave preliminary approval to legislation to require electric utilities to meet renewable energy requirements. It requires the state's largest utilities to derive 12.5 percent of their electricity from renewable energy and efficiency programs by 2021. Municipal utilities and electric cooperatives would be required to meet a 10 percent standard by 2018. SB 3 – Promote Renewable Energy/Baseload Generation is scheduled for third reading in the Senate on Tuesday.

Hazardous waste
Governor Easley has signed into law a bill recommended by a task force created after a massive chemical fire in Apex last year. HB 36 – Haz. Materials Task Force Recommendations requires additional monitoring and more frequent inspections of commercial facilities that store hazardous waste. They would be required to provide financial assurance for cleanup in the event of a release, consult with local governments as to emergency response plans, notify nearby property owners, and provide information about the types of chemicals in storage. The bill states that local zoning or land use ordinances are presumed to be valid and enforceable to the extent that they impose requirements, restrictions, or conditions that are generally applicable to development (such as setback, buffer, and stormwater requirements), unless the DENR Secretary makes a finding of fact to the contrary. It also clarifies that municipal 911 and reverse 911 data is confidential and not a public record. The League participated on the task force and supported this legislation.